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Hedge fund Melvin sustains 53% loss after Reddit onslaught

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Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#401

Post by elihu »

newacct583 wrote: post #374
elihu wrote: post #270

Earlier quoted context omitted.

I'm not an expert, but my understanding is that this isn't like a tug-of-war where if there are more people betting short than long then the shorts win. It's asymmetrical. There are a finite number of shares and if enough people are willing to hold them at a certain price, then that will be its price. Someone with infinite money can't force the price to drop. (At least not through normal "market" means that don't inv…

That's actually not how it works. "Holding" a share doesn't, by definition, do anything to its price. The price is determined by trades. That's what a trade is. You can be sitting on 99% of a company, but as long as that 1% of shares is active in a market it will determine what gets reported as the share price. And yes, someone with infinite resources can absolutely push a share price down. Borrow every share you can…

I suppose that's true, but kind of beside the point. The "official" price isn't really the price if any random person can't actually buy shares at that price. (Kind of like the Raspberry pi zero that can buy for $10 or so but you can't actually buy in volume at that price.) And supposing that you're sitting on 101% of the stock and people are still buying and selling, then what in the world is going on?

(I don't know if that's really what's happening with Gamestop.)

Anyways, even if the price is artificially low because of some artificial trades driving it down, that doesn't really matter in the sense of the shorts being able to unwind their positions. If the people who hold most of the stock aren't willing to sell for less than a certain amount, then that's what the shorts will have to pay if there aren't any other available shares. That requires the people with the stock to hold out for a good price (even if some infinitely wealthy person is borrowing real or imaginary shares and selling them for $1), but if they do they "win". At least, that's my (possibly inaccurate) understanding of the situation.

One aspect of this whole thing I don't understand is what happens in a "failure to deliver" situation? If the shorts just can't or don't want to pay the market price for a share, what's the penalty? Do they get sued? Declare bankruptcy? Is the exchange or brokerage liable for their debts?

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#402

Post by newacct583 »

elihu wrote: post #401
newacct583 wrote: post #374

Earlier quoted context omitted.

That's actually not how it works. "Holding" a share doesn't, by definition, do anything to its price. The price is determined by trades. That's what a trade is. You can be sitting on 99% of a company, but as long as that 1% of shares is active in a market it will determine what gets reported as the share price. And yes, someone with infinite resources can absolutely push a share price down. Borrow every share you can…

I suppose that's true, but kind of beside the point. The "official" price isn't really the price if any random person can't actually buy shares at that price. (Kind of like the Raspberry pi zero that can buy for $10 or so but you can't actually buy in volume at that price.) And supposing that you're sitting on 101% of the stock and people are still buying and selling, then what in the world is going on? (I don't know…

> If the people who hold most of the stock aren't willing to sell for less than a certain amount, then that's what the shorts will have to pay

But that presupposes not that WSB was big enough to trigger a short squeeze (something that everyone accepts), but that they are big enough to hold the bulk of the capitalization of (at this moment) a $18B company. Needless to say they aren't remotely that big. This isn't happening.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#403

Post by sroussey »

rantwasp wrote: post #389
keeganpoppen wrote: post #334

Earlier quoted context omitted.

that's what i've been thinking about too-- at what point is it economically expedient for GameStop to sell shares directly to the shorts to bail them out? doesn't seem much weirder than all the credit default swap silliness that's happened for the past few years.

they cannot just make whatever stocks they want up. they are limited there on the number they can emit. plus, not sure if they get to choose who gets to buy the shares. also, why would gamestop bail out the same people that wanted to drive it into the ground?

So they benefit. It’s stock is up, but that doesn’t help their business.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#404

Post by lultimouomo »

koonsolo wrote: post #388
lultimouomo wrote: post #381

Earlier quoted context omitted.

When the stock crashes, you can sell some bonds, which have not crashed, and buy stock on the cheap. When the stock recovers, you sell some stock and buy bonds. Rinse and repeat. (You don't need to try and time the market for this to work. You can have a threshold so that you rebalance when you deviate from your target allocation more than X%)

I don't see how this would outperform 100% stocks over 10 years. Or in other words, show me the numbers.

Are you asking if it can outperform total stock (it's pretty clear it can) or if it did?

According to https://www.justetf.com/en/etf-strategy-builder.html (click on "show simulation" and it will show the historical analysis) a 80/20 allocation slightly outperforms total stock over the last 20 years, while having lower volatility at the same time. I did not run the numbers myself.

Considering only the last 10 years seems pretty limited, as you are ignoring both the dot-com bust and the 2008 crisis.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#405

Post by elihu »

newacct583 wrote: post #402
elihu wrote: post #401

Earlier quoted context omitted.

I suppose that's true, but kind of beside the point. The "official" price isn't really the price if any random person can't actually buy shares at that price. (Kind of like the Raspberry pi zero that can buy for $10 or so but you can't actually buy in volume at that price.) And supposing that you're sitting on 101% of the stock and people are still buying and selling, then what in the world is going on? (I don't know…

> If the people who hold most of the stock aren't willing to sell for less than a certain amount, then that's what the shorts will have to pay But that presupposes not that WSB was big enough to trigger a short squeeze (something that everyone accepts), but that they are big enough to hold the bulk of the capitalization of (at this moment) a $18B company. Needless to say they aren't remotely that big. This isn't happ…

Sure, there's more going on than just some WSB people holding stock. Probably a lot of other people have gotten onto the bandwagon, and maybe even some hedge funds or bored billionaires. And some of the high prices lately may have more to do with short sellers covering their positions than retail investors buying at those prices.

At the same time, it's worth noting that a lot of the WSB people got in early, and were able to buy a lot more shares at a lower price. That WSB could scrape together 1.8 billion when the stock was worth one tenth what it is now is still a bit far-fetched, but closer to the realm of possibility than 18 billion.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#406

Post by lc3sim »

nrmitchi wrote: post #315
lc3sim wrote: post #305

Earlier quoted context omitted.

I am not a financial advisor and this is not financial advice. I understand your response. There is one assumption that I think marks the difference between what side of the line one falls on. My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying. One might also assume that Melvin would not be dumb enough to short over 100% of GME stock. In exerci…

> I am not a financial advisor and this is not financial advice. Okay as soon as I read this I knew I shouldn't be expecting much, but... > My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying. This really isn't just lying a little bit , and isn't just a large risk . If you're running a fund like this, purposely making materially false statements…

> Okay as soon as I read this I knew I shouldn't be expecting much, but...

There is no need for you to get feisty over an comment that I (who seems like someone you disagree with) posted on the internet. Perhaps this is a point where you can self-reflect on how you articulate yourself.

Please understand that I don't care anymore. I don't care if you think I'm out of line. Yes, I read and understand your comment. I just don't engage with people that have bad communication skills.

I am only writing this in an attempt to make you a better person.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#407

Post by orestarod »

UncleMeat wrote: post #371
pcthrowaway wrote: post #359

Earlier quoted context omitted.

Well considering it's currently at 7.8 million subscribers, and a week ago it was 2.1 million subscribers [1] I'd love to know how 4 million redditors subscribed without opening reddit [1] https://web.archive.org/web/20210125060034/https://www.reddi...

Ok that's fair. New subs does mess with my estimate. I'll still insist that only a small minority actually purchased GME.

Don't know about that. I have never in my life bothered with stocks, and now I bought a share with all the spare money I could afford to lose. Me, a complete outsider. I can say at least 1M of the members hold stocks. And probably many more. I only got in the sub to watch how things unfold, intent on buying from the beginning. I don't think anyone would bother following WSB just for the giggles. Most of the posts are for the sole purpose of reaffirming our collective choice of holding GME.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#408

Post by orestarod »

sekai wrote: post #366
bugzz wrote: post #238

Earlier quoted context omitted.

2-3 weeks ago when share prices were around $17, GME had a market cap of less than 1.2B. WSB has 7.6 million users now, but I assume it went up a lot recently. Say 2 million of them bought some GME. To buy 50% of the shares a couple weeks ago it would have only taken $296 each. So they could ABSOLUTELY get prices moving significantly. Now of course lots more people have jumped on now. But that 20B volume number is af…

> WSB has 7.6 million users I keep seeing this metric everywhere, it's irrelevant, $GME became a meme stock, people are joining the sub to check out the fun, not to invest. Max 1% of them are really investing anything of value.

Cannot confirm, I joined to watch things to eventually buy, and I bought. I never bothered with stocks before. I also know many like me, in my real life circle, who did the same. A good chunk of WSB holds GME, is my estimate.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#409

Post by elif »

ajross wrote: post #382
elif wrote: post #378

Earlier quoted context omitted.

You don't think it is relevant in a discussion about deceptive paid primetime television marketing, that the company in question has the highest documented rate of deceptive paid primetime marketing?

OK, you're just misunderstanding. "Primetime Television" is a marketing term that refers to the traditional TV network programming scheduled between 8-10pm. This is where they put the sitcoms and dramas and reality shows. And "Product Placement" refers not to advertising per se, but paid placement of retail products (e.g. cars, sodas, whatever) into the scenes in the fiction, or to appear as prizes, etc... It doesn't…

You say i'm alleging the opposite of your argument, while I'm merely commentating about the observable ethics of the company in question.

I'm not straw

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#410

Post by tpmx »

dang wrote: post #395
tpmx wrote: post #81

Earlier quoted context omitted.

> %53 What's with that weird way of writing a percentage numeric? Some weird "i'm an insider, trust me" signalling?

Please don't take HN on offtopic flamewar tangents and certainly please don't perpetuate them, as you did below. That's not cool. https://news.ycombinator.com/newsguidelines.html

I'm sorry. The tangent was a sincere belief in this crazy GME situation. Perpetuating the tangent was just stupid.
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