Stonks: Shortin' The Hedgefund

The Something Awful Forums > Discussion > Video Games > Stonks: Shortin' The Hedgefund

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

I love the David and Goliath / Robin-Hood story here but I worry about how many dumb redditors are getting caught up in that story and buying into things they don't understand.

As much as a few hedges are going to lose on this, a lot of redditors are going to lose money to other redditors too. This has become a meme stock and that's dangerous. Its obviously a bubble and this is real wild speculation going on.

Its basically a Reddit ponzi scheme at this point.

One thing that's quickly obvious from looking at Twitter or Reddit the last few days is how little most people know about the stock market. I'm no MBA type and am ignorant about a lot of complex finances but even I'm shaking my head at lots of the misinformation going around.

E:

Yep here's exactly what I'm talking about

https://arstechnica.com/tech-policy/2021/01/the-gamestop-bubble-is-going-to-hurt-a-lot-of-ordinary-investors/

The "apes stick together" memes are covering up the fact that a bunch of redditors are robbing other redditors.

quote:

There's just one problem: the billions of dollars in new "wealth" people have supposedly gained is mostly in the form of inflated GameStop stock. Before they can actually use that wealth, they need to convert it to cash. And if a lot of people start selling their shares, the stock will crash. Most of that GameStop "wealth" will evaporate, with many shareholders getting a fraction of the value they expected.

Meanwhile, if GameStop's stock price starts to fall, short sellers will start to make money. Any short sellers who maintained their short positions through the bubble will make back most of what they lost.

Sooner or later, GameStop's stock is going to return to normal levels. And when it does, we are likely to find that little wealth was actually transferred from wealthy hedge fund investors to the general public. Short losses as the stock appreciated will be largely balanced out by short gains as the stock falls. The gains of GameStop shareholders as the stock appreciates will be balanced by losses as the stock declines.

But while there won't be a big transfer between short sellers as a group to shareholders as a group, there will be big wealth transfers within these groups. People who bought GameStop early and who had the good sense to sell near the top of the bubble will make a lot of money. People who buy into GameStop near the top and don't sell until after the stock starts to fall will lose money.

In other words, the GameStop bubble will have the same practical effect as any other pump-and-dump scheme: transferring wealth from those who got into the scheme late to those who got into it early. The fact that there are short-sellers on the other side of some of these trades doesn't change the analysis.

Zaphod42 fucked around with this message at 19:05 on Jan 29, 2021

# ¿ Jan 29, 2021 18:59

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# ¿ May 15, 2024 15:26

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

Waltzing Along posted:

One thing I am a bit confused about is why the stock got so high. I mean, doesn't someone have to buy it for the price to go up? Who is doing the buying when it is already super high?

Maybe I am missing part of the process but I've always understood it as something like:

stock = $1.00. Someone buys it and it goes up a fraction. Repeat. And the price drops when people start selling.

Why is gamestop so high? For it to hit $300, someone had to actually buy the stock at $250, right? That's incredibly stupid.

I have to be misunderstanding something.

It got high because its a meme stonk and lots of people who have never invested before are buying in.

They are going to lose their shirts.

# ¿ Jan 29, 2021 19:10

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

Ariong posted:

All of that hinges on the notion that investing in Gamestop shares is a foolish meme investment. It�s not. There are also serious investment people in suits and ties who are invested in Gamestop, and who recommended that the people who follow them make the same investment.

Not buying in at $329 they're not.

They may have been long on GME back at $30 sure.

# ¿ Jan 29, 2021 19:13

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

https://twitter.com/ogooogramses/status/1355230742981324801?s=19

The more I read the more convinced I am this is all a pump and dump scheme

Apparently HALF of all robinhood accounts own some GME

Meme stocks bad

# ¿ Jan 29, 2021 23:33

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

Welp, judgement day is here. The sky is falling.

https://www.youtube.com/watch?v=B74cnt0-8xY

https://www.pcgamer.com/after-gamestops-share-price-plummets-reddits-wallstreetbets-investors-are-hurting/

https://www.washingtonpost.com/technology/2021/02/02/gamestop-stock-plunge-losers/

quote:

"I just want my money back but I know it is gone," wrote an investor from the Wallstreet Bets Discord named Slik, a 52-year-old Nevada resident. On Friday, Slik had invested $1.1 million in options on GameStop stock and lost $850,000. "I just didn't spend enough time to research what I was doing, or what the market could do to my account so quickly."

"My income is low, and this stonk sinking this low after buying it so high is a big hit," another Discord user named Housecat said. They only bought two shares priced at $316, but say that was $632 they really needed. "I�m hurtin [right now]. Not nearly as bad as others, but it�s not great. Luckily I�m in the military and I�m not married, so my expenses are low, don�t have many bills. But I will have to cut back on how often I eat out, or when I buy groceries. It�ll be a lot of playing video games and going to the gym to prevent spending any money for now. Just have to recover from the losses."

It's a sentiment shared by thousands on the Discord and subreddit, where users are frequently lamenting their losses while others spam "Hold the line" into chat like a war cry. On Twitter, a user named Shane explained they had initially bought shares when GME was listed at around $390. After buying more at lower prices, now owning just seven shares, they were facing the reality that their investment of $1550 might be burnt. "After this experience day trading, the second I can pull out for some profit I�m likely never going to day trade and do this stuff again because it was highly stressful and not worth it by any means," they said.

Some of these are probably fake, but not all of them.

quote:

"I know you are going to hate to hear this, but the lower it goes, the more powerful WSB can be stepping up to buy the stock again," he said.

heh

Zaphod42 fucked around with this message at 23:37 on Feb 2, 2021

# ¿ Feb 2, 2021 23:34

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

S w a y z e posted:

Still holding, it was never about the money. At this point I and I think most investors just wanna make it as painful as possible for the hedge funds to exit. Just knowing I was part of Elon Musk losing 8b is enough to make it all worth it.

I assure you that for the hedge firms, it was always about the money. So if you don't hit them in the money, you aren't causing any pain.

It is about the money, and its about rich people manipulating poor people. Exactly the opposite of the narrative being sold to poor people. Most of the rich guys are profiting off this.
One small firm nobody has heard of wrote off a loss, but it didn't come anywhere near killing them. They moved on already. Everybody else is going to end up more rich, not less.

How were you part of Musk losing money? Tesla stock is insanely over-valued, everybody knows this. GME has nothing to do with it.

# ¿ Feb 2, 2021 23:47

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

multijoe posted:

So were these guys not in it to be the Joker burning the money to prove a point? I thought the whole affair was meant to be an economic suicide bombing

A few people have said that, but there's obviously a whole lot of people on /r/WSB who got caught up in the hype.

And if the stock price crashes then they get neither. The shorts will be able to cover themselves just fine now at this price, no big losses, AND anybody who bought in late loses whatever they put in.

The idea that it's ever going back to $400 is pretty ridiculous, much less the "to the moon!" claims that people were posting while it was at $400.

# ¿ Feb 2, 2021 23:56

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

to quote isthesqueezesquoze.com (made by the WSB guys)

quote:

This is not an epic crusade to get retribution on the financial sector for its reckless greed and the damage it's done to people's lives. It's just a stock play, undertaken to make money off of some hedge funds who got caught in an overexposed position. The financial industry as a whole does not care. This is just a blip on its radar.

The people who started this on /r/WSB did it to make money. They're wealthy wall-street investor types themselves, with access to market data and knowledge that laymen do not have.

Then a bunch of redditors got caught up in a bunch of tinfoil hat stuff about righteously defeating the rich, which drove a pump-and-dump bubble.

Note that before isthesqueezesquoze.com posted that backpedal message, this was their take

quote:

Over the past year, hedge fund supervillains have made money by selling shares of Gamestop they don't actually own - they've just borrowed them. Short selling. If they sell enough they can drive the price down so far that when they eventually need to return the shares they borrowed, they can get them cheap. It's free money. They throw a couple hundred mil at this, chill in their offices watching live video feeds of homeless people being exsanguinated on the hoods of their vintage sports cars, write up an investor report, and call it a fiscal year.

They borrowed and sold a record amount - they sold more shares, in fact, than are actually traded, far more than Gamestop's float. This shouldn't have been allowed to happen and probably means they were selling shares they never even bothered to borrow - naked shorts. (Where were you on that one, SEC?) Essentially, they were simultaneously betting on Gamestop going bankrupt and doing their best to drive them into bankruptcy. It's a good tactic when you need to find a way to pay for your old wife's alimony and your new wife's poolboy.

Like holy poo poo there is so much loaded language there. Its obviously manipulation. They're trying to pitch a story here, one that doesn't really match reality, hence the need for all the big scary words like "supervillains".

Short selling isn't bad, but people who don't understand stocks can be convinced it is nefarious.
Having more shorts than stocks isn't bad and can be reasonable and natural; but people who don't understand stocks can be convinced it is nefarious.

The people who drove /r/WSB were intentionally engineering this event by manipulating people who didn't know as much about what was going on. They're the real supervillains here.

Zaphod42 fucked around with this message at 00:07 on Feb 3, 2021

# ¿ Feb 3, 2021 00:01

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

S w a y z e posted:

It 100% was from the very beginning, goons gonna though. Also the stock is still like 120% shorted so, again, with a critical mass of people holding eventually they have to cover.

Dude, click that reddit link. It absolutely, verifiably isn't 100%. Using "goons gonna goon" as a defense here is rather questionable.

Also, do you understand what 120% shorted means?

# ¿ Feb 3, 2021 21:08

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

S w a y z e posted:

I think so, but idk if that's the burn you think it is. But honestly it's true that I don't have a lot to contribute here so I'm gonna duck out. My only real issue with the discussion going on here was that it was misrepresenting the average retail stock buyer's mindset as some sort of pump-and-dump chump instead of literally just someone who wanted to stick it to hedge funds. Which absolutely happened too and was all over the front page of the NYT like two days ago. But yeah, that's my only real point. I have no real idea whats gonna happen next. But I dont really think anyone does.

Nobody has the mindset of a chump. You never think you're a chump. Other people trick you into becoming a chump, by fooling you into believing something else. (Like "sticking it to the big guy")

I'm sorry but this is a tale as old as time and pretty much everybody knows what happens next:

# ¿ Feb 3, 2021 23:53

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

Also, again, the "sticking it to the big guy" largely didn't happen, or happened in reverse:

https://www.wsj.com/articles/this-hedge-fund-made-700-million-on-gamestop-11612390687

quote:

Richard Mashaal and Brian Gonick started buying GameStop Corp. GME 2.68% shares in September.

They aren�t Reddit day traders or Discord users. They are hedge-fund managers in New York. And when the stock surged from less than $10 a share to above $400 and the dust had settled, they were sitting on a profit of nearly $700 million, one of the great fortunes of the January market mania.

$700 million dollars to just one hedge fund, and there were others who profited off GME. Some of that money came from Melvin Capital, but some of that money came from redditors.

Redditor money given to a hedge fund. That's the opposite of sticking it to the big guy.

And look, the reddit ringleaders who championed buying and holding GME are actually registered securities brokers:

https://www.nytimes.com/2021/02/03/business/roaring-kitty-gamestop-massmutual.html

quote:

Moonlighting under the name Roaring Kitty, Keith Gill became something of an online folk hero for his dedication to GameStop, the struggling video-game retailer at the center of a trading frenzy that sent its share price into the stratosphere.

But now a regulator in Massachusetts wants to know more about Mr. Gill, a registered securities broker, and his former day job as a financial wellness education director at an insurance company based in Boston.

But Mr. Gill�s former employer, MassMutual, has told securities regulators in Massachusetts that it was unaware that Mr. Gill had spent more than a year posting about GameStop on social media, online message boards and YouTube. The insurer also told regulators that had it known about Mr. Gill�s outside activities, it would have asked him to stop or possibly fired him.

MassMutual, officially known as Massachusetts Mutual Life Insurance Company, also informed regulators that Mr. Gill gave his notice on Jan. 21 but was technically still an employee of the firm and its securities and investment advisory arm, MML Investors Services, through Jan. 28 � the week when GameStop shares surged the most.

Zaphod42 fucked around with this message at 00:19 on Feb 4, 2021

# ¿ Feb 4, 2021 00:15

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

S w a y z e posted:

I remember reading the last 4 posts verbatim and even contributing one in the bitcoin thread way back in the day. You guys are right, these things are usually bubbles, but sometimes they aren't. At the end of the day smart money shouldn't ignore the possibility of masses of idiots stumbling into becoming millionaires online v0v

Like if I had put the same $50 into every dumb bubble I heard about on SA including bitcoin I'd be colossally up right now. Just something to think about with all this chump talk.

Its key to remember that this is an entirely zero-sum game.

Its like poker. For someone to win, someone else has to lose.

There is no "smart money" in a meme stock. The old adage of the stock market holds true here, "If you're hearing about a stock, its too late to get in"

The "possibility of masses of idiots stumbling into becoming millionaires" requires even MORE masses of idiots to be financially ruined and lose their entire life savings.

You're basically arguing that a lottery is a good investment because maybe you'll get lucky. Even if you did make money, other people lost tons of money. I wouldn't feel good about that. Its basically theft.

https://www.reddit.com/r/gme_meltdown/comments/lezb9b/go_fund_them/

Some of these are probably made up or scammers, but no doubt several of these people who are now crying over losing thousands of dollars are real humans.

If I had put $50 in Apple or Tesla I'd be rich right now. You can always say that about past investments. If you'd put $50 into plenty of other stocks you'd have $0 though.

Its like saying "If I'd bet $50 on the Buccs to win the superbowl I'd be up right now!" like, yeah. But back when you had to make that bet, it wasn't such a sure thing. That's how gambling works.

Zaphod42 fucked around with this message at 17:33 on Feb 9, 2021

# ¿ Feb 9, 2021 17:30

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

Stocks in general aren't a zero sum, but profiting off a bubble is entirely zero-sum.

Lorem ipsum posted:

3) Firms don't go bankrupt

More firms profited off this then went bankrupt. So if anything, if we're talking about for redditors, its negative-sum then.

Inflation doesn't effect bubbles, at least not one like this. All of this is way too short term. Its just a money lottery.

# ¿ Feb 9, 2021 20:04

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# ¿ May 15, 2024 15:26

Zaphod42: Sep 13, 2012; If there's anything more important than my ego around, I want it caught and shot now.

Lorem ipsum posted:

My mistake, I thought you were talking about the market as a whole.

Nah, long term buying in of stocks you believe in and hold for years is a fairly reasonable investment. Especially big mutual funds.

But people buying into GME is the direct opposite of that. Completely different thing.

# ¿ Feb 9, 2021 22:10

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