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The Gamestop Stock Market Boogaloo

For discussion and debate about anything. (Not a roleplay related forum; out-of-character commentary only.)
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Ostroeuropa
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The Gamestop Stock Market Boogaloo

Postby Ostroeuropa » Wed Jan 27, 2021 5:22 am

I'm sorry but there's no other way to start this thread other than

hahaahhahahahahaha.

Okey, with that out of the way, let's cover the basics.

DISCLAIMER:
This is my best understanding of the situation.

Short selling is when you think a companies stock price is going to go down. So you borrow some stock, sell it, and then buy it back later when the price is lower, then give the stock back to the person you borrowed it from.

(As a non-stock example. Let's say I borrow your car. It's worth 10,000 dollars. I sell it to someone. I now have 10,000 dollars, but I owe you a car. I then buy the same car when the price drops to 5,000 dollars, and give it back to you along with 500 dollars for you lending me your car, and walk away with 4,500 dollars.).

It is not like a normal investment. If I invest 100, I can only ever lose 100 if the stock drops to zero. However, with short selling the risks on this are in fact theoretically infinite. If I borrow your car and sell it for 10k, thinking i can buy it again later, and then something happens like it turns out that brand of car makes you immortal and gives you magic powers, and the price rises to 2 billion dollars, i am fucked. I have 10,000 dollars and a debt of 1,999,999,99000.

I *have* to return your car to you, and if I can't, you can seize my assets equivalent to the value of the car *as it is currently valued*.

So.

Enter gamestop.

Gamestop is a brick and mortar games company. It hasn't been doing well.

Hedge fund managers and institutional investors swoop in to short the shares. They short more than 100% of the shares available. (Because borrowing shares is involved, a single share can be shorted multiple times.).

This is discovered by reddit.

Reddit users then decide to buy up as much gamestop stock as they can and refuse to sell it until the wall street investment firms go bankrupt.

Cue the panic.

The stock rose from 3 dollars to 140 dollars, and is still rising, because the short sellers *HAVE* to return the shares to the people they borrowed from, there are only so many shares, and redditors are trolling the shit out of them by refusing to sell, and only doing so if the stock price climbs.

So far, they have lost 5 billion dollars. Almost 2 billion dollars in a single day. Mostly going to ordinary fuckwits who decided to spend a hundred bucks on buying gamestop shares at 3 dollars a piece, knowing that the hedge fund managers *would have no choice but to buy from them at some point no matter what price they demanded, because they shorted over 100% of the stock*.

It's the equivalent of finding out there are 100 toyotas available and the short-seller needs to return 150 of them. (Buy returning them, then buying them from the person they borrowed from, and then returning them to another person they borrowed from).

So you and your friends swoop in and buy 80 of them and... that's all it take to break wall street. Just doing that and not blinking when the stock price collapsed to almost 0, because you *know* it has to climb back up. When the short-seller calls and goes "Gee i feel real bad about selling you that toyota for 10,000 bucks now the price has gone to 5,000. How about I offer you 5,500 to take it back of you?" and you say "No thanks." and get all your friends to do it to and watch as they squirm and say "How about 8000?"

"No thanks."

"10000!"

"No, thankyou."

"...15,000."

"Okay buddy sure. You can have one toyota for 15,000 dollars."

The the next calls in a panic "I need to buy your toyota at 15,000. That's their value right?"

"nah."

And so on, rinse repeat.

And wouldn't you know? Suddenly the financial media is calling for regulation on the stock market. They don't like this. This is against the fundamentals of capitalism, this is insane, this is ridiculous, this is unfair, there needs to be legislation to stop people doing this to wall street.

So far there has been one bailout, and one wall street fund going into bankruptcy having been looted by users of the "Robinhood" app that helped organize this operation, its money distributed to people who bought gamestop shares, carcass picked apart. As one person put it "You're going to trickle down whether you like it or not.".

So, NSG, what should be done about this?

Is this a sign of the free market being self-correcting against people like wall street provided people know how to play them at their own game?

Should this be regulated to protect wall street investments?

How loud did you laugh about this?
Last edited by Ostroeuropa on Wed Jan 27, 2021 5:39 am, edited 6 times in total.
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Risottia
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Postby Risottia » Wed Jan 27, 2021 5:26 am

Ostroeuropa wrote:So, NSG, what should be done about this?

Outlaw short selling outright. It should have been done ages ago. Only the owner of an item (material or immaterial) should be entitled to sell it.
Last edited by Risottia on Wed Jan 27, 2021 5:28 am, edited 1 time in total.
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Ostroeuropa
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Postby Ostroeuropa » Wed Jan 27, 2021 5:30 am

Risottia wrote:
Ostroeuropa wrote:So, NSG, what should be done about this?

Outlaw short selling outright. It should have been done ages ago. Only the owner of an item (material or immaterial) should be entitled to sell it.


I honestly think this is a case where the market is self-regulating now this has happened. If financial institutions short-sell, they risk 1000 people on an internet forum deciding they want to take all that companies money and assets by just repeating this maneuver. This is why the financial institutions are now bitching and crying and demanding that what reddit is doing be against the law, so they can continue to short sell.
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Neutraligon
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Postby Neutraligon » Wed Jan 27, 2021 5:52 am

Seems fine to me. Short selling is a big risk, if you want to take the risk fine, but I won't bitch and cry when it bites the short seller in the ass.
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Ethel mermania
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Postby Ethel mermania » Wed Jan 27, 2021 5:56 am

I find it amusing. PRofessionals who manipulate markets get their wallets Emptied by amateurs manipulating a market out of rededit for the Lol's.
Last edited by Ethel mermania on Wed Jan 27, 2021 5:56 am, edited 1 time in total.
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Auphelia
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Postby Auphelia » Wed Jan 27, 2021 5:57 am

I find this absolutely delightful. Large corporations are much too powerful again and it is good to see people taking back some of the power.

I do think shorting stocks should be illegal, as these sorts of speculative strategies can be quite damaging to long term health of an economy in favour of the short term profit of a few. If illegality is too much, taxation is one of my favourite tools to guide behavioural change. It depends country to country, but as this seems to be primarily about the United States and their market, I will speak to that. Capital gains taxes need to be structured in a way that makes shorter term trades unattractive to investors.
These sorts of trades, shuffling around vast amounts of wealth quickly and without regard for the later consequences, rarely ever portend good news. Incentivising assets to be held for longer periods of time will make many think more carefully about the longer term health of the companies they buy the stock of and perhaps even make it more attractive for companies to begin prioritising strategies that are not the rapid growth at all costs mindset we see today.

And speaking of, this is a perfect example of how a company could do this to their own stock with buybacks, using their own cash reserves to (in this case) make their stock 100x more valuable by starting a run on their stock of their own design. That too should be illegal, or at the very least limited.

The highest echelons of the economic world are far too powerful and comfortable for their own good, and more importantly, the good of the rest.
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Postby Cannot think of a name » Wed Jan 27, 2021 5:59 am

I literally just read about this after someone sent me a link. Like, just clicked off the tab to see if people were talking about it here.

This delights me.
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The Huskar Social Union
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Postby The Huskar Social Union » Wed Jan 27, 2021 6:03 am

Well thats a thing that is happening.
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Postby Hrstrovokia » Wed Jan 27, 2021 6:04 am

Greed is good.

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The Blaatschapen
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Postby The Blaatschapen » Wed Jan 27, 2021 6:05 am

Why are we bailing out these wall street stock brokers.

Let them go bankrupt.
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Ostroeuropa
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Postby Ostroeuropa » Wed Jan 27, 2021 6:10 am

The Blaatschapen wrote:Why are we bailing out these wall street stock brokers.

Let them go bankrupt.


But who will create the jobs? /s
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The New California Republic
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Postby The New California Republic » Wed Jan 27, 2021 6:11 am

Image
Last edited by Sigmund Freud on Sat Sep 23, 1939 2:23 am, edited 999 times in total.

The Irradiated Wasteland of The New California Republic: depicting the expanded NCR, several years after the total victory over Caesar's Legion, and the annexation of New Vegas and its surrounding areas.

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Ostroeuropa
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Postby Ostroeuropa » Wed Jan 27, 2021 6:13 am

Cannot think of a name wrote:I literally just read about this after someone sent me a link. Like, just clicked off the tab to see if people were talking about it here.

This delights me.


I've been grinning all day.
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Ethel mermania
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Postby Ethel mermania » Wed Jan 27, 2021 6:20 am

OP, who got bailed out for being smacked for being a short seller?
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Gravlen
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Postby Gravlen » Wed Jan 27, 2021 6:21 am

Somewhat related, but if you haven't, go watch The Big Short.

It's an economic horror movie.
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The New California Republic
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Postby The New California Republic » Wed Jan 27, 2021 6:23 am

Ethel mermania wrote:OP, who got bailed out for being smacked for being a short seller?

Are you referring to Melvin Capital Management?
Last edited by Sigmund Freud on Sat Sep 23, 1939 2:23 am, edited 999 times in total.

The Irradiated Wasteland of The New California Republic: depicting the expanded NCR, several years after the total victory over Caesar's Legion, and the annexation of New Vegas and its surrounding areas.

White-collared conservatives flashing down the street
Pointing their plastic finger at me
They're hoping soon, my kind will drop and die
But I'm going to wave my freak flag high
Wave on, wave on
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Ostroeuropa
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Postby Ostroeuropa » Wed Jan 27, 2021 6:24 am

The New California Republic wrote:
Ethel mermania wrote:OP, who got bailed out for being smacked for being a short seller?

Are you referring to Melvin Capital Management?


Yup, Melvin.
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Ethel mermania
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Postby Ethel mermania » Wed Jan 27, 2021 6:26 am

The New California Republic wrote:
Ethel mermania wrote:OP, who got bailed out for being smacked for being a short seller?

Are you referring to Melvin Capital Management?

According to wiki,, They are said they not filing for bankruptcy, but they did close their short position yesterday.
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Ethel mermania
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Postby Ethel mermania » Wed Jan 27, 2021 6:27 am

Ostroeuropa wrote:
The New California Republic wrote:Are you referring to Melvin Capital Management?


Yup, Melvin.

Who bailed them out?
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Gravlen
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Postby Gravlen » Wed Jan 27, 2021 6:32 am

Ethel mermania wrote:
Ostroeuropa wrote:
Yup, Melvin.

Who bailed them out?

I happened to have the page open...

Hedge funds Citadel and Point72 infused nearly $3 billion into Melvin Capital to shore up the fund, news reports said earlier this week. Plotkin told CNBC that speculation the fund would file for bankruptcy is false. Also, Andrew Left of Citron Research, in a video posted to YouTube on Wednsesday, said he covered the majority of Citron's short position in GameStop in the $90 price range.

https://www.marketwatch.com/story/hedge-fund-melvin-capital-closes-out-gamestop-short-cnbc-2021-01-27
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Postby Borderlands of Rojava » Wed Jan 27, 2021 6:32 am

It's all fair game for them till they're not having fun anymore.
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Ethel mermania
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Postby Ethel mermania » Wed Jan 27, 2021 6:35 am

Gravlen wrote:
Ethel mermania wrote:Who bailed them out?

I happened to have the page open...

Hedge funds Citadel and Point72 infused nearly $3 billion into Melvin Capital to shore up the fund, news reports said earlier this week. Plotkin told CNBC that speculation the fund would file for bankruptcy is false. Also, Andrew Left of Citron Research, in a video posted to YouTube on Wednsesday, said he covered the majority of Citron's short position in GameStop in the $90 price range.

https://www.marketwatch.com/story/hedge-fund-melvin-capital-closes-out-gamestop-short-cnbc-2021-01-27

I am happy for them to get smacked by the market. No issue at all. Shorting more stock than exists is a dangerous game.. i would have an issue if they were bailed out.

Edit: oh the citadel buy in, when I hear bailout, its the government. Citadel took a position in them, more of a buy in, than a bail out. Citadel and point 72 don't do charity.
Last edited by Ethel mermania on Wed Jan 27, 2021 6:56 am, edited 2 times in total.
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Old Tyrannia
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Postby Old Tyrannia » Wed Jan 27, 2021 6:37 am

Sorry, Wall Street, regulating the stock market would be communism. This is just the hand of the free market at work, right?
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A-Series-Of-Tubes
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Postby A-Series-Of-Tubes » Wed Jan 27, 2021 6:42 am

Ostroeuropa wrote:(As a non-stock example. Let's say I borrow your car. It's worth 10,000 dollars. I sell it to someone. I now have 10,000 dollars, but I owe you a car. I then buy the same car when the price drops to 5,000 dollars, and give it back to you along with 500 dollars for you lending me your car, and walk away with 4,500 dollars.).


And someone loses money from that. The poor chump who bought a car for more than they could sell it for.

This is information exploitation. I'm looking into ways to stop it, but the best I've got so far is everyone turning over management of their money to equally-competent AI's, and preventing them being exploited by better AI's ... uh, that's all I've got.

But in this simplified example, exploitation could be reduced by the chump selling the car on the open market. This is prevented by some contract: the only person the chump can sell to is you, and you have a huge incentive to fulfill the contract since you owe ME a car which we both agree is worth $10K. If the chump behaves irrationally and responds to your contract with "that was a great car, but I traded it for this rock ... uh, pebble, but hey you've always done me straight so you can have it" then you're pretty much fucked. Go home and smoke some ice, you're $10K in the hole because of ... information exploitation. You lacked information about a market participant, and going to the law might get you small remittances from the junky but it's hardly worth the hassle.

My point is that trading in intangibles requires strict adherence to the law. Which makes it an almost ideal environment for taxation.
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Dakran
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Postby Dakran » Wed Jan 27, 2021 7:30 am

It's been giving me giggle fits, observing the entire thing. They're going after AMC now too, it's great.
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