OT: Reddit Kills the Stock Market
Anyone following this stuff with GME, AMC, etc. with some thoughts?
For anyone not clued in, the gist: a Subreddit called WallStreetBets decided en masse to buy up stocks that large institutional funds have placed negative bets on (e.g. put options). Stocks like Gamestop, AMC, and others that have been hit hard by the pandemic, hedge funds shorted them, and now a bunch of folks on Robinhood and other apps are pushing trades up more than any other stock (including blue chips like Microsoft, Tesla, industrials, etc.).
January 27th, 2021 at 12:57 PM ^
It wasn't very nice of them to not tell me before they did it.
January 27th, 2021 at 1:19 PM ^
lulz
In actuality, they've been trying to attract as much attention as possible for a while. (Think "strength in numbers".) But it recently caught fire.
On a related note, I love this. Retail investors banding together* and putting the squeeze on a hedge fund is the stuff of financial legends.
*They had some assistance from a few famous people - like Chamath Palihapitiya and Elon Musk - amplifying their message.
January 27th, 2021 at 3:43 PM ^
I agree. The people have shown the ability to target two stock and inflict pain on huge hedge funds. Great work! That said, investing in $gme is absolutely crazy. Business model is dead.
January 27th, 2021 at 4:45 PM ^
Ryan Cohen (of Chewy dog food fame) would not have bought such a huge stake (15% I think) if he didn’t see the potential, & he will continue to transform the company by closing most of the retail stores, & becoming a distributor of games online & by mail. Think Amazon of the gaming world.
My 24 year old son is one of those redittors that are just killing it right now. He has made over $100k in the last few days on paper, & has already taken profits to protect his original investment.
January 27th, 2021 at 7:55 PM ^
I got in when Cohen got in... @$15. It closed today @$347.
January 27th, 2021 at 8:55 PM ^
If that’s true, get out as fast as you can. Pigs get fat, hogs get slaughtered
January 27th, 2021 at 10:07 PM ^
I'll get out when Melvin goes bankrupt.
Holding for now. The media and government is trying to do their best to screw the little guy. CNN ran an article tonight comparing day traders to Trump. As long as people hold and the shorters cannot cover their positions, I'll be just fine.
January 27th, 2021 at 7:48 PM ^
That said, investing in $gme is absolutely crazy. Business model is dead.
What's crazy is a handful multi-billionaires shorting 140% of a stock which was $2. Why do that? Only out of greed and spite would some dumb fuck do that.
I hope they end up like Mortimer and Randolph.
Fuck Citadel, Andrew Left, Melvin, et al.
January 27th, 2021 at 3:45 PM ^
How long until The Big Short 2 comes about about this event? Early release exclusively at AMC theaters and GameStop.
January 27th, 2021 at 6:42 PM ^
I guess you gotta call it the Big Short 2 but it's really the opposite, in many ways, since it's those who shorted who are getting massacred. Maybe "Taking it in the Shorts?"
January 27th, 2021 at 10:13 PM ^
I’m fine with screwing over the hedgers. These companies: AMC, GameStop, all have zero potential though. In a way, the market is being falsely inflated and is going to be way more volatile with inflation of these companies that will once again find the bottom sooner rather than later.
January 27th, 2021 at 6:04 PM ^
For anyone who wasn't paying rapt attention, this is a pretty good summary with background on short selling and options if needed:
https://arstechnica.com/gaming/2021/01/the-complete-morons-guide-to-gamestops-stock-roller-coaster/
January 27th, 2021 at 12:57 PM ^
It's crazy how much money some people have made. Some people who got in early turned $5 into $425 and some people made tens of thousands of dollars. The concept is really dumb and shows how flawed the stock market is, but it's kinda funny
January 27th, 2021 at 1:31 PM ^
You misspelled millions. An early r/wallstreetbets participant turned a few thousand dollars into $14 million.
January 27th, 2021 at 1:44 PM ^
It's way more than $14M right now at $300+ for GME.
January 27th, 2021 at 4:02 PM ^
He was at 22 million when it was 250. Gotta be around $30 million now.
January 27th, 2021 at 8:51 PM ^
$44 million at close, about $12 million of which was cash.
January 28th, 2021 at 12:51 AM ^
Tens of thousands? DFV has been showing his account daily. Today it was at just under $48M. I believe he started a year ago with $53K.
January 28th, 2021 at 2:22 AM ^
Turned two thousand into 30 on accident, simply because I spend too much time on reddit
January 27th, 2021 at 12:57 PM ^
So what does this mean for the companies and their stocks they are pumping?
January 27th, 2021 at 12:59 PM ^
Folks working there with stock options are selling.
January 27th, 2021 at 1:07 PM ^
It means the gamestop employee who tried to upsell disk undercoating and digital download warranties to grandmothers buying a present are now buying yachts.
/s
January 27th, 2021 at 2:28 PM ^
Talking to a friend of mine the past few days who has some shares. Sold a handfull yesterday when it was at 145. Today he’s nervously waiting on when to get rid of the rest before the bottom falls out.
January 27th, 2021 at 12:57 PM ^
Great system we've got here. Very sensible.
It seems this is only notable because the people doing the manipulation this time around are different than the people who've been doing it all along.
January 27th, 2021 at 1:04 PM ^
The bully got punched in the face for the first time, and now wants to outlaw fighting.
January 27th, 2021 at 1:56 PM ^
same as it ever was
January 27th, 2021 at 1:14 PM ^
My favorite thing about the stock market is that when it does extremely super well, nothing really changes for 90% of the country.
But when the stock market does extremely super poor, we're all unemployed.
Super great system, no flaws at all.
January 27th, 2021 at 1:22 PM ^
Something like half of americans have relatively tiny, if any, investments whatsoever. So glad we treat the S&P as the best indicator of our country's financial health.
January 27th, 2021 at 2:17 PM ^
Good solution to this particular problem would be to get more people in a position to invest by (insert preferred political-economic solution here).
The nice thing about this Gamestop thing is that there is a real bipartisan enjoyment seeing some of the hedge fund types who trade in this stuff all the time squirm because their own tactics are being used against them by redditors. I have suspicions that the endgame here is going to look bad for some people that aren't really deserving of it (wouldn't surprise me if Gamestop the actual live company eventually bottomed out and winds up worse off for all of this, for example). But watching people who manipulate the market to make a buck off of short-selling get out-manipulated is a treat.
This would sort of be like the comments section in a UFR taking over playcalling for a football team and winning.
January 27th, 2021 at 1:35 PM ^
It's no longer a logical market.
At one time, it was a fairly good indicator of the overall health of the country's economy, but no longer. Stocks are consolidating into a smaller and smaller group of people/companies, and it's only going to increase with Covid.
People who lost their jobs and had to sell things like stocks or dip in to their 401ks basically sold them to rich people who had enough money to wait covid out.
I've gotten so much cold feet in the market because it's just gambling at this point.
January 27th, 2021 at 1:49 PM ^
I think it's been quite a while since the stock market was anything but fun and games for the rich...probably since the '80s when blatant market manipulation through stock buybacks was legalized.
January 27th, 2021 at 6:23 PM ^
It's no longer a logical market.
Oh it's definitely been a minute since it was a logical market. It's an old saying, "the market can stay irrational longer than you can stay solvent."
January 27th, 2021 at 12:58 PM ^
Irrational market, meet irrational market
January 27th, 2021 at 12:58 PM ^
Lol...if there's not a law against that right now, I'm sure the SEC/DoJ will make something up to protect the big institutional funds from the mean little day traders.
Btw, something like 80% of day traders lose money.
January 27th, 2021 at 1:00 PM ^
Oh yeah. Just like venture capital, it seems like we're only hearing about the winners in this one.
January 27th, 2021 at 1:02 PM ^
Survivor bias is the cornerstone of investing. You hear about bitcoin millionaires and day traders who made millions, but not the other side of the coin.
January 27th, 2021 at 1:02 PM ^
Saw TDAmeritrade is already making regulations against Gamestop and AMC today. Just goes to show you the people at the top really hate the common man's success.
January 27th, 2021 at 1:03 PM ^
Yeah, how is THAT not illegal.
January 27th, 2021 at 1:50 PM ^
Yeah, it's infuriating, sad, depressing. Murica.
January 27th, 2021 at 1:03 PM ^
I don't know how "common" it is for someone to drop $10k into a meme stock, but point taken. The platforms are doing some crazy shit to stop what is par for the course in a Bloomberg terminal.
January 27th, 2021 at 1:06 PM ^
Exactly. And these funds short a stock and then hire another firm to do "research" and write a hit piece on a company which causes a decline in the company's stock and allows the fund to profit. I can't understand how it's not illegal the way some are manipulating the market. I guess it's okay when the big boys do it.
January 27th, 2021 at 1:09 PM ^
I feel like the whole concept of shorting a stock should basically be illegal.
Like in order to invest $10k in a company, you need to prove I'm an accredited investor with over $1M in savings "for your own protection", but shorting, where there's literally no bottom on how much you can lose, is legal?
January 27th, 2021 at 1:57 PM ^
Absolutely disagree with that, 100%. Short selling has its role in a healthy market.
Why should someone be allowed to "bet" that a company is going to grow and improve its market share and revenue, but not allowed to "bet" that a company is fundamentally flawed in some way and is going to face struggles?
January 27th, 2021 at 2:44 PM ^
I don't think people object to short-selling so much as the wag-the-dog that tends to happen once a major player gets in a strong short position.
They bet the company is going to hell. Tell everyone it's going to hell. So everyone sells, and it goes to hell. Profit.
And how much fun would it be if you were the company on the other end of this just trying to re-org and downsize as much as your cash flow can handle, hoping you have just enough time to get it right without going belly up. Then one of these jackasses comes along and blows the timing by 2 years and everyone is out of job?
Profit?
January 27th, 2021 at 3:03 PM ^
Seems like events like this week could be a useful deterrent against that sort of thing if it catches on without blowing up.
You know, a small segment of people looking to make a profit from another small segment of people profiting from shorting businesses? Could keep short positions rational.
For all I know.
At any rate, lacking compelling evidence to the contrary, I would oppose government interference with the anti-short people here.
January 27th, 2021 at 3:22 PM ^
Your objections seem to be more toward the games that the major players play (no matter what their position). I do agree with you as regards those "wag the dog" games. They are neither efficient nor helpful.
As for the "companies on the other end" --- yes, shorting stock can (can, not will) reduce a lender's valuation of the company and potentially inhibit immediate capital generation. But, then again, any company whose long-term future is highly dependent on short-term actions: well, that's a company which has some foundational issues. E.g., perhaps why it is getting shorted. It's a circle.
January 27th, 2021 at 4:43 PM ^
Of course they have foundational issues. The short players aren't wrong on the fundamentals. There is a good chance that company won't make it.
But there is a difference between you may or may not make it and having your stock tank and your note called because some short seller decides he'd rather make sure you go bankrupt than wait to see if he was right or wrong.
January 27th, 2021 at 3:07 PM ^
I'm ok with shorting a stock in the micro, but not the macro.
What you described, someone using intel to bet on a stock going down, is no different than betting on a stock to go up. In a vacuum, that's totally legit.
The issue is that once a fund shorts a company, they are incentivized to actively use their market force against that company, which invites all kinds of potentially illegal and monopolistic activity. It's the difference bet.
I know that people like to paint shorting as just the inverse to investing, but with literally unlimited potential losses, and a very concentrated, monopolistic handful of organizations capable of doing the shorting, it's basically a perfect storm for corruption.
A lot of behavior is fine on the small scale, but illegal on a large enough scale.
January 27th, 2021 at 4:00 PM ^
To be honest, anyone can short a stock. It's not reserved for "a very concentrated, monopolistic handful of organizations."
However, I think institutional investors shouldn't be allowed to publicly disclose large positions they've taken. An example is when Bill Ackmen and his hedge fund took a massive short vs Herbalife and then he spent $50 million on a public relations smear campaign in an attempt to drive down the stock price
January 27th, 2021 at 8:56 PM ^
OK. But if I can get somebody addicted to crack or heroin because it benefits me you better be OK with that too.
Shorting is betting on failure and hoping for it for personal gain. Damage caused isn’t your problem. Like somebody’s heroine addicted kid ain’t the dealers problem. Fuck him. I got mine.
I know. The failure was likely going to happen anyway. Yup. So it’s OK to precipitate it? Accelerate it? I say no. Companies that are failing to keep up should suffer the decline they have coming. In the time it comes. Let them struggle, let them reorganize and shuffle the deck chairs. Let them have every reasonable chance to right the ship. The brutality of efficiency has gone too far. People tell themselves their doing the “free market” a favor. Helping shed the losers faster. Making room for more winners. Now if I was an MD and your 18yr old separated his shoulder and I give him a scrip for a big ol bottle of Oxy’s cuz that foxy Perdue rep is kicking me back 3 timeshare weeks in Vail. It’s the same fucking thing thru my eyes. Brutality.