GameStop Is Rage Against the Financial Machine • Hacker News Board

Re: GameStop Is Rage Against the Financial Machine

#991

Post by eindiran » Thu, Jan 28, 2021, 9:48 PM UTC

delaaxe wrote: post #742

eindiran wrote: post #552

Earlier quoted context omitted.

But behind the algorithm there is a human trader with motivations and market knowledge who is commanding it; the fact that the buyer is, in some technical sense, an algorithm doesn't seem very relevant to me.

Market makers just profit off of the bid ask spread, without “motivations” or “market knowledge”

Arbitraging the bid-ask spread is tied to both halves: motivation - desire to make a profit, market knowledge - knowing when there are arbitrage opportunities (asks smaller than bids).

Re: GameStop Is Rage Against the Financial Machine

#992

Post by FabHK » Fri, Jan 29, 2021, 2:13 AM UTC

rory wrote: post #981

FabHK wrote: post #838

Earlier quoted context omitted.

I'd say that it's always been about the long run; however, with (real) rates around, say, 5%, as in the 90s, what matters for the present value is mostly within the next 20 years. With rates about 1%, what happens after the next 50 years still determines more than half of your PV.

Do investors really think they can predict the income of a company in the 2070s with ANY degree of accuracy? None of the top five companies by market cap even existed 50 years ago.

That's my point - with high ("normal") interest rates, your horizon becomes shorter, what happens in 30+ years doesn't really matter, and the fundamental value of a share should become visible more quickly, so the uncertainty now is lower. With rates near zero, what happens in 50 years still matters, so who knows what the share should be worth today?

Re: GameStop Is Rage Against the Financial Machine

#993

Post by 99_00 » Fri, Jan 29, 2021, 4:24 AM UTC

edgyquant wrote: post #956

99_00 wrote: post #400

Earlier quoted context omitted.

The problem I have isn't that a hedge fund screwed up. It isn't even with WSB. The problem I have is that this seems to be another red flag that we are in the late stages of a bull market. The point where, at least according to folk wisdom, the least sophisticated investors enthusiastically enter the market.

We have been for at least two years, the cycle may be changing. Even if there is a crash it just means it’s time to buy.

Especially if there is a crash.

Re: GameStop Is Rage Against the Financial Machine

#994

Post by Thorrez » Fri, Jan 29, 2021, 5:53 AM UTC

pbalau wrote: post #942

Thorrez wrote: post #868

Earlier quoted context omitted.

I can't answer most of your questions, but I think I can answer the voting part. There are 100 shares, Alice owns all of them, but loans them all to Bob so Bob can short them. Bob sells all of them to Charlie. So Alice owns 100 shares and Charlie owns 100 shares even though only 100 real shares exist. (Bob owns -100 shares.) But Alice can't use her shares for voting because she loaned them out, only Charlie can vote.

That's not correct. Alice does not own anymore the shares, only Charlie does. There are 2 steps involved: 1) shares borrowing 2) shares selling Shares borrowing: Bob will borrow 100 shares from Alice. Bob will have to give Alice a collateral, valued at 100% value of the shares + a percentage. Bob also has to pay a borrowing fee to Alice, daily. At this point, Bob owns the shares, not Alice. Alice does not receive div…

I think my description was pretty close to this, just a bit off in the terminology.

Re: GameStop Is Rage Against the Financial Machine

#995

Post by pietrovismara » Fri, Jan 29, 2021, 10:11 AM UTC

ta1234567890 wrote: post #384

This is a great example of how the stock market is not about fundamentals, just like Bitcoin, it’s all about popularity and perception. In the end, people don’t care if the “stock is really worth” the price, they only care if themselves or someone else are willing to pay the price, nothing else really matters.

The stock market, or Astrology for men.

Re: GameStop Is Rage Against the Financial Machine

#996

Post by ric2b » Fri, Jan 29, 2021, 12:54 PM UTC

jariel wrote: post #987

throw0101a wrote: post #986

Earlier quoted context omitted.

Just because GME-as-ownership-unit may be overvalued, does not necessarily mean it is overvalued for GME-as-contract-closure-instrument. If you want to focus on GME-as-ownership-unit, as a share in a retail business, that's perfectly valid. But that's not the only perspective.

That's actually a good point, at the same time, in the bigger picture, it's market chaos and nobody wants it. Basically, mobs are fighting against hedge funds using random companies as battle grounds - the markets are there to support those companies, not destroy them. So what we are seeing is kind of an inflection point that the system wants to tamp down. It's actually pretty distressing to see how many intelligent…

> the markets are there to support those companies, not destroy them.

The shorts were the ones destroying Gamestop, though.

Re: GameStop Is Rage Against the Financial Machine

#997

Post by ric2b » Fri, Jan 29, 2021, 1:10 PM UTC

polote wrote: post #324

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…

> Reddit traders that are making a killing right now How can you know that ? Some of them are making a killing, but how can you be sure it is the majority of them ? It is easy to say that some hedge founds made bad bet, but I strongly think that some other hedge founds were winners. These people are professionals at making money from such events !

> Some of them are making a killing, but how can you be sure it is the majority of them ?

Because they're mostly opening long positions (buying and holding the stock) and the price is way up?

Re: GameStop Is Rage Against the Financial Machine

#998

Post by LBarret » Fri, Jan 29, 2021, 5:18 PM UTC

wisty wrote: post #762

SimonPStevens wrote: post #353

Earlier quoted context omitted.

While I mostly agree, it is a touch more subtle than this metaphor. Shouting fire in a crowded theatre doesn't typically cause the fire to get worse. A major newspaper breaking news of an impending bank run, does have the likelihood of actually being the thing that triggers the bank run, or maybe making it much worse.

If you shout fire in a crowded theatre, people will be crushed as they run for the exit.

It depends on how you shout. People won't stampede if they trust the leading authority, if there is credibility and competence.

Re: GameStop Is Rage Against the Financial Machine

#999

Post by pbalau » Fri, Jan 29, 2021, 5:18 PM UTC

Thorrez wrote: post #994

pbalau wrote: post #942

Earlier quoted context omitted.

That's not correct. Alice does not own anymore the shares, only Charlie does. There are 2 steps involved: 1) shares borrowing 2) shares selling Shares borrowing: Bob will borrow 100 shares from Alice. Bob will have to give Alice a collateral, valued at 100% value of the shares + a percentage. Bob also has to pay a borrowing fee to Alice, daily. At this point, Bob owns the shares, not Alice. Alice does not receive div…

I think my description was pretty close to this, just a bit off in the terminology.

No, your explanation is wrong. You said:

> So Alice owns 100 shares and Charlie owns 100 shares even though only 100 real shares exist.

which is wrong, Alice does not own any more shares.

Re: GameStop Is Rage Against the Financial Machine

#1000

Post by naveen99 » Sat, Jan 30, 2021, 12:59 PM UTC

JumpCrisscross wrote: post #539

DennisP wrote: post #369

Earlier quoted context omitted.

Yes but those aren't naked shorts. You don't get short interest in 140% of the total shares available from people hedging their holdings. That did happen with GME and it's what the r/WSB people picked up on.

> You don't get short interest in 140% of the total shares available from people hedging their holdings Of course you do. I buy a share. I loan it to you. You sell it short. That buyer pledges it to a third person. Et cetera .

The person who borrowed sold naked then. Covered would be if you they a protective call option no ?