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GameStop Is Rage Against the Financial Machine

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Re: GameStop Is Rage Against the Financial Machine

#821

Post by didibus »

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…

There's two way this can play out in the end from my understanding.

1. The Hedge funds loses their bets, and some retail investors make ton of money of it. This will happen if when the retail investors "cash out", all the money is coming from the shorters being forced to buy it back at the inflated prices.

2. The shorters will be done liquidating their loss, and now more "little guys" will buy the now inflated stock from the earlier retail investors at an inflated price wanting to "get in" on the action. This will result is something more akin to a pyramid scheme and get rich quick scheme.

Edit: Well there's a 3rd way, though seems less likely to me, which is that the new surge in stock price allows GameStop leverage to somehow become a massively profitable company that actually meets and surpassed the now "apparently" inflated stock price. In which case, all of the "little guys" will win and only the shorters will lose. I guess this is the best case scenario.

Re: GameStop Is Rage Against the Financial Machine

#822

Post by gmadsen »

gregable wrote: post #807
objektif wrote: post #794

Earlier quoted context omitted.

Market can remain irrational longer than your wallet can remain solvent or something like that.

Sure, but irrational enough not to short a $6 stock priced at $300?

just because it was held at $6, doesn't mean that is the fair market price. These Hedge funds had significant incentive to bankrupt this company. 300+ is most likely a bubble, but $50-$90 is completely reasonable looking at the fundamentals. And besides, traditional wall street fundamentals are not the end all be all of a stocks value. Tesla is living proof of that.

Re: GameStop Is Rage Against the Financial Machine

#824

Post by pishpash »

gregable wrote: post #807
objektif wrote: post #794

Earlier quoted context omitted.

Market can remain irrational longer than your wallet can remain solvent or something like that.

Sure, but irrational enough not to short a $6 stock priced at $300?

You need unknowable amounts of capital to pull this off. $300 could be $600 tomorrow (as example).

Re: GameStop Is Rage Against the Financial Machine

#826

Post by SigmundA »

adolph wrote: post #796
SigmundA wrote: post #768

Earlier quoted context omitted.

What makes no sense to me as a layman is how can you sell something you don’t own legally? If I borrow your cow and sell it that’s illegal without consent, if you give me consent to sell the cow, there is still only one cow and ownership changes hands, there are not now two cows.

Apparently there is some consent and interest payment involved. https://www.investopedia.com/ask/answers/how-does-one-make-m...

Again one cow does not become two, you just may owe two cows when there is actually only one in circulation because you sold the same one twice.

I guess the talk of creating new shares threw me off this is just IOU’s

Re: GameStop Is Rage Against the Financial Machine

#827

Post by TylerE »

gmadsen wrote: post #822
gregable wrote: post #807

Earlier quoted context omitted.

Sure, but irrational enough not to short a $6 stock priced at $300?

just because it was held at $6, doesn't mean that is the fair market price. These Hedge funds had significant incentive to bankrupt this company. 300+ is most likely a bubble, but $50-$90 is completely reasonable looking at the fundamentals. And besides, traditional wall street fundamentals are not the end all be all of a stocks value. Tesla is living proof of that.

What fundamentals?

Retail is a liability, and they're retail that's ESPECIALLY being eaten alive by online.

Re: GameStop Is Rage Against the Financial Machine

#828

Post by [deleted] »

thenanyu wrote: post #683
wolverine876 wrote: post #666

Earlier quoted context omitted.

Can you provide some factual basis for these claims? We can type out claims without foundation endlessly; the Internet demonstrates that well; what we need is real knowledge and facts.

the only thing resembling a "claim" is greater than 100% short interest on the security. This information is public https://www.marketbeat.com/stocks/NYSE/GME/short-interest/ As of this comment, it's 134%. So, 134 cows are borrowed from a base of 100.

[deleted]

Re: GameStop Is Rage Against the Financial Machine

#829

Post by Clewza313 »

phyalow wrote: post #791
dcolkitt wrote: post #711

Earlier quoted context omitted.

> A Redditor notices this. She knows that in a month's time, the hedge-fund will have to buy 200 cows, and there are only 100 available. This is a common misconception, but fundamentally wrong. Every short sell has an equal but opposite buy. Therefore every share shorted creates a new synthetic long share. Alice owns 100 shares. Bob borrows 100 shares from Alice, then short sells them to Chuck. There are now 200 shar…

You are not wrong, but you are also missing the part where risk management departments will forcibly unwind shorts of institutional investors, option gamma creating massive amounts of reflexivity and the Weaponized autism of /r/WSB and the viral network effects of its memes encouraging even more reflexivity. I have no doubt this will end in tears for investors on both sides. GME's management would be wise to issue 1-…

Except that would potentially make GME complicit in activity that regulators are already making threatening "market manipulation" noises about. Also, if they were to issue more shares, the mere news of this would likely pop the bubble hard before they would realize any gains.

Re: GameStop Is Rage Against the Financial Machine

#830

Post by pishpash »

SigmundA wrote: post #817
CGamesPlay wrote: post #785

Earlier quoted context omitted.

Cows aren't fungible, so that analogy isn't great. The key thing to keep in mind is that here you do legally own the share you bought, except that when buying it you also signed a contract that says you will resell a share to the original owner at the original price, plus interest. This is exactly how loans from banks work. You took money from the bank and bought a house. You now do not have enough money to pay back…

Right but the bank no longer has the money in their account they let you borrow, so one dollar does not become two.

The bank has an "asset" in their account that is the debt note from you. This asset has the value of the money you borrowed, plus interest, and it can be sold for that. One dollar just became two. (If it's a mortgage it's called a mortgage-backed security which the Federal Reserve will gladly take off your hands currently. The money they pay is created from nothing.)
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