The Gamestop Stock Market Boogaloo

[Odreria]

Good.

Think of it like this:

A lot of hedge funds and brokers are going to have to liquidate their long positions in order to for overpriced GME stock at a heavy loss on GME, as well as losing out on a lot of opportunity on the stocks they are anticipating will increase in price. They'll start with less attractive longs, but might have to migrate up to "good" longs.

If there isn't enough cash to cover all of this sell off, then we got the liquidity crisis. The only way out is either an injection of money in, or selling things for dramatically reduced price to get what you can while you can.

Easy solution: everyone cash out their 401Ks and put the money into gamestop. Then when GameStop goes up and everything else goes down, put the money back in everything else.

(in case anyone is wondering please don’t do the 401k part)

[Fahran]

(Image)

how subtle

I mean there are significant risks. You can lose a lot of money by pouring it into risky investments like GME without due consideration. As a rule, it's preferable to seek out less risky stocks and to diversify. In this case, a lot of the retail investors don't care about their own personal losses. They might lose the $350 they sank into GME, but they're hoping that hedge funds lose billions more due to the losses they incurred by shorting.

EDIT: Oh, and some of the reail investors are going to win big as well. Like life-changing money potentially, especially those who hopped in early.

[Fahran]

This episode shows how the stock market game is rigged against ordinary speculators. Perhaps we are seeing an acceleration into the end stage of the system of speculation. The root problem is the whole system of making money from money instead of from productive labor.

Capital adds a lot of value to products and services. As a result, equity, the thing a lot of companies use to raise capital, can become quite lucrative. I doubt we're seeing the advent of a socialist revolution or even an end to speculation. Hedge funds will probably just be less monumentally stupid when shorting in the future because, while that has always been a risky move, the market is presently punishing them for doing it in an unprecedented way.

[Flanderlion]

This episode shows how the stock market game is rigged against ordinary speculators. Perhaps we are seeing an acceleration into the end stage of the system of speculation. The root problem is the whole system of making money from money instead of from productive labor.

Capital adds a lot of value to products and services. As a result, equity, the thing a lot of companies use to raise capital, can become quite lucrative. I doubt we're seeing the advent of a socialist revolution or even an end to speculation. Hedge funds will probably just be less monumentally stupid when shorting in the future because, while that has always been a risky move, the market is presently punishing them for doing it in an unprecedented way.

More they'll do exactly the same and be shocked when the same thing happens again to slightly different people.

[Odreria]

(Image)

how subtle

I mean there are significant risks. You can lose a lot of money by pouring it into risky investments like GME without due consideration. As a rule, it's preferable to seek out less risky stocks and to diversify.

Maybe long term investing isn’t the point here?

[Nevertopia]

Think of it like this:

A lot of hedge funds and brokers are going to have to liquidate their long positions in order to for overpriced GME stock at a heavy loss on GME, as well as losing out on a lot of opportunity on the stocks they are anticipating will increase in price. They'll start with less attractive longs, but might have to migrate up to "good" longs.

If there isn't enough cash to cover all of this sell off, then we got the liquidity crisis. The only way out is either an injection of money in, or selling things for dramatically reduced price to get what you can while you can.

Easy solution: everyone cash out their 401Ks and put the money into gamestop. Then when GameStop goes up and everything else goes down, put the money back in everything else.

(in case anyone is wondering please don’t do the 401k part)

yes let us do the exact same thing the hedgefund did that caused this in the first place.

[The Alma Mater]

I mean there are significant risks. You can lose a lot of money by pouring it into risky investments like GME without due consideration. As a rule, it's preferable to seek out less risky stocks and to diversify.

Maybe long term investing isn’t the point here?

Not for the redditors no (although plenty of them made loads of money of it). But "normal" people who do not understand what is happening are now joining in thinking they can solve their financial problems caused by corona and missing stimulus checks with it.

It is good to warn them.

[The Lone Alliance]

This post had a good point about how some of these protections measures actually look like.

Imagine you are a gambler enjoying a night at the casino. You decide to play Blackjack. Your hand is a ten and the dealer shows a 7.

"I would like to hit."

"No sir. You are only allowed to stand or surrender."

"That's not the rules of the game. Aren't you regulated?"

"Due to the votality your hand represents to the Casino, sir, you are only allowed to stand or surrender. These are extraordinary times."

"...are you only allowed to stand or surrender?"

"No sir. In fact, we may double down."

"Wait. What? You are the dealer, you can't put more money in that I didn't put in. That money doesn't even exist on the table!"

"Sir, you have a gambling problem. We might have to report the commission on you for attempting to hit with your hand because your friend told you that you should."

"Wait, are you trying to make me fold?"

"Sir, we reported you to the newspaper for being a degenerate."

"You guys are crazy!"

"Sir, we have decided that in order to protect your interests, you have decided to surrender."

[Servilis]

i didnt laugh when i heard the news but i do think its absolutely fucking hilarious,

when the hedge fund folks started complaining and requesting trading systems to temporarily stop people from buying shares, it kind of reminded me of when you get banned from a casino in fallout new vegas becos you made too caps off the casino and they start to profit,
just without the occasional casino member coming to give you some free food and whatnot,

[Seangoli]

Easy solution: everyone cash out their 401Ks and put the money into gamestop. Then when GameStop goes up and everything else goes down, put the money back in everything else.

(in case anyone is wondering please don’t do the 401k part)

yes let us do the exact same thing the hedgefund did that caused this in the first place.

That would not cause a crisis. What caused this crisis is that effectively hedge funds took out more debt than there are stocks. A bubble is one thing, it happens, whatever. 2001 was a bubble that didn't have major reverberating issues aside from value evaporating. A bubble fueled by bad debt is a time bomb when the piper comes calling.

[Ostroeuropa]

Good.

Think of it like this:

A lot of hedge funds and brokers are going to have to liquidate their long positions in order to for overpriced GME stock at a heavy loss on GME, as well as losing out on a lot of opportunity on the stocks they are anticipating will increase in price. They'll start with less attractive longs, but might have to migrate up to "good" longs.

If there isn't enough cash to cover all of this sell off, then we got the liquidity crisis. The only way out is either an injection of money in, or selling things for dramatically reduced price to get what you can while you can.

It would be genuinely hysterical if WSB watched which stocks they liquidated to pay this off, and then bought those same stocks at the lower prices.

[Seangoli]

(Image)

how subtle

I mean there are significant risks. You can lose a lot of money by pouring it into risky investments like GME without due consideration. As a rule, it's preferable to seek out less risky stocks and to diversify. In this case, a lot of the retail investors don't care about their own personal losses. They might lose the $350 they sank into GME, but they're hoping that hedge funds lose billions more due to the losses they incurred by shorting.

EDIT: Oh, and some of the reail investors are going to win big as well. Like life-changing money potentially, especially those who hopped in early.

The reason this has turned into such a big deal isn't because they aren't diversified. No amount of diversification would save them right now.

What is going on is that they essentially have potentially unbounded risk in exchange for relatively little potential gain. Shorting Tesla right now isn't a bad play. Even if it doesn't pan out, the likelihood of getting punished is pretty minor.

They went for the stupid play. Melvin Capital shorted about 12.5 million shares, roughly, at 4/share. The only way they make any real money is if Gamestop went bankrupt, and even then they are looking at a maximum gain of $54 million minus fees. Meanwhile, if Gamestop went to $16-20, which is a wholly sane evaluation, they stood to lose on the order of $150-200 million. And now, as we see, their play to gain a meager $54 million maximum cost them *billions* due to the squeeze. They were being stupid, reckless vultures hoping to score free money, and didn't properly evaluate the absolute insane level of reasonable risk they were taking, let alone the losses if it hits the hundreds per share.

I have no idea what they were thinking with that short bet. To be frank, if I were an investor I would seriously be considering suing them for violating their fiduciary responsibility with that level of risk taking.

Equally, it wasn't the stocks that got them, but rather short selling. If all they did was buy or sell GME stocks, their potential losses would be limited. But because they shorted GME on margin, and they are required to return those shares of they want out of their short contracts, they have to absorb significant losses.

Taking on the significant risk involved with short selling on a stock that is already at rock bottom isn't just risky, it's completely idiotic. There is almost nothing to be gained. Short something you think is severely overvalued and is due for a correction. Not a god damn penny stock that can't go particularly lower. These people weren't just taking a huge risk; they were taking a massive risk with a low payout. Would you bet your house at the blackjack table if the maximum payout was a dollar? Of course not, thats just stupid. And that's what these Hedge Funds were basically doing.

[SD_Film Artists]

I'd have more sympathy if it was an individual trader taking an honest 'bet' and lost, but the WS types are free-market capitalists who tried to game the system and then cried to the government when someone played better than them.

[An Alan Smithee Nation]

Anybody want to buy some tulip bulbs?

[Seangoli]

Think of it like this:

A lot of hedge funds and brokers are going to have to liquidate their long positions in order to for overpriced GME stock at a heavy loss on GME, as well as losing out on a lot of opportunity on the stocks they are anticipating will increase in price. They'll start with less attractive longs, but might have to migrate up to "good" longs.

If there isn't enough cash to cover all of this sell off, then we got the liquidity crisis. The only way out is either an injection of money in, or selling things for dramatically reduced price to get what you can while you can.

It would be genuinely hysterical if WSB watched which stocks they liquidated to pay this off, and then bought those same stocks at the lower prices.

That's my plan. We have already had two days running of red. I'm thinking the market is going to bleed across the board Monday, panic sets in Tuesday from retailers and the like, things take a dive, lowered liquidity across the board, and things will go on fire sale as people desperately try to cover shorts across the board at a loss just to keep from being exposed. I'm thinking it's going to get ugly in a hurry for hedge funds and brokers, which presents an opportunity for retailers who don't panic and buy the panic. We could see a double-whammy of wealth changing hands, both from selling high prices GME stock *and* taking those profits and buying good long term stock at a discount. Margin levels are at historic highs right now, and that spells disaster in the current market conditions.

We could see some real transfer of wealth going on.

[Northern Socialist Council Republics]

Anybody want to buy some tulip bulbs?

Well, it’s all about the greater fool theory. No price is too high to pay for something if there is some fool greater than you who will take it off your hands for yet more.

Just avoid being the greatest fool and you’ll be fine. Plenty of people made lots of money in the South Sea bubble even as half the country went bankrupt. :p

And as long as funds keep shorting the stock there is reason to believe that there are greater fools out there...

[Ostroeuropa]

Anybody want to buy some tulip bulbs?

Well, it’s all about the greater fool theory. No price is too high to pay for something if there is some fool greater than you who will take it off your hands for yet more.

Just avoid being the greatest fool and you’ll be fine. Plenty of people made lots of money in the South Sea bubble even as half the country went bankrupt.

And as long as funds keep shorting the stock there is reason to believe that there are greater fools out there...

I'm legit baffled why they keep doubling down and shorting more stock.

Someone breaks from the line, the funds get it sold to them and go "IT'S HAPPENING!" and then short it again to someone who holds.

[Seangoli]

Anybody want to buy some tulip bulbs?

Well, it’s all about the greater fool theory. No price is too high to pay for something if there is some fool greater than you who will take it off your hands for yet more.

Just avoid being the greatest fool and you’ll be fine. Plenty of people made lots of money in the South Sea bubble even as half the country went bankrupt.

And as long as funds keep shorting the stock there is reason to believe that there are greater fools out there...

The shorters right now are idiots. So long as short percentages are as high as it is, this can go on indefinitely, and even if prices start to go down, the sheer number of shorts trying to cover their bets will just drive the price back up, leading to more shorts, etc. And as long as WSBs users don't sell, the price will go on. And, collectively, that's about $30 million in premiums per day.

[Seangoli]

Well, it’s all about the greater fool theory. No price is too high to pay for something if there is some fool greater than you who will take it off your hands for yet more.

Just avoid being the greatest fool and you’ll be fine. Plenty of people made lots of money in the South Sea bubble even as half the country went bankrupt.

And as long as funds keep shorting the stock there is reason to believe that there are greater fools out there...

I'm legit baffled why they keep doubling down and shorting more stock.

That's simple. If you are one of the ones who can survive this mess, you stand to make a hell of a lot of money (or, rather, you have made a hell of a lot of money right now, and stand to keep most of it).

That said, if there is another price hike, and you get margin called during the hike, you are utterly, completely, and totally boned. There has been smchatter about using this tactic by WSB users.

[The Alma Mater]

Well, it’s all about the greater fool theory. No price is too high to pay for something if there is some fool greater than you who will take it off your hands for yet more.

Just avoid being the greatest fool and you’ll be fine. Plenty of people made lots of money in the South Sea bubble even as half the country went bankrupt.

And as long as funds keep shorting the stock there is reason to believe that there are greater fools out there...

I'm legit baffled why they keep doubling down and shorting more stock.

Because they are making loads of money. While the big boys had ouchies at first they are now profiting massively.

[Seangoli]

I'm legit baffled why they keep doubling down and shorting more stock.

Because they are making loads of money. While the big boys had ouchies at first they are now profiting massively.

If they keep successfully orchestrating these short ladder attacks, its basically an infinite money loop.

That said, if they get caught with their pants down even once, and enough people excercise their call options against them when things go up, it will be the absolute mother of all squeezes.

[An Alan Smithee Nation]

Because they are making loads of money. While the big boys had ouchies at first they are now profiting massively.

If they keep successfully orchestrating these short ladder attacks, its basically an infinite money loop.

That said, if they get caught with their pants down even once, and enough people excercise their call options against them when things go up, it will be the absolute mother of all squeezes.

Then what, do we end up with a repeat of the Wall Street crash of 1929?

[Lost Memories]

I mean there are significant risks. You can lose a lot of money by pouring it into risky investments like GME without due consideration. As a rule, it's preferable to seek out less risky stocks and to diversify.

Maybe long term investing isn’t the point here?

Yeah. It's a diamond tip vs a diamond head. Or a retailer lance vs a hedge fund belly.

The retail investors could never compete with big funds if they were both spread out, or "diversified". The investment funds with short shares exposed, have all the interest to disperse the retailers active on them.

[Seangoli]

If they keep successfully orchestrating these short ladder attacks, its basically an infinite money loop.

That said, if they get caught with their pants down even once, and enough people excercise their call options against them when things go up, it will be the absolute mother of all squeezes.

Then what, do we end up with a repeat of the Wall Street crash of 1929?

If these brokers keep giving margin to their buddies? Possibly. I would hope the banking sector is relatively protected from this nonsense, however.

That said, no same broker should be giving anything out on Margin for gamestop at current levels. It is currently over shorted to a massive degree, and it is absolutely idiotic that we are potentially going to have a market crash involving a stocks for a company that was facing dire straights six months ago. The fact it has gotten this bad already says more about the financial sector than anything else. It simply should not be possible.

[Ostroeuropa]

Then what, do we end up with a repeat of the Wall Street crash of 1929?

If these brokers keep giving margin to their buddies? Possibly. I would hope the banking sector is relatively protected from this nonsense, however.

That said, no same broker should be giving anything out on Margin for gamestop at current levels. It is currently over shorted to a massive degree, and it is absolutely idiotic that we are potentially going to have a market crash involving a stocks for a company that was facing dire straights six months ago. The fact it has gotten this bad already says more about the financial sector than anything else. It simply should not be possible.

But if they pile all their money on the fire and lose it all, thereby causing a wall street crash, they get to jump up and down and scream at everyone "You see you fucking plebs? We told you it was dangerous. We're the experts and we say this was caused by the retail investors, now bail us out and give us all our money back, and don't dare ever invest like this again, in fact, we need to ban it.".

When in reality it only crashed because they refused to take the L and thew all their money in a pit to crash the entire economy rather than lose a few billion to plebs. They would rather lose *EVERYTHING* and then reset it the entire thing through bailouts.