Just asking, as it is making all the rounds on social media, what is the cliff note
explanation of the Gamestop, reddit, autists and hedgefund manager situation?
ETA:
Last night I posted the above after seeing the headlines and blurbs about Gamestop. It is quite an interesting situation. IS it a Davy and Goliath tale OR is it how they will use this as an excuse to control all the finances because things are "risky". As I am fond of saying nowadays, "I don't trust a fucking thing anymore" which is why the quote below rang so true.
Anyway:
Thank you for all the comments and links. I have added them here for those interested.
One sentence from the Z-man's informative post on the subject rings true across the spectrum:
"The institutions we are supposed to rely upon to regulate our lives have been corrupted by managerial insiders." - thezman
Links to posts left in the comments section. Do go read through the comments over at each site for a lot more perspective.
This is a pretty simple explanation from one of the participants. https://patriots.win/p/11SK7KTZoM/on-gamestop-why-hedge-funds-are-/ Note that 'naked shorts' are nominally illegal but that is what the hedge funds get away with. As of a few days ago shorts of Gamestop equaled 143 percent of all GME shares.
ReplyDeletehttps://www.americanpartisan.org/2021/01/elites-versus-you-the-crescendo-begins-to-peak/
ReplyDeleteCheck out conservative tree house. Most entertaining.
ReplyDeletehttps://theconservativetreehouse.com/2021/01/28/decepticon-maneuvers-dont-forget-who-owns-the-new-york-stock-exchange/
- Hooda Thunkett
Check out thezman.com blog...concise.
ReplyDeleteAs George Carlin said: "and you ain't in the club".
ReplyDeletePutting aside the entertainment value and the news cycle, here are the takeaways:
ReplyDelete1. This is the quintessential all-American story -- the little guy wins one for a change.
2. The autists involved did absolutely nothing wrong, they simply bought a rather risky stock. They won big in this case, but they could just as easily have lost their entire investment.
3. Anyone willing to do the research and take the financial risk could do the same thing. But most folks wouldn't even consider it, because it requires enormous balls and nerves of steel.
(You shouldn't play the game unless you're willing to risk the loss and still sleep at night.)
4. The apparent outrage over what amounts to normal investing behavior tells you everything you need to know about how thoroughly the markets have been rigged.
5. Everything else aside, the autists performed a positive service for the financial system, by making the markets function more efficiently. The technical term is "arbitrage". The wall street traders do it all the time, they just don't expect the little guy to do it too.
A bunch of little guys on an investing sub Reddit just stuck it up a bunch of hedge funds butts and the hedge funds don't like it cause they got caught at their own game.
ReplyDeleteAdditionally the Robinhood trading site that a lot of these small investors use, screwed their customers by first suspending trading in Gamestop shares, then selling the shares from customer accounts without the customer's permission to "protect the customer's investment". Both those actions by Robinhood (I asked my sons to consider the implications of the name of that trading firm about a year ago when I found out, from them, that they were using the platform to day trade) should crush the trading platform. Additionally, at least one class action law suit has been filed against Robinhood over their suspension of trading in Gamestop shares. Tucker Carlson did a segment with Dave Portnoy about this last night, with Portnoy contending that a bunch of people SHOULD be headed to jail. it's such a contentious issue that AOC, of CONgressional fame (or is that infamy) and Ted Cruz actually agree that "something needs to be done" by .gov which means that there'll be A LOT of hot air, but nothing will change, except maybe Robinhood ceases to exist, maybe.
Nemo
Nemo, not much is likely to happen to Robinhood except loss of some customers because the laws and the industry rules permit platforms to take either or both of those actions, if one has opened a margin account (which is now standard), whether or not one is actually trading on margin at the moment. It's wrong and it's evil but it's generally legal.
DeleteTY. I was unaware that the a platform could execute a trade without the customer's permission. Somehow, not only does it seem illegal it is surely unethical, especially as I'm informed from what I've read about Robinhood's action here, that the shares sold without authorization were sold to one of the short selling hedge funds to enable that hedge fund to cover some of its shorts.
DeleteNemo
The Bar-stool guy explains it quite well:
ReplyDeletehttps://twitter.com/stoolpresidente/status/1354848771184750598
A bunch of not professional traders saw an opportunity to make lots of money and gathered and ganged up on the company crushing hedge fund short traders who sought an opportunity to make millions. The not professionals bought GME and drove the price thru the roof. The big boy 1 percenters with all the advantage don't like sitting on a potential 54 Billion dollar loss as they would have to buy at the higher price to close out the shorts, they don't like that. Called the overlords who they make millions of campaign contributions to and said they don't get to do this to us their not in the club. All of the sudden SEC looking into a Sub reddit chat room for people to prosecute for what ever laws they can create. The trading platforms are only allowing buys for the stock. They can't sell at a large profit like the hedge funds. Huh, go figure.
ReplyDeleteThis guy is about the most sensible investor I have ever seen. Very clear explanation on financial stuff.
ReplyDeletehttps://www.youtube.com/watch?v=E5k1UFqqReU
Time to take the penalty on the 401k and convert to cash. Buy a high quality Safe with at least a TL30 rating, dont buy a cheap RSC(gun safe) because they are not safes.
ReplyDeleteOver 30 years experience in finance/accounting - but, that is not the point in my opinion (see below)
ReplyDeleteHere is my take for what it is worth - my C Theory
First, anything that MSM is touting is an F'in lie from hell
Second, one of the major holders of GME stock sold over $1 BILLION worth during the run up in price
That alone doesn't make it seem like a buy at all
So, my take is the 'cover" story is just that
Looks to me llike the big holders / insiders are running for the hills behind the fake news story
And the little guy will be / is left holding a big bag of shit - AGAIN
Insiders holding stock that's about to be worthless is one of the 1st things I thought. Took some big pockets to get the thing rolling.
DeleteThat seller was a type of fund sitting on a long term stock that was at a 300,000 dollar loss and did the wise thing and sold for 1.15 billion. Read the reddit sub for some entertainment.
Delete"That alone doesn't make it seem like a buy at all"
Delete3Score, AFAIK no investor ever claimed the stock was a buy, the autists simply said we like GameStop, so let's use it to crush the hedge fund that's fucking up a company we like.
Two from David at N C Renegade
ReplyDeletehttps://ncrenegade.com/editorial/valuable-information/
https://ncrenegade.com/editorial/whats-in-your-retirement-account/
Before I retired 5 years ago I cashed out my 401K and my IRA and put the money in this land and homestead in the NC mountains, paid off virtually everything I owned and invested heavily in band aides, beans and bullets. Started on a road to self sufficiency and we keep travelling down that road. If I had left everything ride until the market peaked awhile ago I and cashed out on the high I would have made a lot more money, but no regrets. One thing is for certain and that is the validity of Stein's Law: "If something cannot go on forever, it will stop."
We will eventually see the fiscal insanity come to an end but probably only looking in the rear view mirror after a complete collapse. Jo & Ho and the insane policies they are implementing will at least insure that we won't have to wait long for that tohappen.
H/T 90 Miles from Tyranny...
ReplyDeletehttps://www.breitbart.com/clips/2021/01/28/fncs-carlson-gamestop-saga-shows-system-is-not-the-capitalism-we-were-promised-not-even-close/
Not sure the david and goliath ‘narrative’ about this situation regarding GameStop is all that it is cracked up to be … that the ‘little guys’ ganged up on the ‘big guys’ and fixed them good and hard.
ReplyDeleteI don’t know when MelvinCap shorted this stock — or at what price — but look at the shorting possibilities at today’s prices and you’ll get a whole different picture of just what enormou$ amounts of money are possible.
Various — and rhetorical — questions come to mind in all of this: who’s actually funding these ‘little guys’ for the amounts of their play (just today — 26,000,000 shares have traded at an average of of $352/share — for a total of all trades just today of $9,152,000,000 — yes, north of $9 billion); have these ‘little guys’ already sold out and taken their seemingly significant profits; do any of the principals at MelvinCap have personal enemies — folks who’d love to $¢rew them sideways — i.e., is one or more other hedge funds behind all of this, using the ‘little guys’ as their front — i.e., a false flag event; what’s the exit strategy here — i.e., how will this end, financially speaking; and, as always — cui bono?
If MelvinCap and others shorted this stock — as Glenn Greenwald seems to imply — at $4-10 per share and expected to make a lot of money — imagine how much money someone stands to make by shorting this stock at $350+ per share … and you know that someone is going to be unable to resist that temptation.
Just some random musings … I’ll be interested to see any replies …
I agree
DeleteWe average people just do not have enough $$ to compete with them
They are up to something else - and it is not good
I think they are developing a story line - for cover
You can't look at trade volume as a static number, but only as a dynamic trend, because a huge percentage of the volume on ANY stock is automatically done by computers. As humans trade, the algorithms respond automatically.
DeleteSimilarly, you can't look at big sale amounts from individual insiders the same way you look at volume from traders or investors, because insiders are required to set up their sales well in advance, either by date or by price target.
Markets are easily moved by the little guys, even though the amounts are small, because their small trades cause these larger volume actions to be triggered, which initiates a cascade of further trades. And then the talking heads start to comment...
The little guys probably don't have an exit strategy and most of them won't make money from this, but watching the big guys squirm is itself ample reward.
Peter also has some excellent analysis on this.
ReplyDeletehttps://bayourenaissanceman.blogspot.com/2021/01/the-gamestop-fiasco-reveals-our-ruling.html
I'll assume everyone knows how shorting works and how short squeezes can happen. The only thing to add imo is the squeeze was not just put on or initiated by young people with limited funds. This thing was started and fueled by some deep pockets though a lot of Joe sixpacks benefited if they got in early and are now out.
ReplyDeleteThis is now a game of musical chairs and there will be lots of people without a seat when the music stops.
market-ticker.org. as usual, Karl lays it out. must go to website.
ReplyDelete"Before I retired 5 years ago I cashed out my 401K and my IRA and put the money in this land and homestead in the NC mountains, paid off virtually everything I owned and invested heavily in band aides, beans and bullets. Started on a road to self sufficiency and we keep travelling down that road."
ReplyDeleteSmart guy. THAT is what everyone should have done by now. Those that still have to work and aren't very well off are going to be in deep poo from this point forward.
This is the point at which survival is everything and investing is nothing.
The stock market has always been a rigged game.
Put your money towards yourself & family. Stockpile food and supplies of all types, be self sufficient as much as possible. Time is really really short now.
Over the longer term 20+ years the market keeps you up with inflation. Cash in the drawer is worth less every day that goes by. There is talk of the gov taking over managing the 401ks. If that happens then by all means take it out. Gonna pay a lot of tax though unless it's a Roth
DeleteAll the exciting shit is over. If you don't have $5000 to drop just for shits and giggles, nevermind.
ReplyDelete