Stock Wars: Deutsche Survey - "We're Gonna Buy Stocks w/ Our Stimmy Checks."...says just about everyone

[www.bloomberg.com]
@ wrote:

'It was at that point that the value trade thesis and the idea of forming an unofficial cooperative to swarm the stock coalesced into what would eventually push the shares to the promised land: a chance to inflict pain against Wall Street. For a change.'
There's a small part of me that is enjoying this.

Wall Street destroyed so many lives and got bailed out first in 2008 and 2020. Now, they're eating some of the pain lately. [www.cnbc.com]
@ wrote:

The power of the internet is bringing individual investors together to crush Wall Street hedge funds and other investment bigwigs. It’s a new trend that’s only just getting started, CNBC’s Jim Cramer said on Monday. . .

“I’ve never seen the guns like this,” Cramer said on “Squawk on the Street.” “They can break shorts.”
It's surreal and like watching a movie right now. Kids taking their "stimmy" checks (as they call them) and gambling it up in the stock market - often buying call options in large droves to force brokers to hedge by buying the underlying stock themselves (driving up its price) and then short squeezing these hedge funds to death and forcing them to relent and bow out (driving up the price further)!

Wallstreetbets reddit group is crushing hedge funds' shorts and hurting them in collective swarms. It's a casino and social justice thing taking place right now at the same time it feels.

If anyone hasn't seen it yet, the Tik Tok Investors Twitter page is a MUST READ (it collates kids'/teens'/YA's Tik Tok videos discussing investing):
[twitter.com]
The advice is often very bad, but it's an interesting read to see what's happening all across America right now.
This was the recent viral video everyone is laughing up (Chad and Jenny): [twitter.com]

Jesse Felder's son (10 years old), I believe, didn't have Fortnite friends to play with last year he said, because they were all trading the stock market! I've heard 5 and 6 year olds asking their parents to buy stocks and maids and janitor types getting in. . .

Edited 16 time(s). Last edit at 03/09/2021 12:15AM by shoptastic.

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Someone commented on how this is a sign of the times too. So many teens and young adults are out of work (over 50% of 19-29 year olds are living back with their parents now) and see few prospects for themselves with the crushed economy. They feel they might as well take a shot in the stock market. What's there to lose they, they think, that they haven't already lost? And now some are ganging up to make money by short squeezing and inflicting pain back on Wall Street. ...

It's quite interesting.

Edited 1 time(s). Last edit at 01/25/2021 05:27PM by shoptastic.
There are still opportunities for people who can humble themselves and perform low-level work. It seems that everyone wants to be a superstar from the very moment they receive their diploma or degree. They will litter the monetary fast track, I think, because they are not getting experience that someday could lead to a better working life. But I am old and look at the trajectories of some of the rich and famous who started with nothing, worked their way up from the bottom, and made enough to enrich themselves and others. They had humble beginnings and wealthy endings. They had to be humble in order for this to work. I feel for people who do not have the ability to be humble for even a little while. The ones you mention, shoptastic, seem to be killing the goose that laid the golden egg, or biting the hand that feeds them, or something.

The human spirit needs places where nature has not been rearranged by the hand of man. ~ Unknown
_____
I’ve noticed that everyone who is for abortion has already been born. - Ronald Reagan
_____


Edited 1 time(s). Last edit at 01/26/2021 09:09PM by Shop-et-al.
There are so many job opportunities here. The people I know who are able to work and out of a job will not seek employment. Not to mention those who quit their jobs to enjoy federal and state handouts. It's so much easier to not work and collect PAU. Especially when you can make so much more. I personally agree that new graduates with degrees feel they should start out with high salaries. My nephew is guilty of this. He wants to start out big. Not happening. He is 28, unemployed, living at home and entitled. Yes, his parents enable his behavior and actions. TMI here. I need to shut up.
@shoptastic wrote:

There's a small part of me that is enjoying this.
I should not have said this, as: a.) these people may be engaged in illegal activity (market manipulation); and b.) not every hedge fund or hedge fund client is a bad or greedy actor out there.

Yes, billionaire hedge fund managers are getting hurt badly - losing billions in their funds this week - but two wrongs don't make a right (if people are illegally colluding to do this). It'll be hard to prove, since you need to establish intent for all the investors (who are smartly saying "we just like the stock" to avoid the appearance of working together to bring down these short-sellers on purpose).
@Madetoshop wrote:

I personally agree that new graduates with degrees feel they should start out with high salaries.
That might be true for some, but it's definitely not the case with many that I know. They do work, but their wages from their primary job don't really cover all that they'd like. Second jobs and side hustles are the norm. Relying on parents for a little help is common.
[markets.businessinsider.com]
@ wrote:

Entrepreneur Mark Cuban said Wednesday his 11-year-old son made money by trading with r/WallStreetBets, and that he loves how the Reddit day-trading forum became the central catalyst to an epic short-squeeze.

"I got to say I LOVE LOVE what is going on with #wallstreebets," Cuban said in a tweet. "All of those years of High Frequency Traders front running retail traders, now speed and density of information and retail trading is giving the little guy an edge. Even my 11 yr old traded w them and made $"
Getting crazy and worrisome. What is happening in America and the stock market?

et tu Mark Cuban?
The hedge funds that were hurting from their BETS that a company like GME was going to lose is unethical in itself as they relies on derivatives to make their money and even worse, gambling on behalf of their clients. They have done this to many other companies for years and no one bats an eye.

But when they’re finally eating their words with retail investors going against the grain, it’s suddenly an issue outrage and the fault of retail investors? Get real. Hedge funds made the gamble, and crying like babies because retail investors finally made an influencer with a gut punch.

Shopping the Greater Denver Area, Colorado Springs and in-between in Colorado. 31 year old male and willing to travel!


Edited 1 time(s). Last edit at 01/28/2021 05:55PM by Tarantado.
@shoptastic wrote:

Someone commented on how this is a sign of the times too. So many teens and young adults are out of work (over 50% of 19-29 year olds are living back with their parents now) and see few prospects for themselves with the crushed economy. They feel they might as well take a shot in the stock market. What's there to lose they, they think, that they haven't already lost? And now some are ganging up to make money by short squeezing and inflicting pain back on Wall Street. ...

It's quite interesting.

19-29 year olds SHOULD be partaking in the stock market as early as they’re able regardless of the “sign of the times”... Simply investing into low-cost, diversified index funds and utilizing tax-advantage accounts like IRA’s and 401k’s too...

Shopping the Greater Denver Area, Colorado Springs and in-between in Colorado. 31 year old male and willing to travel!
After today's shenanigans, I'm back on the side of "down with these hedge funds!" grinning smiley

I bought some Texas Roadhouse stock when it dropped down to the $73.xx range the other day (I own some already, but added more). In order to raise capital to cover their short losses, big hedge funds like Melvin Capital had to sell their long winners earlier this week.

If the math is correct, they may still have lots of shorts to cover (i.e., they lied about closing their positions) and will continue to sell their assets. Per Melvin's last 13F filing, they added lots of: [seekingalpha.com]
@ wrote:

Significant positions were increased in Nike (NYSE:NKE), Adobe Systems (NASDAQ:ADBE), Alphabet (NASDAQ:GOOG), Pinterest (NYSE: PINS), Texas Roadhouse (NASDAQ:TXRH) Read More and National Beverage (NASDAQ:FIZZ).
I want your TXRH stock (they have a 5% stake), please!!!

When Melvin goes down and has to liquidate these positions more, I'd like to buy. tongue sticking out smiley
@Tarantado wrote:

The hedge funds that were hurting from their BETS that a company like GME was going to lose is unethical in itself as they relies on derivatives to make their money and even worse, gambling on behalf of their clients. They have done this to many other companies for years and no one bats an eye.
Shorting a stock is not unethical from a legal standpoint - both individual and institutional investors can do it if they like.

I personally don't ever do it and don't like the practice myself, because:
a.) As Warren Buffett says, it has infinite downside and limited upside.
b.) I actually do have questions about shorting from an "ethical" and societal economic value perspective. It may not be illegal, but I struggle with finding value that is created from it, because it is a zero sum game. One person wins and the other loses. It's not like selling a hot dog, where the buyer is happy to give the seller $ for a tasty treat. Both sides win and value is created.

The one argument that I think maybe is fair is that options and shorting can provide "insurance" or "hedging" . . .It's an interesting argument and one I ....kinda think is "fair" in terms of a societal/economic value perspective? I dunno.
@ wrote:

But when they’re finally eating their words with retail investors going against the grain, it’s suddenly an issue outrage and the fault of retail investors?
Both legally and ethically, you cannot collude to manipulate the markets, so that's the part people are upset with regarding the retail investor part (IF they were doing that).

That's why I said two wrongs don't make a right earlier, if one dislikes all the dishonest, dirty, and illegal/unethical/underhanded practices of hedge funds and is sticking it to them in an illegal/unethical way...that's wrong too. Keep in mind you could be hurting a perfectly "good" hedge fund too (wholesome management and practices) and innocent clients.

Edited 2 time(s). Last edit at 01/29/2021 02:20PM by shoptastic.
@Tarantado wrote:

19-29 year olds SHOULD be partaking in the stock market as early as they’re able regardless of the “sign of the times”... Simply investing into low-cost, diversified index funds and utilizing tax-advantage accounts like IRA’s and 401k’s too...
The context of my post was that there are people who precisely should not be investing, because they've got no job/inadequate income and are treating this like gambling (re: wallstreet bets Reddit users and Tik Tok investors). . .

I agree one should invest (smartly) earlier in life if possible. The compounding with time is so much more powerful the earlier you start.
With all the pain on Wall Street:
[finance.yahoo.com]
@ wrote:

LONDON (Reuters) - Short-sellers are sitting on estimated losses of $70.87 billion from their short positions in U.S. companies so far this year, data from financial data analytics firm Ortex showed on Thursday.

The hefty losses come as shares of highly-shorted GameStop jumped more than 1,000% in the past week without a clear business reason, forcing short-sellers to buy back into the stock to cover potential losses -- defined as a short-squeeze -- while retail investors then piled in to benefit from the surge.
...this is kind of a feel good story:
[www.marketwatch.com]
@ wrote:

Jaydyn Carr’s mom gave him 10 GameStop shares that cost $6 apiece as a holiday gift in 2019. Nina Carr said that she has been teaching Jaydyn about trading, and bought him the GameStop shares in an embrace of Ujamaa, a Kwanzaa principle focused on cooperative economics. She even made her then–8-year-old son a certificate stating that he owned the shares so that he would have a tangible present to unwrap.

Well, it’s a gift that’s kept giving, especially this year as GameStop shares have surged more than 1,000%. “My phone was going off, because I have GameStop on my watch list,” Nina told the San Antonio newspaper. “I was trying to explain to him that this was unusual. I asked him, ‘Do you want to stay or sell?’ ”
Cashed out for $3,200 ...great job! smiling smiley

Edited 2 time(s). Last edit at 01/29/2021 02:38PM by shoptastic.
@shoptastic wrote:

Shorting a stock is not unethical from a legal standpoint - both individual and institutional investors can do it if they like.

I personally don't ever do it and don't like the practice myself, because:
a.) As Warren Buffett says, it has infinite downside and limited upside.
b.) I actually do have questions about shorting from an "ethical" and societal economic value perspective. It may not be illegal, but I struggle with finding value that is created from it, because it is a zero sum game. One person wins and the other loses. It's not like selling a hot dog, where the buyer is happy to give the seller $ for a tasty treat. Both sides win and value is created.

The one argument that I think maybe is fair is that options and shorting can provide "insurance" or "hedging" . . .It's an interesting argument and one I ....kinda think is "fair" in terms of a societal/economic value perspective? I dunno.

Both legally and ethically, you cannot collude to manipulate the markets, so that's the part people are upset with regarding the retail investor part (IF they were doing that).

That's why I said two wrongs don't make a right earlier, if one dislikes all the dishonest, dirty, and illegal/unethical/underhanded practices of hedge funds and is sticking it to them in an illegal/unethical way...that's wrong too. Keep in mind you could be hurting a perfectly "good" hedge fund too (wholesome management and practices) and innocent clients.

When the stock is more than 100% shorted, illegal or not, the hedge funds are shorting GameStop for more share than it’s available..... adding money to the stock, which is basically what is happening and raising the prices, is all fair game. What’s manipulative about that, and any different from a big player like Warren Buffet adding or pull a position?

And then you have the brokerages that decided it was fair (and not market manipulation) to literally only allow selling of particular stocks like GME.... and in today’s case, even more limitations from buying into it?

Short sellers are the same type of people that bought out toilet paper, hoping to get their cut by selling it for a higher price. Instead of toilet paper, they borrowed GME stock, sold it for ~$40/share, and hoping to buy it back at something much less than $40/share for a profit, because they thought it was easy money. So again, no pity on my part and NOTHING ILLEGAL OR WRONG WITH BUYING INTO IT AND GOING AGAINST THE GRAIN.

Options expire today and sooooo many people are in the money. Lots of money to be lost by those that tried shorting GME. Hence, another reason why not all gambles are like this are 100% easy money for shorting dying companies.

Shopping the Greater Denver Area, Colorado Springs and in-between in Colorado. 31 year old male and willing to travel!
I'm way too simple-minded to really understand this stuff but I think I'm hearing something akin to, "Stickin' it to the man" so, yeah. Right on! Fight the power and eat the rich! That - I do find exciting!

sestrahelena
@sestrahelena wrote:

I'm way too simple-minded to really understand this stuff but I think I'm hearing something akin to, "Stickin' it to the man" so, yeah. Right on! Fight the power and eat the rich! That - I do find exciting!

I’ll try to explain it as simply as possible.

GameStop, a dying publically trading company exists.

Typical Situation: Hedge Funds looks at GameStop and see it as a money opportunity: I’ll borrow your equity with interest from the “borrower” (the broker) and sell it for $50 per share to others. How do hedge funds make money? They buy back the shares are a lower price, say $20/share. So when they “return” the equity they borrowed, the hedge fund made $30/share. That money adds up when you’re talking about millions of shares, right?

So guess what, how do you increase the stock price? Buy into it. Lots and lots of people buying into it and now the stock is say $200/share. Now let’s look at the same situation again (I bolded the differences):

What’s happening: Hedge Funds looks at GameStop and see it as a money opportunity: I’ll borrow your equity with interest from the “borrower” (the broker) and sell it for $50 per share to others. How do hedge funds make money? People are suddenly buying stocks to RAISE the stock price to like $100/share. If the hedge funds try to buy back now, they’ll LOSE $50/share now because they would buy higher than what they sold it for. Thus, they buy into the market to protect themselves to hold on until more people sell off to drop the stock prices. The problem is, the hedge funds buying + people continuing to buy = stock price now at $200/share. And it keeps getting worse for the hedge funds because the stock price isn’t dropping to what they sold the shares at.

Hope that helps explain things in the most simple terms I can smiling smiley

Shopping the Greater Denver Area, Colorado Springs and in-between in Colorado. 31 year old male and willing to travel!
Thanks, T. I kinda get it but then there are all the "what ifs" than might make my brain explode so I'll stay in my (slow) lane!

sestrahelena
Dumb question: So, is that robinhood app the only way people can buy stocks? Didn't there used to be a lot of websites for that when DIY stock buying got big in the early 90s? Why don't people use other websites if RH is implementing restrictions?

sestrahelena
@sestrahelena wrote:

Dumb question: So, is that robinhood app the only way people can buy stocks? Didn't there used to be a lot of websites for that when DIY stock buying got big in the early 90s? Why don't people use other websites if RH is implementing restrictions?

RH is very simple and attracts the mass public.

Robinhood is just a brokerage, like Fidelity, E*TRADE, etc.

The retail investor purchase stocks through brokerages.

The major differences are the types of brokerage accounts available, like a taxable account (Robinhood and what a lot of people are using right now), then there are you retirement accounts like IRA’s, TSP’s and 401k’s. Within those, you’re also purchasing stocks directly or indirectly (mutual funds and ETF’s).

Hope that helped answer your question!

Shopping the Greater Denver Area, Colorado Springs and in-between in Colorado. 31 year old male and willing to travel!
This whole situation is exacerbated because of both official and unofficial 'deregulation' of the markets. Until about twenty years ago the enforced rules about 'short selling' required that a brokerage house (Robinhood, Ameritrade, Schwab, ETrade, Raymond James etc.) have shares of a stock available to be lent to someone who wanted to sell it short. Under that rule, hedge funds and others could NOT sell short a stock where there were not actually shares available for them to sell. Legally stock shares held in retirement accounts can not be loaned for selling short.

On the January 15th analysis of how Gamestop (GME) was held, "Institutional Investors" were shown to hold 112% of GME shares. "Institutional Investors" includes mutual funds, hedge funds, pension funds and other non-individual holdings. Something is wrong here as there can not be more than 100% of shares of any company. That same analysis indicated that about 122% of the shares had been sold short. In fact it was mentioned by a long/short fund manager on CNBC that she failed to understand why the short sellers continued shorting when there was already 156% of all shares shorted. The pressure being brought on hedge funds is caused by the same greed that had the industry pressure the SEC to end the requirement that a brokerage house lend for short selling only shares they actually held in a control position.

What is the fallout from this greed? Money has to be raised by short sellers to buy shares to cover their short sell. To do that, they need to sell other investments. As they sell out other stocks, that drives the prices in the market down. As share prices crash, other investors who were never associated with Gamestop, short selling or hedge funds get hurt. Thus far more than a month of growth in a strong market has disappeared because of this folly.
Contagion.

That's the worry for those of us not involved in the hedge fund-short squeezers battle.

Will this spill over into the broader market in a serious way (maybe requiring Federal bailouts and intervention ultimately)?

If one has a "large bill" they are expecting to have to pay (maybe remodeling or repairing a home, for example) within the next six months, maybe taking a few chips off the table would be prudent. This will be an interesting upcoming week that's for sure. I thought this was funny from Jim Bianco's Twitter (investors preparing for the opening stock market bell):
@Flash wrote:

On the January 15th analysis of how Gamestop (GME) was held, "Institutional Investors" were shown to hold 112% of GME shares. "Institutional Investors" includes mutual funds, hedge funds, pension funds and other non-individual holdings. Something is wrong here as there can not be more than 100% of shares of any company. That same analysis indicated that about 122% of the shares had been sold short. In fact it was mentioned by a long/short fund manager on CNBC that she failed to understand why the short sellers continued shorting when there was already 156% of all shares shorted. The pressure being brought on hedge funds is caused by the same greed that had the industry pressure the SEC to end the requirement that a brokerage house lend for short selling only shares they actually held in a control position.
I don't understand the mechanics behind everything, but from what I've gathered:

This (Gamestop) situation was very unique. In fact, Michael Burry (Christian Bale's character in "The Big Short" ) wrote on Twitter a few days ago that there cannot be another Gamestop. The situation was a once-in-a-lifetime set-up.
--100%+ short interest in shares***
--micro-cap stock (that could be moved more easily)
--very under-the-radar and ignored by mainstream media

***I believe this was possible due to what are known as "synthetic longs." Normally, you can only short up to the amount of shares outstanding. But, given the market structure of bets for and against Gamestop, you had synthetic longs that were created and these were shorted too. That's how/why the short interest (SI) in shares was 100%+. This pretty much never happens, as Michael Burry and others have seemed to suggest.

It's illegal, from what Jim Bianco has stated, to short above 100% of outstanding shares and the reason other hedge funds did not attack firms like Melvin, Citadel, etc. right away for this vulnerability is that they're all in on the "game" (they probably do the same stuff in shorting and trying to bring down companies) and no one wanted to upset the apple cart. Big hedge funds got "cocky" Bianco said, knowing they were the big players and thinking no other hedge fund would dare challenge them. And, if they did, they'd have the backing of prime brokers (Goldman, Morgan Stanley, etc.), possibly the SEC, etc. to smash those short squeezers. Little did they expect that an army of Redditors with no fear and lots of anger towards Wall Street would gang up to attack those short positions. eta: [www.youtube.com] (Bianco talks about this here in "Stock Wars" )

Edited 5 time(s). Last edit at 01/31/2021 04:17PM by shoptastic.
@shoptastic wrote:

I don't understand the mechanics behind everything, but from what I've gathered:

This (Gamestop) situation was very unique. In fact, Michael Burry (Christian Bale's character in "The Big Short" ) wrote on Twitter a few days ago that there cannot be another Gamestop. The situation was a once-in-a-lifetime set-up.
--100%+ short interest in shares***
--micro-cap stock (that could be moved more easily)
--very under-the-radar and ignored by mainstream media

***I believe this was possible due to what are known as "synthetic longs." Normally, you can only short up to the amount of shares outstanding. But, given the market structure of bets for and against Gamestop, you had synthetic longs that were created and these were shorted too. That's how/why the short interest (SI) in shares was 100%+. This pretty much never happens, as Michael Burry and others have seemed to suggest.

It's illegal, from what Jim Bianco has stated, to short above 100% of outstanding shares and the reason other hedge funds did not attack firms like Melvin, Citadel, etc. right away for this vulnerability is that they're all in on the "game" (they probably do the same stuff in shorting and trying to bring down companies) and no one wanted to upset the apple cart. Big hedge funds got "cocky" Bianco said, knowing they were the big players and thinking no other hedge fund would dare challenge them. And, if they did, they'd have the backing of prime brokers (Goldman, Morgan Stanley, etc.), possibly the SEC, etc. to smash those short squeezers. Little did they expect that an army of Redditors with no fear and lots of anger towards Wall Street would gang up to attack those short positions. eta: [www.youtube.com] (Bianco talks about this here in "Stock Wars" )

To explain it simply:

Hedge funds shorting >100% of what’s available just means that they shorted GME for more shares that what exists. Imagine “IOU’s” that gain interest because they’re banking on being able to win their bets from the other side (the gamblers going against the grain buying call options), so they WOULDN’T have to pay up the sell for a loss and pocket premiums for “wins.”

But since people are suddenly buying into GME, it’s raising the stock to the point where the hedge funds are not LOSING their “bets.” Hence, the hedge funds having to pay up eventually and when the hedge funds are bleeding so much, as Flash detailed, they have to liquidate other positions they have, which in turn, lowers the stock on whatever they liquidate if they have significant enough of positions to budge the stock price.

In the end, the retail investor that’s diversely invested will be just fine in the end.

Shopping the Greater Denver Area, Colorado Springs and in-between in Colorado. 31 year old male and willing to travel!
@Tarantado wrote:

To explain it simply:
My comment to Flash about not understanding the "mechanics" of things was specific to how short interest shares got to over 100%, which was the quoted portion from her post.

Typically, this should not happen and is not allowed/illegal. If I'm not mistaken, both naked shorting and synthetic longs were part of how this happened, no? That was what I was trying to determine above.

@ wrote:

Hedge funds shorting >100% of what’s available just means that they shorted GME for more shares that what exists. Imagine “IOU’s” that gain interest because they’re banking on being able to win their bets from the other side (the gamblers going against the grain buying call options), so they WOULDN’T have to pay up the sell for a loss and pocket premiums for “wins.”

But since people are suddenly buying into GME, it’s raising the stock to the point where the hedge funds are not LOSING their “bets.” Hence, the hedge funds having to pay up eventually and when the hedge funds are bleeding so much, as Flash detailed, they have to liquidate other positions they have, which in turn, lowers the stock on whatever they liquidate if they have significant enough of positions to budge the stock price.

In the end, the retail investor that’s diversely invested will be just fine in the end.
Did you mean "winning" in the bolded part? Yeah, I understand the gamma squeeze (i.e., buying of call options + a rising GME price that force brokers to delta hedge and buy GME at some point themselves, which drives up its price) and short squeeze (i.e., hedge funds short covering after unacceptable rises in GME's price, which drives up its price further) situation with GME and the subsequent hedge fund degrossing (required by hedge fund VAR models) that led to selling winning long positions. All of that I detailed/referenced in posts earlier in the thread. But, it's the way we got to 140% short interest that I'm not sure about.

I know it's not supposed to happen (legally) and just pretty much never happens, which is why Michael Burry said this is such a unique scenario. Short squeezes happen all the time, but not at this level, due in part to the 100%+ short interest Flash mentioned. It's this part that I don't fully understand.

Edited 6 time(s). Last edit at 02/01/2021 01:32AM by shoptastic.
@Tarantado wrote:

What’s manipulative about that, and any different from a big player like Warren Buffet adding or pull a position
*disclaimer*
--Not a lawyer, so I don't know the specifics behind what counts as manipulation or not. Although, I did find this Investopedia (one of the more trusty industry sources out there) page helpful: [www.investopedia.com]
--My ethical view of things is provisional (based on what I know/understand now) and could easily change in the future.

I think the difference is that Warren Buffett is "naturally" buying and selling stocks for his portfolio for value reasons. One doesn't have to buy for value - you can buy just to speculate or hope to trade the momentum of a stock on the rise - but the main thing is that it's natural and without intent to "artificially" mess with stock prices for personal gain.

It feels like intent is the key here. Something I've read about in gold markets is that price manipulation happens all the time with banks and hedge funds. They typically try to manipulate to the downside. To drive the price down, they allegedly send out huge sell orders seconds before the market's closing bell. These orders are so huge they cannot be filled in time and the buyside gets scared by them and lower their bids. The closing price of U.S. gold ends up much lower than the day's average and gets set as the price in Europe and Asia, which can depress sentiment globally. All this amounts to artificial fixing of prices (not what the free market would naturally set) for one's personal gain. Often banks or hedge funds don't profit as much from gold sales and prefer to have people buy their products.

So, the question here would be whether this is fair and should be allowed? I don't think so, as it's manipulating the free market.
@ wrote:

And then you have the brokerages that decided it was fair (and not market manipulation) to literally only allow selling of particular stocks like GME.... and in today’s case, even more limitations from buying into it
Yeah, this was suspicious when it happened! I did think some shenanigans were happening behind the scenes to possibly protect hedge fund interests, but I've seen articles and fintwit commentary defending it for seemingly legitimate reasons as well. In terms of culpability, for me, it would come down to intent. For sure, limiting buying, while allowing selling favors the hedge funds with shorts...but I don't know what was in their heart of hearts, so cannot come to a moral conclusion on it. I'm suspicious, but just resign myself to the fact that we don't know intent for sure (having to take people's word only).
@ wrote:

Short sellers are the same type of people that bought out toilet paper, hoping to get their cut by selling it for a higher price. Instead of toilet paper, they borrowed GME stock, sold it for ~$40/share, and hoping to buy it back at something much less than $40/share for a profit, because they thought it was easy money. So again, no pity on my part and NOTHING ILLEGAL OR WRONG WITH BUYING INTO IT AND GOING AGAINST THE GRAIN.
I don't think short selling is inherently bad. For sure, many institutions can abuse the practice and combine it with illegalities to achieve nefarious purposes. But, I think it can be used for "good" or neutral purposes as well. Shorting provides a hedge for markets, much like a put option might. It can be insurance against a loss.

A second benefit is that it can also be used to shine a light on fraud or serve as a "check" against overly exuberant markets. Jim Chanos famously shorted Enron and helped expose fraud in the company. When you short a stock and deliver your thesis, you can help prevent people from buying a bad business (like a Luckin Coffee) or one that is wildly overvalued that they would have otherwise lost money on. In short (no pun intended), I don't think shorting is inherently wrong/bad.

Returning to the Gamestop short squeezers, I thought Aswath Damodaran had a good podcast recently discussing his view of things. I think I agree with him. A short squeeze that happens "naturally" from people believing Gamestop is a great company and buying its stock (or call options) can be "good" for all sides and the market as a whole. This brings out the "true value" of the company and gives it legs to make further progress in providing society with a useful service/product. On the other hand, a short squeeze that happens artificially on a bad or so-so company is questionable. People buying tons of call options to purposely try to trigger a gamma squeeze, which can then lead to an even more severe short squeeze, for example, is arguably only enriching the squeezers.

Is Gamestop really worth $325/share? No. And it's more of a wild overvaluation than a small one. Likely, no one would ever "naturally" buy it at that price. And could such actions actually hurt the company (or others like it)? Maybe. He gave an interesting example of AMC. It's a company that on fundamentals does not look like it can survive without attachment to some other entity - like a Disney. But, by driving up the cost of the stock of AMC (to short squeeze), you make it a more expensive acquisition target for Disney. And that could doom AMC's future and lead to bankruptcy and liquidation later.

I don't know if the Reddit short squeezers have thought about these things. They're interesting and deep considerations beyond just the ability to exploit a really bad hedge fund short situation to make some money. I totally understand why people are so enthralled by this. I have been too! Yes, it's got the classic David vs. Goliath and Main Street vs. Wall Street themes. And I understand the populist anger arising from the unequal 2008 and 2020 recession bailouts and wanting to hurt the elites through this. I just think:

a.) If there is illegal collusion and manipulation of free markets, this is a danger to participants (albeit, most analysts believe it'll be hard to prove) and maybe just inherently wrong/unethical.
b.) If people are buying Gamestop stock with money they cannot afford to lose, this can really hurt them and their family.
c.) If they are artificially short squeezing and propping up a bad/so-so company way beyond its fundamentals, this can potentially hurt the business itself.

Edited 4 time(s). Last edit at 02/01/2021 03:25AM by shoptastic.
I would add d.):

At current mania stock price levels for GameStop, there will be a lot of "bagholders" after the 55-60 million remaining shorts finally cover their positions.

There will be no "natural" buyers of GME at $325 (current price) left at that point. That leaves a lot of hurt people. Those who cannot sell at a profit to the shorts will get burned - possibly very badly (depending on how many shares they own and their cost basis).

This is the dark side to it all for the retail traders. I would like to think people responsibly bought into GME, but when you read Reddit and Twitter, you see that is clearly not the case for so many people. They speak of putting their last dollars in and of their desperate financial situations.
What I dislike most is the targeting of existing companies instead of creating a new company and using that to shape (somehow?) and change (somehow?) the world of investing so that more people can invest. This would support the stated goal of broader access to investments and eliminate an agenda laden with machinations, skullduggery, and downright disrespect.

The human spirit needs places where nature has not been rearranged by the hand of man. ~ Unknown
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I’ve noticed that everyone who is for abortion has already been born. - Ronald Reagan
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@Shop-et-al wrote:

What I dislike most is the targeting of existing companies instead of creating a new company and using that to shape (somehow?) and change (somehow?) the world of investing so that more people can invest. This would support the stated goal of broader access to investments and eliminate an agenda laden with machinations, skullduggery, and downright disrespect.
You could also just donate to charity directly.

.....So, the Gamestop battle might be "Game Over" now. That was quick!
[www.marketwatch.com]
S3 data showed a huge decline in short shares (about 50%). There are still 27.1 million shorts remaining, which is a lot by overall market standards, but relative to GME, it's showing that short covering in large amounts has begun. The stock cratered today and might go down a lot more this week if covering continues.

I got "tricked" myself into believing Melvin Capital had not covered earlier and that I might get a chance to buy more of TXRH stock if they were forced into more selling. Might have missed the boat - oh well....I was glad to buy some last week when they degrossed their positions.

For anyone who has no idea what on Earth happened with this Gamestop drama, apparently, there will be TWO movies about it: one Netflix and one MGM produced...[www.theguardian.com]
Well, maybe it's not over yet for GameStop stock holders after all:
[www.reddit.com]

Billionaire Mark Cuban (owner of Dallas Mavericks and Shark Tank investor) did an AMA on the wallstreetbets Reddit this morning. His very first question answered why the stock is falling and he suggests people who can afford it to hold the stock:
@ wrote:

pinklips_indy
1 hour ago
Why is the stock plummeting so much?

mcuban
1 hour ago
Supply and Demand, but in this case it literally could be because the source of demand has been crippled . When RH shut it down, then cut it back, lets put aside why, they cut of the greatest source of demand. They created a RobinHood Dive. No RH buyers, means sellers lower their price to find buyers. And they keep on lowering it till they find buyers. Keep the most natural buyers out of the market and the price keeps on FALLING.

Then that drop accelerates because the more the stock falls the more owners who bought on margin get margin calls. When that margin call happens, its brutal. They just take your stock, send you a @#$%& you note and sell your stock at the market price, no matter how low. They just want to get your cash to pay back the loan.

That then accelerates the selling.

Which then leads to what we are seeing in the market right now with GME in particular

So what to do ?

If you can afford to hold the stock, you hold. I dont own it, but thats what i would do.

Why ? because when RH and the other online brokers open it back up to buyers, then we will see what WSB is really made of. That is when you get to make it all work.

I have no doubt that there are funds and big players that have shorted this stock again thinking they are smarter than everyone on WSB.

I know you are going to hate to hear this, but the lower it goes, the more powerful WSB can be stepping up to buy the stock again. The only question is what broker do you use . Do you stay with RH , who is going to have the same liquidity problems over and over again, or do you as a group find a broker with a far, far, far better balance sheet that wont cut you off and then go ham on Wall Street.
And, this was another interesting post:
@ wrote:

fjposter22
1 hour ago
Is it in the realm of possibility that these hedge funds just, don’t cover their shorts at all? They go full felon and act like it never happened, ala “Fake News!”?

mcuban
1 hour ago
Their goal is to never cover their short. But that would take the company going out of business or being delisted. That wont happen here.

Best thing you can do is hold on to the stock and do business with GameStop. If everyone goes to their website and buys from them that is going to help the company which will help the stock which will help everyone here.

If you still believe in the reason you bought the stock, and that hasnt changed, why sell ?
"The Hedge Funds Strike Back" for now.

But, "The Return of the Redditors" might come next. tongue sticking out smiley It's intriguing as someone with no dog in this race. I hope if/when the Redditors strike back that they don't bring the entire stock market down with them.

eta: It's unclear if Cuban has seen the S3 data and if he's factoring that into his comments.

Edited 1 time(s). Last edit at 02/02/2021 04:46PM by shoptastic.
@sestrahelena wrote:

Dumb question: So, is that robinhood app the only way people can buy stocks? Didn't there used to be a lot of websites for that when DIY stock buying got big in the early 90s? Why don't people use other websites if RH is implementing restrictions?

The big difference with Robinhood app is it allows customers to trade with no transaction fees. That has attracted lots of new, small investors/players to the financial markets, who no longer have to pay $4.95 to $9.95 per trade. How does Robinhood make money? By routing all their trades through a couple of specific companies--"market makers"--who pay fees for the right to make the transactions. Market makers make money in several ways, but mainly in the difference--the "spread"-- between the "bid" and "ask" (buy and sell) prices per share of stock. In addition to doing business with RobinHood and TDAmeritrade, they do a lot of business with pension funds, university endowments, etc., where an individual transaction can be hundreds of thousands of shares.

From what I recall, Robinhood made about $700 million last year in fees just by routing their trades through a couple of market making dealers. They have been so successful with this business model that regular DIY brokerages--Fidelity, Schwab, TDAmeritrade, etc. now offer fee-free trading to their customers, to keep them from running to RobinHood and apps-based companies like them. It free trading also encourages more frequent transactions, so the DIY companies can make money like Robinhood, too.

BTW, without fee-free companies like RobinHood, the Gamestop action probably would not have happened.

(Actually, the action also needed help from reddit boards to spread the information, and covid-bored people isolated at home with a few dollars in their e-pockets...)
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