I know who will win.
Roaring Kitty to testify on GameStop alongside hedge fund managers
121–130 of 216 posts
Re: Roaring Kitty to testify on GameStop alongside hedge fund managers
#122What did Gill do that was illegal?
https://www.nytimes.com/2021/02/03/business/roaring-kitty-ga...
He was a securities broker registered with FINRA. FINRA representatives have a whole lot of regulations placed on them.
To me, the main things he did wrong were, not disclosing that he is a securities professional on his channel (as opposed to just, some guy), and not disclosing his youtube channel to his employer.
> MassMutual, officially known as Massachusetts Mutual Life Insurance Company, also informed regulators that Mr. Gill gave his notice on Jan. 21 but was technically still an employee of the firm and its securities and investment advisory arm, MML Investors Services, through Jan. 28 — the week when GameStop shares surged the most.
Re: Roaring Kitty to testify on GameStop alongside hedge fund managers
#123Earlier quoted context omitted.
Institutional investors did do what people suspect wsb of doing. Retail investors where net sellers of GME during this event. The short squeeze happened because other institional investors went in hard under cover of the WSB memes. https://www.cnbc.com/2021/02/05/gamestop-mania-may-not-have-...
> Institutional investors did do what people suspect wsb of doing. Buying based on observing market conditions or seeing the posts in reddit wouldn’t have been questionably legal afaik. Only actively coordinating e.g. through posts on Reddit or phone calls or a Smoky back room could be argued to be market manipulation I think? If they were posting in Reddit to feed the squeeze that’s when stuff may get problematic.
The sentiment on WSB from what I can tell is that they can’t coordinate which thread to sticky, let alone which stock to buy. My impression of observing it for a couple of weeks is that this is true. They aren’t capable of truly coordinating anything.
Best I can tell, Roaring Kitty/Deepfuckingvalue basically had been buying more and more GME stock for like a year and every month showed screenshots to prove this saying a short squeeze was coming. Eventually in January something happened and everyone else was like “he might actually be right, I’m buying”. Then the news picked it up and it hit a positive feedback loop. Robinhood stopping buy orders put a wet blanket on things and after they lifted the restrictions enough time had passed that the frenzy slowed down. The short squeeze might still happen but lots of WSB participants bought at $300+ and I suspect will never recover that loss. But also because of this specific crowd it seems a good chunk of them are not selling on the idea that if you buy at $300 and sell at $50, you definitely lose. And if you hold the stock it might some day rise back to above $300-400. Mark Cuban did an AMA there where he basically reaffirmed this point of view which they took and ran with.
Part of this behavior is that WSB wasn’t really focused on going long on stocks until now. They mostly traded options which have specific deadlines. They simply aren’t used to the idea of an open ended investment. I saw people talking about how GME is a solid company and how they believe it’ll transition to digital successfully. How it might grow from fundamentals, etc. Nevermind their EPS, or the fact that their valuation currently sits at 10x what it was with no justification as to how their fundamentals might have changed to account for this. The difference with this crowd is that they for the most part acknowledge that this is gambling and that you are likely to lose all the money you invest so don’t worry about losing it. They also acknowledge that they don’t know what they are doing vs pretending like this is all based on research, experience, or education. Makes them a sort of dangerous crowd, especially as some there do accumulate a good amount of wealth, IMO.
Re: Roaring Kitty to testify on GameStop alongside hedge fund managers
#124Earlier quoted context omitted.
> ...applying the value investing style. I thought this style is pretty much dead, because market efficiency has increased compared to the times when Benjamin Graham analysed securities by hand Do you mean the manual part has gone out of style or fundamental analysis altogether? My knowledge on finance/accounting is extremely limited and after watching some of his videos back in November, I took for granted that this…
What I mean is this flowchart: use a financial model like Discounted Cash Flow for finding companies that are "objectively" severely undervalued -> buy them -> wait X years until they reach their "fair price" that you calculated at the start -> sell for a profit Aswath Damodaran has some online academic content on valuation in that style. The main problem nowadays is the "severely undervalued" part. People in general…
No that model of investing is still very much alive. It's the basis of every long/short equity hedge fund. The successful ones do it in a more sophisticated way with some additional quantitative and data-driven analysis. But it's essentially the same model.
Re: Roaring Kitty to testify on GameStop alongside hedge fund managers
#125Earlier quoted context omitted.
If they required 100% collateral, why did that mean Robinhood stopped trades? Why couldn't they allow trades with 100% settled funds?
I highly recommend https://youtu.be/4RS4JIEVyXM?t=60 -- I didn't understand any of this myself till watching that. (Still don't! But I'm less confused.) My understanding is that the clearing firm informs everyone "Hey, we no longer support opening positions in three stocks specifically: GameStop, AMC, and KOSS." Literally everyone, including Robinhood, was forced to only allow people to sell GME. Somehow Fidelity was…
There's more than one clearing firm in the market. The more money the clearing firm has, the more likely it'll be able to continue trading highly volatile stocks at high volume. Fidelity, as a huge financial firm that's been around for a while, had the assets to afford to keep trading it (and/or their customers weren't trading enough to put strain on them), robinhood (which has its own, small, clearing firm) couldn't, simple as that.
Re: Roaring Kitty to testify on GameStop alongside hedge fund managers
#126Earlier quoted context omitted.
I’m not sure I follow. People/governments can use crypto and continue paying taxes, I don’t see the connection here.
One of the main features of crypto is that it enables tax evasion. No need to worry about carrying suitcases of cash, gold or jewels onto an airliner anymore and getting caught when you want to move money across a border without a recorded transaction. Supposedly that’s one reason it’s big in China since miners can generate coins to move wealth outside of the country more easily than moving their Chinese fiat.
No, that supposition is absolutely wrong. You can lose your head for that in China, and Bitcoin is very trackable. Nobody is doing that.
Re: Roaring Kitty to testify on GameStop alongside hedge fund managers
#127Earlier quoted context omitted.
Not quite right. There's the DTC (which carries out 95% of the trades), then there's clearing houses (sometimes a seperate entity, sometimes part of the broker: the larger ones all do their own clearing. e.g. Robinhood has their own clearing house), then there's the brokers, then the traders. The DTC said 'we need 100% collateral on these trades' (probably because they viewed there being a significant risk that someo…
The Wikipedia article on DTC isn't very informative What is the relationship between the NYSE and DTC?
The NYSE is one of the stock market centers in the US (yes, there's more than one). It's a place where you (usually virtually these days) go to agree with someone on the specifics of the trade - buy 100x GME at $420. The DTC is involved with what happens next - actually exchanging the stock and cash. In particular, they keep the records of which brokers hold how many shares of which stocks.
Re: Roaring Kitty to testify on GameStop alongside hedge fund managers
#128Earlier quoted context omitted.
They didn't change the rules of the game. The volatility and risk changed, thus the collateral requirements changed. Note: I am not a financial professional. I'm not sure if anyone from wsb should be prosecuted; but I will say that if another hedge fund had tried to do what wsb did, it would have been clearly and unambiguously illegal market manipulation. I do think it is quite likely there were some financial profes…
There are formulaic requirements based on volatility and risk, but those aren't specific to one stock. The clearing exchange exercised discretion in applying a new collateral requirement, and in doing so put its thumb on the scale.
Specifically the “Margin Liquidity Adjustment Charge”.
Re: Roaring Kitty to testify on GameStop alongside hedge fund managers
#129Earlier quoted context omitted.
> Institutional investors did do what people suspect wsb of doing. Buying based on observing market conditions or seeing the posts in reddit wouldn’t have been questionably legal afaik. Only actively coordinating e.g. through posts on Reddit or phone calls or a Smoky back room could be argued to be market manipulation I think? If they were posting in Reddit to feed the squeeze that’s when stuff may get problematic.
The sentiment on WSB from what I can tell is that they can’t coordinate which thread to sticky, let alone which stock to buy. My impression of observing it for a couple of weeks is that this is true. They aren’t capable of truly coordinating anything. Best I can tell, Roaring Kitty/Deepfuckingvalue basically had been buying more and more GME stock for like a year and every month showed screenshots to prove this sayin…
But also because of this specific crowd it seems a good chunk of them are not selling on the idea that if you buy at $300 and sell at $50, you definitely lose.
So close! You're almost completely correct, but remember that a loss is considered a win on wsb, because you get to post loss porn. Can't spell trader without retard.
https://www.reddit.com/r/wallstreetbets/comments/ljde34/rip/
Your comment is excellent. But I just wanted to chime in with a "yes, but remember that they don't take themselves very seriously" type reply. It's necessary for preservation of their culture. People who act like they know a thing or two tend to get immediately jumped on, which I found quite refreshing. "But will a gamma squeeze happen?' is usually met with "stfu and go read a book rather than drop terms you don't understand."
Which ... seems unhelpful and awful, until you realize that it preserves the important property of letting everyone feel like they can participate. You, me, anyone. And I don't really see how that's a dangerous group; it's more like a virtualized casino meme factory.
Re: Roaring Kitty to testify on GameStop alongside hedge fund managers
#130Older RoaringKitty YT spreadsheet videos (before he became all about GME and before much of anyone watched his streams) are interesting to watch for a person casually interested in finance. They are very nerdy in discussing his approach to investing, tools etc. and don't present any clear recipes. He had/probably still has a biggish public portfolio of stocks and seemed to base it on financial analysis applying the v…
> Please don't say Matt Levine, he's a (great) commentator not a practitioner.
He’s a former practitioner and alum of two extremely prestigious firms: Wachtell and Goldman. He definitely knows what he’s talking about.