GameStop Is Rage Against the Financial Machine • Hacker News Board

Re: GameStop Is Rage Against the Financial Machine

#491

Post by akgoel » Wed, Jan 27, 2021, 10:55 PM UTC

oars wrote: post #461

restingrobot wrote: post #440

Earlier quoted context omitted.

You're forgetting the stock is 125% over shorted. There literally isn't enough stock for shorts to cover their current positions. That's why there is potential for infinite, (huge) gains as long as everyone holds.

As someone who's new to this world of stock trading but now understands what a "short" is, could you elaborate on this? How is it possible for a stock to be 125% over shorted? What does this mean?

If you short, you are borrowing a stock from Alice, and selling it to Bob, hoping to buy it back later from Bob at a lower price. But, you can then borrow again from Bob and sell to Charles. Ad infinitum.

Re: GameStop Is Rage Against the Financial Machine

#492

Post by lordnacho » Wed, Jan 27, 2021, 10:57 PM UTC

SomewhatLikely wrote: post #435

wesammikhail wrote: post #391

Earlier quoted context omitted.

You´re right in the short term. But in the long term the hope is that things average out and true value emerges as a function of countless transactions over years and years. Markets are a value ascribing heuristic machine. There is nothing about them that can deterministically point to objective value. However, the idea is that over a longer period of time, an approximation of true value emerges though wisdom of the…

I would say it's more than a hope. Any trader whose strategy is closer to optimal will have larger profits over time and come to own a larger and larger fraction of the market. Though saying that out loud makes me realize optimal doesn't have to mean buying and selling according to true value. Optimal would in fact be predicting the behavior of other participants and trading off those predictions. I still think certa…

> I still think certain events ground value though: bankruptcies, mergers, and dividends attach a real cost/gain to holding a stock.

Those things are themselves the product of the market price, it's not a one way street. This is what Soros' reflexivity is about.

Re: GameStop Is Rage Against the Financial Machine

#493

Post by HNfriend234 » Wed, Jan 27, 2021, 10:58 PM UTC

xorx wrote: post #117

cwhiz wrote: post #68

I am loving every minute of this. The "professionals" gamble on the market all the time, front run, high frequency trade, and relentless tactics to get rich at the expense of the "retail" investors. Now they are upset that apps like Robinhood has provided unprecedented access to the markets. Their exclusive access to insane gambling nonsense is being torn down in real time. If Wall St can gamble and cause a global fi…

Yes, but retail is going to get destroyed in the end. The power elite always get what they want. Right now there appear to be curbs on GME and AMC buy orders for TD Ameritrade and Schwab customers. If you have to pull strings with your drinking buddy from Dartmouth to blow up a bunch of propertyless zoomers in order to prevent a margin call on the account you've leveraged to buy your house in the Hamptons, then that'…

Also they apparently have the "biden economic team" looking into the situation so it does go to show that lobbying dollars allows you to get your concerns addressed rather quickly.

Re: GameStop Is Rage Against the Financial Machine

#494

Post by imtringued » Wed, Jan 27, 2021, 10:58 PM UTC

admax88q wrote: post #315

AdmiralAsshat wrote: post #20

> These points doubtless make me appear to be a complacent shill for the financial industry, talking down to the rubes. For the record, I’m still angry about the way workers were ripped off in Britain more than three decades ago, and about the way the little guy ended up bearing the brunt for the financial implosions of 2000 and 2008. But it looks horribly to me as though the same thing is going to happen again — and…

> The "little guy" refers to the Reddit traders that are making a killing right now, with the expectation that eventually the stock price will crash again. The reddit traders are only making a killing if they're selling these inflated positions. At some point somebody will be left holding the bag, odds are it will be a bunch of people from wallstreetbets and other retail investors that are late to the party. There's…

If anyone forgets to sell their shares that just means the short sellers will be left hanging even longer.

Re: GameStop Is Rage Against the Financial Machine

#495

Post by drited » Wed, Jan 27, 2021, 10:58 PM UTC

restingrobot wrote: post #440

Traster wrote: post #347

Earlier quoted context omitted.

The second that the shorts have covered the price isn't going to drop to $90, it's going to drop back to $20 and most of the WSBers who were holding out for $2000 will lose their shirts. The shorts are going to lose, no doubt. But once they've lost, the stock price is probably $20. A lot of WSBers are going to be holding stock at that point, and possibly on margin. And that stock is going to be a crappy retail stock.…

You're forgetting the stock is 125% over shorted. There literally isn't enough stock for shorts to cover their current positions. That's why there is potential for infinite, (huge) gains as long as everyone holds.

The company could issue new stock (to get a lifeline of cash from inflated price)

I know someone who tried to convince VW management to do that during the Porche/VW squeeze. They didn't but I see no reason why another management team wouldn't act differently.

Re: GameStop Is Rage Against the Financial Machine

#496

Post by admax88q » Wed, Jan 27, 2021, 10:58 PM UTC

bee_rider wrote: post #458

admax88q wrote: post #322

Earlier quoted context omitted.

And if it doesn't fall you lose money. You can't just reduce risk without also reducing gains.

But in the case of something like a pension, reducing risk is often the goal, right?

The goal is to make enough money for pensioners to live off.

If the goal was to reduce risk then pensions would be better off being held in cash. But pension funds dont have enough cash to meet needs so they have to grow.

Re: GameStop Is Rage Against the Financial Machine

#497

Post by [deleted] » Wed, Jan 27, 2021, 11:00 PM UTC

TheCoelacanth wrote: post #228

cwhiz wrote: post #209

Earlier quoted context omitted.

How can you get to a point where 140% of the shares are shorted without naked shorts?

A owns 1 share (the only share in existence for simplicity) and lends it to B. B short sells to C. C lends 1 share to D. D short sells. 200% of outstanding shares are shorted.

[deleted]

Re: GameStop Is Rage Against the Financial Machine

#498

Post by drited » Wed, Jan 27, 2021, 11:00 PM UTC

nl wrote: post #471

restingrobot wrote: post #440

Earlier quoted context omitted.

You're forgetting the stock is 125% over shorted. There literally isn't enough stock for shorts to cover their current positions. That's why there is potential for infinite, (huge) gains as long as everyone holds.

An unrealized gain (ie, "everyone holding") isn't actually money though. The sensible people will take their (massive) profits, and those who believe the "as long as everyone holds" rhetoric will be left with losses, probably on margin.

Yes and if it gaps down their broker won't be able to sell fast enough to cover the margin loan. The broker can then usually come after the person's other assets (ie traders can lose more than the cash they transferred to the account in the first place).

Re: GameStop Is Rage Against the Financial Machine

#499

Post by imtringued » Wed, Jan 27, 2021, 11:01 PM UTC

ahepp wrote: post #445

swiley wrote: post #432

Earlier quoted context omitted.

They won't lose their shirts, just the beer money they spent on a meme. Plenty of them really don't care.

you may be overestimating the responsibility of the people involved I remember reading about people mortgaging their house to get into bitcoin, etc. I don't know how the coming days will play out, but I'm quite confident when this is all over we'll be treated to stories in the NYT about how someone lost their life savings, alongside calls for regulation.

That subreddit was built around losing money on bad trades.

Re: GameStop Is Rage Against the Financial Machine

#500

Post by paulpauper » Wed, Jan 27, 2021, 11:01 PM UTC

throwaways885 wrote: post #490

paulpauper wrote: post #377

Earlier quoted context omitted.

I call them 'professional morons'--high-profile who have a lot of status and money and clout in various tech and investment fields despite being sorta dim and banal

Rossmann is hardly rich. His whole brand is fighting Apple for right-to-repair legislation as well as a bunch of pro small business stuff. What exactly is wrong with this opinion on the oppressive covid lockdowns?

I was not referring to him specifically