AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains • Hacker News Board

Re: AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

#211

Post by cwyers » Wed, Feb 03, 2021, 7:24 PM UTC

fbelzile wrote: post #193

toolz wrote: post #144

Earlier quoted context omitted.

I find that most people don't realize they are always betting. Keeping your wealth tucked under your mattress in USD is still a bet. Everything is a bet and everything has different risk profiles. If someone sees that shorts in GME are over leveraged, well in hindsight they were absolutely right to buy in to this "gambling". I find the most irrational actors with regards to investing are the people who only do "safe"…

This was me. I lost money on GME betting on the fact that more shorted shares still had to be covered. The short squeeze wasn't a complete failure. It happened, it was just much smaller than many predicted. I still wonder what would've happened if Robinhood didn't shut off demand by preventing people from buying shares. My investment thesis didn't foresee this happening. I don't think anyone did. The other large part…

Can I suggest that if you couldn't foresee the chance of a trading halt in a massive short squeeze like this, then your risk modelling wasn't as sophisticated as you seem to think it was?

Re: AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

#212

Post by ditonal » Wed, Feb 03, 2021, 7:24 PM UTC

dougmwne wrote: post #85

Watching HN get caught up in this Gamestop bubble over the past week has been eye-opening to me about the community. The kind of information being spread around WSB was fully ridiculous. Wild conspiracy theories, financial advice with no basis in reality, astroturfing, and mob behavior. There has been an incredible amount of bleed-over between the garbage I've seen posted on WSB and the things posted in these HN thre…

Conspiracies happen so frequently on Wall St that “conspiracy theories” should be closer to a priori assumption than irrational fringe ideas.

Were people skeptical of Moodys A+ ratings of subprime mortgages conspiracy theorists? And that’s far from the only example of financial fraud . There’s a lot of money at stake.

Citadel is most of Robinhoods revenue, they put money on the opposite side of the trade via Melvin, and Robinhoods decision to restrict trading benefited the short position of the trade . The stock markets been around for over a century and online trading around over 20 years, with many volatile stocks and bubbles, yet restricting trading in one direction has no precedent. The conflict of interest Robinhood had is crystal clear and at a minimum calls for a deep investigation. Accepting their PR, which has barely explained anything is about as far from rational as possible. They described the collateral requirements as “opaque” and “pretty technical” with no real clarity, and never explained other details such as why they restricted fully cleared non-margin cash accounts or why they removed tickets from their search bars.

I’m not saying with any confidence there was foul play, but there’s more than enough conflict of interest and unprecedented behavior to call for an investigation far more than what we’re getting. Especially with regards to who was buying when so many retail traders were unable to.

Financial markets should be open and transparent. They are not supposed to be casinos with arbitrary hedge funds playing the house. To resign yourself to that idea is far more irrational than calling for openness and investigation into the many unanswered questions around what happened.

Re: AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

#213

Post by betterunix2 » Wed, Feb 03, 2021, 7:24 PM UTC

scarmig wrote: post #47

PragmaticPulp wrote: post #2

I expect a lot of Redditors will be very disappointed when they realize just how much money hedge funds made, on average, out of this episode. The WSB moderators really did everyone a disservice by letting obvious misinformation flood the subreddit. It’s hard to view the later stages of the GameStop phenomenon as anything other than a Reddit-fueled pump and dump scheme.

I wouldn't be surprised if hedge funds overall made a profit and retail investors overall made a loss in the GME fiasco. More likely than not, even. My pet conspiracy theory is that WSB is just a cat's paw for another hedge fund that saw an opportunity to make money and wanted to try out a new approach.

It is a near certainty that hedge funds fleeced retail investors who bought GME above $100/share. The real problem with WSB is not the people who post there, it is the large crowd of unsophisticated lurkers who overestimate their own knowledge and abilities. The media did not help by hyping this story and making it sound like "Wall St." was terrified by a mob of Redditors. Two hedge funds lost some money, but as many have pointed out, those funds will probably still turn a profit on the year. Meanwhile, a bunch of hedge funds, algos, and prop traders are raking in cash from the spike in volatility, and a bunch of HFTs took advantage of the spike in volume. I expect a small bump in sports car and yacht sales in the NYC region as a bunch of "Wall St. bros" spend the giant bonuses they are taking home from this whole episode.

As to the scam aspect, I give it a 50/50 chance that someone saw an opportunity to pump-and-dump some symbols with very high short interest. I doubt it was a hedge fund, it was probably an individual, probably someone living outside the reach of US law enforcement. The alternative is that a bunch of idiots actually came up with the idea that they could take on "Wall St." and managed to trigger a short squeeze, many of whom have yet to realize that the party's over.

Re: AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

#214

Post by dcolkitt » Wed, Feb 03, 2021, 7:24 PM UTC

notJim wrote: post #172

dcolkitt wrote: post #92

Earlier quoted context omitted.

The difference is the HN hype train might cause you some headaches from picking an immature tech stack. Whereas the WSB echo chamber has literally ruined thousands of people's lives and retirements.

Do you have any proof of this? From what I've seen people are mostly aware they're gambling (it's in the name after all.)

I think you see that pattern in a lot of subcultures that glorify destructive and reckless behavior. Look at hard drug subreddits, like /r/stims, or binge drinking fraternity culture, or that Facebook group where everyone points loaded guns at their crotch.

Participants will willingly acknowledge that the behavior is destructive or reckless. But they do so in a way that glorifies it. "Woah, I totally blacked out again last night. So crazy. High Five". When the most self-destructive member receives the most attention that acts as a pretty powerful incentive.

Humans are social animals. And the way most of us avoid bad decisions day-to-day is to look at our peer group and think "would this be something that a normal, respectable person would do". When you create a subculture filled with self-destructive people, it normalizes and encourages self-destructive behavior, even when people rationally know they shouldn't be engaging in it.

Re: AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

#215

Post by pfortuny » Wed, Feb 03, 2021, 7:24 PM UTC

nprz wrote: post #188

kortilla wrote: post #147

Earlier quoted context omitted.

> Here is a truism for you all: In any casino Wall Street is not a casino in this regard. There is no “house edge”.

I'm gonna go out on a limb here and suggest the group with teams of PhDs writing high frequency trading algorithms might have an advantage over a dude with a Robinhood account.

They have more information but time and again, they have indeed lost. Sometimes some of them, everything. They are not “the house”.

Re: AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

#216

Post by compiler-guy » Wed, Feb 03, 2021, 7:26 PM UTC

fbelzile wrote: post #193

toolz wrote: post #144

Earlier quoted context omitted.

I find that most people don't realize they are always betting. Keeping your wealth tucked under your mattress in USD is still a bet. Everything is a bet and everything has different risk profiles. If someone sees that shorts in GME are over leveraged, well in hindsight they were absolutely right to buy in to this "gambling". I find the most irrational actors with regards to investing are the people who only do "safe"…

This was me. I lost money on GME betting on the fact that more shorted shares still had to be covered. The short squeeze wasn't a complete failure. It happened, it was just much smaller than many predicted. I still wonder what would've happened if Robinhood didn't shut off demand by preventing people from buying shares. My investment thesis didn't foresee this happening. I don't think anyone did. The other large part…

That a small-time broker (as is Robin Hood) wouldn't have enough capital to cover a giant short-squeeze was entirely foreseeable by people who understand what it takes to successfully execute one.

Big players know that when they plan big market moves, they need to notify their brokers in advance, so the broker can prepare.

What we had here was a bunch of retail investors who are somewhat more informed than the average retail investor, but not well versed in the nuts and bolts of the maneuver they were involved in, and therefore the executed it without sufficient planning.

Re: AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

#217

Post by clairity » Wed, Feb 03, 2021, 7:26 PM UTC

tmpz22 wrote: post #179

clairity wrote: post #151

Earlier quoted context omitted.

> "You don’t hyper rationalize a public health crisis like you would a line of python code." when lives are at stake is exactly when we should 'hyper-rationalize' (which doesn't mean don't consider emotion at all). we don't build bridges, go into war, or write aircraft control software thinking we'll wing it.

Apologies I made an edit to my comment before yours posted that’s bad etiquette on my part. Hyper rationalization means following a technically correct path that misses the Forrest for the trees, in this case you could get away without wearing a mask while running through a park and maintaining a ten foot buffer, but you shouldn’t because it signals to others that it’s ok not to wear a mask and makes it less likely f…

> "...that it’s ok not to wear a mask and makes it less likely for others to conform if there is a list of semi exceptions."

by your definition, that's hyper-rationalized (missing forest for trees) and exactly the kind of othering belief being highlighting: let's ignore actual risks and shared goals, and instead try to outwit those damn fools that are surely out there trying to kill us.

masks worn outside are largely for signaling (as your example admits) and self-mollification rather than infection reduction. it's unlikely that outdoor mask-wearing has reduced spread meaningfully or measurably.

but outdoor mask-wearing in turn gives us permission to not wear them at home or at private gatherings, because we've already 'done our part' against those selfish others, and this lowering of the guard in private does measurably increase spread. if you're really concerned about spread, you'd focus solely on minimizing close (15min) shared breathing indoors, not showing others outdoors how conformant and fearful you might be.

Re: AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

#218

Post by mlyle » Wed, Feb 03, 2021, 7:26 PM UTC

nytesky wrote: post #175

toolz wrote: post #144

Earlier quoted context omitted.

I find that most people don't realize they are always betting. Keeping your wealth tucked under your mattress in USD is still a bet. Everything is a bet and everything has different risk profiles. If someone sees that shorts in GME are over leveraged, well in hindsight they were absolutely right to buy in to this "gambling". I find the most irrational actors with regards to investing are the people who only do "safe"…

I remember for me during 2008 I finally understood how NOTHING has intrinsic value, it’s always about what others perceive in the market. Real estate, dollars, gold, stock all arbitrary in a way I never considered. All built on sand.

Some things have utility distinct from what people are willing to pay for them.

My cheeseburger with one bite out of it has a market value of 0.

Re: AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

#219

Post by rightbyte » Wed, Feb 03, 2021, 7:26 PM UTC

jimbokun wrote: post #191

nytesky wrote: post #175

Earlier quoted context omitted.

I remember for me during 2008 I finally understood how NOTHING has intrinsic value, it’s always about what others perceive in the market. Real estate, dollars, gold, stock all arbitrary in a way I never considered. All built on sand.

With real estate, you may have a place to sleep even if it's market value goes to 0.

Ye many things has intrisic value. If your house is worth (about) zero it is probably on some cliff about to fall into the sea or there is posion in the ground, though.

Re: AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

#220

Post by cwyers » Wed, Feb 03, 2021, 7:26 PM UTC

jb775 wrote: post #177

dougmwne wrote: post #85

Watching HN get caught up in this Gamestop bubble over the past week has been eye-opening to me about the community. The kind of information being spread around WSB was fully ridiculous. Wild conspiracy theories, financial advice with no basis in reality, astroturfing, and mob behavior. There has been an incredible amount of bleed-over between the garbage I've seen posted on WSB and the things posted in these HN thre…

Hindsight is 20/20. Being the guy on the sidelines saying "I knew this was gonna happen" after the fact never adds any value. It's you trying to make yourself feel special. If you were so confident in your predictions, show me where you shorted the stock and made a bunch of money off it going down. If not, please stfu with your grandmom truisms.

Uh, plenty of people knew this was gonna happen with the benefit of foresight. The problem is that short-selling is a risky position because your losses are unbounded, which means that 1) it's harder to do than taking a long position, and 2) it's possible for even a correct short bet to lose money due to volatility.