How Reddit's Co-Founder, Jim Cramer, and Wall Street Reacted to GameStop's Surge (cnn.com) 180
Friday afternoon CNBC reported that "heightened speculative trading by retail investors" (later referred to as "GameStop mania") had "continued to unnerve the market."
The Dow Jones Industrial average lost 620.74 points, or 2%, to 29,982.62, the first time the 30-stock gauge has closed below the 30,000 mark since Dec. 14....
The market also experienced the highest trading volume in years as the mania heated up. On Wednesday, total market volume hit more than 23.7 billion shares, surpassing the level during the height of the financial crisis in 2008. Thursday also saw extremely heavy trading with more than 19 billion shares changing hands.
But Forbes reports that experts "seem in broad agreement that the bull market can rage on." "The market is not broken, but recent events have revealed some cracks," says Commonwealth Financial Network Chief Investment Officer Brad McMillan, who thinks one likely result of the week's frenzy could be that the price of options — which helped fuel some of the outsized meme-stock demand — rise to help curb "price hacking" in the future. McMillan eschews concerns from other experts that the Reddit-fueled price mania could be a sign the market is in the middle of a bubble akin to the dot-com era in the late 1990s, but he says "crackdown" by regulators is likely.
CNN pointed out that the tagline of Reddit's forum is "like 4chan found a Bloomberg terminal illness" — and cited two more reactions:
- "We've seen how social media can be manipulated to expose fault lines in our democracy," said Arthur Levitt, Jr., the former chair of the Securities and Exchange Commission, in an op-ed [titled "Danger Lurks Beneath Reddit Day Traders' GameStop Triumph"]. "Are we certain the same isn't happening in our financial markets? Time to find out."
- "I think it's a real example of what we're already seeing with the way media has been upended," said Reddit co-founder Alexis Ohanian in an Instagram video this week. "All of these big institutions have been challenged, quietly and sometimes loudly, at moments, for the last 10 years with the rise of social media."
Meanwhile, CNBC's stock pundit Jim Cramer advised the traders who'd helped spark the runup to grab their profits now: "Take the home run. Don't go for the grand slam. Take the home run. You've already won. You've won the game. You're done," Cramer said on "Squawk on the Street."
"Please don't lose a lot of money on GameStop," added the "Mad Money" host.
Cramer, who's being treated in the hospital for a pinched nerve, said he called into CNBC in hopes of making sure people recognize the potential downside risk in GameStop and other soaring short squeezed stocks. "Don't let them get hurt. It's our job" to make sure people know they may get burned if the stock price collapses, he said....
Cramer said he was concerned about the stability of the rest of the U.S. equity market the longer the frenzied trading continued...
"I'm not saying that Reddit is good or bad, or that the shorts are good or bad," he said. "I'm just saying that the government has to step in and at least try to address the situation so the rest of the market isn't panicked by four stocks that are heavily shorted."
The market also experienced the highest trading volume in years as the mania heated up. On Wednesday, total market volume hit more than 23.7 billion shares, surpassing the level during the height of the financial crisis in 2008. Thursday also saw extremely heavy trading with more than 19 billion shares changing hands.
But Forbes reports that experts "seem in broad agreement that the bull market can rage on." "The market is not broken, but recent events have revealed some cracks," says Commonwealth Financial Network Chief Investment Officer Brad McMillan, who thinks one likely result of the week's frenzy could be that the price of options — which helped fuel some of the outsized meme-stock demand — rise to help curb "price hacking" in the future. McMillan eschews concerns from other experts that the Reddit-fueled price mania could be a sign the market is in the middle of a bubble akin to the dot-com era in the late 1990s, but he says "crackdown" by regulators is likely.
CNN pointed out that the tagline of Reddit's forum is "like 4chan found a Bloomberg terminal illness" — and cited two more reactions:
- "We've seen how social media can be manipulated to expose fault lines in our democracy," said Arthur Levitt, Jr., the former chair of the Securities and Exchange Commission, in an op-ed [titled "Danger Lurks Beneath Reddit Day Traders' GameStop Triumph"]. "Are we certain the same isn't happening in our financial markets? Time to find out."
- "I think it's a real example of what we're already seeing with the way media has been upended," said Reddit co-founder Alexis Ohanian in an Instagram video this week. "All of these big institutions have been challenged, quietly and sometimes loudly, at moments, for the last 10 years with the rise of social media."
Meanwhile, CNBC's stock pundit Jim Cramer advised the traders who'd helped spark the runup to grab their profits now: "Take the home run. Don't go for the grand slam. Take the home run. You've already won. You've won the game. You're done," Cramer said on "Squawk on the Street."
"Please don't lose a lot of money on GameStop," added the "Mad Money" host.
Cramer, who's being treated in the hospital for a pinched nerve, said he called into CNBC in hopes of making sure people recognize the potential downside risk in GameStop and other soaring short squeezed stocks. "Don't let them get hurt. It's our job" to make sure people know they may get burned if the stock price collapses, he said....
Cramer said he was concerned about the stability of the rest of the U.S. equity market the longer the frenzied trading continued...
"I'm not saying that Reddit is good or bad, or that the shorts are good or bad," he said. "I'm just saying that the government has to step in and at least try to address the situation so the rest of the market isn't panicked by four stocks that are heavily shorted."
HEDGE FUNDS PLACED MORE SHORTS THAN SHARES EXIST (Score:5, Informative)
Re:HEDGE FUNDS PLACED MORE SHORTS THAN SHARES EXIS (Score:5, Insightful)
This is way more concerning:
Perhaps the big boys do need some more serious regulation if they can't differentiate between four stocks in a surreal position and the broader market. Or maybe "panicked" is just code for "afraid someone who's not a member of the cartel might call them on their bullshit."
SEC needs to step in (Score:2)
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Why not outlaw short selling completely? What does such an anti-business behavior accomplish? Look at all the assholes that tried to crash Tesla, for example.
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Short selling is important if you want prices to convey full signals and (used appropriately) can help prevent bubbles. Suppose you have a bunch of investors who are all gung ho on a bad stock (they are coming out with cold fusion next year!). There's no way to communicate to the purchasers that the rest of the market thinks its a scam, and some people could easily lose their life savings. Especially as the price
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What? Why end it? The longer Reddit holds their feet to the fire, the less likely they are to short, or at least short an unreasonable fraction of the stock, in the future. And a nice big loss for 2020 will make people less likely to give them money in the future.
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Why would the government get involved in a private transaction? These aren't FDIC secured funds.
If financial actors have transacted on shares that don't exist, or put themselves into a financial hole, they just need to follow the bankruptcy laws.
Too big to fail (Score:2)
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The market was due for a correction but this moved it up a bit.
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Meh, a few billion isn't enough to move the market much. The indexes took little dips yesterday, but nothing exceptional.
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The thing is, and retail investors are seen as "dumb money" by the professionals. As in they're just a minor amount of noise in the grand scheme of things and the private equity funds and all that control the world.
What the four stocks did, was provide a wake up call that basically called their bluff.
And nothing wrong with a deep selloff of other holdings. It meant us "retail investors" could take up positions in companies that were good at discounted priced and benefit from the long term growth of said com
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If the government wants to step in, maybe they should outlaw naked shorting.
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I agree with you, except for one word. Naked shorting is already illegal. Just outlaw shorts in general.
It's herd behavior (Score:2)
One hedge fun shorting Game Stop is not a problem.
When it becomes wisdom on Wall Street to do so, and the "new big thing," or a trend/fad in other words, then everyone starts doing it.
At that point, it takes on a destructive nature, like most crowd actions.
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Crowd actions can also perform checks and balance to the asymmetric power of access to information and monetary privilege. That's likely what happened recently as in addition to being able to obtain information on the hedge fund position an internet crowd was able to muster the monetary resources to act.
Can... (Score:2)
...but usually do not. It's important to remember that the system as it is consists of the results of two centuries of attempting to "balance the asymmetric power of access to information and monetary privilege."
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The hedge funds got a pretty massive hit. But loaning out more shares than exist could make sense in some very rare situations.
social media needs some good ol' democracy, fast! (Score:2)
It may surprise some to learn that... (Score:3)
after a long career of standing for the "little guy" in the face of the billionaires on Wall Street, Elizabeth Warren is not amused by the GameStop event... and she's not in support of the little guys against the big hedge funds. She's demanding [twitter.com] the SEC look into BOTH sides. It seems she's no more concerned by the billionaire hedge fund managers artificially pushing down a stock for quick profits and doing it by selling more shares than actually exist (an actual act of fraud) than she is by anonymous small
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There's no "agreement" on Reddit. It's more like someone saw that the Emperor was wearing no clothes, published the information that lead him to that conclusion, and then a bunch of commoners starting buying up all the clothes so the Emperor would have to pay a ton of money to cover his ass.
What? (Score:5, Insightful)
If random amateur people investing small amounts each in four stocks can threaten the stability of the entire stock market.... you need a new kind of stock market.
Because... how long has that same stock market been vulnerable to professional, targeted, inside, well-funded, distributed, multi-stock attack of the same nature?
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If random amateur people investing small amounts each in four stocks can threaten the stability of the entire stock market.... you need a new kind of stock market.
I think it's more important to realize that the stock market is not the economy.
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I think it's more important to realize that the stock market is not the economy.
But for various reasons the stock market is the new savings account.
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If random amateur people investing small amounts each in four stocks can threaten the stability of the entire stock market.... you need a new kind of stock market.
If random amateur people investing small amounts each in four stocks can threaten the stability of the entire stock market.... just think what China could do. They're sitting on tons of cash, and could easily launch attacks on over-shorted stocks. Through fronts, of course.
Why they could even setup their own RobinHood site, and call it DennisMoore for shits and giggles.
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The heavy movers are already here in the effort to beat the shorts. Look at Friday's trading. The shorts were ladder trading (selling the shares back and forth between themselves to lower the price artificially), dropping the price precipitously. However, the share price hit a $250 wall set up with a party who threw in a multi-million dollar purchase order. Similarly, the shorts tried to dump the stock fifteen minutes before the markets closed in an attempt to have the January calls finish out of the money.
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The explanation for why this *WAS* a good buy (Score:5, Interesting)
People are acting like the GME rally was a "meme", as though there was no basis for the rally that happened here. That is incorrect.
The fact is that GME was _extremely_ over-sold. That makes it a good buy. In fact, it was _so_ over-sold that by buying a _lot_ of it, and holding that lot of it, you could force the sellers to realize their mistake and exit their position -- at which point they owe you _more_ money. It was recognized as over sold, it was a planned purchase, it was executed, and it corrected the over-sold nature of the stock.
Stop there. I'm not going to degrees, I'm saying that GME _is now_ a good buy, but it was _certainly_ a good buy when it was over sold. It was also good for Gamestop -- they covered debt, they'll be able to keep going as a company for some time. AMC too -- they didn't spike, but their debt is absolved by the growth in their over-sold stock, and that makes them a more valuable company in the end.
Lets look at that last part. Other large investors felt strongly enough about the strength in the AMC gains that they used it to absolve AMC of their pandemic-induced debt. This is institutional traders, who supposedly know more than these meme-followers. The growth in these stocks is _justified_ and is supported by institutional traders.
The end result? A few companies that were going to go under have now been supported through the pandemic. Real companies, that people really interact with, that do provide value to the country.
So lets go back to the high valuation of gamestop right now. Absolutely, it's now "over valued." In fact, just about every stock in the stock market is over valued right now. Is it just going to fall out of the sky, then? No. Again, every stock is over valued. There are holders of this stock that bought it because they like Gamestop. My friend said his family practically lived there for years (him and kids). Gamestop is over valued, just like everything else in the market. (Tesla -- why aren't they halting trading on Tesla?)
The reason for this is that people have money, and they don't know what to do with it. Previously they were putting it into savings accounts. (Through high school, "7% _compounding_ interest! You should put your money in a savings account and save for retirement!" Oh, that interest is now 0.05%... damn. The stock market! We'll put it into the stock market!) Savings accounts aren't viable, and most people realize that, so all the money that people are just sitting on is being used to buy up stock. As a result, every company's stock is over-valued; as a result, many, many stocks are inflated beyond reason; as a result, all the "fundamentals" that you're hearing about no longer apply to the stock market. People are just buying because they don't have anything better to do with their money. If it goes up, great. If it doesn't, well they weren't doing anything with it anyway. People are buying the indexes (SPY, XLK, QCLN, TAN, PBW) because it's "easy" and/or because they like what it represents (clean energy! I'll buy into that!). Because people are buying, it keeps going up. It's a meme. "Buy the market!"
That's not to say these savings-accounters are wrong -- they're putting there money 1. where they might get something out of it (as opposed to where they _won't_ get something out of it), 2. where it might help the world (clean energy!), 3. in the relatively "safe" indexes.
The absolute result is everything in the indexes is growing just because people "meme"ed it. The current market is a meme. It will crash if anyone finds something better to do with their money than put it in the stock market like a savings account, because "Hey stock market!" isn't any longer the best option.
Hedge funds and institutional traders are just meme-followers.
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A lot of it has to do with extra stimulus money. But it's highest price in the last 5 years was ~30$ is 10x that now. I don't think they've been doing 10x better
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There is 5.2 Trillion in circulation, and they bought bonds for what 2 Trillion for the stimulus and possibly 2 Trillion more? So if you just use a ratio (which doesn't work but anyway) it would be more like 2x. Most of the damage will come from inflating prices (because there is more money around) and because we are spending tommorows money today and it will have to be paid off. This will happen through bonds and through taxes. The lower and middle class will suffer more because salaries will not increase.
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No, do some more reading. The short squeeze is the reason it's up. There has been no news from Games news department in the last week
Speaking of Indexes (Score:3)
Re: The explanation for why this *WAS* a good buy (Score:2)
The fact is that GME was _extremely_ over-sold. That makes it a good buy. In fact, it was _so_ over-sold that by buying a _lot_ of it, and holding that lot of it, you could force the sellers to realize their mistake and exit their position
If you truly believe that then buy the discounted stock the shorting created until the price is what you consider to be more realistic, not some crazy high multiple of that to force some technical shenanigans.
Don't act like it was so undervalued it deserved to be incredibly over valued, that's not what happened, that's not true. The shorts got exploited, and they didn't realize their error like GME was REALLY fundamentally more valuable than it is, they got forced to buy high, a technical knock out. Now G
Shorts are bad (Score:2)
Can someone explain what purpose have shorts? What advantage do they bring? Why are they legal? Why do they even exist in the first place? To me, it seems that they serve no other purpose than to screw over some people (in a direction or the other).
Re: Shorts are bad (Score:2, Interesting)
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Re: Shorts are bad (Score:2, Informative)
It's precisely the same thing as any other stock.
Betting on positive beliefs is just ad bad as betting on negativr beliefs. It's the delta between the bet and reality, that's the whole cause of the problem.
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It's actually a good thing because it is preventing GME from going to some ridiculous price like 1000, which would make gamestop valued in the 70 to 100 bil $ range. Price spikes end eventually and the shorts are betting on that.
Shorters want stocks to go down, and this has exposed bad business plans like enron and some shady companies in China.
Shorts have a purpose (Score:2)
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Shorting can serve a useful purpose. Imagine that some stock is overvalued, but the market is slow to catch on. This is a misallocation of capital, and it won't last in the long run.
Under those circumstances, a person should be able to put their own capital at risk on a bet that the price will fall. If they are right, they make a profit (and thus increase their ability to influence the markets in the future). If they are wrong, they lose their capital (and thus decrease their influence). Their bet by i
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The first problem with that is that this is more in line with betting than investing.
The second problem is that most people on Wall Street are short-sighted and want profits right fucking now, no matter the social/environmental cost.
That kind of thinking completely destroys long-term financial planning, ex: all the shorters that tried to basically kill Tesla or any other long-term projects to re-build greener industries that will help reduce or eliminate the pollution of our* planet.
* with apologies to any
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So far, you gave the most complete answer (thank you!) and you're confirming my intuition: it has nothing to do with investing, it's pure speculation. Unlike investment which is essential to many things, I don't think speculation serves any purpose other than allowing a happy few to make a quick buck by screwing other. I'll be happy yo change my mind if someone has good arguments.
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Everyone keeps talking about how short selling involves a bet that the price will fall. They forget that nobody can bet with themself. If one person is betting it falls, then someone else is betting it rises: the person who bought the stock from them. I think the whole thing between those two people is symmetric and it's not fair to say the purpose is to screw someone, unless you think the purpose of the whole market is to screw someone. Is the purpose of good ol' traditional "Buy Low, Sell High" to screw t
Front-running, debt (Score:5, Informative)
Pundit on KCRW https://www.kcrw.com/news/show... [kcrw.com] said the "free" trading apps not only sell your trading data to the big boys, but the big boys (probably) use it to front-run your trades. I had thought the data was for typical historical analysis, but guess not. Front-running means you don't get the best price. In this case, the difference would not be enough to keep you out of the money if you got in early.
Some big boys - not just small traders - were on the other side of that $10b loss on options. Options are a zero-sum trade, so they made $10b. That's aside from those who bought the stock, not the option.
AMC theaters had its $600m debt wiped out for good. Its creditor exercised a stock purchase clause on the debt, at a set price. AMC now has more shares outstanding, diluting their value fundamentally, but for now the share price is holding. Long term, the debt is gone. The short sellers paid for that.
Do not panic (Score:2)
Are there people really so naive? Stocks go up and down all the time. Last week we lost about 5% on the stocks. So what? We know exactly why it happened.
And instead of panicking, I am planning to buy more (not GSE, my regular portfolio). When it goes down, it becomes cheaper, you buy more, if it goes up then you make money.
I think this should be thought at elementary school. Don't need a finance degree to understand what is going on.
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It is the hedge fund companies and everyone they feed that are panicking and they're trying to panic everyone else (mostly, the GME buyers) to get out of their mess.
Hence why so many of the quotes in the summary treat the retail investors at WSB as a problem that needs to be fixed, without talking about the totally fucked up shorting. Anyone who thinks Jim Cramer isn't a shill hasn't heard the phrase "Roll 212".
hodl (Score:2, Insightful)
"Take the home run. Don't go for the grand slam. Take the home run. You've already won. You've won the game. You're done," Cramer said on "Squawk on the Street."
That's a sure sign that they're scared shitless and everyone needs to hold, and keep the price up there. Is $300, $400 overpriced? Yeah, it probably is. But as long as the pundits are trying to convince regular people to sell, there's still a hedge fund or two deep in shit looking for a way to cash out without going under. Some of the assholes are still in need of closing out their shorts with a loss less than Melvin took.
When the enemy tells you that you've won - you haven't yet won. They want you to give
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The stock has been flat (although volatile) for the past few days after its big jump. From here, do you think it will go up or down?
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Short-term or long-term?
In the short run, it will continue to fluctuate while this powerplay is going on. Depending on the outcome, it will then fall slowly or quickly, though I doubt that it'll hit single-digits again.
If had bought in at $200 or higher, and if I were in it for the money, I'd look for the next spike to sell. If I bought in for $50 or lower, I'd turn off the news and let it sit. Inbetween, depends if you're in it to make a buck or to enjoy some sweet justice.
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The short as a percentage of float is currently at 247%. The fundamentals of the stock do not matter. The only thing that is relevant is the belief that short sellers need to buy the stock.
If you missed the boat don't try to jump on. (Score:2)
I think the takeaway someone thinking about joining in now is this: if you bought in early great but if you just heard aboiut it you missed the boat and the situation has mostly played itself out.
Right now the stock price is high because the short sellers are required by law rto buy the stock to cover their shorts. That will slowly disiparte and the price will fall again. So if you buy in now you are likely to lose. If you bought early at say $25, then as long as you sell before the stock goes down to $25
The best explaination I've seen so far (Score:5, Insightful)
Media & Establishment: Great Job!
Redditors on WSB: This stock costs me $3 to buy and I can sell it to an over leveraged hedge fund for $300 a share. It's not like they can say "no".
Media & Establishment: THIS IS AN OUTRAGE!
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Virtual +1. Your choice of type of moderation (insightful, informative, etc)
Take the home run. (Score:5, Insightful)
Why? The point hasn't been made.
The Gamestop incident has only resulted in an 8% reduction in naked shorts
This means that COUNTLESS financial institutions are still HEAVILY invested in this shady business.
And Jim still thinks that the push is to "Pump & Dump".
No.
The push is to hold longer than these short-sellers can afford to stay liquid.
And all it requires is patience.
If you try and ruin a company through this method, prepare to be bitch-slapped over it.
What Cramer is really saying⦠(Score:3)
Jim Cramer, paraphrased: "I'm just saying that the government has to step in and prevent the little guy being able to manipulate the market like the big players have been doing for decades".
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Re: Best financial advice ever (Score:3, Insightful)
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If you buy something for peanuts is there really much to lose? I don't think so. These guys did this on a lark. Bonus points for causing the big hedge funds who were shorting stock to take a bath. That's the issue here I think. If a few little guys lose a lot of theoretical paper profits that's nothing, but when the big players lose real money people get angry.
Thus I don't think most of these "retail" investors care that much if the stock tanks. They spent very little and did what they set out to do which
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Some people bought at $6, some at $20, some bought at $200. And subsets of all those people bought because they thought they could stick it to the man, because it was a meme or because they were really hoping for the money. If you look at WSB, some people are donating the proceeds, some people are holding forever, and some people are like "this is lifechanging money". The point is, anyone who is is looking at a life changing sum should hop out soon - you may not lose much of your original investment, but
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Re: Best financial advice ever (Score:4, Interesting)
I bought two shares around $200/each. I spent that money out of my entertainment budget. Note that I said "spent", not "invested" - that money is gone and never coming back. The harder they try to convince everyone that the shorts got out, the more I want to hold. I'll ride it down to zero, or up to twenty thousand - doesn't matter to me.
And I don't even fit into the groups that are doing this out of spite. I'm not a millennial, I wasn't ruined by the crash in 2008, I'm not a left-wing radical who hates Wall Street or hedge funds. I don't even have a fundamental problem with short selling in theory, I just don't like the way we do it in practice.
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It won't go to 1000, GME would have to be worth 50 billion. To give you an idea of how much gamestop is worth, let's say they sold all the PlayStations in 2021(10% cut which is probably generous) they would make about 900 million tops, but they won't.
Its currently trading 10x what is best was in the last 5 years so it's overvalued since no updates to the business plan have been made.
I think the problem is most people are used to tesla and things that only go up
Right now the stock is worth 17 billion at 312$
Re: Best financial advice ever (Score:5, Informative)
Gamestop, the company isn't worth it, but GME, the stock can certainly be worth more, at least for a while.
The stock price doesn't currently reflect anything to do with Gamestop's business. It's based on the fact that the shorts will at some point have to buy GME to replace the shares they borrowed. Shorts aren't like options - there's no fixed expiration date. GME is still massively shorted (still over 120% of float). Those holding short positions are having to put up margin calls, basically they have to have funds in their accounts worth 125% (or more) of the current value of their shorted shares. So, while they don't directly lose money until they close out the position (well, they're also paying interest on the borrowed shares, so that is an ongoing cost), there are huge amounts of money they have to come up with so it can just sit there. So right now it's a waiting and betting game to see who flinches first - the longer the redditters hold out, the more it hurts the shorts.
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Right, and I think it will go up some. But there will be a lot of shorters waiting for people to take up the stock. The other thing is there are 5 big hedge funds that already had stock that could dump stock anytime and probably will (I can't think of a reason not to, seeing as the value will most likely not be as high in a month). The craziest thing is people are announcing that they will buy x amount of stock on reddit or twitter, which is crazy because the easiest way to profit is if you know something i
Which shorts? (Score:2)
I mean, I understand your concept. But those two hedge funds (M... whatever and the other) with substantial exposure are only worth 22 billion between them - if every ounce of value is wrung from their bankrupt company.
What makes you think that? On Monday, Days-To-Cover was 2 and it's been more than two days. Those f
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https://financhill.com/most-he... [financhill.com]
Stock Company Last Price Short Interest % Float Days To Cover % Shares Short
GME GameStop Corp $325.00 68.13M 249.67% 6.31 97.68%
Current days-to-cover if you take a short position today has nothing to do with days-to-cover a month ago. And Melvin Capital used a bunch of weasel words when telling about them closing the short - in particular, we never heard how much of it they closed. Might have been a single short sale, while you
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So, why is the short % listed a 250%? Other numbers have half that with same number of shares shorted?
And close in a single sale, no. But in a two days with 100,000,000 shares traded, sure. Melvin claimed they covered their position, and while they have incentive to lie, it looks plausible.
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Based on your logic-driven analysis of the fundamentals, how much is one bitcoin worth?
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There is no worth to a bit coin, they are worthless
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And yet the market disagrees with you. Thoroughly.
(I personally agree with you. I have never owned cryptocurrency, and have no plans to. But I do recognize that there is a core of people keeping that price up.)
Gamestop fundamentals dont matter (Score:5, Insightful)
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You'll take all the hedge funds capital? That was already done, to do that again you'd have to dump in about 20-30 billion because the shorts are shorting in the 350$ to 370$ range and you'd have to break there accounts again, which may not happen because all they'd have to do is sell other securities.
It was easy to do when the shorts are in the 30$ range. Not so easy when it's 10x that. A lot of shorts are pumping and dumping in the reverse direction (they did that on Thurs).
Seeing as how retail is
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I am talking about everything that happened after the first shorters lost. After that new shorters took their place
But as far as the share price goes, where are the redditers going to come up with 30 billion to pump into GME to get it to 1000 (its at 17 billion now), do you know how much money that is? WSB has what 3 million followers? That means everyone that follows WSB would have to pump in 3000$, this is assuming nobody shorts it and none of the big 9 institutional players start to sell (if they did it
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You're not getting it, they don't have to come up with that much. The stock is overshorted, more of it is shorted than actually exists. This means at some point the hedge funds have to buy it, whatever the price. They *have* to.
Maybe Gamestop could issue more stock to stop the problem, but why would they help the hedge funds that have been driving their stock price into the ground for the past 2 years?
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No, they just have to hold their position, they can let it go high. But many probably wouldn't let go until 400 since many shorted in the 340 to 360 range, but given the choice, they know how high it could get (they have already figured how how much money the retailers could possibly throw at the stock) and they only have to sell more of their stock in other areas to hedge against the rising price, because a price spike can't last forever. The other price spikes that have been caused by retailers usually la
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No, they just have to hold their position, they can let it go high
Not without backing up the potential losses. In practice they get a nice call from their broker informing them their negative stock balance is being balanced in their name by the broker. Meaning they are forced to buy at a price way higher than they dumped the stock for. Meaning massive losses for the shorters.
The people on the other side of the short are the ones that will win by simply holding. By not giving in to the ask of the shorting party they make the price go higher, as the shorters need the stock,
Re: Best financial advice ever (Score:3, Informative)
These people on Reddit are in for anywhere between $20 and $2000 and now own about three times as much, if they can cash out at all.
Most donâ(TM)t really care about that money, they just want to hold it to have Citadel (the company that was recently found to own RobinHood), Schwab and Ameritrade lose the cash they invested shorting those stocks.
Wall Street, Big Tech and the White House however slammed back on these small time investors, because to them, they donâ(TM)t belong in that game and were
Re: Best financial advice ever (Score:5, Insightful)
Yes, exactly. That is what so many people covering this topic don't seem to understand. They are making judgements and giving suggestions (like Cramer's "take the home run" advice) that are applicable to a rational actor trying to act in their own self interest (ie: profit). That's not (mostly) who these people are. They would be considered irrational actors (though their actions are actually quite rational....just with a different endgame in mind). The majority aren't looking to cash out. They say they will either ride the stock to zero or pass it to their kids in their will. The number one goal here is to punish the shorts, and they just want to "be a part of history" (as I've heard many of them say).
And since their goal is to punish the shorts, this is where all of this advice falls flat on it's face. If they cash out now, then the shorts will recover and it will have been a failure. The longer they can hold the line (and continue sucking up as many shares as they can as the come available), then the longer it will take to squeeze the shorts. Even if the shorts try to ride it out, those shorts have to pay an ongoing fee for shorting (when you short a stock, you are actually selling a stock you borrowed, so you have to pay a fee to the person you borrowed the stock from). So the longer this rides out, the longer the shorts money is tied up in the short and the more the fees will mount up.
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they just want to hold it to have Citadel (the company that was recently found to own RobinHood), Schwab and Ameritrade lose the cash they invested shorting those stocks.
How are brokerages going to lose money?
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Because it’s the brokers owners and bank rollers that shorted the stock. Just because you’re a broker doesn’t mean you don’t have skin in the game. They are not neutral third parties which this whole debacle exposed.
It is very apparent that Citadel, who owns and bankrolls RobinHood and also has ties to Schwab and Ameritrade, used the information they get from brokerages to short sell stocks they don’t see their customers interested in. Then when someone games the system they ga
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They are the ones that gave the shorters the stock to sell.
If the shorters won't be able to reacquire the stock they won't be able to give the stock back to the brokers and the brokers will take a hit.
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The brokers aren't going to lose money, the investors have to cover the stock purchased and you have to have cash in you account. Anyone that invested too high will lose money when everyone pulls out. Those that have bought on margin may go bankrupt, and brokers are really good at getting their cash back
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"Please don't lose a lot of money on GameStop," added the "Mad Money" host.
Translation: PLEASE sell your GameStop stocks now so the prices will go back down before we get caught in our short sell and lose our money instead of the common investor losing theirs.
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The point of WSB is so that the posters can make up a story and get people to drive up the price so they can make millions on options. You would to if you had a free crowdsourced stock buying army.
Everything is broken (Score:2)
Institutions create rules, rules get gamed, and you end up with selfish careerists running everything, at which point the product sucks.
https://www.tabletmag.com/sect... [tabletmag.com]
This is another form of Crowdism (socializing creates herding behavior):
http://www.amerika.org/texts/c... [amerika.org]
People do not change (Score:2)
Nor do ideologies: they produce the same results, time after time.
The notion of "equality" drove people into such a fervor that they cheered for the guillotining of whole families, informed on their relatives, held struggle sessions, and threw friends into the gulags.
We're just seeing history repeat itself.
Quick question (Score:4, Insightful)
Question: What is the exit plan?
There's a ton of people holding GameStop stock and forcing short sellers to cover. I get that, it's easy to understand.
I was imagining getting some of that stock, and came to a question: what is the exit strategy of doing this?
Once people start selling their held shares the price will drop drastically, and it'll be unlikely that many people will sell at the high point. The speed of the drop and the timing will be enough leave most investors in the dust. The only people who win in this situation will be the few people who sell *first*.
GameStop is *still* a distressed company in a restricted market with no obvious business plan moving forward. They're a little better than they were last year due to Ryan Cohen joining the board, and they could raise some capital on the new stock price, but it's still a company in distress and will most likely fail in a year or two.
So real question here: what's the exit strategy for all the people holding GameStop stock?
How do they cash out and make a profit?
Re:Quick question (Score:5, Insightful)
Maybe they don't cash out. Why do they need an exit strategy? Did you read the post above where the slashdotter bought a couple shares on a lark and has no plans to sell or recoup his costs? You seem to be operating under a mistaken idea of what the goal or purpose of these activist investors is. The fact they aren't necessarily in it to make money seems to be unfathomable to you.
I think this inability to fathom why these social-media -inspired folk have bought GameStop shares is causing a great deal of heartburn and anxiety among the big players. It's as if someone has finally called their game for what it is, and they are scared of the house of cards coming down. They want everyone to play by their rules. They don't want everyone to realize the whole system is bizarre and broken if you take a step back and look at it with a critical eye. I understand dividends as a means of attracting investment and giving investors a return on their money. But the whole idea of stock trading to make money in a zero sum game is just a bit ludicrous when you step back.
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Remind me again what happens when everyone tries to exit through the same door at the same time?
Some buyers are true believers who are trying to teach a hedge fund a lesson, but many more are just piling onto the stock to make a buck.
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There is no problem, markets aren't supposed to be rational all of the time. Just know what your doing and be a cautious investor
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The market is absolutely broken.
"The Economist" agrees with you. From their coverage:
The short squeezes are not confined to GameStop. Some of the biggest share price gains this year have been made by companies that were the most heavily shorted and those with the weakest balance-sheets. That seems an uncomfortable result for those who believe markets are always efficient, and allocate capital to the companies with the best prospects.
Re: Is that so? (Score:2, Informative)
You should go outside. Not trailer parks or big cities either.
Rather somewhere with good education. It's refreshing.
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I hope reddit does go for the metals. We'll finally get to find out if the shorting is real or just a conspiracy theory. The CFTC has responded to this years ago, along with an explanation of cash settlement and other aspects of the markets indicating there is no such conspiracy. The thing is, you don't need over-shorting to drive the price of GLD and SLV nuts. A few million WSB "autists" churning their GME profits and "stimmie" checks to the metals will do it. Like all bubbles, it'll have a Minsky mom
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Sorry for bringing it up.