Finance is my least favorite subject, but I can't completely ignore something that feels expressive of my reasons for not engaging. I'm not even going to attempt to vaguely gesture at the briefest summary of what happened. Go read the article... or any article on the subject.
But I will quote the second highest-rated comment.
If the hedge fund managers are concerned, perhaps they should simply drink fewer cups of Starbucks. Eat less avocado toast. Do a better job at saving. Or, get a side hustle. Drive an Uber? Learn to code? Just pull yourself up by your bootstraps, fellas.
This situation underscores how Wall Street is essentially a casino, with only a passing relationship to reality. The financial industry has been drawing the marrow out of our country for decades, often at the expense of working Americans. I was financially destroyed in the fallout from 2008. You'll forgive me if I see this as a well-deserved, and long overdue, taste of their own medicine.
Eat less avocado toast. Remember that meme? Know Your Meme explains:
On May 15th, 2017, Australian website 9news ran an article recapping a 60 Minutes episode in which millionaire property mogul Tim Gurner said “When I was trying to buy my first home, I wasn't buying smashed avocado for $19 and four coffees at $4 each.” Gurner was attempting to make the point that millennials spend too lavishly to afford a home, while older generations saved money in order to invest in a home. However, the quote about avocado became a subject of derision as it became the focus of dialogue around Gurner's comments. TIME tweeted an article that claimed Gurner stated "Stop buying avocado toast if you want to buy a home."
पोस्ट्स
३०९ टिप्पण्या:
«सर्वात जुने ‹थोडे जुने 309 पैकी 201 – 309Can we appreciate the irony that a company called "Robin Hood" is protecting the rich from the poor.
I agree that there's nothing in particular wrong with hedgies which is why I'm referring more broadly to private capital as containing enough unscrupulous big swinging dicks, that even if the predominant trader/analyst/principal is a decent person, there will be high profile ruthlessness or manipulations that will have people getting out the pitchforks. Most hedge funds lose money or at least fail to better their index, I suspect, because most money managers are skilled in the raising of funds and not necessarily much else.
The problem for the industry, which may be unfair, is that America having recently revealed itself to be an oligarchy, and a fairly ruthless one at that, the people are coming after the oligarchs. And the scrupulous as well as the unscrupulous are at risk.
The manipulation engaged in by some of the bigger players or less scrupulous assortment of smaller players is real and punishing to retail investors and many times the companies and brands people love. More broadly the socialization of losses in an environment of private profits kind of pisses people off--really pisses them off.
>>
I've worked this for 16 years like I wrote. There is very little actual equity "manipulation." There are crowded trades that seem like it. There is naked shorting/derivative plays that do weird things on occasion (and as I said I don't think should be allowed), but even Steve Cohen isn't able to wake up and say I'm going to make XYZ go up $100/share or down $100/share.
There is very little "socialization" of losses for equity hedgies. Hundreds start up every year, hundreds go out of business. No one cares. No one bails them out. No one should.
No, the socialization of losses happens when you have massive debt/currency hedgies enabled by retarded bankers packaging up liars' loans (and let's not talk about the massive fraud every day Americans engaged in on their mortgages back in 2005-2007) and selling them to German pensioners stretching to squeeze another 0.25% out of their savings.
But I'm a Santelli type. I don't believe big banks or credit/currency funds should have been bailed out then. I don't believe small fry who lied on their refi and bought an Escalade should get bailed out either. I don't believe Robinhood should be trying to help out the hedgies here by screwing their customer base. They all deserve to be out of business.
>>DavidUW, you seem like a nice and intelligent guy for a greedy bloodsucker.>>
Thanks. I never pretended to be otherwise. My job description for years was to make rich people richer and get my beak wet in the process, and I never tried to make it sound noble. Now that I set up my self-funding pension plan and can see the other side of this stupid plandemic, I got a big bucket list to check off.
Most hedge funds lose money or at least fail to better their index, I suspect, because most money managers are skilled in the raising of funds and not necessarily much else.
>>
Mostly they start with a few good ideas, beat the index for a year or three and then start losing and shut down.
>>
America having recently revealed itself to be an oligarchy, and a fairly ruthless one at that, the people are coming after the oligarchs. And the scrupulous as well as the unscrupulous are at risk.
>>
Which is why I'm leaving America.
Surely this is a case where the cure is worse than the disease?
A bunch of internet rowdies discovered that some of the high and mighty had gotten sloppy, and decided to profit off of it while punishing the manipulators. Lo and behold, they were successful. It looked like a couple of investment funds might fail. Bad news right?
In order to prevent those investment funds from going bankrupt, every institution involved including the government, Wall Street, the markets and trading firms have cooperated to protect the rich and screw the poor. Worse, just like the Democrats and the election, they were sloppy about it, secure in the knowledge that they were safe from any repercussions. The collusion and manipulation to protect the elite is manifest and manifold.
I don't think this ends here.
That sounds like fun, and it sounds as though you've managed your risks and covered your shorts already. Your distinctions are fine and accurate, although I think you underestimate the degree of unscrupulousness in your own industry to a degree: scrupulous people tend to make that mistake. And hedge funds are far from the most powerful or sinister members of the private capital world. The unholy alliance of finance and tech and politics, the small club that runs shit and the brazen emergence of this oligarchy from the shadows means that fine distinctions such as those you're making. That's what I mean by these corrupt and increasingly clumsy motherfuckers are going to take down a lot of us with them, many who don't deserve it. Cover the shorts, maintain the hedges and hope for the best. And make some popcorn.
@Original Mike
@jaydub
I just went out to grab some lunch and coincidentally Dave Ramsey was on the radio talking about GameStop, craps, gambling and buying single stocks. A kid called in and said he had just make 47K off his 5K GameStop investment asking Dave what should he do with the profit. Of course Ramsey told him to pay off his student loans and stop day trading (gambling) equating it to craps. Ramsey says he never keeps more than 10% of his portfolio in single stocks which I found interesting. I keep about 30% in single stocks. Tesla and Amazon have been very good to me. I am a gambler though and understand the risk versus reward.
And Mike, looking back on my posts, I was conflating portfolio management with the "emergency fund" concept.
For my part, I'm insulted by the talking heads on CNBC and FBN talking about how a stock's departure from fundamentals of the business is some kind of horrifying aberrance, when the most profitable trading strategies for the ballers doing momentum or HFT or using other quantitative strategies hasn't paid attention to the underlying business fundamentals for many years. They're saying that only the ballers get to do that, retail has to trade based on the fundamentals. They're not helping their case.
A supposed Robinhood insider says they got a call from the White House before hobbling trades.
our distinctions are fine and accurate, although I think you underestimate the degree of unscrupulousness in your own industry to a degree: scrupulous people tend to make that mistake
>>
I think we're generally more honest than politicians. And I have no problem with things like carried interest being taxed as ordinary income etc etc. I do think income tax rates are too high however. But then again, I think the government is probably 3x as big as it needs to be too.
>>Cover the shorts, maintain the hedges and hope for the best. And make some popcorn.
>>
It might not surprise you to learn my focus is reliable income, and generally speculative small caps don't provide that.
I agree, this is very entertaining to me.
Daskol, what separates Robinhood traders from an illegal pool? Has the SEC said word one about any of this yet? They couldn't have, or the stock would be 50 or 15 by now.
Seems like way too much publicity on this thing (GME) for there to be much more run to it, though.
I think we're generally more honest than politicians.
My God, if that weren't the case we'd all be in the mines already.
Kai Akker, what would make them a pool? They're having a really big idea dinner, and they're eating roasted hedgies.
They just really like the stock.
I don't know what regs say, but a group of traders working in concert to hype a stock sounds like a pool to me. It is hard to argue that there is any rational basis to the GME price action other than the collusion and manipulation of a group of traders acting in concert. Just because you don't like some of the people on the other side of the trade doesn't make this an automatic good, IMO.
---The collusion and manipulation to protect the elite is manifest and manifold. [Gahrie]
Gahrie, please tell me why the Robinhood traders are not the source of all the collusion and manipulation on GME.
The story is far more involved than a simple pool-based pump and dump. This all started a long time ago, a year or so, when a prominent forum member called DeepFuckingValue laid out his case that GameStop was undervalued. He YOLO's about $50K into it and wouldn't shut up about it on the boards, for which he was pilloried. But they love GameStop, his thesis started playing out and then the shorts came in hard to keep it down. This large group rallied in favor of the stock mostly as a reaction to that, and also to the huge gains DFV was showing (he was sharing monthly or more frequent updates to his portfolio). He had around $50M in there yesterday, about 1/3 in cash and the rest still holding some stock and options in GME.
I don't really understand how all these people independently purchasing shares in a company they like are colluding exactly. It's out in the open: they noticed how crowded the shorts were, that more than 120% of the float had been borrowed and sold, and saw that the very low prices were a result of short selling. That's an opportunity, and created the opportunity, in protecting their gains and positions, to put the squeeze on the big players. There were a lot of factors involved.
But this is nothing like a small cabal of financiers coordinating their actions in private dinners. This is not like that at all, it's like the opposite. It's having a similar impact in terms of impact on prices, but it strikes me as nothing at all like the type of manipulation you're describing.
---I've worked this for 16 years like I wrote. There is very little actual equity "manipulation." There are crowded trades that seem like it. There is naked shorting/derivative plays that do weird things on occasion (and as I said I don't think should be allowed), but even Steve Cohen isn't able to wake up and say I'm going to make XYZ go up $100/share or down $100/share. [DavidUW]
Right, ITA. Hedge funds are easy scapegoats because it sounds easy when the only things covered are somebody's great trade or great year. They are envied just as Trump was envied. And the result, as with Trump, is a great deal of irrational hatred. Nobody is forced to pay a hedge fund fee. They do not "run" the markets. Only the Federal Reserve comes close to that description.
Thanks, Daskol, I appreciate your replies. I have never looked at Robinhood so I am not asking out of any entrenched position on their actions. I am puzzled at the silence from the SEC so perhaps your viewpoint regarding GME or Robinhood in general is entirely correct.
Tomcc said...
Anyhow, is there a less sympathetic group (excluding lawyers) than hedge fund managers?
HR.
Public School teacher Union leaders.
Congressman.
Media.
Ya think? What do you call it when Tucker Carlson and AOC agree?
This happens a lot, actually. Assange, certain economic and regulatory measures, etc. If AOC would just drop the race-hustling, America-hating, terrorist-coddling bullshit, and conceal a bit better her contempt for half this country, they'd be totally simpatico.
Okay. Fair enough. Then I'll go with Ben Shapiro and Rashida Tlaib as America most uncomfortable bedfellows.
Normal people can short sale a stock, it's just high risk. I did sometime in the '80's for about 100 shares of something, can't remember. I kept that position for about three months. When the company paid dividends, I had to pay rather receive them. I think I made a profit on the transaction, but it was never racking. I never did it again, as the loss potential is unlimited and the reward potential is limited to the price of the stock at the start of the short sale.
Far better to just buy index funds, which reflect the overall economy and are much, much less risky.
I am very impressed that people on this blog have such an active interest in the financial markets.
That interest will come in handy over the next few years. Shit is gonna happen and we need to be prepared.
Kai Akker said...
I don't know what regs say, but a group of traders working in concert to hype a stock sounds like a pool to me.
Because it doesn't sound like they were working in concert. The guy who got the ball rolling was buying GME in quantity as far back as September, 2019 and the other members of WallStreetBets were laughing at him. But he held. It was only after the value started moving up that they jumped on the bandwagon and started going heavy into GME.
How is that any different from a bunch of golf buddies jumping trading stock tips?
Shorting can serve a purpose. My favorite was when a short fund went after Hemispherx Biopharma (HEB, now AIM). They raised and kept raising lots of money for the soon to be approved drug to treat CFS (Chronic Fatigue Syndrome). Lot's of money raised and lot's of many made by management. What still hasn't happened during its existence is the approval of of an actual drug. It's still a big con game.
After getting losers to keep buying more stock issues, the company did 1:44 reverse stock split, it is now trading at $2 per share.
It was a short seller who blew the whistle on this loser.
Shorting is a tool. It can be used for good, but now is a great way to make great returns by manipulating the market. Big funds become market makers to their own ends.
I don't know what regs say, but a group of traders working in concert to hype a stock sounds like a pool to me.
>>
This isn't quite a pool. A pool is generally an agreement among group to have a single person do the trading for them.
So if these reditors gave their money to DFV to buy/manipulate GME and split the profits, that would be a pool.
It's closer to a pump & dump but it hasn't been dumped yet, and again, there's an instigator, for example, DFV position a bunch of BS to hype the stock while selling it at the same time into the rally. There's no evidence he was lying about his initial buy thesis, bought the stock himself, and apparently hasn't sold.
So not really a pump and dump.
It's a simple short squeeze. It happens. As stated above, noticing a crowded trade and taking the other side is pretty common.
What else is common is likely happening now but I haven't seen it/paid attention to the other shorts' holdings, where hedgies will hear about XYZ fund liquidating, run through what that fund owns, and, say, short all the positions especially in smaller stocks. Also perfectly legal.
Nobody got their arm twisted into buying GME, it’s a free country and you can’t legislate to fix stupid.
Now it looks like if you bought shares on margin RH is unloading them without your consent. And you can guess at which price. Funny that some on wsb apparently don’t even know if their shares were bought on margin...
One of at least two awesome soliloquy’s by Charles Payne yesterday. Rock solid.
https://video.foxbusiness.com/v/6226936023001#sp=show-clips
The clip on Varneys show was even better though.
---How is that any different from a bunch of golf buddies jumping trading stock tips? [Northof101]
It may not be. But GME runs 3 to 500, KOSS $0.80 to 120. LOL, these are more than short squeezes!! And are they ever screaming SELL.
The real barnacles on efficient markets are players like Robinhood, who don’t charge commissions or charge very low ones and sell the trades to high frequency traders prior to executing them to make up for it. That’s insider trading on an industrial scale.
I don’t know that that is what Robinhood does, it just makes sense, because it is what most of these low commission traders do.
I would be most interested to hear a theory of how high frequency traders trading on the interval between order and execution are improving price discovery in markets. It’s more like a private tax on the market, IMHO
I would be most interested to hear a theory of how high frequency traders trading on the interval between order and execution are improving price discovery in markets.>>
>>
you won't from me. I hate robot traders and also think they should be eliminated.
Stock markets are invented by humans, for humans, not our robot overlords.
Gahrie, please tell me why the Robinhood traders are not the source of all the collusion and manipulation on GME.
Robinhood was not the only firm that stopped allowing people to buy Gamestop or the other stocks involved. I know Ameritrade did the same thing for instance. I have read reports that a Robinhood insider has leaked that they got a call from the White House.
The real barnacles on efficient markets are players like Robinhood, who don’t charge commissions or charge very low ones and sell the trades to high frequency traders prior to executing them to make up for it. That’s insider trading on an industrial scale.
>>
They don't exactly do that. They bundle the trades and they direct them to market makers who pay for the order flow and resulting liquidity.
All brokers do this; your order is directed to market makers who, well, make the market between buyers and sellers, and they profit on the spread between bid and ask.
Well RH, Schwab, TD, and Fido charge zippo for trades now. I think a sea change has happened in finance as the access to info has evened the playing field. Now the big fish are whining because they’ve lost their edge...boo hooo.
Thanks Wall Street for saving us from ourselves.
Further, the clearing houses and prime brokers that the retail trading platforms use shut down buying
So...if the supposed low level insider from RobinHood is real, this was a lie RH used to deflect blame, and it was not about an inability to execute the trades. It was their discretion.
Temujin said...
Here's a larger view from someone who spent his career in it: Points & Figures
-- read this and will read it again. I'm not in that world but it seems like I should know about it.
I would like to offer this thread/discussion as Exhibit #1 in today's round of "why the blogosphere is vastly superior to social media".
Thank you to all contributors, I've learned a lot today. Not sure I'm a better person, although I won't spit any more when I say "hedge funds".
Not a good look that Yellen took 800k in speaking fees from Citadel either??????
When asked about that and RH at today’s WH presser, Pasockie said, you guessed it, I’ll have to circle back on that.
Thanks Jen!
It may not be. But GME runs 3 to 500, KOSS $0.80 to 120. LOL, these are more than short squeezes!! And are they ever screaming SELL.
They are specifically going after companies that have relatively modest market caps or floats (e.g. number of shares) or for some other reason have few tradeable shares (e.g. insiders own huge stakes they won't unload), and are heavily shorted. That means lots of people have borrowed shares to sell them in the anticipation they can cover later when the price is down. But when the time comes to cover, there actually have to be shares available to buy. That's the mechanism responsible for the price spikes: people are buying and holding these shares to make them scarce.
There are other factors such as buyings lots of call options which allow you to control 100 shares per contract. When these expire tomorrow, those in the money grant the older the right to buy those shares at the strike price. By pushing even higher strike prices that were WAY out of the money when purchased into the money, e.g. below the share price, the idiot retard army are ensuring that brokers will have to buy a ton of shares. This could have a huge impact because they have no choice, whatever the price they have to buy the shares to fulfill the contracts. Other tactics are for major shareholders to stop lending shares out for shorting, or to try to get those out there back, although some regulatory changes make that one less potent than it might have been.
There's a lot of shenanigans, but the only things that obviously break the rules and possibly the law appears to be the behavior of some of the brokers, and possibly the traders at the short hedge funds who may have coordinated a "short ladder" attack when the retail buyers were locked out by trading small lots between themselves back and forth to drive the price down and panic the retail holders into selling. The order book from today looks like that's exactly what happened, but I guess the hedge funds figured they'd rather deal with a fine and stay solvent than give up the ghost.
So DavidUW put it succinctly: the idiot-retard army is going after traders who didn't mind their risk. If they quickly covered their positions, or if they had bought other protection or just avoided an obviously over-crowded trade, this opportunity wouldn't exist. They have made their beds. They're not used to losing these types of confrontations, so in many cases have been doubling down on the short positions after the spikes, which gives the idiot-retard army another shot to squeeze them.
RobinHood and other brokerages changing the margin rrequirement and then issuing an immediate margin call sucks, but they are free to do that. And frankly that's for the safety of the investors at this point.
Gahrie, that wasn't the question I asked you. I am really asking for simple facts. So here is the issue this raises to me -- how can markets operate with a minimum of interference yet still protect investors from nefarious victimization?
Glenn Greenwald describes the GME players as small investors who "banded together to drive up the stock price of that company into the stratosphere, abruptly leaving the hedge fund short-sellers with billions of dollars in losses."
Driving a stock from 3 to 500 is not normal market action. Banding together to drive a stock price up 12,000% or whatever that rise is -- how can that possibly be considered legal behavior? Imagine what would be said if the hedge funds had done this at the expense of some less-swift institutions who were taking losses as the hedge funds, colluding together, pulled off such a manipulation?
The problems this raises are being confused by the supposedly populist message that is covering a simple greedy stock manipulation.
That might be the least shitty thing RH did today.
Kai Akker, it may not seem in the spirit of the rules, but 1st amendment protects talking about your trades, and these are all individual investors trading their own accounts. And to be clear: it's not just or necessarily even mostly on RobinHood. The community is based on a specific subreddit, and the main guy, DeepFuckingValue, uses Etrade. It's just every kid in the country seems to have opened a RH account in 2020, AND they allow purchasing fractional shares, so you can play this game on their site with $10.
Shortest possible version: Hedgefund trader did not hedge their risk (e.g. they shorted without protecting themselves from downside risk). They are paying dearly for it. Instead of financial ass-fucking coming from a rival trading outfit, it's coming from reddit. And they're doing it mostly for the lulz and not the money, although there are a lot of individuals who've made out very well and share their heartwarming stories of rescuing their homes, paying off their debts, etc. on the site.
"They don't exactly do that. They bundle the trades and they direct them to market makers who pay for the order flow and resulting liquidity.”
I am not going to tell you how I know that they do, so we are going to have to agree to disagree. But I would be interested to know how you ‘know' that they don’t. I don’t think that HFTs function as market makers, am I wrong?
Blogger TheOne Who Is Not Obeyed said...
I would like to offer this thread/discussion as Exhibit #1 in today's round of "why the blogosphere is vastly superior to social media".
I offer this as Exhibit #2...today I went on Facebook after avoiding it entirely since mid Nov, more by accident than anything and this is the first thing I saw from an old co worker...
“- Radicalization online
- Demonization of the ‘enemy’ to justify violence
- Draw to a cause greater than themselves
- Devotion to a cultish leader
- Belief in a false reality
- Deep feeling of humiliation and victimization
Radical Islamist movement?
Nope, DOMESTIC TERRORIST that is considered the biggest National security threat at the moment. Same groups that stood down and stood by until January 6th and have now caused three police officers deaths and injuries to 140 other officers.....all do to one man!”
Mind you this is a person who repeatedly claims to be a Republican, is a naturalized citizen from Denmark, and works as a major airline captain here.
RobinHood straight up sells subscriptions to that order data so that Citadel among others see the trades before they go out, and can front-run them. That's not secret info...
That's their main monetization strategy today
GameBox down 150 points today. Presumably some profit taking and some Reddit guys then going short.
GameBox down 150 points today. Presumably some profit taking and some Reddit guys then going short.
Gamestop is down because the trading firms did not allow anyone to buy the stock, and actually sold some of the stock without people's permission.
The problems this raises are being confused by the supposedly populist message that is covering a simple greedy stock manipulation
So ordinary people talking together about their investments is stock manipulation, but trading firms coordinating strategies to protect hedge funds is the system working as intended?
GameBox down 150 points today. Presumably some profit taking and some Reddit guys then going short.
Turn on the news, man. The stock was down because the hedge funds colluded with discount brokerage to prohibit buys. Robinhood announced that it is lifting its ban on GME buys and the stock almost wiped out its losses in the aftermarket.
https://isthesqueezesquoze.com/
Turnabout is fair play--use the thinly traded after-market session to pump the price. RH doesn't do after market trading, but this is more "manipulation." After market trading is pretty thin, so a few bulls with bucks can move prices a lot, and the increasing availaiblity of after market trading on many retail platforms means there could be a lot idiot retards out there playing tonight.
Daskol, it's not just GME. Not just KOSS. There are how many of these -- six, eight, 10? Or more? These levitations don't happen because golfing buddies get enthused about a stock. Stocks rising thousands of percent in a short time, absent any radical change in business fundamentals, are manipulations. Usually they require serious organization.
Now these guys are mad because they want more of a chance for even more bulls-eyes, they want 20,000%! Or 50,000! It is simple greed. But if the report that Robinhood has had to draw down credit lines of hundreds of millions are at all accurate, you can see that these manipulations are threatening the very firm that has enabled them, or so it appears.
It takes manipulation to move a stock that much. Much less six, eight or 10 such stocks. It isn't just one nice contrarian guy whose discovery the world came around to understanding more clearly.
Moreover, crazy stuff like this wasn't going to happen in 2009, 2010, 2011. It takes a pretty extreme condition of optimism or overoptimism to generate the greediness needed to make these things work on this scale. Extremely extreme conditions.
Thanks everyone, and especially daskol and David UW, for an informative discussion. All this info strengthens my resolve to stay away from anything but index and hybrid funds. I don't know if the market is actually rigged, but some portions of the market seem arcane and specialized and susceptible to manipulations. The poker players say that if you don't know who the mark is, then there's a good chance it's you. As a corollary, I'd say that if you're convinced you're the smartest guy at the table, there's a good chance you're the mark.....Nobody's mentioning that when the hedge funds have to cover their losses, they do so by selling out their most liquid assets. This drives down the price not of the contested company but rather the price of all those other companies the hedge fund has to sell and the market in general. It's not just the hedge fund manager who's losing money, but all those pension and index funds that have a position in the market.....I'm still ambivalent about this whole thing.
I hate the stock market BTW, but you can’t just put your money in a savings account and earn 5.25% anymore, not since Nixon, I think put the kibosh on that. If you could, that’s where all of my money would be.
A lot of small guys are going to lose some money. If it was money they should not have been speculating with then they will learn a hard lesson. For many the loss will simply be a paper loss or a loss that won’t affect them materially anyway. Some will win big, and if it’s at the expense of the whales then so be it. They will be just fine too. Either we have free markets or we don’t. Do we want equal opportunity or the guarantee of equal outcomes. You can have both. Decide.
Can’t
Louis Rossmann --> This requires prison time for top offenders
This is about GameStop. Louis is arguing that some of the top officers in Robinhood and also many other brokers and some of the people from the hedge funds deserve and should go to jail for their illegal stock market manipulations.
There is also an image in this video of the original anonymous assertion from a Robinhood employee that the founder of their company received a call from the White House pressuring them to close trading on GameTop.
The big guy wants his 20%.
All this info strengthens my resolve to stay away from anything but index and hybrid funds.
>>
Those are the best choices for retail investors for the long term.
it's pretty simple, save, dollar cost average, and go for low fees.
>>Nobody's mentioning that when the hedge funds have to cover their losses, they do so by selling out their most liquid assets
>>
I kind of mentioned that. It's a standard Wall Street tactic to find out who's going under/liquidating (as I mentioned hundreds do every year) and pile on those sales via shorting or waiting it out to buy it cheaper. Or both.
>>
I hate the stock market BTW, but you can’t just put your money in a savings account and earn 5.25%
>>
Correct. The only returns at those levels involve taking on risk. Preferred shares, foreign high dividend stocks, buying your own personal rental real estate.
Kai Akker, what all those stocks have in common, the so called meme stocks: they are relatively small companies with very high short interest. That means the prices are subject to big moves on relatively light volumes.
There is no conspiracy here. There is the exploitation of weakness at a rapid pace, and what is being exploited is entirely the creation of the investors who left their asses wide open. It's just that the attack came from a place nobody was even watching.
As to the folks who will lose money when these stocks eventually tank, I've been on the reddit boards for a while. The folks getting in over last few weeks were definitely trying to make some money, and many have. Folks getting in this week especially last two days are going into battle, not stock positions. Some people are going to get hurt, but this is about participating in history, in the 2021 American version of the Boston Tea Party. It will have financial consequences, but not ruinous ones except for the truly idiotic who put in more than they can afford to lose at this point.
Nobody's mentioning that when the hedge funds have to cover their losses, they do so by selling out their most liquid assets
I don't know if yesterday's sell-off was directly related to the tactic DavidUW mentioned, but the skyrocketing volatility index sure indicated a spasm of fear spreading across the land. And to all who lost money thanks to the big Wall Street men's terror at facing down the idiot-retard army, most of those losses were recouped today. I suspect that this may have been the hedge funders in deep shit trying to spread fear of systemic risk around to help get the brokerages to intervene for them.
I suppose the fact that Google just deleted over 100,000 dislikes for the Robinhood app is just a coincidence....
there's a lot of this on the subreddit now. I'll quote this guy because he's one of the more articulate, at least as far as speaking to boomers goes. this is from a guy whose initial bet was against the stock--he bought puts which is similar but less risky to short selling while the board was announcing their long positions. he's had a change of heart (and also some profits on the put options because despite being a bet that the stock would go down, puts are strange things that are deeply affected by overall volatility).
People are holding despite wall street twisting your arm and trying to make you tap out by only allowing you to sell. It's a beautiful thing to see. I don't think of my purchase as an investment, but as putting my own skin in the game as a fuck you against a rigged system.
If you have some time and want to see what they think they're up to, this is a good thread
daskol said...
Further, the clearing houses and prime brokers that the retail trading platforms use shut down buying not only GME, but about 5 other stocks that are all heavily shorted, allowing only selling of positions to the retail clients. Meanwhile the shorts can drive the price down and try to unwind their trades at a much lower price point because of this suppressed demand. The more prudent ones, anyway. The most arrogant are shorting more.
This is the market manipulation we saw today, not a bunch of individual investors manipulating it, but the retail retards goading the major players into some truly monstrous and obvious market manipulation the legal implications of which will take years to play out. And if they don't pay heavily, well, I won't be that surprised because the rule of law is looking ever less robust. But they ought to be destroyed, most of them. And replaced.
There's two possibilities here:
1: There will be lawsuits, and either the retail brokers or someone further up the line will be made to pay
2: There will be bloody violence.
Because what they pulled today was straight up robbery. And when teh government open protects the robbers, vigilant justice happens, and gets broadly supported.
Kai Akker said...
Imagine what would be said if the hedge funds had done this at the expense of some less-swift institutions who were taking losses as the hedge funds, colluding together, pulled off such a manipulation?
Business as usual.
Many times they talk to their congress people to find out if legislation is coming down the track as well.
And our Congress People are somehow miraculously good at picking stocks too.
And they get a lot of money from Wall Street.
It is totally inexplicable how it all works.
Mystifying.
Deevs said...
Greg the Class Traitor:
Thanks for taking the time to answer my questions. Particularly, since this is the internet, thanks for doing so without any insults or condescension.
Glad I could be of use.
You appeared to be asking honest questions. Neither insults nor condescension would have been appropriate. :-)
Gahrie said...
I suppose the fact that Google just deleted over 100,000 dislikes for the Robinhood app is just a coincidence....
Totally inexplicable.
https://finance.yahoo.com/quote/GME?guccounter=1&guce_referrer=aHR0cHM6Ly9kdWNrZHVja2dvLmNvbS8&guce_referrer_sig=AQAAAKpBrn1tyC3vskvQ7rEoHMbffRlABENE9ZLjM3e0n_89j0u_W3KOmw4GbAEBgCEOQor1hhfJJNmcK_l6F3tjW8AWHTy0zfRrKwnjJeoyx-BwdnTKOj4p1rPQTkaIONCKmy0DIu4xnqPDf95q06c92CwYrRQmcwVhjU9FnPrkWsjQ
GME Price at close: 193.60-153.91 (-44.29%) At close: 4:00PM EST
GME After hours trading: 311.99 +118.39 (61.15%) After hours: 8:00PM EST
Apparently Fidelity is allowing customers to buy GME. I may have to open an account and buy 10 - 30 shares.
And then I may take part in a class action lawsuit. Something I never thought would happen
This guy gives a great rundown of the full DeepFuckingValue story in this thread. As I mentioned, this story started long ago, with DFV taking his "last $50K' and YOLOing it all into the stock because he figured out this vulnerability a long time ago. And he waited, and was ridiculed for his move, for a loooong time. And then it took off, and he's not only independent now he's a fucking legend.
Gahrie said...
I suppose the fact that Google just deleted over 100,000 dislikes for the Robinhood app is just a coincidence
Just downloaded the Robinhood app. I'm going to open it, then review it
Greg, I picked up some shares a little while back with a couple of brokerages, both of whom restricted trading today to some degree, with the idea that if there's going to be lawsuits, I want in on that sweet class action action.
I think I need to try to buy a share of GME on RobinHood tomorrow.
When is the close date/time on their short sale?
Options expire tomorrow and then I think again next friday, although the end of month contracts have more open interest.
The shorts themselves, well: the smart ones are already closed out, in the last week or today when the price was driven down to $125 or so. For those with open interest, it's a question of their balance sheets: can they and their lenders stay solvent longer than the idiot retards can keep the price high. Those who couldn't survive a margin call have already had cash injected, like Melvin which needed $2.5B just to stay afloat this week. Should be an interesting few weeks both with GME and with the other midcap companies with a lot of short interest.
Achilles said...
When is the close date/time on their short sale?
IIUC, a lot of them have to close out tomorrow, for the end of the month
daskol said...
Options expire tomorrow and then I think again next friday, although the end of month contracts have more open interest.
The shorts themselves, well: the smart ones are already closed out, in the last week or today when the price was driven down to $125 or so.
Any idea where I would get the "number of shares traded at price X at time T" data?
Also the "short interest in stock vs available shares"?
100 shares trading at $125 establishes that price as the low for the day. It doesn't, however, help many shorts unwind their positions. :-)
Man I'm old and out of the game at my advanced age of 45 so I guess these whippersnappers at GME shorting hedge funds never learned about fighting the Fed.
Expand it to don't fight entities with infinite balance sheets.
These reddits have the implicit backing of $1.9T in money printed by the Fed.
It's only 1,000x the AUM of these hedgies. So if just 0.1% of stimulus check people put it on GME, they're all getting carried out. (yes, it's actually way less than that as they double/triple down on their longs)
They didn't manage risk. They didn't see risk? You don't need to see it, you just need to ask yourself at every point, on every trade, what's the worst that could happen. They failed. Oops.
Wrap it up boyos, you're done.
Greg, you can buy that data from NASDAQ or NYSE and/or subscribe to it from a broker with good data packages. The nice thing about the internet is that you can go ahead and buy and analyze the data yourself, but if you wait a day or two, someone will do it for you. And then other people will point out what he got wrong, and eventually you'll have what you're looking for without doing much unless you enjoy that stuff. But I'm figuring that tomorrow there will be a lot of interesting analysis of the trading patterns around the many halts and correlated with when the brokerages started restricting trade. Some folks were posting it live, and the volumes in the order books were laughable, yet the price was plummeting.
Nearly all the posters here are far more knowledgeable and sophisticated than me. I get the idea that the people in the game are not playing with their rent money. This will end badly for some people, but if it's mad money, I don't see it triggering an insurrection. All the sturm and drang are part of the fun...... I don't look upon the stock market at as a casino. It's an investment vehicle for those who are too lazy to research and buy real estate, old comic books, or gold bars. There are parts of the market that resemble a casino, but they're easy enough to avoid. The stock market is not the only game in town, but it offers a better payout with less effort than other types of investment.....I have come out ahead and don't hate those who come out way, way ahead. If you make too much money in the stock market, people are nearly always going to hate you. Warren Buffett is the sole exception. That's his real achievement he got rich in the market and afterwards people considered him folksy and wise.
There was in aggregate a decent amount of volume today: nearly 60M shares traded, fewer than lately but enough to cover some big positions. Unfortunately short interest data isn't up to the minute so really can't know how many people covered and how many are still exposed. However, at these lofty prices, probably more than 10x the "fundamental value" of the stock, I imagine a lot of greedy bastards couldn't resist and opened new short positions. This could go on for a while. Someone is going to ride it down to massive profits, just definitely not Melvin or Citron, lol.
Thanks to my grandfather, who admired him and his approach to investing (and hated speculators), I always had a positive impression of Buffett. He squandered some of that goodwill with his tin-eared sanctimony and injection into politics, but he's still to your point a remarkably beloved corporate raider.
Daskol, I have read several of your posts multiple times. And not just Daskol's. But you know the situation and I am one of those who don't. I do know the general phenomenon of stock manipulations and that is what I think is operating here. It will be bigger traders than the subreddits who were doing much of this, I suspect. But I hope you are right, because it would mean that something actually has changed. The first amendment implications are especially interesting.
If Warren lives long enough, he too will be hated, I think. But that's another story. When people hate the markets.
Blogger daskol said...(they call themselves a less polite word on their site, retards, but Howard Stern says that's not a nice word anymore).
Howard Stern worrying about words? He is the one reason I don't take a full subscription to SiriusXM and stick to music channels.
Thanks Kai. I'm no more than a deeply interested amateur in the markets, wagering my own money but nobody else's (well, technically my wife and kids', I guess) but been following this story pretty closely because it's so great.
By now, you are almost certainly correct that there are major wall st. types who are in here trading the swings and momentum and proabbly even greedy bastards opening huge short positions when the stock hits crazy highs (even though the cost to borrow shares is astronomical, which will reduce their staying power), and other professional in there trading and making a killing. But if this group of folks just holds on to their shares for a while, it's fair to say they drove this phenomenon. I've dug a little more, and confirmed a bit more why this stock is so sensitive besides the short interest. Something like 70% or more of all outstanding sharers are owned by insiders or index/passive funds that can't or won't sell under almost any circumstances. So the float, the easily tradable shares, is around 30%. So if there is short interest equal to 120% of shares outstanding, that's something more than 300% more shares sold short than are even available to trade. These hedge funders really left their asses out there on this one.
There is hyperbole in here, a LOT of it, but he's absolutely right that Tom Peterffy's interview was an astonishing one, an admission that he had to halt the options trading not to save the hedge funds, but to save his and other brokerages, the clearing houses and the banks that provide their liquidity, as they were staring down a liquidity crisis and those things spiral quickly to who knows what end. I was surprised when IBKR halted options, as nobody has done more to "democratize" investing than Peterffy. He's old now and did not articulate himself all that well, mixing in his opinion on the stock price, but he admitted this was about saving his own ass (and that of his trader/investor clients) and not to help Melvin. I'm sure now that this little stock is what triggered the momentary market panic yesterday and then the ensuing sell-off.
If this take is correct, then this crew of idiot-retards don't just have a few hedgies by the nuts. They've got almost every brokerage and various other players in the settlement game in a deep bind. Besides IBKR's Peterffy's candid admissions which alone have huge implications, note that the only brokers who did not at least temporarily restrict trading were Fidelity and Vanguard: due to their index funds, they control the largest block of tradeable shares of GME. The simplest supply/demand logic could destroy major market players because they let these hedge funds and other traders crowd into a trade whose unwinding could be epic for the whole market. Brokers HAVE to buy shares to settle contracts, no matter what the cost and how poorly they hedged, and nobody hedged for a max $20/share company's shares trading in the thousands. It's possible this is all being exaggerated as cover for bad behavior of firms helping insiders, but that explanation--protecting a few shorts, no matter how prominent--could not possibly explain what we saw today. This hypothesis would be a much better explanation for the extremely drastic measures we saw taken today by household name firms who really don't do shit like this, and not all together either.
They don't call it an infinite squeeze for nothing, if this is what's happening behind the scenes. I'm going to go ahead and say this has been a far more effective insurrection than animal skins guy taking the Capital, no matter how stylish he looked in the Speaker's chair.
An insurrection to what end, Daskol?
I agree with your observation about the possibility of spiraling damage. The market is at such an extreme, never-before-seen valuations, that any situation, even this one, could spiral into something much worse.
To take the instruments of risk hedging, such as options, and utilize them to wag the dog of the stock price is...... well, this has been a hallmark of this market, hasn't it? And to those who say hedge funds and other traders are getting a taste of their own medicine -- who could argue with that?
Yet, if the evidence of behind-the-scenes damage and trouble is correct, this game stops somewhere. And if GameStop is stopped by a deus ex machine, like the SEC, and the shares and gains are effectively vaporized by a regulatory action, the players will scream but the need for market safety must override a stock manipulation by whatever name it may be given -- an infinite squeeze.
These are the abuses of trading ploys rolled into one particularly flammable case, seems to me. Today is the day, in your take? I don't think I would want to hold paper gains over the weekend because it seems clear there is a high risk of an intervention that is not likely to go in GME players' favor.
The price action this morning suggests that this was not all of Wall St. closing ranks to protect a few short funds that everyone hates anyway. Rather, Peterffy's surprisingly candid interview and the sheer smell of fear in the air suggests that retail brokerages were at risk of a liquidity crisis that could have threatened their and their clearing houses solvency, which could have rippled through markets in scary and unpredictable ways.
Think about that: a combination of lax enforcement by regulators of the rules (or practically unenforceable rules) against naked shorting and the underlying interconnectedness and fragility of the whole system left our market and therefore global markets susceptible to collapse from a self-professed idiot-retard army, because a few hedgies didn't manage their risk well...not well at all.
To what end, you ask? I don't know. To burn it fucking down, to protest its inherent unfairness, to strike back at our elites, just for the lulz. People are pissed off. Anyway, this is speculation, but if this is what is happening, the underlying fragility of the system is as bad and as dangerous as we had in 2008, if not worse. It's a wonder the damned thing even runs. I guess one's disposition more than anything will drive one's tendency to hold one group more accountable than another--maybe like Peterffy, you're exasperated with all involved--but I can't see how the redditors are the problem here. I think with this kind of fragility, which is systemic and endemic to complex over-optimized overly interconnected systems, it ain't the kids' fault. And if this pans, it's not really the hedgies' fault either. And while Peterffy sounded a bit out of touch and had a little bit of a "get off my lawn" attitude, we should be grateful that someone in the industry had the honesty to share with the public what was actually going on. Every other talking head yesterday either was too uninformed or too interested in concealing the fragility of their industry to be honest about it.
You don't just short 300% of the available float. And even if that happens anyway, you don't let the inevitable short-squeeze threaten the solvency of your retail brokerage and therefore all its partners in the chain of trading and settlement.
If this were another high roller hedge fund or other investor driving the squeeze, there would be a person or a handful of people you can get into a room and negotiate an exit from the trade that rewards the shareholders but does not threaten a market-shaking liquidity crisis. This idiot-retard army, though, it has no official leader. They do worship DeepFuckingValue, so maybe they can persuade him to persuade them that "hold your shares no matter" will end badly for them. Suggest we all grab some popcorn today.
Kai Akker said...
"Daskol, what separates Robinhood traders from an illegal pool?"
How is it illegal?
If I have and idea about a hot stock why can't I ask friends to go in with me.
The hedge fund overbought their options by 140%. They owned 40% more stock than there was issued shares. Now that's a question for the FEC. As I said before. At the end of the day the books have to balance If you made 10,000 then somebody paid 10,000. On a short sale you make money on the difference. You're betting the stock will go down.It goes down. Collect your cash. However. If the stock goes up you have to pay the difference. You and your friend bought in at $4.00 and it goes to $8.00 you have to pay your friend $4.00. If it goes to $2.00 your friend has to pay you $2.00. It is a zero sum bet and takes big balls to play.
--- the underlying fragility of the system is as bad and as dangerous as we had in 2008, if not worse. [daskol]
It's a more extreme extreme in stocks. So the system, despite all the work, is going to experience an extraordinary test when the levee breaks.
There are blue-chip stocks which are breaking down in ominous ways already. Just starting, but unmistakable by some technical measures. It's my opinion that this market must fall of its own weight regardless of GME, Robinhood, or what have you. Too many market measures are at extremes rarely, in some cases never, seen before.
@Rusty, why is the RH trading action illegal? I don't know the specifics well enough to give a hard-and-fast answer, but my impression is that it would be too easy for traders to signal each other about their objectives in a way that might (might) violate acting-in-concert regulations.
I have trouble with the idea that small traders, or any traders, can bid a stock from 3 to 500 in very short order without having manipulated the market. GME was in the 12s six weeks ago; as you know, it traded over 500 earlier this week. Nothing changed on the fundamentals other than a vague claim that one new director might improve their not-so-good operating results, and that was farther back than the recent action, I believe.
I think a lot of angst over limitations being put on the GME trading is simply the sound of outrageous greed thwarted. YMMV.
There are competing narratives, but the systemic risk posed by an infinite squeeze is not the product of the greed of the GME holders. It's a poorly engineered system that can be taken down by the inevitable greed around a crowded trade in a small to midcap stock or even in a handful of them. And that appears to be where we are at.
And if a brokerage destroying liquidity crisis is really why everyone lost their fucking minds yesterday, this starts to look like a national security threat.
if a brokerage destroying liquidity crisis is really why everyone lost their fucking minds yesterday
>>
As you know, that's the height of a bullshit excuse.
There's no liquidity crisis here.
Even during the worst drops in equity values, there was no liquidity crisis. The liquidity crises are *all* linked to debt crisis.
Another old saying: "Your assets can change value, but your liabilities never do" (not quite true but you get the idea).
Fair point. Split the difference: it's a balance sheet problem for the brokerages and apparently the clearing houses and the banks who fund them. I think the divergence from the preferred narrative is the key. The brokerages are restricting trading to protect themselves (and by extension mitigate systemic risks) rather than colluding to save a few short funds. RobinHood needed a $1bn injection today.
Kai Akker said...
I have trouble with the idea that small traders, or any traders, can bid a stock from 3 to 500 in very short order without having manipulated the market. GME was in the 12s six weeks ago; as you know, it traded over 500 earlier this week. Nothing changed on the fundamentals other than a vague claim that one new director might improve their not-so-good operating results, and that was farther back than the recent action, I believe.
I think a lot of angst over limitations being put on the GME trading is simply the sound of outrageous greed thwarted. YMMV.
1/29/21, 8:14 AM
Sorry but I think you have that backwards. It is the funds that were greedy. They over bought to the tune of more than 100% of what was available either expecting or hoping to push this company into bankruptcy. If the company folded they would not have owed anything back and so would have gotten pure profit. The redits caught on and decided to buy and buy a lot. The only "manipulation" was a bunch of bored folks deciding either for the lolz or for middle fingers to the funds and go buy a cheep stock that resulted in the price going up instead of down. They kept doing it for the profit and the lolz and others joined in, to the point that the big guys started crying foul.
As others have pointed out, these funds do this ALL THE TIME but for some reason it is OK when they do it. A bunch of no-bodies try their luck on a stock that the funds were already cheating on (due to over purchases) in the other direction and suddenly the no-bodies are the baddies? There was a detailed post on this that I read the other day that explained all the movements here (wish I still had the link) and the ONLY reason these "kids" are getting roasted is that they are doing to these funds what these funds do to businesses every day and HOW DARE THEY! At least these kids are not cheating by buying more than what exists.
Hope these funds loose their shirts and the FEC gets on them for this practice. Also hope there is a class action against RH and any of the others that cut of purchases of these stocks. It is NOT their job to protect their customers or their "friends" from their own decisions but to facilitate those decisions.
Todd, thanks for your thoughts. It is a fascinating case and we are seeing it through a variety of prisms, I think.
I don't agree that "funds do this all the time." Collude to kite a stock 15,000%? I must have been asleep for all those other cases. Ha ha. So part of your prism is dislike of hedge funds, I take it. OK, no problem.
Also, just to be accurate, the one fund's error here was not in overpurchasing, but in overselling. Ken B kept posting that the fund published its own parameters, of the size of the position and the price at which -- what? They had sold short? Or were hoping to cover their shorts? The latter would doubtless be zero, as you say. Who would publish this, unless he meant the required SEC filings.
So, OK, it was a greedy position, if one fund, or a couple of funds, had shorted more than the float. Dangerous spot to be in. But greed, real greed, is when your boys have moved the stock up from 12 to 500 and you're complaining!!
I saw Merrill put GME, KOSS and one other as subject to increased margin requirements: 100%. Absolutely appropriate. This action is insane and there are limits to what people get to do. Even awful hedge funds. Which NEVER get to do this!
I don't care about who is on what side of this trade. This is one of the manipulations that will go down in history. It is pure enterprise and it is pure market-wrecking, both at the same time. When RH needs hundreds of millions in emergency credit.... the billion is to cover whatever might happen NEXT week!
So I do not see this through the class-warfare prism. It's just stock trading, IMO. And if it is going to destabilize the markets, I think reining it in is appropriate and is almost always done by the rules. There are plenty of rules that brokers follow and put into their account requirements because some wacky thing might happen some day, any day. And here is that day.
If the stock market had to undergo such tulip-mania stock manipulations every month, or every week, it would cease to exist. I don't want that, and I bet you don't either.
PS You write great comments, am I allowed to say that? But you can still bash me all you want. Let the debate roll on.
William said...
I get the idea that the people in the game are not playing with their rent money. This will end badly for some people, but if it's mad money, I don't see it triggering an insurrection
I think you're wrong there.
We are seeing our government and economic "elites" saying that "you peasants are not allowed to win. You are not allowed to rock the boat.
"WE are allowed to do both. You are not. Don't like it? Get stuffed."
And THAT is enough to start an insurrection. it doesn't take many people betting more than they should to have one person willing to go postal on the people who gamed the system to screw him over.
Kai Akker said...
An insurrection to what end, Daskol?
An insurrection to the end that "we all have to follow the same rules."
What are the essentials of the situation?
1:Some people failed / potentially screwed up (see 2007 and the housing market / mortgage boom)
2: Some other people noticed this potential screwup / failure, and decided to take advantage of it to make money (see hedge funds taking negative positions on the housing market)
3: The people in 2 spread the word to the people (see any Wall Street / hedge fund manager press release / "market report" / interview
4: The "elites" in government and industry decide that these people can't bellowed to have that success, and so violate all teh normal rules to shut them down and take away their profits
If what WSB did was wrong, then every single investment related person who talks up or down an investment where they have an interest is equally wrong.
And that, to be clear, is every single investment related person who's ever discussed anything investment related.
So, shall we go to Wall Street and confiscate every single asset of any sort owned by any hedge fund, brokerage, investment house, etc, on the ground that what they're doing isn't legitimate?
No?
Then we need to financially destroy and / or prosecute, convict, jail, and destroy everyone involved in shutting down the WSB play.
"Private profit, socialized risk" is another way to say "corrupt system." If those traders took short positions that put the entire system at risk, then those traders need to be bankrupted and run out of the business.
Not saved by their corrupt buddies, and politicians they've bought
Kai Akker said...
I don't agree that "funds do this all the time." Collude to kite a stock 15,000%? I must have been asleep for all those other cases.
They (the hedge funds in this case) were colluding to drive a stock price down. They (WSB) colluded to drive a stock price up.
Hedge funds, brokerages, investment banks, and investment managers do both actions all the time. They but a stock, and talk it up. They most certainly don't talk it up, and then buy it.
They short a stock, then talk it down.
The ONLY difference here is that the WSB people took advantage of the stupidity, greed, and possible dishonesty of the hedge fund managers, rather than hedge fund managers taking advantage of the stupidity, greed, and possible dishonesty of someone else..
"But they were better at it" doesn't qualify as a legitimate complaint. Which is the only point of the 15,000% comment.
So, OK, it was a greedy position, if one fund, or a couple of funds, had shorted more than the float. Dangerous spot to be in. But greed, real greed, is when your boys have moved the stock up from 12 to 500 and you're complaining!!
No.
The "real greed" was the hedge fund shorting GME.
What WSB was doing was trying to take down one of the self anointed "Masters of the Universe." "Real greed" would be dumping their holdings on the way up, to collect their profits.
Is America a country of laws? One where there's rules that apply to everyone?
Or is America a corrupt country where being a member of the nomenklatura, where the rewards of your successes are yours, and the costs of your failures are stuck on everyone else?
Where "rules are only for the little people"?
WBS set out to test this proposition, by trying to impose on one of the "big boys" the same kind of costs that have been imposed on the rest of us (see how many small businesses have been crushed by the lockdowns, and how many of the big boys got their payoffs in the "Covid relief bill").
I don't see how anyone who believes America should be a country of laws, could also support protecting WSBs targets from the cost of their own choices.
I saw Merrill put GME, KOSS and one other as subject to increased margin requirements: 100%. Absolutely appropriate. This action is insane and there are limits to what people get to do. Even awful hedge funds. Which NEVER get to do this!
Wrong. If the hedge funds had faced reasonable margin requirements for their short sells, they couldn't have gotten in so deep
I don't care about who is on what side of this trade. This is one of the manipulations that will go down in history. It is pure enterprise and it is pure market-wrecking, both at the same time. When RH needs hundreds of millions in emergency credit.... the billion is to cover whatever might happen NEXT week!
The only reason why RH needs any $$$ infusion at all is because they worked to screw over their customers.
Customer tells RH "I want to buy Y shares of GME at $X". Shares become available at $X. RH takes the customer's money, and tells the customer he now owns Y shares of GME. GME continues to go up.
Unless RH perpetrated a fraud on the customer, RH is perfectly happy with this situation. If the customer bought on margin, the shares are worth more, so their exposure is less, and if there's a problem, RH can easily sell the shares at get its, and the customer's, money back.
If your claim is "the system is currently set up so that things can't be done honestly", then the system needs to be burned down, a whole bunch of people need to go to jail, an honest system needs to be put in its place, and the WSB people need to be celebrated for exposing the dishonesty.
Kai Akker said...
It's just stock trading, IMO. And if it is going to destabilize the markets, I think reining it in is appropriate and is almost always done by the rules. There are plenty of rules that brokers follow and put into their account requirements because some wacky thing might happen some day, any day. And here is that day.
Again, no.
I've never signed a brokerage agreement that said "Charles Schwabe reserves the right to refuse to allow you to buy a publicly traded stock who you have the money in your account to make the trade."
I haven't signed the RH agreement, but I'm pretty sure theirs doesn't say that, either.
It's not "just stock trading" when the connected are allowed to buy a publicly traded stock, but retail customers aren't. That's corruption and fraud.
So, when Soros "destabilized the market" by shorting the English pound, I didn't notice anyone re-writing the rules to defeat him.
because, "it's different when an insider does it."
No. You can legitimately set up rules where "insiders" are blocked from doing things that "outsiders" can.
You can never legitimately set up rules that go the other way. Which was what was done with GME.
If the stock market had to undergo such tulip-mania stock manipulations every month, or every week, it would cease to exist. I don't want that, and I bet you don't either.
The manipulations will go away when hedge funds stop accumulating short positions that can be squeezed this way. You want to set up some regulations that will make that happen? Go for it!
But "the insiders will screw over the outsiders any time the outsiders catch the insiders with their pants down" is not a legitimate rule. But that's what you're defending here.
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