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The Complete Moron’s Guide to GameStop’s Stock Roller Coaster
The Complete Moron’s Guide to GameStop’s Stock Roller Coaster:
Last week, an epic short squeeze had driven GameStop stock up to $40 a share, a roughly 1,500 percent increase from its low point nine months ago. Little did anyone know at the time that this would only be the beginning of the story.
As I write this, GameStop's stock price is hovering around $350, up another 775 percent or so since I wrote about this situation eight days ago. By the time you read this, that number may be horribly outdated, as the stock continues to bounce up and down with extreme volatility hour by hour (it dipped down as low as $61 and peaked as high as $159 on Friday).
The current stock price now gives the company a market cap of about $26 billion.
On the surface, that means the market currently thinks GameStop is worth more than twice as much now (during a potentially existential threat to brick and mortar game sales) as it was during the height of the Wii boom in late 2007, when console game downloads were barely a thing.
Also at: Business Insider.
Melvin Capital, Hedge Fund Targeted by Reddit Board, Closes out of GameStop Short Position
Melvin Capital, hedge fund targeted by Reddit board, closes out of GameStop short position:
Melvin Capital closed out its short position in GameStop on Tuesday afternoon after taking a huge loss, the hedge fund's manager told CNBC's Andrew Ross Sorkin.
GameStop, hedge funds' most-hated stock, was targeted by an army of retail investors who marshaled forces against short sellers in online chat rooms. In the Reddit forum "wallstreetbets" with more than 2 million subscribers, rookie investors encouraged each other to pile into GameStop's shares and call options, creating massive short squeezes in the stock.
CNBC could not confirm the amount of losses Melvin Capital took on the short position. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its finances. On Wednesday's "Squawk Box," Sorkin said Plotkin told him that speculation about a bankruptcy filing is false.
GameStop shares have soared more than 400% this week alone to $347.51 apiece, driving its January gains to 685%. The stock was worth just $6 four months ago.
Reddit's WallStreetBets is locked as AMC, GameStop stocks fall after-hours
For the past week, Reddit's WallStreetBets community has been the center of an epic war between large Wall Street investors and small scale social media betters. Now, it's been locked, and spooked investors appear to be dumping their shares.
Shares of GameStop and AMC dropped dramatically in after-hours trading shortly after Reddit's community was made only viewable through an invite.
See also: Reddit traders cause Wall Street havoc by buying GameStop
GameStop and Elon Musk send Reddit and Robinhood to the top of the App Store charts
'Dumb Money' Is on GameStop, and It's Beating Wall Street at Its Own Game (archive)
(Score: -1, Offtopic) by Anonymous Coward on Thursday January 28 2021, @05:33AM (83 children)
Please make your predictions of what you expect the Biden administration to do today, instead of creating some sort of ad-hoc mental gymnastic rationalization that the media will feed you after the fact.
The corporate media and Wallstreet are both turning to the Biden administration, who they donated a fuck ton to, to save them from the peasants. What do you think will happen?
And similarly all of this is being sourced from WallStreetBets [reddit.com], a subreddit. Right now Reddit leadership is overtly in support of this. What do you think will be this little subreddit's ultimate fate?
(Score: 0, Offtopic) by hemocyanin on Thursday January 28 2021, @05:42AM (1 child)
Federal prosecution. I mean, if they can prosecute a guy over posting memes in 2016, who can't they prosecute?
https://www.justice.gov/opa/pr/social-media-influencer-charged-election-interference-stemming-voter-disinformation-campaign [justice.gov]
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @09:44AM
The actual inside traders?
https://en.wikipedia.org/wiki/2020_Congressional_insider_trading_scandal [wikipedia.org]
Or I dunno, the rest of the people escaping prosecution or the consequences for being found guilty? Those people?
Or the ones whose political opponents were allowed to run the investigations for years without finding prosecutable evidence? Cause I think you wanna say those people.
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @05:45AM (3 children)
Careful what you wish for.
The losers here are almost certainly not regular DNC members. Chances are this will an opportunity to set an example. A warning tale for rich entitled fucks that think they're bigger than the rules. Who may occasionally try to incite free tours of Nancy Pelosi's office. It's time for some bitches to feel the unity with their poor brethren.
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @06:07AM (2 children)
Why do you think I wouldn't want to see this? This tribalism is particularly what I'm trying to get people, themselves, to see.
I completely agree with you that the losers here are obviously not normal DNC members. They're something much more relevant: they're the people who are and who control the DNC, as well as the GOP. The DNC, if they're to keep to their rhetoric, should be cheering this event on. Not only did a whole bunch of middle class types just make a ton of money off of Wallstreet greed, but it's ultimately the story of the little man taking on the bourgeois, playing by the rigged rules that the latter created, and winning - big time.
I simply do not think they will keep to their rhetoric. And most times here we can only speak of vague things like 'what do you think will happen over the next 2 years'. But in this case it's something right in your face. You now have millions of little guys winning at the cost of a handful of Wallstreet billionaires. What will happen in this specific situation over the next weeks? If they do anything, the masks are going to come off. And you're not going to like what you see.
(Score: 3, Informative) by c0lo on Thursday January 28 2021, @06:45AM
Some notable of them are [twitter.com]
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @04:06PM
Now that Trump has been ousted, the masks can indeed come off.
(Score: 2) by c0lo on Thursday January 28 2021, @06:05AM (26 children)
In a normal world, absolutely nothing would happen.
Biden was just reelected, there's nothing anybody can do for at least two years, Biden administration could go ahead with saving the America from pandemic as the utmost priority and, with a shrug, let those fuckers in the hole they dug themselves into. Unlike the 2008 crisis, the impact on the Average Joe is non-existent, no rush for a "too big to fail" is necessary.
But I'm old enough to know the world is far from normal, so I'm not inclined to place bets.
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 4, Interesting) by Grishnakh on Thursday January 28 2021, @06:26AM (22 children)
I'm no finance expert, but my guess is this kind of activity can cause a market crash. Short-selling is actually blamed for the 1929 crash that led to the Great Depression. Because of this, it was highly regulated, but that regulation was lifted in 2007. So the Biden Administration might find itself *forced* to deal with this. Hopefully, they'll bring back some of the sensible regulation that was implemented after 1929 to prevent another Depression, but which has been repealed over the last 20-30 years.
(Score: 5, Insightful) by c0lo on Thursday January 28 2021, @06:40AM (2 children)
In this case, it's the stock of very few companies that are the battlefield, thus not generalized on the entire stock market.
And the rational conclusion from this limited exercise would be "Shorting is dangerous like hell", thus less chances of the entire market crash.
But as I said, we aren't living in a normal world. And share trading is not a rational exercise for already a long time.
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @07:20AM (1 child)
What is dangerous about buying puts?
(Score: 2) by FatPhil on Friday January 29 2021, @12:53PM
What's so dangerous about the lottery or putting money on nags?
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 1, Insightful) by Anonymous Coward on Thursday January 28 2021, @08:40AM
> I'm no finance expert, but my guess is this kind of activity can cause a market crash.
LOL quick we need to ban it - the wrong guy(s) won. Eerie.
(Score: 3, Interesting) by Anonymous Coward on Thursday January 28 2021, @08:41AM (17 children)
Right. You are no expert and you are just guessing.
This "kind of activity" with GME is barely a blip on a market that involves trillions of dollars. It's not going to cause a "crash."
Regardless, crashes happen -- that is just the way free markets work. Additionally, the big crashes are usually symptoms of underlying problems in the general economy. The Great depression wasn't caused by short-selling.
The good thing is that the SEC isn't run by the typically ignorant luddites (and politicians) who think that free markets need to be regulated to protect "mom & pop" investors from those "nefarious short sellers" and from those "evil high frequency traders." To anyone who has the slightest clue, the truth is that if no one is selling a stock then no one can buy stock. Thankfully there are short sellers and HFT's who make stock available to buy. The short sellers and especially the HFT's are also great for liquidity, which most definitely helps "mom & pop" get a better deal when buying and selling.
So, short sellers and HFT's are actually beneficial to the overall market and particularly to retail traders.
Stock prices go up and down for all kinds of reasons, most of which are perfectly legit/valid. Anyone who invests (whether long, short or neutral) takes a risk, and one party has to make money while the other party has to lose money -- that is integral to trading. If that were not the case, and if risk was eliminated with regulation for one or both sides, no one would ever invest on the side that has all the risk, and there would be no reason to invest if neither side had risk.
This reddit activity and the "opposing" institutional shorting are both perfectly legitimate trading occurrences. Don't hamstring the free market with misinformed regulations!
(Score: 1) by khallow on Thursday January 28 2021, @06:21PM
(Score: 2) by quietus on Thursday January 28 2021, @06:29PM (14 children)
Indeed. Short sellers are just identifying the weaklings before anybody else does. If there were good economic reasons why Gamestop et al could return/become successful companies once again, you'd just wait until the price goes lower due to the shorters, then move in with your own long position.
What all those foming at the mouth against shorters don't see is that if you chase shorters out of the market, you only encourage zombie companies i.e. exactly the companies who thrive on political connections to survive. What they also don't see is that this stinks to high haven of a pump-and-dump scheme, fuelled by social media manipulation.
Enjoy holding your Gamestop shares for ever and eternity (that is, if you ever cared about the people at Gamestop): and be comforted, you just made a couple of rich assholes very, very happy. You better return to being Tesla fanbois and QAnon adherents, now.
(Score: 2) by Socrastotle on Thursday January 28 2021, @07:50PM (6 children)
I don't think you understand what's happening here. The shorts got way too greedy and dramatically over-shorted the company. This left them *extremely* vulnerable. The shorts, likely due to illegal naked shorting, need to buy about 140% of floated shares in order to cover their shorts. When they buy these shares, it's going to send the price of the stock skyrocketing. They clearly were just hoping nobody would notice/exploit this. People did. And now the shorts are screwed. They, unlike the people who bought the stock, are on a strict time limit for two reasons:
1) They are paying interest on their short positions each and every day that passes.
2) The shorters are generally from elite hedge funds that promise huge returns and, in turn, charge huge fees. They can't just sit around with billions of dollars not only tied up but actively costing them money.
Of course getting out would also cost them what could amount to tens of billions of dollars. Bahaha. It's hilarious and awesome. The hedge fundies might want to brush on their Nassim Nicholas Taleb. They could have hedged against this extremely improbable possibility at a negligible cost to their profit margin. But they thought 'nah, fuck it - all in!' And now they get to pay the price. And, in the process, they're making millions of not-rich assholes very, very happy.
(Score: 2) by quietus on Thursday January 28 2021, @08:11PM (3 children)
You forget another thing: margin call. A short seller needs to put up collateral with his brokerage, which itself has a maintenance margin on those [short] sales. Typical for a short sale is that the collateral needs to go up when the stock price rises. In practical terms, when the stock price has gone up with, say, 30%, the shorter got a call from his/her brokerage to increase the collateral. And another call at the next threshold. And another one at the next threshold, and so on. Shorters though have their own thresholds, and are non-emotional number people: they'll cap their losses, and ditch the short sale the moment that threshold has been called. They're not going to hang around to prove their point.
Besides, that a few shorters get burned is not the issue here: the real issue is that the share price has gone up to ludicrous levels; and somebody's going to cash in. All he/she needed was a little investment in bots, and a loophole in robinhood's registration process.
(Score: 2) by Socrastotle on Thursday January 28 2021, @08:36PM (2 children)
The one thing I think many people are missing here is that the shorts need to buy shares to close their positions. And not only do they need to buy, but they need to buy 140% of all floated shares. This is why Gamestop was targeted. The hedgies got greedy and *massively* over-shorted this stock. When they try to buy to cover, prices are going to go into lala land. Real losses are already in the billions of dollars. Losses when they try to close out their positions, and as a result jack the price up, are going to be *easily* in the tens of billions of dollars. This isn't a 'darn, cut my losses, time to go' type thing - we're talking about losses far larger than the net income Goldman Sachs, and perhaps surpassing even Alphabet/Google. This is real money, even in our world of fake money.
This is why they're already now turning to widespread collusion and what is likely illegal activity by getting brokerages to try to manipulate their users in order to manipulate the market and ideally drive the price down. They're in bed with the government and will be able to get off likely breaking the law/regulations with a limp slap on the wrist, if that. But bigger than that is the perception stuff. This stuff involves millions of people, all around the globe. And they're now overtly 'taking off the masks', colluding, and likely breaking the law - all to save Wallstreet vultures. And they're doing this in front of everybody. That's just unimaginably huge, and shows how critical this has become.
(Score: 1) by khallow on Friday January 29 2021, @12:34PM (1 child)
I don't think the private world has this kind of rapid coordination - there's no private organization that can deploy media and collude this fast. Look to the feds. They're the ones with the infrastructure already deployed for this sort of thing. They also have a lot of legal protection (such as sovereign immunity) against charges like collusion.
I see that the price of Gamestop dropped dramatically yesterday. That indicates to me that a good portion of the short is gone.
(Score: 0) by Anonymous Coward on Friday January 29 2021, @06:16PM
From what I understand when it was down the amount of shares being sold was small and possibly just back and forth between brokers to try to get retail investors to sell when a lot of them could only sell because many brokers blocked retail investors from buying.
(Score: 2) by FatPhil on Friday January 29 2021, @01:00PM (1 child)
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 0) by Anonymous Coward on Saturday January 30 2021, @12:57PM
Naked shorting isn't required. The contacts are not all for the same date.
(Score: 2) by quietus on Thursday January 28 2021, @08:43PM (6 children)
Two consequences.
Consequence A. People are going to rebalance their portfolio away from companies with a small amount of outstanding shares, because these are the most vulnerable to such flash mob attacks by "retail investors". And no, because this time the price went up, that doesn't mean that next time the stock price also is going to go up.
Consequence B. The Reddit crowd went wild on evil hedge funds. Those hedge funds will incorporate that in their risk strategy, wait with bringing liquidity back in the market, and increase their own reserves. The net effect will be that there's less money in the market (though a bit of deflation there is not overdue), and even bigger price swings: which in turn is not necessarily good for retirement funds, which should prefer stability.
This whole idiocy, if it spreads, will hurt exactly the younger and smaller companies, who need the stock market money the most for growth -- and with it the US economy.
Me, I prefer Buffalo Man.
(Score: 1, Insightful) by Anonymous Coward on Thursday January 28 2021, @10:23PM (1 child)
Could someone explain? Thanks.
From my understading, when a company sells shares to be publicily traded, they get money once, and then just have to give profits to whoever owns the shares. But the companies does not get money again for those shares, it's a one time thing.
OTOH, I know that companies can suffer if their shares are worthless, because people will think the company is worthless, ignoring if it really is an empty shell, or a full bag (maybe even with with lots of recurrent business in the future, or even growth path) with a cheap sticker attached.
If the quote is about companies playing with someone else stocks... well, I guess different thing and I could see what it means.
(Score: 2) by quietus on Friday January 29 2021, @11:02AM
Errr ... you know of any company that brings shares to the market only once? Any company at all? While the share price at IPO might be based on estimates about the future profitability of a company, the next rounds of share selling will be heavily based on the performance of the shares already present on the stock market.
If that performance whipsawed, or has shown valuations that have clearly no economic basis, serious investors will not want to get involved unless the premium (guaranteed profit) you offer them rises; which in turn will lower the valuation at which you can bring your shares to market, which in practice means that your borrowing rate [from the stock market] has gone up, which means you'll either have to grow slower, creating fewer jobs in the process, or sell ever more of your company away, which also has an impact on job creation.
(Score: 1) by khallow on Friday January 29 2021, @12:48PM (2 children)
You say that like it's a bad thing. Sorry, I don't see a problem here. Look at consequence A. Companies with a small amount of outstanding shares have a lot of risk. Investors realizing that risk is there, now will make better trades. That's better for the economy.
Consequence B is temporary. And well, you acknowledge it is needed too. Sounds like another better for the economy thing.
Let's use car analogies. You blissfully followed your car's GPS to Portland, Maine when you wanted to go to Portland, Oregon. Oops. There's no way to get between the two cities without thousands of miles of travel. We could choose to interpret the subsequent trip as bad for you, but it's less worse than staying in Portland, Maine when you need to be in Portland, Oregon. The mistakes that were bad for you have already been made.
Similarly, the mistakes that led to your concerns have already been made. It's less bad for the economy for those investors and hedge funds to be a bit more conservative and correct their exposure to these problems, than to just ignore the lessons from this little episode and perhaps lose billions of dollars down the road (a way markets correct participants who choose not to learn from others' mistakes).
(Score: 2) by quietus on Friday January 29 2021, @03:50PM (1 child)
The risk your talking about here -- flash mob manipulation of share trading -- has no economic basis: it is not based on P/E analysis, insights into the company's liquidity or cash flow situation or any other type of business indicator. Its only basis is emotion -- the lulz for some, anti-evil-i-don't-understand for others -- manipulation through social media.
A better comparison is that bunch of anti-maskers trying to block the entrance of a Trader Joe's of a few weeks ago: convinced they're doing the good fight, but really only falling for disinformation, and very much out of their depth anyway.
(Score: 1) by khallow on Saturday January 30 2021, @08:50PM
I'm not seeing the point to this comment. A lot of what we do has economic effect without apparent economic basis. If market participants only take into account economic bases rather than economic effects, then they're doing it wrong and indicates deeper problems than merely being unable to anticipate lulz. Things like this short squeeze will help correct that erroneous behavior.
And apparently handled well by the Trader Joe's employees. My take on this is that if your business can't handle sporadic adverse activity taken on a non-economic basis, then what else can't it handle? Losing a few billion will both help reduce the future risk from that business and it's issues, and give them appropriate feedback that they're not paying appropriate attention to the risks of their actions.
(Score: 2) by quietus on Saturday January 30 2021, @08:07AM
A funny thing, I didn't know (next to DeepFuckingValue having $21M in his trading account): Robinhood makes money by selling its order flow data to high-frequency traders i.e. established traders making a buttload of money out of this.
(Score: 0) by Anonymous Coward on Friday January 29 2021, @12:33AM
Clearly, you have no idea how the stock market actually works. My suggestion: stick to index funds. It will be much safer for you.
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @11:52AM (2 children)
Washington bailed out Wall Street in 2008 and 2009, so if the results of this silly game get big enough I expect them to do it again. And yes, they shouldn't. Let Wall Street eat itself, it stopped being anything other than a casino for rich people before I was born.
But no, I don't expect the government to sit by and let this happen. I expect the Democrats to get involved on the side of the rich people holding their leash. And if Trump and the Republicans controlled Congress, they would do the same.
(Score: 2) by c0lo on Thursday January 28 2021, @12:38PM (1 child)
A good position to potentially be pleasantly surprised, yes.
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @07:45PM
I hope you're right, but I'm not holding my breath. Wall Street gave millions of mortgages to people they knew couldn't play, and when it was going to come back to bite them, DC gave them bailouts and executive bonuses. Nobody went to prison for fraud. They own DC, the public knows it and hates it, and one of the many reasons Trump won in 2016 was the lie to voters that Wall Street wouldn't own him. Fuck Everyone Else For The Sake Of Wall Street, Inc. didn't need to own Trump, he's on their board of directors.
(Score: 2) by c0lo on Thursday January 28 2021, @06:16AM (3 children)
Today, White House monitoring situation involving GameStop, other firms [reuters.com]
Who knows what tomorrow will bring.
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @08:13AM
Ah the good old Department of Situation Monitoring.
(Score: 1, Touché) by Anonymous Coward on Thursday January 28 2021, @01:12PM (1 child)
Occupy: "Damn you Wall St"
Antifa: *smashes Starbucks window* "Damn you Capitalism"
WSB: "WE LIKE THE STOCK"
(Score: 2) by c0lo on Thursday January 28 2021, @02:02PM
I like it too. Particularly the veggie stock.
On a serious note, WSB seems like the only group that knows what they like, everyone else knowing what they dislike but not what to replace it with.
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 5, Interesting) by c0lo on Thursday January 28 2021, @06:43AM (28 children)
@AOC says Gotta admit it’s really something to see Wall Streeters with a long history of treating our economy as a casino complain about a message board of posters also treating the market as a casino [twitter.com]
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 2, Funny) by Anonymous Coward on Thursday January 28 2021, @07:53AM (8 children)
It's a good point. How did we fall so far as a nation that billionaires in yachts can no longer short companies into bankruptcy? Disgusting.
(Score: 5, Insightful) by FatPhil on Thursday January 28 2021, @08:56AM (4 children)
GameStop was already slated as being moribund long before Melvin moved in: https://www.fool.com/investing/2020/02/22/is-gamestop-headed-for-bankruptcy.aspx
The bears moved in *because* of its downward trajectory, not causing its downward trajectory. (However, it does become a self-fulfilling prophecy eventually.)
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 1, Interesting) by Anonymous Coward on Thursday January 28 2021, @09:05AM (1 child)
> The bears moved in *because* of its downward trajectory, not causing its downward trajectory. (However, it does become a self-fulfilling prophecy eventually.)
In the reddit/GME instance, it appears that most of the short sellers moved in when they smelled blood after the first spike in price caused by reddit folks.
(Score: 2) by FatPhil on Friday January 29 2021, @08:14AM
Stimmy stimmy stimme a check after midnight
Won't somebody fund me chase the shorters away?
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 2) by ElizabethGreene on Friday January 29 2021, @03:08AM (1 child)
If you go spelunking in the ancient DD in /r/wallstreetbets about $GME you'll find an old and compelling argument by /u/deepfuckingvalue that the new CEO was maneuvering to arm-twist or oust some of the recalcitrant board members to change the company's stores into experience centers and drive significant value from the brand. My experiences with the stores led me to ignore it at the time. I'm curious to see if he'll manage to do it. The PR from this squeeze certainly couldn't hurt.
(Score: 2) by FatPhil on Friday January 29 2021, @08:03AM
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @08:59AM (2 children)
Shorting stock doesn't cause a company to go into bankruptcy.
Furthermore, market capitalization doesn't really reflect a company's financial condition.
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @03:41PM (1 child)
If its share price goes to zero it does.
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @04:10PM
No. Only being unable to meet corporate liabilities, or the expectation of such, will trigger bankruptcy.
(Score: 1, Interesting) by Anonymous Coward on Thursday January 28 2021, @08:55AM (18 children)
I admire AOC, and I think that she has truthful insight in most situations, but she is wrong in this instance.
The stock market is not the economy. Those are two separate and frequently independent entities.
Trading stocks (and derivatives) is often a gamble, but stock trading is not treating the economy as a casino.
Furthermore, very few economic experts are correct about anything, other than the most obvious trends. It is unlikely that AOC or any other politician can do any better than "the experts."
(Score: 2) by c0lo on Thursday January 28 2021, @10:12AM (8 children)
Tell me honestly, hand on heart, if you think that the "stock market == economy" confusion is not actually present in the mind of most of the stock traders themselves.
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 1, Insightful) by Anonymous Coward on Thursday January 28 2021, @10:23AM (6 children)
I don't think you can find any stock trader who thinks that.
(Score: 2) by c0lo on Thursday January 28 2021, @10:47AM (4 children)
If you say so, I can do nothing but to believe you.
And, in the context, it is true now because:
1. I don't have any stock trader in my circle
2. I don't have time to search for even a single one (no matter what he believes)
therefore it is guaranteed that I won't find a stock trader who thinks that.
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 1, Insightful) by Anonymous Coward on Thursday January 28 2021, @10:51AM (3 children)
It would be a pretty ignorant thing to think. Doubt you could last long trading stocks if you thought that.
(Score: 2) by c0lo on Thursday January 28 2021, @12:40PM (2 children)
Glad to be ignorant and wise enough to stay away from it. Time of (my) life is too expensive to gamble.
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @01:17PM (1 child)
You seem to be quite comfortable commenting about the dangers and possible regulations.
(Score: 2) by c0lo on Thursday January 28 2021, @01:59PM
[Citation needed]
[Citation needed]
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 2) by FatPhil on Friday January 29 2021, @01:06PM
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @09:42PM
As a trader, I have never thought that the stock market was "the economy." That notion is resevrved for uninformed, non-traders.
(Score: 1) by khallow on Thursday January 28 2021, @12:49PM (8 children)
Except, of course, when it is. You can bet a lot about the economy by betting on companies that are effected, good or bad, by the particular aspects or dynamics of the economy you are interested in.
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @01:04PM
A casino is part of the economy too. It is a casino not a market because when they lose outcome the bailouts, trading halts, etc. The casino will just shut down rather than pay you if it becomes unprofitable.
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @05:48PM (6 children)
Well, if most individuals and most company put all of their cash into the stock market, your notion might be true, and the stock market events could directly effect the economy. However, that is not the reality. If anything, it's the other way around -- events in the economy directly effect the stock market. Such cause and effect is referred to as a "binary event" by some traders, and the phenomenon is frequent and common.
Furthermore, market capitalization usually has little bearing on a company's financial condition, but a stocks price can be a reflection of a company's health/prominence.
No. You can bet on sports, but your betting is not the sport. The betting and the sport are two independent entities (unless there is some sort of hanky-panky going on). Likewise, the stock market and the economy are mostly independent from each other.
(Score: 1) by khallow on Thursday January 28 2021, @06:16PM (5 children)
But your betting is betting. When your stock trading (which is not sports too) is indeed gambling, then there you go circularly.
Incorrect, since stock markets and trading on stock markets are part of the economy, they're by default dependent on the economy. When you say "economy" here you really mean economy outside of the stock market. Even then there are parts that are heavily intertwined and parts that aren't.
(Score: 0) by Anonymous Coward on Thursday January 28 2021, @08:54PM (4 children)
What is your point?
Yes. So what?
Huh? No.
Playing the stock market is just like betting in a sports book, and "the economy is just like the world of sports. You can make all kinds of bets (huge or small), but those bets don't affect the world of sports. Likewise, one can make all kinds of stock trades, but those trades don't affect the general economy.
Not really.
Sure, there has to be an economy with companies for the stock market to exist, and there are frequently events that happen in the economy (and in the world) that temporarily affect the overall market and individual stocks. However, something really serious has to happen to the economy to significantly affect the overall stock market. Otherwise, the two entities are independent.
Take just last year, for instance. In 2020, the US economy shrank by 3.5%, in its worst year for growth since 1946:
https://www.msn.com/en-gb/money/news/us-economy-shrank-by-35-25-in-2020-the-worst-year-since-second-world-war/ar-BB1db4Hc
In that same year (2020), the S&P 500 gained a whopping 16.26%!:
https://www.macrotrends.net/2324/sp-500-historical-chart-data#menu2
So, the "economy" and the stock market often move in different directions and are, thus, mostly separate and independent from each other.
Well, yes... just like when I say "sports" when I mean the sports world outside of the sports book.
The only time that the economy and the stock market are "heavily intertwined" is when "binary" events occur in the economy and in the world.
(Score: 1) by khallow on Thursday January 28 2021, @11:27PM (3 children)
An analogy and final assertion that is irrelevant to AOC's quote. I already explained why. She was specifically talking about a small class of people who invest in stock markets and similar securities markets. It would be exactly like talking about sport betters who interact with the world of sports through betting.
I find it remarkable how you picked one of the worst possible examples to back that claim. Those two parameters are both moving in the same direction!
When there's a great deal of uncertainty in an economy (such as generated by a covid pandemic), investors buy the more reliable (or at least the investments perceived as being more reliable) at a premium and raise the price of those investments. Thus, things like S&P 500 stocks rise in price as one would expect. We have here an example of the couplings between the stock markets and the greater economy, contrary to assertion.
Well, we already have one such "binary" event above. It's time to rethink your assumptions.
(Score: 0) by Anonymous Coward on Friday January 29 2021, @11:02AM (2 children)
Nope. You just need to get a little education regarding the stock market.
Everything I said is most certainly relevant to AOC's (and your) misinformed notion that the stock market and the economy are the same and strongly correlated. You just repeated my analogy to suggest the reality -- hence, my analogy is relevant!
And by the way, AOC referred both to "Wall Streeters" and to "message board posters."
You really should educate yourself a little before you post.
Those two "parameters" are not moving in the same direction, and history mostly disagrees with your notion of how those moves are correlated. Historically, when there is a great deal of uncertainty in the economy, investors go from stocks to bonds and to hard commodities, and sometimes just to cash. However, that is not what happened last year (2020) nor in several instances prior. The correlation between significant drops in the economy and movement into bonds and commodities has broken down in recent years.
It doesn't take much digging to realize that movement of the stock market and the economy are largely independent from each other, with little definite correlation. Merely recall the stock market crash of the Great Depression. During the first for full calendar years of that depression (1930, 1931, 1932 and 1933), the S&P 500 averaged a 26% drop each of those four years. However, I think that even you would agree that there was "uncertainty in the economy" during those for years. Similar economy/market moves happened at the 2008 crash. Yet 2020 (and other periods) show the stock market rising while the economy tanks.
So much for your notion that about uncertainty in the economy accompanies a rise in the stock market.
Other than at periods of really huge economic downturns, there is no solid correlation between the stock market and the economy.
(Score: 1) by khallow on Friday January 29 2021, @12:13PM (1 child)
But that misinformed notion is a straw man. It's possible that AOC believes that, but we can't tell from what she wrote. I certainly don't nor gave that impression.
There was also massive problems with the S&P 500 companies back then. These events are all different - their causes and consequences. As a result, what investments are perceived as more or less reliable and secure change as well. You are trying to use a simplistic model to claim that there is no correlation. But there's no reason to expect a simple one-way correlation (positive or negative) between economic activity and stock price.
(Score: 0) by Anonymous Coward on Friday January 29 2021, @07:01PM
Ahh... So YOU admit that it is a misconception that the stock market and the economy are the same thing.
The fact that AOC is always very direct combined with the fact that it is a very common misconception the stock market and the economy are the same would strongly suggest that AOC is misinformed.
Not exactly. There were massive problems in the economy. Nevertheless, the 2008 crash didn't exhibit the same symptoms, and 2020 was a different situation from both of those crashes. There are countless other disparate examples, especially in the last few years.
Again, the economy and the stock market are generally two independent entities, unless there is a huge catastrophe.
You keep parroting my arguments. What is your point?
Of course, but there were never a lot of "reliable" investments -- not ones that would consistently return huge percentages over a long term.
Again, what is your point? How does this argument relate to the common misconception that the stock market and the economy are the same thing?
No. I am not using a "model" -- I am simply providing facts. The fact is that there is no solid correlation between moves in the stock market and moves in the economy, except when the economy takes a huge downturn.
By the way, here is a chart that shows the S&P 500 overlaid with the US GDP from around 1960 to 2020:
https://www.isabelnet.com/u-s-gdp-and-sp-500/ [isabelnet.com]
Here is an article from 2015 that gives a 45.9% correlation between the S&P 500 and the GDP (from 1958 to 2015):
https://seekingalpha.com/article/3053626-u-s-real-gdp-and-s-and-p-500-price-performance [seekingalpha.com]
A 45.9% correlation means the the S&P 500 and the GDP move together less than 50% of the time.
Exactly my point! The stock market and the economy are two different, independent entities!
(Score: 3, Interesting) by Socrastotle on Thursday January 28 2021, @02:20PM (3 children)
Not the subreddit but WallStreetBet's Discord just got predictably banned. Discord claimed "hate speech". Here [reddit.com] is what WSB had to say about it:
There's apparently a hoard of fake accounts now also running around on Twitter claiming to be them, saying all sorts of nasty stuff, presumably in order to give justification for the likely oncoming mass social media purge. The peasants have bruised the eyes of the royalty. It is time for a purge. The only question is if/when Reddit will ban them given Reddit owners have overtly come out in support of them. Reddit uses Cloudflare alongside a number of other possible middleware vectors that could be used to force them off the web if they don't play ball. This is getting super interesting!
(Score: 3, Interesting) by Socrastotle on Thursday January 28 2021, @04:02PM (2 children)
Further extra-judicial crackdowns continue. Interactive Brokers and Robinhood have now both banned buying of Gamestop stock. If the implication there isn't clear, it means you can only sell it. Sell = price goes down = helps Wallstreet. At the same time this is happening other brokerages are having coordinated 'outages'. This includes Ameritrade, Etrade, Fidelity, and Charles Schwab. Welcome to Cartel Land: population a whole lot more than we probably ever thought.
(Score: 2) by ElizabethGreene on Friday January 29 2021, @03:10AM
I got an email from Robinhood indicating they'll reopen trading in gamestop tomorrow.
(Score: 2) by FatPhil on Friday January 29 2021, @01:08PM
and now one less - Ameritrade is Schwab, since last year.
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 3, Interesting) by Thexalon on Thursday January 28 2021, @04:45PM (12 children)
The Biden administration didn't need to do anything about this: The exchanges stopped allowing trades on those stocks today. All completely legal, and showing to what degree the stock exchange is a fair game that everybody can play.
Oh, and the kinds of regulations the likes of Elizabeth Warren want would have prevented the situation arising in the first place, because they would make it illegal to short-sell 140% of a company's stock.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by Socrastotle on Thursday January 28 2021, @06:22PM (7 children)
Naked shorting, which enables this, is already prevented by SEC regulations. The problem, as always, is that laws and regulations don't mean anything if they aren't enforced. And regulations against banks, wall street, etc are mostly meaningless because these groups and the politicians in DC are, essentially, the same people.
And no, stopping the trading of these stocks was almost certainly illegal. Buying stocks and telling people why you're buying them is legal. Companies colluding with investors (though again they are, in large part, frequently the same people anyhow) to prevent millions of people from trading, in order to prevent them from accessing the markets in order to make a profit (or less of a loss) has to be breaking about a million and one anti-compete and other laws and regulations. But of course this begs the question. Will the government actually enforce it? All we can see so far is that AOC is damn sure not controlled by the banks. But one congresswoman alone is hardly enough to enforce a pizza delivery, let alone bringing to heel the most influential organizations and people in this entire country.
(Score: 2) by Thexalon on Friday January 29 2021, @03:35AM (6 children)
I mentioned Senator Elizabeth Warren for a very specific reason, namely that her specialty has long been banking regulation. And her opinion on this whole mess was that there was a lack of enforcement of stock regulations at the SEC that led to the conditions that made the Redditors win this round.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by Socrastotle on Friday January 29 2021, @04:49AM (5 children)
Redditors didn't "win this round" because of lack of regulations or whatever - they won because market fundamentals were on their side. The reason the market fundamentals were what they were could have prevented had the hedge fund obeyed regulations, but everything the Redditors did was 100% on the up and up.
But beyond that I don't understand what you're even proposing, and I'm not entirely sure you do either. Regulations already "have" to be followed. The reason they're not being followed is systemic. The DNC (and GOP) and Wallstreet/banks/megacorps are all deeply incestuous. And if you ever want one to act in a way disfavorable to the interests of another, you're going to need to completely detach the conflicts of interest. And that isn't happening in our country without a complete overhaul of our entire governmental system.
And hyper-partisanship means that will never peacefully happen, because people are so attached to their D or R that all somebody needs to say is "If you don't vote for, the other [evil] guy wins." and they'll immediately go back to voting for the D/R even if they hate them. Simply because they hate the other guy even more.
(Score: 2) by Thexalon on Friday January 29 2021, @02:59PM (3 children)
What I'm proposing is that we help the politicians that are actually in favor of fixing this situation, of which Warren is absolutely at the forefront, do what's needed to remove the scare quotes from the word "have" in your sentence. And yes, that means that a lot of the people who work at the SEC should be in serious trouble, like go-to-jail levels of trouble.
How do we get more politicians like her? By backing people who don't get their money from Wall Street. For any national election, you can find out exactly who qualifies by that standard over at OpenSecrets [opensecrets.org].
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by Socrastotle on Friday January 29 2021, @05:49PM (2 children)
You might want to read this [twitter.com]. Yeah it's a Twatter link so I'll give the synopsis. Warren has taken a strong position on this issue. Want to guess which side? Oh yeah baby - Wallstreet all the way. In brief 'Dear SEC - filthy peasants have started eating with the royalty and they're not using proper etiquette. One used a salad fork for his Strottarga Bianco caviar!! I mean are you going to just let people use salad forks to eat Strottarga Bianco!? Are you going to just let us become mindless raving barbarians!? Yeah I didn't think so. Tell me how you're going to stop it, NOW.'
Judge politicians by their actual actions, not their rhetoric or their committees or whatever. Because all politicians are not only liars but the best liars this country has to offer. This issue is just glorious because there's enough money at play that it's going to drive people to take off the masks. So far we can say for sure that exactly one congressman isn't corrupt: AOC. Ted Cruz is ostensibly right behind her as well, but since he's 100% running for prezzy in 2024 it's *very* possible he's just playing the [not especially] long game.
(Score: 2) by Thexalon on Friday January 29 2021, @09:00PM (1 child)
Reading the Warren's letter to the SEC [senate.gov], I disagree with your characterization, particularly due to this line on page 4 where she's directing the head of the SEC to answer some questions:
That's specifically asking about the 140% short position the hedge funds had and asking if they were illegal, and if so why nothing was done about it.
Oh, and the concern about it being a pump-and-dump? She's right to be asking the question: Explaining exactly what's different about these Reddit posts and the stock email spam pump-and-dump game that's been around for decades isn't going to be easy. While of course this whole thing was gloriously bad for the hedge funds who went short, it was very good for somebody who bought GME long at $5 per share last year and is looking to unload it for a profit, and that somebody could very easily pop onto Reddit, convince a bunch of people to do what they did for the lulz, and make (last I looked) approximately 6000% return.
And most of the rest of the last page is specifically about how the SEC can use investigation from this incident to prevent market manipulation, which is one of those things that's illegal but vaguely defined and not well enforced.
That letter is right along with her rhetoric both as a senator and her academic work about how Wall Street should be working, versus how it actually works: She wants a securities market where the value of what's being traded has something to do with the fundamentals of the company (earnings per share and anticipated revenue from future product offerings), rather than just a flat-out casino. This incident demonstrated that it's far more like a high-end legal casino than anyone on Wall Street would care to admit.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by Socrastotle on Saturday January 30 2021, @03:52PM
There was a reason I wrote this [soylentnews.org] post before this happened. It's like somehow I could predict the future... Quoting that brief post:
This was not a pump and dump by any stretch of the imagination. When shorts short, they eventually need to rebuy to cover the short. In the mean time they pay interest on it and have their money locked up. One guy, DeepFuckingValue on Reddit, noticed the shorts got crazy greedy on GameStop and had shorted more than 140% of its entire floated stock and informed everybody about this. And that's all there was to it. Now Wallstreet is trying to do everything, including illegal actions and calling in every corrupt favor, to avoid taking what would be at the minimum tens of billions of dollars in losses.
And you're engaging in "ad-hoc mental gymnastic rationalization" to try to avoid see what's in front of your own eyes. The only reason Warren now wants the SEC to "investigate" is to try to find a way to save Wallstreet. She's corrupt. They're all corrupt.
(Score: 2) by FatPhil on Saturday January 30 2021, @05:02PM
Don't use the word "fundamentals", it means something specific, and not how you're using it. The funadamentals for $GME are *terrible*, and on the shorters' side, not on the AOR's.
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 2) by ElizabethGreene on Friday January 29 2021, @03:17AM (3 children)
There is an important clarification on this.
The stock exchange halted trading of Gamestop due to volatility. These "circuit breaker" rules have been in place for decades and they are a very good thing.
Separate from that, several brokerages * blocked opening new positions in Gamestop. That feels wrong, and they will have to make strong arguments defending that decision in the inevitable slew of upcoming class action lawsuits.
* e.g. TD Ameritrade AKA Think or Swim/RobinHood/TastyTrade are what I heard about.
(Score: 2) by Thexalon on Friday January 29 2021, @03:32AM
As someone pointed out, Robinhood, which was blocking trades on Gamestop, is part of the same conglomerate as one of the hedge funds that was being adversely affected by the rise in Gamestop's price. Which means that there's a clear manipulation claim.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1, Redundant) by darkfeline on Friday January 29 2021, @10:39AM (1 child)
> The stock exchange halted trading of Gamestop
They did not halt trading of GME. They halted retail (individual) traders from buying GME. They did not halt retail traders from selling GME, nor did they halt institutional traders (The Man) from buying or selling GME.
There are a number of hypotheses why they did this, none of which are positive.
Join the SDF Public Access UNIX System today!
(Score: 2) by ElizabethGreene on Friday January 29 2021, @03:47PM
With the utmost of respect, you are wrong. The NYSE stopped trading of $GME several times. You can see the full list here: https://www.nyse.com/trade-halt-historical [nyse.com] and filter it for the GME ticker.
Volatility based halts are a good thing. They prevent another 1987 black monday style crash, or at least slow it down enough for humans to take a breath.
That said, I don't have any good arguments for why e.g. RobinHood should have blocked trading. I firmly believe that was a mistake and it will cost them dearly.