The Game is not Stopping
January 26, 2021 12:16 PM Subscribe

Gamestop Stock Has All the Prices at Once. "Of course the chart of GameStop Corp.’s stock price from yesterday[Jan 25/2021] is nuts. It closed on Friday at $65.01, opened yesterday at $96.73, got as high as $159.18 and as low as $61.13, and closed at $76.79. Almost 178 million shares traded, worth almost $17 billion." Matt Levine tackles the question: "If a lot of people on Reddit band together to drive the price of a stock higher, is that illegal?" Especially if some redditors take special pride in buying at the very top?

"So if you buy stock with the purpose of pushing the price up so that other people will buy it, that’s market manipulation. If you buy stock hoping that the price will go up because other people buy it, that’s not market manipulation; that’s just normal. "

----

"I think that in modern markets you could even do a bit better than that and have a completely honest pump-and-dump:

I show up on Reddit and say “hey let’s pump GameStop.”
We all buy GameStop, knowing that we’re just doing it for the pump, with no real or fake catalyst for the stock to go up.
It goes up, because we bought a lot of it.
Other people see us doing this, read my Reddit post, know we are pumping the stock, and also buy it, because we seem to be having fun, and they like fun too.
Eventually some of us get bored and start selling and the price collapses.
The point here is that it is at least theoretically possible that no one buys stock for any reason other than “hey it’s a fun pump.” That is, no one is deceived about the fundamentals (there’s no fake news about the company), and also no one is deceived about the technicals. "

posted by storybored (506 comments total) 64 users marked this as a favorite

The market, of course, has perfect wisdom, so clearly it is... worth... uh...
posted by Tomorrowful at 12:19 PM on January 26, 2021 [39 favorites]

The hedge fund taking an absolute kicking on their stop loss shorts is my favourite part.
posted by Happy Dave at 12:21 PM on January 26, 2021 [72 favorites]

I really don't know how you can look at this and still think Capitalism is a valid economic system.
posted by Mr.Encyclopedia at 12:21 PM on January 26, 2021 [72 favorites]

I love these EVE online threads!
posted by Lentrohamsanin at 12:25 PM on January 26, 2021 [222 favorites]

I kind of feel like this is how markets work anyway. See Tesla's share price increase over the last year, bitcoin values, the housing markets in Toronto, Vancouver, and elsewhere, and really anything else that isn't a good or service.
posted by any portmanteau in a storm at 12:25 PM on January 26, 2021 [20 favorites]

Does anyone own stocks for the sake of the dividends? Are the only reasons for owning stock these days either to hopefully profit by selling it later, treating the stock itself as the asset, not the fraction of the business you own, or to buy a LOT of stock to take over the company and load it with the debt you took out to take over the company in the first place?
posted by thecjm at 12:26 PM on January 26, 2021 [14 favorites]

"Turn those machines back on!"
posted by Servo5678 at 12:26 PM on January 26, 2021 [15 favorites]

I feel like there's been so much attention on this for something that doesn't matter much. It's one stock. One can just... not trade Gamestop stock. The losers here are hedge funds shorting and retail speculators buying too late. I certainly think Gamestop isn't worth its current value ($148) but I'm not going to buy a put because... I'm just going to choose not to gamble.
posted by lewedswiver at 12:27 PM on January 26, 2021 [10 favorites]

I also enjoyed this Vice, article which includes this choice paragraph (emphasis mine):
"This is not necessarily a “good” thing—daytrading is a pretty risky enterprise and at times indistinguishable from gambling. But there is no safe, responsible, idealized form of the stock market that this behavior is somehow abrogating. The stock market is best understood as something like the Yeerk pool from Animorphs—a home away from home for parasites to rest on their laurels in between various plots and attacks. The fact that stocks are skyrocketing while millions are out of work and facing eviction, restrictions are still in place around the nation, and thousands of people are dying daily, illustrates that perfectly. "
posted by clockwork at 12:27 PM on January 26, 2021 [70 favorites]

Matt Levine is an amazing writer and truly Bloomberg's finest, but this article is also good for people who want to get the lowdown for how this whole situation actually happened. r/WSB actually wised up on GameStop months ago, though it really just hit a fever pitch this week.

"How WallStreetBets Pushed GameStop Shares to the Moon" by Brandon Kochkodin
posted by Apocryphon at 12:30 PM on January 26, 2021 [16 favorites]

> Does anyone own stocks for the sake of the dividends? Are the only reasons for owning stock these days either to hopefully profit by selling it later, treating the stock itself as the asset, not the fraction of the business you own, or to buy a LOT of stock to take over the company and load it with the debt you took out to take over the company in the first place?

Yes, half of all stocks are owned by passively-managed index funds. Most people either just dump their investments in dividend-generating box, or hire a financial advisor to do that for them.

Whether the rise of index funds is a good thing is a hotly debated topic that is truly important. But the sexier wallstreetbets stories of Gamestop, Tesla, etc. get much bigger headlines, even though overall they're not that important.
posted by lewedswiver at 12:30 PM on January 26, 2021 [12 favorites]

The point here is that it is at least theoretically possible that no one buys stock for any reason other than “hey it’s a fun pump.”

This seems to be main reason the boys and girls in the investment channel in our Slack are in on this. The "making money" part seems pretty secondary. Typing a shitload of rocket emojis until they lose all their money seems to be main goal.
posted by sideshow at 12:30 PM on January 26, 2021 [30 favorites]

Can we please just quietly turn the stock market into an MMO based on Gil or Credits or GP or whatever instead of the same dollars I need to use for regular stuff like food and rent?
posted by theodolite at 12:30 PM on January 26, 2021 [52 favorites]

I am really confused by my overall ignorance of this whole scene.

Are there really enough day traders with enough spare cash to make price fluctuations like this possible?

I really thought this was a thought experiment or a game about the stock market or something, but it looks real, and I am gobsmacked. And flummoxed.

I feel less informed than before I started skimming the links (because before, I didn't even know about this, and now I have so many questions!) - but I am glad you posted this, storybored. Thank you!
posted by kristi at 12:33 PM on January 26, 2021 [9 favorites]

Thanks for the quote and the link, clockwork. That passage is a thing of beauty.
posted by Bella Donna at 12:36 PM on January 26, 2021 [1 favorite]

Marginally higher transaction costs on stock trades would slow a lot of this down. There's a lot of free capital floating around a system with near frictionless trading. Throwing some money at Gamestop for the lulz gets a lot less appealing when you have to pay a bit to do so.
posted by msbutah at 12:36 PM on January 26, 2021 [13 favorites]

Capitalism is the best and finest system and the laws of economics are ironclad and inviolate. Also a bunch of shitposting Redditors (I'm not being mean, their description is "Like 4chan with a Bloomberg terminal) can cost people billions.
posted by Ghostride The Whip at 12:37 PM on January 26, 2021 [11 favorites]

The hedge fund taking an absolute kicking on their stop loss shorts is my favourite part.

I agree, but I worry that in the long-run the hedge fund is going to use their considerable wealth to pressure US regulators into claiming this was market manipulation. There has been some panic in /r/WSB over this.

Just... that's how this stuff usually goes. Poor people absolutely can't be allowed to "steal" from rich people through "market manipulation" and so new laws will be written, and these people will be punished severely, with assets forfeited, with much of it going back to the hedge fund and a tidy sum going to the Feds.

I guess we'll see what happens, but I don't see anything good coming of it. Lives will be ruined and they won't be the lives of the people who work at hedge funds.

Also the whole last person holding the hot potato of the stock gets fucked part.
posted by deadaluspark at 12:39 PM on January 26, 2021 [25 favorites]

Like when magicians use misdirection to pull off their tricks, I wonder if these kinds of higher-profile, short-news-cycle schemes could be engineered at scale to other purposes. There are only so many people who work at the SEC, and so many hours in the day to enforce laws.
posted by They sucked his brains out! at 12:39 PM on January 26, 2021 [4 favorites]

As the Brandon Kochkodin article mentions (I can't get into the main link):
84% of the retailer’s shares were held short
and
It would only cost about $45 million to buy up the entire float if the stock dropped to 50 cents a share,

So the stock was already being 'gamed' by the Hedgefunds. Reddit viewers just realized that they can play this game too and basically troll the hedge fund people. Also, odds are a lot of these Redditors have shopped at Gamestop at some point in their lives, so it isn't some random stock.
posted by eye of newt at 12:40 PM on January 26, 2021 [39 favorites]

And most of them probably had a shitty experience where they overpaid for a scratched-up used copy of something, sold to them by someone that knows less about video games than they do.

I'm sorry, GameStop, but you know it's true.
posted by box at 12:46 PM on January 26, 2021 [8 favorites]

Are there really enough day traders with enough spare cash to make price fluctuations like this possible?

The whole system is a such an interconnected ball of lies that even institutional investors are going to pay attention to significant movement, and follow suit. Algorithms may do it blindly. The entire web shakes, the entire pond ripples. Also there's always the possibility that institutions aren't just jumping on the fun train, but were already aboard, both visibly or not. For the former, Michael Burry (of The Big Short) was already long on this stock last year, as the Bloomberg article I posted points out.
posted by Apocryphon at 12:47 PM on January 26, 2021 [14 favorites]

I think the lol part is not just because it's fun to create chaos but because everybody hates those Wall Street fuckers, so giving them angst really adds to the pleasure.
posted by emjaybee at 12:47 PM on January 26, 2021 [32 favorites]

The stock market is best understood as something like the Yeerk pool from Animorphs—a home away from home for parasites to rest on their laurels in between various plots and attacks.

Hell yeah, more Animorphs references in financial journalism. The ratings agencies are like the Andalites; their intentions are noble but they're spread too thin to contain the threat. Um Wells-Fargo is like the Hork-Bajir, analogy is left as an exercise.
posted by officer_fred at 12:48 PM on January 26, 2021 [18 favorites]

It's difficult to get a good holistic view of the demographics of r/WSB, but there definitely is an element of class rage to some of them, there are many people on there who are not trust fund kids or bored WFH professionals, but people who are gambling with stimulus checks and unemployment, who otherwise would not be making the money they are from their returns.
posted by Apocryphon at 12:50 PM on January 26, 2021 [3 favorites]

This Twitter thread is an excellent bare-bones summary.
posted by Happy Dave at 12:55 PM on January 26, 2021 [13 favorites]

I've been trying to wrap my head around the gamma squeeze, which seems to be the situation at the heart of the Gamestop war. This isn't just people messing around with pump&dump on regular stocks. They're playing with options now, which is something you couldn't do with a spanking new E*Trade account back in the daytrading fad of the late 90s. And buying an options contract means someone has to cover that bet at expiration.

But it seems that Robinhood lets you play with options, thus the /r/wsb crowd taking their COVID stimulus and amplifying it into 5-figure moves on the market. But then Robinhood is funneling their orders through Citadel (who were backing the options in the first place?) and letting them have first dib on the trade, which means....um....argh where's the Tylenol?
posted by JoeZydeco at 12:56 PM on January 26, 2021 [7 favorites]

For perspective, back of the envelope: a 0.5% per-trade tax would bring the federal government $1 trillion a year.
posted by phooky at 12:56 PM on January 26, 2021 [37 favorites]

It's also worth noting that the r/WSB site culture is absolutely vile, every thread is riddled with slurs and awful channer shit.
posted by theodolite at 12:57 PM on January 26, 2021 [43 favorites]

So the stock was already being 'gamed' by the Hedgefunds. Reddit viewers just realized that they can play this game too and basically troll the hedge fund people

This. It's a short squeeze against all the short-sellers ready to profit from GME going down. So now its going up at a breakneck pace. And traders are going long.

I don't think this should be underestimated. It may seem like this is about one stock but the truth is that
1) Investors with much more money are taking a look, not just Musk and Cramer, and more money is ready to fly into this
2) It is not just gamestop anymore. Any high short interest stock ready to be short-squeezed is a prime target and today saw many stocks post unusual gains as people try to create a new GME.
3) Anyone can join and with frictionless trading, which is new, potentially make huge amounts of money very quickly.

My spouse has been following this for a while and trying to fill me in. It has been going for a while but is getting wider attention now.
posted by vacapinta at 1:02 PM on January 26, 2021 [15 favorites]

It would be a cracking start to the year and so very 2021 if a subreddit triggered the post-Covid financial collapse by short squeezing fucking GameStop.
posted by Happy Dave at 1:04 PM on January 26, 2021 [113 favorites]

theodolite, I believe they refer to themselves as 4chan with a brokerage account.
posted by nestor_makhno at 1:12 PM on January 26, 2021 [2 favorites]

This seems to be main reason the boys and girls in the investment channel in our Slack are in on this. The "making money" part seems pretty secondary. Typing a shitload of rocket emojis until they lose all their money seems to be main goal.

Agreed, this is why I avoid it like fire. Even the conversation 'how do I trade options in employer stock without getting fired and/or sued by the SEC' happens often enough that they have to pin a reminder from HR on the subject.
posted by pwnguin at 1:13 PM on January 26, 2021 [3 favorites]

>>Does anyone own stocks for the sake of the dividends? Are the only reasons for owning stock these days either to hopefully profit by selling it later, treating the stock itself as the asset, not the fraction of the business you own, or to buy a LOT of stock to take over the company and load it with the debt you took out to take over the company in the first place?

Dividends have always been only a portion of the value of a stock. The abstract ideal of how stocks are priced in an efficient market is that each share represents a proportional share of the company's entire future earnings stream. Part of those earnings may be paid out as dividends, but part of them may be retained by the company and reinvested in the company, and the stock's price may increase based in part on expectations of increased earnings as a result of that reinvestment.

There are wildly profitable companies that pay zero dividends, like Apple, but some people still buy their stock on the basis that the company's earning stream still has room to increase. Buying an index fund is, in a fundamental sense, a bet that total earnings in the market will increase which is sort of a proxy for economic growth in general.
posted by AndrewInDC at 1:14 PM on January 26, 2021 [8 favorites]

There is quite a lot of anti-Wall Street establishment rhetoric on the subreddit.

The irony is that the particular hedge funds they are railing against, the ones who short stocks are themselves considered outside of the old school Wall Street establishment. Short sellers are not popular generally anywhere except amongst other short sellers.
posted by storybored at 1:18 PM on January 26, 2021 [3 favorites]

If 2021 sees Gamestop wipe out a few hedge funds and rise from the ashes like a majestic phoenix to create a great game portal behemoth that battles with Steam and produces a client with incredibly innovative tech like say ..... a larger font size.... then I am all for it.
posted by srboisvert at 1:19 PM on January 26, 2021 [22 favorites]

theodolite, I believe they refer to themselves as 4chan with a brokerage account.

I'm aware of that. I just feel like a lot of the recent coverage portrays WSB as a bunch of lovable crazy kids. It reminds me of how other abusive people and groups have been soft-pedaled in the media, and I wish they'd start learning not to do that.
posted by theodolite at 1:22 PM on January 26, 2021 [14 favorites]

There are wildly profitable companies that pay zero dividends, like Apple

Is that now true? They have a table of dividends paid recently.
posted by They sucked his brains out! at 1:22 PM on January 26, 2021 [4 favorites]

Are there really enough day traders with enough spare cash to make price fluctuations like this possible?

One of the nice things about options is that you can pay like a dollar for a claim on a hundred dollar share, and then liquidate without ever having to actually pony up a hundred bucks. So if you take a 1200 dollar stimulus check you can lay out a claim on quite a few shares. Even more if you're gambling this quarter's RSUs.

And if you're selling options to this crowd, you're building up a huge risk, and the easiest way to offset that risk is to actually buy the share. Which means you buy options on the market from a dealer, the dealer then buys shares to offset the risk, and the value of the options you bought goes up because the share price went up.

There are wildly profitable companies that pay zero dividends, like Apple

Apple does have a dividend tho. Berkshire Hathaway is a good example though.
posted by pwnguin at 1:23 PM on January 26, 2021 [4 favorites]

When the financiers do this, it's business as usual. The whole stock market is just an elaborate Ponzi scheme.

/crusty old commie
posted by jb at 1:30 PM on January 26, 2021 [18 favorites]

theodolite: "Can we please just quietly turn the stock market into an MMO based on Gil or Credits or GP or whatever instead of the same dollars I need to use for regular stuff like food and rent?"

I would suggest MetaFilter favorites as a currency of choice.
posted by chavenet at 1:31 PM on January 26, 2021 [10 favorites]

Journalist Aaron Freedman:

Having been on WSB out of sheer curiosity, it is fascinating how much language of fuck the 1%, Wall Street wants us to starve, etc is there. It’s like: inequality - solidarity = retail investing as class warfare.

Tho what’s interesting is there *is* solidarity of a sort on the WSB: the redditors know they can only squeeze the short sellers if they all hold their shares, and encourage each other to do so. It’s not class consciousness, but there is something more than pure individualism

Anyway the GameStop stock episode is a fascinating window into what populism can look like in the asset economy, for better or worse

posted by Apocryphon at 1:33 PM on January 26, 2021 [49 favorites]

pwnguin: "Apple does have a dividend tho. Berkshire Hathaway is a good example though."

As is Amazon.
posted by chavenet at 1:33 PM on January 26, 2021 [2 favorites]

never thought I'd be buying one (1) share of GameStop as a "fuck the man" solidarity gesture but here we are in 2021 I guess

Can we please just quietly turn the stock market into an MMO based on Gil or Credits or GP or whatever instead of the same dollars I need to use for regular stuff like food and rent?

yeah can we please just move the super rich into a completely virtual playspace with its own economy & political power dynamics? they'd be just as happy if not more so & it would solve so many problems for the rest of us

ok right before I was about to post this taquito boyfriend came in the room, said "It's over for the short sellers," & showed me this tweet
posted by taquito sunrise at 1:37 PM on January 26, 2021 [16 favorites]

Whoops, yes, I guess my mind was in a bit of a time warp with Apple. Thanks for the other, better examples.
posted by AndrewInDC at 1:40 PM on January 26, 2021 [1 favorite]

never thought I'd be buying one (1) share of GameStop as a "fuck the man" solidarity gesture but here we are in 2021 I guess

This can be interpreted in two ways: one, capitalism has so commodified dissent that stock investing can be marketed as a rebellious act; two, wealth inequality is so dire that stock traders are part of the angry proletariat. Both interpretations of course, can be simultaneously true.
posted by Apocryphon at 1:43 PM on January 26, 2021 [59 favorites]

If the Literal Richest Man In World History is in on it, maybe it's not so anti-establishment after all?
posted by theodolite at 1:47 PM on January 26, 2021 [20 favorites]

I'm sorry I keep harping on this, but the incredibly ableist/racist/misogynist culture of WSB is not just some weird, funny side note. It says a lot about who's invited to this supposed revolution of the retail investors, and who's not.
posted by theodolite at 1:56 PM on January 26, 2021 [53 favorites]

But that is also the culture of literal Wall Street. There are no Good Guys in any of this.
posted by Atom Eyes at 1:59 PM on January 26, 2021 [27 favorites]

Team None of Them
posted by EatTheWeek at 2:00 PM on January 26, 2021 [25 favorites]

Yes, absolutely. It's not David vs. Goliath, it's Goliath vs. Goliath's gamer nephew.
posted by theodolite at 2:01 PM on January 26, 2021 [60 favorites]

I've been following this for a week or so after a couple investment-minded friends were talking about GameStop's gains but didn't know about WSB.

It's hard to imagine a situation more ripe for abuse than WSB, a large group of people who:

See themselves as members of an oppressed/persecuted group (individual traders vs. cheating institutional investors on Wall Street),
Have a few established villains that are proxies for their hate towards the establishment (e.g. Melvin Capital, Citron Research) and broadly considered "fair game" for harassment and threats,
Have a few local "heroes" who have beaten the oppressors at their own game (e.g. /u/DeepFuckingValue),
Use code (rocket emojis, paper/diamond hands) and toxic language and behavior as in-group identifiers (I won't repeat them here but they've appropriated a number of ableist slurs),
Apply bullying tactics to anyone who doubts the group's agenda, and heap praise on those who reinforce it,
Operate in a pseudonymous forum (Reddit) having well-known problems with misinformation and manipulation, and...
Are willing to invest a lot of money in their cause, based on a mishmash of selfless principle and selfish trust that the group's success will bring them personal success.

Anyone notice any commonalities with any recent political movements?

The other day Citron Research postponed a planned stream presenting the case for GameStop being a bad investment. Two different posts of Citron's tweet to that effect (adding pretty much nothing to it, just inviting mockery) were quickly voted to the top of the page. I noticed that the displayed timestamps on each screenshot indicated that those two users were in time zones in eastern Europe or western Russia.

Now, it's of course possible that these were two individual investors who happened to be very passionate about the goings-on of a mostly American retail company, and also happened to get tons of upvotes. But I highly doubt the SEC has a crack team of intelligence professionals working hard to distinguish scattered one-off assholes on this forum from international organized groups.

Of course, part of me loves the narrative of the little guy sticking it to those Wall Street jerks and getting rich in the process, and would love for that to be me. But a few kernels of truth don't change the fact that the overall narrative is basically just a modern folktale. And like many folktales, the inspiring story covers for some shitty people doing shitty things.
posted by Riki tiki at 2:04 PM on January 26, 2021 [41 favorites]

Elon Musk is bandwagoning. When financial pundits on CNBC are crying wolf about foreign powers, someone on the establishment is rattled. But that's correct, the class warfare narrative is highly dubious. It's not just Musk, billionaire VC Chamath Palihapitiya jumped on this morning, the Winklevoss twins are blowing hype, there are bigger fish taking advantage of the waves made by a lot of little fishes. And the previous point about short-sellers traditionally not seen as the Wall Street establishment- and who are the ones being hammered in this whole event- makes it even more ironic.
posted by Apocryphon at 2:07 PM on January 26, 2021 [4 favorites]

One thing to note about this, or the Flash Crash ten years ago, is that if you are truly a long-haul investor, they don't affect you. If you bought 100 shares of GME two months ago because you genuinely believe that the company has value and want to own ~1/700,000th of it, then you still own 1/700,000th of it today, you will continue to own 1/700,000th of it tomorrow and all the way until 2039 when they get bought out by Weyland-Yutani in an all-cash deal, at which point you will be entitled to ~.000144% of the cash that W-Y pays.

On the other hand, if you bought it at $16 two months ago, and (as of this writing) people are offering you $230 for it today, maybe take your winnings and walk away.
posted by Hatashran at 2:14 PM on January 26, 2021 [15 favorites]

Musk might also have a grudge against Citron specifically, since they were vocally short on Tesla in 2013 and their founder sued Musk in 2018 for trying to manipulate the price (via stuff like his tweet saying he was going to take Tesla private at $420/share).
posted by Riki tiki at 2:18 PM on January 26, 2021 [8 favorites]

so there's a lot of internal conflict about this up in taquito headspace

one huge thing about it for me is that the big traders fundamentally are not playing the same game as Brad Toxicwallstreetbets Guy

not even "they have more chips so at that level the metagame changes," there are special rules for the big players

short sellers are especially terrible in that their profit is made directly from someone else's loss, sometimes putting the final nail in a whole company's coffin

so on the one hand:
1) I really dislike GameStop & think their business model is predatory
2) imo just about every social problem is caused or exacerbated by capitalism
3) never been to wallstreetbets but I fully believe theodolite that they're terrible people

on the other:
1) really fucking sick of every game being rigged in the billionaires' favor, & if they lose a tiny bit of temporal power, GOOD
2) choosing to be a short seller should hurt you in the same way it would hurt if you chose to swallow a demon
posted by taquito sunrise at 2:20 PM on January 26, 2021 [47 favorites]

What is the long term plan for people who bought this week?
Surely the people with $10M of puts are closing those positions.
Once the shorts stop burning and the fresh blood is exhausted, won't the price crater?
This just feels like a pyramid scheme with more steps.

I don't know enough about shorts, but can you open one at any market price? Seems like there was plenty to be made between 150 and 50.
Agree that this feels very similar to musk fanboyism around the tesla shorts.
posted by stobor at 2:20 PM on January 26, 2021 [2 favorites]

Someone has to lend you the stock so you can sell it.

Unless you're Citadel, and then they can lend you the stock without ever having it. Allegedly.
posted by JoeZydeco at 2:24 PM on January 26, 2021 [4 favorites]

> stobor: "What is the long term plan for people who bought this week?"

I was wondering this exact same thing. For all those people -- whether from Reddit or from Wall Street -- who are buying into GME now at prices in the >$100 range, how do they think they're going to exit this position? I mean, aside from Musk who could probably just burn a few hundred million out of pure spite for short-sellers, what do these people think they're getting out of this? Are they all playing the Greater Fool game?
posted by mhum at 2:28 PM on January 26, 2021 [1 favorite]

Anyone notice any commonalities with any recent political movements?

A choice thread

lots of people missing the mark on the wallstreetbets phenomenon. you have a bunch of disaffected people who believe they have a right to the spoils of capital allocation and see the institutional status quo as the primary hindrance to that end. social media provides a means for these people to congregate and further promote this ideology and leads to some amount of action in unison, especially when it's action against their presumed "oppressors"

we've seen this mechanism at play recently. the q-anon coup was similarly facilitated through social media by a group of individuals that believed that they were entitled to a particular societal outcome that institutional oppression was preventing. and through this shared resentment to oppressive institutions they were able to enact change in the physical world.

everyone is feeling some amount of powerlessness in the current moment. and the wallstreetbets crowd has found a much easier power lever to pull (options trading) than trying to enact political revolution. the fact that they're expressing their shared political goals through making purchases is clearly symptomatic of the shared american political brain rot where consumer-based solutions have fully occluded every american's view of the world.

i find the "it's just reckless speculation" argument unhelpful. first of all, reckless speculation is basically the name of the game in this market environment. second, how reckless is it if you have some non-negligible amount of confidence that you're working in tandem with a number of other individuals who will also be pushing prices in a particular direction? and yes, this fits the definition of market manipulation pretty well, but where do you draw the line between "decentralized pump and dump" and "within the acceptable range of market idiosyncrasies". in other words, how many people make a market? how many people make a conspiracy?

anywho, these people are discovering political action in the most american way possible: joining their purchasing power together to achieve a shared (semi) political goal that is both wildly speculative and will only end up benefitting a select few of the participants.

posted by Apocryphon at 2:31 PM on January 26, 2021 [30 favorites]

Selling calls is about the same as shorting a stock: you get paid now for your promise to deliver the stock later. (If you short, you borrow the stock and promise to give it back later. You get paid now when you sell the stock you've borrowed, and you have to buy it later so you can give it back.)

I (a lowly retail investor) have sold calls in the past. Of course, I sold them on stocks that I owned, so if I had to, I could have just given those shares. I made enough to go out for dinner, and the calls expired unexercised. (I made dozens of dollars, dozens, I tell you!)
posted by spacewrench at 2:34 PM on January 26, 2021 [4 favorites]

we've seen this mechanism at play recently. the q-anon coup was similarly facilitated through social media by a group of individuals that believed that they were entitled to a particular societal outcome that institutional oppression was preventing. and through this shared resentment to oppressive institutions they were able to enact change in the physical world.

It may be worth noting that, unless you were directly pulling the strings of that particular conspiracy, to those people you were just another loser on the ends of their strings. I wonder what that means for people who think that buying this stock is some kind of grand symbolic gesture that gives them some power over their lives, when they also seem to be just as pliable, in their own way.
posted by They sucked his brains out! at 2:41 PM on January 26, 2021 [5 favorites]

I'm still not entirely convinced that the whole call/put thing should even be legal, although I'm deeply ill-educated on stock trading beyond buying index funds and regularly selling RSUs because they're free money.
posted by aramaic at 2:45 PM on January 26, 2021 [1 favorite]

Puts & calls have legitimate uses. Suppose you promised stock to somebody in the future (maybe a key employee or something). A call allows you to ensure that you'll be able to provide the stock then, and you're not exposed to a run-up like the one engineered (maybe) by WSB. A put allows you to ensure now that you'll be able to sell some stock in the future for a particular price -- maybe you're not allowed to sell it now, but you want to be sure to get at least a certain amount later. They allow you to buy & sell time, and the price you pay for the time gives you a corresponding amount of certainty about the price you pay (or receive) for the stock.

Certainty allows you to make better plans and do more things, rather than always winging it and maybe this month we have to lay off half our staff because we can't make payroll.

(Not a high-powered financier by any means, and certainly the same tools that have legitimate uses can be abused in a way that's indistinguishable from gambling, but I think the way to control them is education and making the abusive behaviors less lucrative, rather than simply outlawing the tools.)
posted by spacewrench at 3:01 PM on January 26, 2021 [12 favorites]

I check what's on the Bloomberg channel occasionally to see if there's a good interview or discussion and caught an odd blip of wry irony as one commentator said "well, thank you for putting up GameStop on the board". Not knowing the context at the time I now get the sardonic tone.
posted by sammyo at 3:14 PM on January 26, 2021 [1 favorite]

I have spent time on WSB, although I uh, now spend time on much a better investing subreddit (both socially and intellectually) which was spun out of WSB. I am currently playing this stock and a few others, like AMC, which might be next in line for this combo short squeeze and gamma squeeze.

The political parallels are spot on. It's unclear (from what I've been able to find) how much of retail (little investors like me) are running this in terms of $ involved, but it absolutely cannot be retail alone. This is largely one group of very wealthy people fucking another group of very wealthy people who got caught in a short squeeze. Melvin capital (the hedge fund that blew up yesterday over this) appears to be on a PR campaign trying to pin this on the little guy. But when you're somewhere in that millionaire-billionaire range and you just lost an incredible sum of money for your millionaire-billionaire clients, these are the sort of desperate claims you make.

For sure there are larger fish working to prime this stochastically on WSB, similar to what Trump, Bannon, etc, have done through 4chan, youtube, etc. It's not remotely as awful morally; the sense of powerlessness people are feeling these days I think is the prime takeaway.

Options themselves - I've been (frankly) gambling on them for only a year, so I know just enough to be wrong about them. Their original intention was largely as insurance against large moves in stock you own, and $ wise I think that is still their primary use. But they can also be used as very powerful speculative tools, because large amounts of leverage can be involved. The uneducated, speculative side of this, on WSB, works out like this - for every person who made $1M off a $10k investment on TSLA last year, 100 people lost $10k on TSLA. The subreddit encourages gambling fever, because the big winners post their "gain porn" which of course get far more attention than the "loss porn."
posted by MillMan at 3:21 PM on January 26, 2021 [19 favorites]

They might not be able to just wait it out. Stock borrowed for shorting purposes can be called due at any time. People who loaned the stock to the shorters might look at the 15x price increase over the past few days and say, "Hey, that stock I loaned you? I'd like it back now please." - at which point the borrower is legally obligated to immediately return the borrowed stock. Retail investors will have their short position closed out automatically at the current market value, and even bigger investors - like the hedge funds in this discussion - will have very little leeway to delay.

And to clarify: the loaning happens automatically - the loaners don't even know that it happened. They just decide to sell, their broker calls the loan due, and the borrower's position gets liquidated; this entire process can take as little as a few seconds.
posted by Hatashran at 4:40 PM on January 26, 2021 [21 favorites]

Regardless of r/WSB itself, remember that this revolt of retail investors is not isolated to that board and in fact precedes on places like Twitter, the now defunct Yahoo! Finance forums, and TikTok, as the Vice article up-thread mentions. Here's an example FinTok/MoneyTok zoomer talking about her $GME gains. What r/WSB has done really is just drive up the insane bets to Vegas levels and beyond, but even if the SEC somehow forced them to shut down, the retail investment culture they've spawned can easily take root elsewhere. Would Biden ban TikTok?
posted by Apocryphon at 4:52 PM on January 26, 2021 [1 favorite]

WSB does have loss porn. Lots of the people who show 5 and six figure gains get karma a few month later show huge losses when they made bad bets..

Bogleheads, a conservative long term passive investment forum has a very active discuss of GME right now, which tells me this is going big
posted by CostcoCultist at 5:20 PM on January 26, 2021 [9 favorites]

Seems like the capitalists are still the ones winning at the end of the day?

So, the next time you discount the impact of "4chan with a bloomberg terminal", remember that they are not the only ones who stand to benefit from intentionally screwing exposed short-sellers.

The professionals are all too happy to amplify the efforts of the amateurs for profit.

posted by destrius at 5:36 PM on January 26, 2021 [2 favorites]

This twitter thread is gleefully predicting the immanent death of a $13.1 billion dollar hedge fund as soon as their shorted stock reaches a set value, but.... couldn't they just wait it out? Gamestop is obviously a bubble, eventually it will pop and the price will fall back to where it was before this nonsense. Is there a specific reason why the fund has to collapse at that point?
posted by Mr.Encyclopedia at 7:25 PM on January 26 [+] [!]

Melvin's problem is pretty idiosyncratic - their strategy requires a lot of money from wall street banks ("Prime Brokers") which is lent to them on a promise that it is invested ina very low risk way, because it is being used to lever a portfolio of long and short bets which in theory have an exposure to the market pretty close to 0. I.e. if they ran their strategy with no skill they would generate a return roughly similar to the short dated treasuries and they would lever that 3x/4x. They usually do t his by using a risk model of their aggregated holdings which confirms its low risk. Except sometimes those risk models don't work (or you are gaming them, which Melvin probably was) and you get a drawdown/bad returns. As a result of this and other bad short bets Melvin had performed way worse than the risk models forecast, and their banks got very nervous. So Melvin was basically forced to sell a portion of their business to Point72 and Citadel in exchange for a slug of assets for them to manage, making the banks more comfortable with their exposures. I'd also guess they are being forced to dial down their risk models, run a more obviously hedged book and reduce how much money they are borrowing. I sort of suspect (And think) they should be a dying business just because you just got shown you couldn't manage risk correctly (even if this was an extraordinary circumstance, shorting dying small caps can be profitable, except when it really isn't - so they should have been prepared)

Ultimately while this is big wall street news, net net its pretty penny ante stuff. Like the total dollars at play just isn't big. At the end of the day a few WSB guys will make a lot of money, but most of them will lose a little bit (because they mostly just bought options that'll expire worthless.) But you gotta kinda hand it to them

I kind of love the Robin Hood/Citadel/Melvin conspiracy theory, but I actually don't think it makes sense if you think Melvin is impaired as a business by this.
posted by JPD at 5:55 PM on January 26, 2021 [11 favorites]

Does anyone own stocks for the sake of the dividends?

Yes, though I’ve not yet made more than one year’s IRA contribution in dividend return (auto reinvestment). 98% of my shares are in IRAs, everything else is an index fund there or 401k, and I have a few espp shares.

I think I thought about GameStop when I was allocating my IRA dollars last year but turned it down in favor of more target date retirement indices. Dumbass.
posted by tilde at 6:02 PM on January 26, 2021

because they mostly just bought options that'll expire worthless.

That sucks, it would be much funnier if they held stock, ended up holding a bag collectively amounting to a controlling interest, and we got to see WSB corporate governance.
posted by save alive nothing that breatheth at 6:28 PM on January 26, 2021 [6 favorites]

The laws about what is and isn't legal in stock markets have always seemed similar to the laws about what is and isn't allowed in war.
Arbitrary and useful, I guess, to stop some people from doing bad things, but ultimately you know they won't get applied to the largest offenders.
And the whole enterprise is evil from the get go, anyway.
posted by signal at 6:33 PM on January 26, 2021 [13 favorites]

I’ve kinda toyed around with the amusing idea of this stunt somehow saving GameStop’s business, between the money they raise through their stock price increasing and the immense amount of free advertising they’ve received through this. Steve Cohen and his Chewy crew had better find a good way to capitalize upon it.
posted by Apocryphon at 6:50 PM on January 26, 2021

This whole affair is almost a weird mirror-universe type of activist investing, where you target an entire mode of operation rather than any specific company.

...if WSB and their ilk manage to take down a few hedge funds we may suddenly find a variety of new rules being deployed. It'll be "interesting" to see which happens first -- new SEC rules, or a general bubble market collapse.

In fact, the right time to start talking about new rules is probably now, before the Bad Guys get their narrative established (in watching TV [shudder] it seems like they're already trying to tee up).
posted by aramaic at 6:53 PM on January 26, 2021 [2 favorites]

joining their purchasing power together to achieve a shared (semi) political goal that is both wildly speculative and will only end up benefitting a select few of the participants.

There's a thread on /r/WSB (that I won't link to, because Reddit...) that discusses what people want to do with their profits/winnings, if the whole scheme works and everyone gets some huge multiple of their initial investment — a depressing number of them are "pay off debt".

A large number also involve animal shelter donations, so there's that.
posted by Kadin2048 at 7:55 PM on January 26, 2021 [6 favorites]

if the whole scheme works and everyone gets some huge multiple of their initial investment

This seems remarkably optimistic.
posted by They sucked his brains out! at 8:39 PM on January 26, 2021 [1 favorite]

Keep in mind that mysterious guy who is gaining the most (53k->22MM) started in 2019. Not exactly yesterday. And people on WSB are saying things like “who cares what do I have to lose, become more broke” has all the hallmarks of a bubble. Notice they’re pumping AMC and BlackBerry too.

Plus their “fuck Wall Street” attitude is amusing. When your worthless call option expires who do you think made money off that?
posted by geoff. at 8:44 PM on January 26, 2021 [8 favorites]

Having been on WSB out of sheer curiosity, it is fascinating how much language of fuck the 1%, Wall Street wants us to starve, etc is there. It’s like: inequality - solidarity = retail investing as class warfare.

Which is also the implicit logic of the marketing of Robinhood. Which is to say their whole scam. But given the number of institutions betting on retail investors being dummies, it’s still kinda fun to see them win this one.
posted by atoxyl at 8:56 PM on January 26, 2021 [6 favorites]

The subreddit encourages gambling fever, because the big winners post their "gain porn" which of course get far more attention than the "loss porn."

You can definitely find people sort of reveling in the self-destruction of losing a bunch of money, too. The gains probably do convince people to get in, to get options-trading accounts they have no business messing with. I don’t know how much the psychology of gambling is really impacted by exposure to other people’s wins and losses once you’re in in, though.
posted by atoxyl at 9:03 PM on January 26, 2021

"There are wildly profitable companies that pay zero dividends, like Apple"

Apple pays a dividend and has for a long while.
posted by jcworth at 9:07 PM on January 26, 2021 [1 favorite]

As a side note; there's a few people who have dismissed this as one or a few stocks and who don't gamble like this, doing something sensible like buying index funds.

I think the overvaluation of Tesla is partially directly a r/WSB thing and partly a broader (as Matt Levine calls it) a "boredom market hypothesis" thing. I like electric cars (relative to gas cars at least); I would bet money that there will be more electric cars sold five years from now than sold this year; I expect them to become the most common new vehicle type in a generation.

But Tesla, who sold half a million cars last year, is currently valued at more than the next ten largest auto makers combined, who collectively sell around 65 million cars a year (and 5 times as many electric cars as Tesla). This makes no reasonable sense, especially since over the history of Tesla's run up their competitors have not fallen, so it's not even consistent with Tesla taking over half the market; it's only consistent with the world auto market doubling (and Tesla getting that entire new half).

But guess what, as of a month ago, damn near 2% of your (and my) S&P 500 index fund is now invested in Tesla.
posted by Superilla at 10:19 PM on January 26, 2021 [18 favorites]

Does anyone own stocks for the sake of the dividends?

I do.

I inherited a tidy sum from the sale of the house I grew up in after Dad and Mum died, the respectable middle class neighbourhood they'd bought into in the late 1950s having slowly but inexorably gentrified since (mostly due, I believe, to the presence of so many beautiful old trees in it; trees which the incoming class of highly moneyed buyers can't seem to wait to destroy in pursuit of boundary-to-boundary building extensions and lap pools. Sigh.)

I gave about half of that to ms. flabdablet (we're married but have always continued to run mostly independent finances) and invested about a third of it in a diverse portfolio of company shares. What I intend to live on for the rest of my life is the remaining sixth plus dividends. About a quarter of the portfolio is shares in newer companies that are not yet paying dividends, but work in market segments where I expect demand to increase sharply as fossil fuels give way to renewables and fresh water becomes harder to source.

If I ever do end up collecting enough in dividends that my cash reserves are growing year on year rather than slowly shrinking as they're doing at present, I'll increase the diversity of my shareholdings. I will also keep on paying my taxes and keep on making no financial decisions motivated by an intent to minimize them, and will continue to argue in public for socialist reforms that generally raise taxes in order to distribute society's wealth more equitably.

I am not interested in selling out to realize the share price growth component of the portfolio. Rather, I expect that by the time I die, the winning half of it will have grown enough to secure the financial futures of the three kids we've fostered to a similar extent as my parents' house has secured mine, should they choose to deal with it in a comparable way. Seems only fair.
posted by flabdablet at 10:27 PM on January 26, 2021 [24 favorites]

I know this is gonna sound crazy but I feel like maybe people should base their stock market moves on research into the companies they're trading instead of trends and memes and algorithms.
posted by scaryblackdeath at 11:20 PM on January 26, 2021 [7 favorites]

I wouldn't be so quick to believe that this situation doesn't pose a serious risk to the whole financial system. Melvin was bailed out on Friday to the tune of $2.75B which was then promptly vaporized. There's a non-zero chance that Citadel and point72 have to be bailed out by the Fed. Gonna be an interesting few days.
posted by alpinist at 12:46 AM on January 27, 2021 [2 favorites]

Someone has to lend you the stock so you can sell it.

This fairly fundamental to the short squeeze isn't it? You drive up cost of the stock and then lending becomes expensive. I mean presumably here is a "real" day trader with an IB account talking about how it makes sense to go long just for the revenue of lending the shares.

In any case Wall Street is getting bailed out, retail investors are not.

I think we are going to see WSB max out their purchasing power here shortly. GSE was a good buy when the cash on had was above the market value of the stock. It is just a Blockbuster Video waiting to happen. At least AMC still has the movie experience going for it. Tesla has technology and talent, even if they can't manufacture cars. The last two GSE's I visited over the holidays were going out of business and liquidating. Think about that: before Christmas the last two GameStops were literally not stocking inventory.

Businesses need something tangible or intangible to keep them afloat. GSE has neither and if video game stores were really worth that it would be a great time to see competition come in. Unlike Tesla, you're not seeing that. Surprisingly even Blockbuster is alive as a penny stock.
posted by geoff. at 1:12 AM on January 27, 2021 [1 favorite]

> There's a thread on /r/WSB (that I won't link to, because Reddit...) that discusses what people want to do with their profits/winnings, if the whole scheme works and everyone gets some huge multiple of their initial investment — a depressing number of them are "pay off debt".

Well redditor in Latin does indeed mean something like "the debt must be paid" or something.
posted by runcifex at 1:43 AM on January 27, 2021

This seems like a reasonable point, and not at all an analogy to another ridiculous (and far more harmful) techbro bubble:

GameStop shares are actually a tremendous store of value and their volatility will naturally decline once they settle at around $1m each and become an intrinsic part of global remittance flows.
posted by ambrosen at 4:31 AM on January 27, 2021 [7 favorites]

someone in the replies there links the very memorable story about someone using Gamestop pre-orders as a bank account

maybe that's the pivot Gamestop needs with their ridiculous stock price: gamer banking
posted by Merus at 5:02 AM on January 27, 2021 [6 favorites]

But Tesla, who sold half a million cars last year, is currently valued at more than the next ten largest auto makers combined, who collectively sell around 65 million cars a year (and 5 times as many electric cars as Tesla).

The real advantage Tesla has is that it is a new company and has no union (so far) and doesn't have a legacy pension anchor attached to it. Investors are not just betting on electric. They are betting on union busting and the impoverishment of one of the last bastions of organized labor.
posted by srboisvert at 5:43 AM on January 27, 2021 [22 favorites]

So basically this is what happens when you have a large enough mass of Extremely Online brain poisoned 4-channers/Redditors who got their $600 stimilus cheque, saw that they couldn't get a PS5 anyway and instead decided to "I'm gonna ruin this man's entire business", right?

Open sourcing short squeezing to kill vulture funds at their own game, using the speed and collective brainpower of the internet, not something that could've happened in, say 1930, to pick a year completely at random. In Marxist turns, more of a revolt of the petite bourgeoisie than a workers' uprising, but still deeply satisfying to watch.

I can see no reason why this could go wrong.
posted by MartinWisse at 6:00 AM on January 27, 2021 [7 favorites]

Writing to Lion Philips in the summer of 1864, Marx revealed a remarkable detail of his prosperous new way of life after receiving a large inheritance:
I have, which will surprise you not a little, been speculating — partly in American funds, but more especially in English stocks, which are springing up like mushrooms this year (in furtherance of every imaginable and unimaginable joint stock enterprise), are forced up to quite an unreasonable level and then, for the most part, collapse. In this way, I have made over £400 and, now that the complexity of the political situation affords greater scope, I shall begin all over again. It’s a type of operation that makes small demands on one’s time, and it’s worth while running some risk in order to relieve the enemy of his money.

- from Francis Wheen's biography Karl Marx: A Life (W. W. Norton, 2000)
posted by vacapinta at 6:17 AM on January 27, 2021 [15 favorites]

Well the big hedge fund shorts just closed out their bets. So this roller coaster hit its latest peak.
posted by geoff. at 6:20 AM on January 27, 2021

It's obvious and inarguable that one of the truly stupid and pernicious truths of our financial system is that stock market value and stock health are significantly artificial and don't really correlate with overall economic health, employment, and wages.

But another truly stupid and pernicious truth is that the lasting aftereffect of blowups within this current system isn't guys with monocles spitting out their tea and ending up wearing barrels. It's devastation of working people's retirement savings. It's layoffs. It's government bailouts that come for the rich at the expense of more practical programs to help the 99%. The pain is passed to regular people every time.

I mean, fuck yeah, let's transform the stock market into a vehicle that helps everybody. But let's maybe not just let the people behind GamerGate crash it on purpose just for the lulz.

The whole thing is stressing me out. I'm gonna have to go offline for a while.
posted by DirtyOldTown at 6:39 AM on January 27, 2021 [15 favorites]

AMC (tripled since yesterday) and BBBY, other top short interest stocks are flying high today.

Really anything with shorts is up today. I randomly picked Tootsie Roll (TR) which yesterday reached a yearly high of 37. This morning its already at 55.

GME is at this moment at 310.
posted by vacapinta at 6:41 AM on January 27, 2021 [2 favorites]

In Marxist turns, more of a revolt of the petite bourgeoisie than a workers' uprising, but still deeply satisfying to watch.

You probably know Marx better than me, but isn't the petite bourgeoisie more like small business owners and what I guess you could call the lower-upper-middle class? I think of like Trump supporters in McMansions.

I'm sure that the r/WSB denizens can be assimilated into some category of Marxist theory, and maybe petite bourgeoisie fits, since these folks are thinking of themselves as capitalists, when they are in fact probably going to be assimilated into some species of useful idiot eventually. To be fair, I don't see how the man himself could have forseen this kind of thing.
posted by thelonius at 6:45 AM on January 27, 2021

When the rich collectively lose large sums of money, our system doesn't treat it as comeuppance; it treats it as blood debt for the rest of us to pay on their behalf or die trying.
posted by DirtyOldTown at 6:47 AM on January 27, 2021 [15 favorites]

Because the pre-market was up 165% even though it has swung 350 to 269 it still looks up. If only there was some way to trade on volatility.
posted by geoff. at 6:52 AM on January 27, 2021

It was mentioned upthread that this could save gamestop. How?

The money going into these stocks isn't flowing into gamestop. They already sold the stock in their IPO. If they're running out of cash, then they will need more cash either by being profitable, by getting a loan, or getting acquired by an actually profitable business. It may mean that the new generation of corporate raiders will not swoop in and fire everyone and sell everything, but it doesn't change the fundamental profitability of the business, does it?

Am I missing something here? For all the talk of value of companies in shares, it seems that the price of any non-dividend granting stock has only as much relation to anything to do with the company as people want it to have, as shown by this example.
posted by Hactar at 7:01 AM on January 27, 2021

Well the big hedge fund shorts just closed out their bets. So this roller coaster hit its latest peak

Top posts on /r/WSB claim the data doesn't back this up, it's just Melvin going on CNBC and saying as much.
posted by JoeZydeco at 7:02 AM on January 27, 2021 [3 favorites]

Oh the exchanges love this shit. They eat it up. Then they eat you.
posted by seanmpuckett at 7:07 AM on January 27, 2021 [5 favorites]

I'm pretty sure that Melvin and Citron would not announce they're out if they're not, as that's pretty blatant market manipulation and all eyes are on this one stock so someone with an actual Bloomberg, or like a real reporter would cover it. Stocks are perfect for conspiracy theories because to a large degree they're random and they're really complex in how they operate.

The simple truth is that the retail investors on /r/WSB need 3-4x gains quickly. Some of them managed to play a short squeeze once. Now every fund between NYC and Palm Beach is going to be trading on short squeezes sending volatility down.

Really if you want to make 3-4x quickly, stick to actual gambling, your odds will literally be better than randomly picking stocks in the hope that it'll be an internet meme in a couple years. And if you lose Robinhood doesn't comp your room and your meal.
posted by geoff. at 7:15 AM on January 27, 2021 [1 favorite]

Now that the 2020's have decided to mirror the 1920's crazy stock market, what kind of fun do we get to look forward to in the 2030's?
posted by fimbulvetr at 7:18 AM on January 27, 2021 [4 favorites]

what kind of fun do we get to look forward to in the 2030's?

Ohhhh, I think you already know, and the better question is: where do we run to escape it?
posted by aramaic at 7:22 AM on January 27, 2021 [8 favorites]

Top posts on /r/WSB claim the data doesn't back this up, it's just Melvin going on CNBC and saying as much.

you can't know that unless an insider is leaking that to you. The SEC filings that WSB is sourcing this stuff from is done quarterly. If you own>5% of a stock or are an insider you are required to notify the market of position changes, but the allowable time frame for that is days. And Melvin's position doesn't count for that.
posted by JPD at 7:25 AM on January 27, 2021 [6 favorites]

This is all going to be great fun for them until they discover that there are people who are far, far better at working the markets than they will ever be.

There’s always a bigger fish.
posted by azpenguin at 7:46 AM on January 27, 2021

Ohhhh, I think you already know

Yeah. Rhetorical question and all. All sorts of pundits are predicting a "new Roaring '20's" after the pandemic is over. Do we really have to go through a funhouse mirror of all of that early 20th century mess?

Rising fascism, increased international tensions and saber-rattling, stock market craziness, ultra-rich robber barons, increased inequality, etc. etc. etc..

Fun fun fun!
posted by fimbulvetr at 7:48 AM on January 27, 2021

It was mentioned upthread that this could save gamestop. How?

GameStop probably owns some of its own stock which it can now sell, or borrow against, or use to buy a profitable business. Even if it doesn’t own its own stock, GameStop has the ability to issue more stock.
posted by chrchr at 7:51 AM on January 27, 2021 [2 favorites]

GameStop would need to issue stock, but I'm guessing their lawyers are telling their board not to do that.
posted by JPD at 7:54 AM on January 27, 2021

Bloomberg TV is doing a special Gamestop hour at 5pm EST today 1/27.

One of the commentators on CNBC suggested that some large hedge funds that do shorts gambling could be seriously hurt. And not just the Gamestop but the reddit groups could change the futures market.

There was a special overlay giving the Gamestop stock price during a financial expert discussing Exon.

Just really very interesting that the financial community is even aware of what reddit is, let alone taking it seriously.
posted by sammyo at 8:02 AM on January 27, 2021

GameStop would need to issue stock, but I'm guessing their lawyers are telling their board not to do that.

Hertz attempted this back in the summer when they saw this crazy bounce in their stock after filing for bankruptcy, then they cancelled it.
posted by JoeZydeco at 8:10 AM on January 27, 2021

And not just the Gamestop but the reddit groups could change the futures market.

How about we actually enforce the laws against naked short selling? That would be a great start.
posted by JoeZydeco at 8:13 AM on January 27, 2021 [12 favorites]

From what I am seeing, the Venn diagram of the WSB dudes and the GamerGate dudes is close to a circle. Unless you've just woken from an eight year coma, that should give you real pause, no matter what level of vitriol you have for hedge funds and stocks.
posted by DirtyOldTown at 8:32 AM on January 27, 2021 [14 favorites]

Gamestop Short Squeeze is Rage Against the Financial Machine. Another Bloomberg article that crystallizes some of the thoughts about finrage.
posted by storybored at 8:43 AM on January 27, 2021 [2 favorites]

> Melvin was bailed out on Friday to the tune of $2.75B which was then promptly vaporized.

How did this money get 'vaporized'? Not any of the part with GME, of which many articles have been written about, but the part where Melvin was given money, and then that money "vaporized". Melvin did not literally shoot high-powered lasers at dollar bills, so where is it now?
posted by fragmede at 8:48 AM on January 27, 2021 [1 favorite]

Good grief, the stock is soaring but long-dated put options are *increasing* in price.

My God.
posted by storybored at 8:50 AM on January 27, 2021 [2 favorites]

The simple truth is that the retail investors on /r/WSB need 3-4x gains quickly. Some of them managed to play a short squeeze once. Now every fund between NYC and Palm Beach is going to be trading on short squeezes sending volatility down.

This is all going to be great fun for them until they discover that there are people who are far, far better at working the markets than they will ever be.

Yep. The money to be made here was in the process of catching the market by surprise, like a stiletto slipped between ribs in the night. Now, websites and networks are talking about it and your grandmother has heard something about it and loads of people are Herman Munstering through the day-traders' wall with fistfuls of money in their hands.

There IS a lot of money to be made in the coming weeks... but much of it may not be on the /WSB side.
posted by delfin at 8:55 AM on January 27, 2021 [3 favorites]

Sidestepping GME, has there been any discussion of whether the stock market is so high/inflated during an economy-hammering pandemic partly because the wealthy aren't able to take vacations and go out to restaurants and so have more savings to put into the stock market?
posted by little onion at 9:01 AM on January 27, 2021 [7 favorites]

There’s a lot of heightened expectations that there will be a dramatic recovery once the pandemic is over. Also, the immense amount of money that was printed by the Fed this past year.
posted by Apocryphon at 9:05 AM on January 27, 2021 [5 favorites]

Also, the immense amount of money that was printed by the Fed this past year.

They'll blame a crash on redditors and Gamestop, but the reality is the house of cards was ready to crumble, and these folks just kicked the card at the bottom.
posted by deadaluspark at 9:06 AM on January 27, 2021 [6 favorites]

I briefly dated a pro stock trader and she said she loved LOVED day trading kiddies because either they're idiots and their faces get eaten off, they do the same thing as everyone else but with less leverage so their faces get eaten off, or they come up with something new which is immediately co-opted by big dogs with direct market access and their faces get eaten off after a short delay.

So, yeah, it's like a one in a million lucky shot that Serena Williams missed but she will not miss again.
posted by seanmpuckett at 9:08 AM on January 27, 2021 [6 favorites]

I wish I knew about this stuff before it happened so I too could get rich screwing wall street douches
posted by Ray Walston, Luck Dragon at 9:12 AM on January 27, 2021 [4 favorites]

has there been any discussion of whether the stock market is so high/inflated during an economy-hammering pandemic

There was some discussion on Ask last week.
posted by JoeZydeco at 9:12 AM on January 27, 2021 [2 favorites]

If only there was some way to trade on volatility.

There is, but it's complicated.
posted by jedicus at 9:18 AM on January 27, 2021

I mean buying options is implicitly trading vol.

But that's not why I'm here. They discovered unlisted ADRs. This is going to be fun.

Look at Nokia's unlisted ADR - its +102%. These things have no volume in them.
posted by JPD at 9:23 AM on January 27, 2021 [3 favorites]

it's like a one in a million lucky shot that Serena Williams missed but she will not miss again.

This GameStop event is the most spectacularly visible example of r/WSB shenanigans and both the most destructive to institutions (or at least to one) and angry, but it isn’t the first rodeo. As mentioned up-thread there was the Hertz event last year (September 2020 article- also mentions DogeCoin prices spiking thanks to TikTok), which was just as dramatic at the time, now completely overshadowed by GameStop.

The comparison to EVE Online up-thread also feels appropriate. Every year you hear about one massive virtual space battle or immense heist of virtual space ships totaling in tens of thousands of real-world dollars, only to be outshone the next year by another even larger battle or more dramatic heist. In EVE, it’s like thousands or tens of thousands of players (per battle) collaborating in obsessive detail to change numbers on a spreadsheet, both in terms of how the game is played, and the practical results of the game. The r/WSB phenomenon seems to follow, except there’s something like 3 million(?) people on the board and who knows how many following along on TikTok, YouTube, Twitter, and other online communities, and the numbers in these spreadsheets are worth even more. Certainly the firms- and the SEC- will have to adapt. But I’m not sure if this is going to be the last event, or the most spectacular.
posted by Apocryphon at 9:23 AM on January 27, 2021 [2 favorites]

Easier to blame your problems on Russia and gamergate than to confront the genuine anger of regular people, even if they use ableist slurs, I suppose.
posted by MartinWisse at 9:38 AM on January 27, 2021 [7 favorites]

I wish I knew about this stuff before it happened so I too could get rich

Write a bot to monitor various reddit boards and the like, with an eye toward creating an ML model on the dataset. Once your model is trained, write another bot to trade on the predictions that develop out of ongoing post activity.

I guarantee a bunch of random quant guys are doing this as we speak.

...back in the dotcom era, my brother-in-law made some petty cash (like, a couple hundred bucks max) day trading Apple by monitoring the media -- he noticed that Apple stock behaved weirdly whenever CNN was talking about the apple harvest, for example (or "are apples really good for your health?" -- anything mentioning the word apple), so he bought like one share immediately at the beginning of any news story that mentioned apples, and sold again a few minutes later. As you might expect, the fees took a big hammer to his profits, but he was mostly doing it for the sake of amusement anyway (he's not actually a day trader, and I don't think ever even looked at options stuff).

Your model could bankrupt you, but if you cap the volumes it's allowed to move you should be able to skim off profit over time because you'll be faster than the redditors. This would only last, naturally, until Wall Street machines get into gear -- as they'll be even faster than you, and will eventually suck the profit out.
posted by aramaic at 9:42 AM on January 27, 2021 [6 favorites]

There was a question above about what kind of game people are playing that bought in at 100 - well as someone that re upped at 96 my plan has been to reap profits and get out and (checks ticker) that worked ok
posted by thedaniel at 9:47 AM on January 27, 2021 [4 favorites]

How did this money get 'vaporized'? Not any of the part with GME, of which many articles have been written about, but the part where Melvin was given money, and then that money "vaporized". Melvin did not literally shoot high-powered lasers at dollar bills, so where is it now?

Melvin realized they had to cover their shorts as the price kept going up or else risk losing even more money. They don't have cash on hand to do that so they had to borrow externally to get the cash. As soon as they got the cash they immediately turned around and used it to buy the shares to cover their shorts.

So the money came in one door and immediately went out the other -- vaporized -- but only from Melvin's point of view. The money didn't just disappear though. It ended up in the pockets of the people who sold their shares to Melvin at elevated prices.

Melvin now has a huge debt that they still owe to whoever loaned them the money. This presumably will come out of selling other assets that Melvin owns and eventually out of the pockets of the investors in Melvin's hedge fund.
posted by JackFlash at 9:48 AM on January 27, 2021 [8 favorites]

The r/WSB phenomenon seems to follow, except there’s something like 3 million(?) people on the board

I think about a million of them joined in the last week, seriously.

Easier to blame your problems on Russia and gamergate than to confront the genuine anger of regular people, even if they use ableist slurs, I suppose.

To be fair we are probably mostly talking about people with some money to throw around (not all of them, but the people who making tons presumably had some to start with). And the phenomenon is definitely young, bro-ey, and probably skewed white. But yeah I think something is off in trying to set up a moral equivalence between this crowd and the big money guys. On the other hand presumably another group of big money guys is cashing in on the whole thing.

(I’m not a WSB regular but there was a minute while I was unemployed this summer where I definitely saw the appeal!)
posted by atoxyl at 9:59 AM on January 27, 2021 [5 favorites]

The point is that no money is created or destroyed in this process. It just changes pockets from one group to another, from losers to winners.

In the short run, it is the hedge funds who are losing and the redditors who are gaining. The investors in the hedge funds are mostly millionaires with more money than they know what to do with. And the redditors are people with less money than they know what to do with. So in the short run you have a transfer of wealth from the rich to the poor.

But in the longer run, with the hedge fund shorts out of the way, you mostly just have redditors gambling against each. So you might say that half are going to be winners who bought low and sold high and half are going to be losers who bought high and sold low. Money isn't created or destroyed. It has just changed pockets from the losers to the lucky winners.
posted by JackFlash at 10:01 AM on January 27, 2021 [8 favorites]

With the events of the past decade people tend to forget that GamerGate, and the /pol/ - 8chan - r/The_Donald - Parler pipeline aren't the only toxic or troll communities that ever existed. Remember when 4chan was in the news for apolitical mischief, or at least not political in a reactionary way? The Anonymous hacker collective even engaged in a lot of hacktivism for worthy causes - and still even today, in the age of BLM. Remember when the Something Awful forums were the ones in the news? And despite what they would make one believe, reddit, 4chan, and Something Awful are the whole internet, and they are not the only places that host misanthropic, often toxic, sub-communities that use offensive and oppressive language.

If one was to make claims that two of these communities are exactly the same, one either needs to either put up concrete evidence other than similarities in language and tone, or one needs to expand their view of the internet. Especially, sadly- it seems like every fandom can turn into a Truther/QAnon/pit of misinformation once exposed to the internet. Just because multiple communities are toxic doesn't indicate they're identical, especially since r/WSB's whole thing from the beginning was stunt-gambling and the profit motive, and has only seemingly recently gotten into populist rage. And are they even actually radicalizing? If anything, a lot of the language that has been quoted so far sound like generalized anti-1% anger, a fun house mirror version of the OWS and Occupy movement more than more recent- and more right-wing- movements.
Not all problematic or vile groups are the same, and not all are in league with each other.
posted by Apocryphon at 10:07 AM on January 27, 2021 [10 favorites]

Man I don't know about all this game stopping stuff but this feels like exactly the right moment to sink a lot of money into tulips.
posted by nickmark at 10:16 AM on January 27, 2021 [9 favorites]

Time to party like it's 1637!
posted by Kadin2048 at 10:26 AM on January 27, 2021 [3 favorites]

In Marxist turns, more of a revolt of the petite bourgeoisie than a workers' uprising, but still deeply satisfying to watch.

Alongside ruined roués with questionable means of support and of dubious origin, degenerate and adventurous scions of the bourgeoisie, there were vagabonds, discharged soldiers, discharged convicts, runaway galley slaves, swindlers, charlatans, lazzaroni, pickpockets, tricksters, gamblers, procurers, brothel keepers, porters, literati, organ grinders, rag-pickers, knife-grinders, tinkers, beggars; in short, the entirely undefined, disintegrating mass, thrown hither and yon, which the French call la bohème.

posted by Apocryphon at 10:33 AM on January 27, 2021

What is the long term plan for people who bought this week?

There isn't one, it's just a short term play. The goal is when the shorts get covered, the stock needs to be bought back at the ridiculously high price to unwind the short and all the retail investors get out at that point. It works with GameStop because the stock has been shorted something like 140% of the shares outstanding, so the short holders need to buy all the shares AND buy 40% of them again.
posted by jmauro at 10:33 AM on January 27, 2021 [10 favorites]

Some pension plans ( and Endowments, and Sovereign Wealh Funds) really like low net long/short funds like Melvin and Melvin was the hottest around. There is a material chance that a bunch of the capital that was lost was not High Net Worth.

Yes, and that is an unfortunate fact. Some pension fund managers are susceptible to the same over-promised hype as retail investors. They should never have been investing in hedge funds to begin with. They have a horrible track record and are just ripping off pensioners.

A major reason for this is the the lack of transparency in these transactions. Hedge fund managers write contracts that make the terms of their contracts secret from the public. And they also keep secret their annual performance numbers from the public. If the pensioners knew the hundreds of millions they were paying to these hedge fund managers and how poorly they perform and how much their pension are being ripped off, they would demand that their own pension managers stop these deals. But currently the deals remain a closely guarded secret from the owners of the pension.
posted by JackFlash at 10:35 AM on January 27, 2021 [15 favorites]

Well GameStop is now worth over $10 billion, a large cap stock and Ryan Cohen's position increased to over $3 billion after all this nonsense.
posted by geoff. at 11:04 AM on January 27, 2021 [1 favorite]

MarketWatch: Even Reddit is beginning to discuss the endgame for the wild GameStop ride

At the source of the madness, the Reddit WallStreetBets forum, there is a fascinating if not-safe-for-work thread discussing the endgame for GameStop. “It’s rapidly becoming apparent that we will soon enter the GME endgame. Before you can come up with an exit strategy or, if you’re still on the fence, decide whether to jump in, you need to form an opinion about the GME bull thesis, without considering the short squeeze,” says this user, Thicc Dads Club.

For those “just along for the ride,” this user recommended using a simple price-to-sales ratio and setting a limit sell order based on that. Now, this user didn’t mention that you can’t use price-to-earnings since GameStop is loss-making, and its price-to-cash flow is an astonishing 48.3, according to FactSet — but the notable part was the suggestion to enter a sell order, even if it is conditional.

For those who are up big and are now fearful, there was a suggestion to sell the options that expire within 30 days, but keep all the stock and longer-dated options until there is firm news that GameStop shorts are being liquidated. For “the diamond hands” the advice was to “immediately plow every dollar of those 20-bagger returns into shares” and not sell a single share until the final squeeze.

posted by Apocryphon at 11:22 AM on January 27, 2021 [2 favorites]

> If 2021 sees Gamestop wipe out a few hedge funds and rise from the ashes like a majestic phoenix to create a great game portal behemoth that battles with Steam and produces a client with incredibly innovative tech like say ..... a larger font size.... then I am all for it.

> It was mentioned upthread that this could save gamestop. How?
>
>The money going into these stocks isn't flowing into gamestop. They already sold the stock in their IPO.

AMC raises $300million selling their own stock. Others are pointing out that it would have been $1B if they waited until today.
posted by rhizome at 11:30 AM on January 27, 2021 [2 favorites]

While I agree with your view on Long/Short in fundamentally long-term portfolios that just need equity returns as stupid and egregiously priced, the guys who run these things and hire people like Citadel or Melvin do it because they think its a way to earn money market + returns at money market level of risk. I.e. its risk-aversion or drawdown aversion really, not a desire to YOLO the portfolio and be a hero. And everyone likes to hire the kool kidz. That said fees and returns for liquid strategies like this are usually pretty transparent - like it probably wouldn't take a lot of phone calls to find out melvin's normal terms. Its really Private Equity where you had a lot of secrecy around fees.
posted by JPD at 11:31 AM on January 27, 2021 [1 favorite]

[hedge funds] keep secret their annual performance numbers from the public

Not really. Hedge funds with at least $100 million in invested equities are required to publicly disclose their holdings in their quarterly Form 13F filings with the SEC. Here's Melvin's most recent 13F, with its 5.4M share short of GameStop. One can calculate returns using those disclosures.

The purpose of a hedge fund is not necessarily to outperform the market in the long run. That's nigh impossible to do. The kinds of hedge funds that pension plans and the like are interested in are those that (ahem) hedge against various risks. The goal is stability and predictability of returns, not necessarily getting the highest possible return, which is pretty important when you have a legal obligation to pay out $X per year in pension benefits.

If you look at something like the S&P 500 its long term performance is great, but there are some pretty deep valleys and a lot of volatility along the way. These kinds of hedge funds, ideally, get you something like close to the same long term returns but with a chart that looks more like a straight line and less like the S&P 500's seismograph.
posted by jedicus at 11:35 AM on January 27, 2021 [6 favorites]

That said fees and returns for liquid strategies like this are usually pretty transparent - like it probably wouldn't take a lot of phone calls to find out melvin's normal terms.

Call who? Is each beneficiary of the pension fund or each taxpayer supposed to call their secret insider to find out fees and performance?

Transparency would mean that the contract terms and fees paid in dollars and performance of the hedge fund would be published in the quarterly and annual reports of the pension funds. The hedge funds require in their contracts for this information to be secret. Why do you think that is if, as you claim, it is of no consequence that can be easily found out? If it's not really secret, why require a secret contract?
posted by JackFlash at 11:41 AM on January 27, 2021 [1 favorite]

A lot of that has to do around rules on private market funds - i.e. can't disclose performance - and that's the SEC not the funds themselves. Most of the institutional kind of funds that pensions will invest in are pretty open about things if you are a "qualified investor", but they can't put them in the public domain due to the SEC regs. Fees themselves are pretty much a market.

Again - I agree with you - they are terrible invesment choices that manage to both underperform and are massively over priced. I'm not offering this up as a defense of investing in hedge funds. You can almost certainly replicate their performance with cash + and index fund, I'm just saying its not as nefarious as you suggest.
posted by JPD at 12:26 PM on January 27, 2021 [1 favorite]

Man I don't know about all this game stopping stuff but this feels like exactly the right moment to sink a lot of money into tulips.

It was variegated succulents and you are about 4 years too late. Asian mass production via tissue culture, transient chemically induced variegation and automated super-warehouse sized greenhouses rationalized the market and plants that were once $1000 are now about $15. You snooze, you loose, really fast!
posted by srboisvert at 12:40 PM on January 27, 2021 [7 favorites]

Others are pointing out that it would have been $1B if they waited until today.

I wonder what is stopping them from printing more stock. Seems like a perfect time to get suckers on board.
posted by They sucked his brains out! at 1:28 PM on January 27, 2021

I wonder what is stopping them from printing more stock.

See the Hertz story above. The SEC starts asking interesting questions about why you're valuing your offering based on some wild gyration of the stock that's out of your control.
posted by JoeZydeco at 1:38 PM on January 27, 2021 [3 favorites]

I've been almost always loading /r/wallstreetbets in an incognito tab specifically to stop it from becoming overrepresented when I'm using reddit normally.

Nevertheless, of the 25 stories on my front page, 16 are now from WSB.

During the election I was probably looking at five or more /r/politics posts each day, non-incognito, and yet I don't think the front page ever showed more than three or four at a time.

WSB is now the Urkel to my Family Matters... what was supposed to be a one-time side story now dominates the entire experience.
posted by Riki tiki at 1:57 PM on January 27, 2021 [5 favorites]

What reason would TD have to put a stop and cancel orders? Can it not fill the orders?
posted by geoff. at 2:08 PM on January 27, 2021

Things are getting overloaded, and it looks like TD is being cautious. A missed/glitched order, especially a stop loss order at time like this, could wipe someone out and customers start getting litigious when that happens.
posted by JoeZydeco at 2:11 PM on January 27, 2021

A lot of that has to do around rules on private market funds - i.e. can't disclose performance - and that's the SEC not the funds themselves.

C'mon, you know that isn't true. The private fund industry has lobbied long and hard to prevent the SEC from requiring them to disclose financial information, but there's nothing precluding them from doing that. The SEC does prevent them from directly marketing and selling to the general public, but nothing prevents their pension fund clients from disclosing their performance and fees of their investments except the secrecy the hedge funds impose in their contracts.

Transparency is a key element of efficient markets. If one side is hoarding private information, they are doing it for their own advantage.
posted by JackFlash at 2:14 PM on January 27, 2021 [4 favorites]

Maybe I'm missing something, but I fail to see how any of this is bad or will have a bad outcome.

Either a bunch of channer assholes lose money, or a bunch of billionaires lose money, or the FSB costs a bunch of billionaires money.

When my enemies fight among themselves, why should I see that as bad?

Billionaires are the biggest enemy of course, and I'll admit that if the channer assholes can demolish a hedge fund and drive a few billonaires down to mere multi-millionaire status (I'm far too realistic to imagine that any of them will actually be forced to poverty) then yay!

And if the billionaires win and the channer assholes lose some money, then also yay.

In the meantime they're hurting each other and don't have as much time to hurt me or people I care about, so yay for that too!

Where's the downside?
posted by sotonohito at 2:23 PM on January 27, 2021 [4 favorites]

Does anyone own stocks for the sake of the dividends?

My observation is that all investment activity is heavily influenced by tax laws. Capital gains taxed at lower rate than income? Then yes, people will buy stock primarily for capital gains, not dividends. Primary place of residence exempt from capital gains? Mortgage interest tax deductible? Then yes, people will buy property.

Corporations pass their gains onto investors in two ways: dividends, or capital gains.

In countries like Australia, we have a dividend imputation system, where the tax paid by corporations (30% corporate tax) is passed through to investors as part of their dividends as tax credits I can use to offset my own personal income tax. The reasoning is that I should not be taxed on profits that were already taxed at a corporate level. This has led to companies being more willing to structure themselves in a way to pay out dividends, as their investors will not be so heavily penalized. Overall, it leads to less incentives for companies to self invest, and they instead return cash to shareholders. In theory this could lead to lower investment / research and development / value add activities performed by corporations, so corporations in Australia would underperform relative to corporations in the US....
posted by xdvesper at 2:50 PM on January 27, 2021 [3 favorites]

Overall, it leads to less incentives for companies to self invest, and they instead return cash to shareholders. In theory this could lead to lower investment / research and development / value add activities performed by corporations, so corporations in Australia would underperform relative to corporations in the US....

Quite the opposite, actually. The best way to avoid taxes is for corporations to reinvest their profits in capital equipment and R&D. Those are deductible expenses so that any profits reinvested become tax free.
posted by JackFlash at 2:58 PM on January 27, 2021

Where's the downside?

the only downside I can see is the potential for serious financial losses for folks that aren't actually channers or even redditors, but heard about this because it's all over the news and Twitter. From how things are looking online, there's a significant number of people signing up for retail investment accounts and buying $GME / AMC for amounts on the order of $100 - $1500. That's not a lot of money in the investing world obv, but for these people hoping to catch a late break on the bandwagon? Idk.
posted by lazaruslong at 3:01 PM on January 27, 2021 [4 favorites]

It really isn't a redditor thing at this point. r/WSB might've started this fire- or did Michael Burry and other professional analysts light it?- but as I keep pointing out, TikTok, Twitter, YouTube, etc., all have their own zoomer/millennial amateur trader communities now.
posted by Apocryphon at 3:08 PM on January 27, 2021 [2 favorites]

From what I can tell the current theory/mentality is that hedge funds and even Melvin capital are still short and the contracts come due Friday. I can't speak to this if it's true or not but what I've seen are people saying there's not enough market movement for these funds to have covered the 140% they were shorting the stock. Now Melvin said they're out so take of that what you will, but they believe that Friday is when things will really hit the fan.
posted by Carillon at 3:09 PM on January 27, 2021 [1 favorite]

Here's Melvin's most recent 13F, with its 5.4M share short of GameStop. One can calculate returns using those disclosures.

Thanks for that link. This is a great way to also see what 'wallstreetbets' is targeting—have a look at the puts Melvin's hold. Most performing well (outside the pharmaceutical puts) since early Jan, which tells me—a complete novice at this—that this has been going on for a bit with WSB. Also a way to speculate, for those willing to take on some significant risk…
posted by Ahmad Khani at 3:20 PM on January 27, 2021

Where's the downside?

NYTimes: Stocks have their worst day since October

Though the trading that grabbed Wall Street’s attention this week is only in a handful of stocks — including GameStop and AMC Entertainment — the level of speculation is reminiscent of trading during the dot-com bubble two decades ago. On Wednesday alone, GameStop rose 130 percent and AMC surged 300 percent.

Those gains, though, stood in stark contrast to a sell-off in the rest of the market. The S&P 500’s drop was its worst daily decline since late October.

Some market watchers said the two could be connected. The spiking shares are wreaking havoc for hedge funds and other large investors that had bet against companies like GameStop, which is expected to have lost hundreds of millions of dollars in 2020, and AMC, which is struggling as the pandemic keeps moviegoers home. To shore up their finances those investors may have to sell large capitalization stocks.

Like, it's obviously not WSB's fault that the US stock market is a billionaire's gambling house where prices have no relationship to reality, but until we can secretly replace it with Fortnite V-Bucks this could hurt a lot of random uninvolved people.
posted by theodolite at 3:30 PM on January 27, 2021 [4 favorites]

And WSB is at least temporarily set to private.
posted by Carillon at 3:40 PM on January 27, 2021 [1 favorite]

"Half the country works for ~~GameStop~~Brawndo!" "Not anymore!"
posted by They sucked his brains out! at 3:49 PM on January 27, 2021 [2 favorites]

Probably when WSJ talked to actual lawyers who said it was free speech if they weren’t taking the opposite position or making up what they bought. Suddenly it went from lol Reddit bros to sophisticated traders manipulating WSB with a few Reddit accounts and actual capital.
posted by geoff. at 3:50 PM on January 27, 2021 [2 favorites]

I should stress that unless some people were photoshopping it some of the positions people were taking for a short momentum trade weren’t $600 stimulus checks. I mean who has the cash to put $52k in a single heavily shorted equity, sit on it for 3 years and flip it for $22MM? At least some of those commenters were sleazy day traders with not insignificant capital. I realize $52k isn’t a lot in Wall Street world but it is when you cause a fund to borrow close to $3B to cover your shenanigans. Reminds me of those Miami coke dealers that thought they could buy a Russian sub and NATO wouldn’t notice.
posted by geoff. at 3:56 PM on January 27, 2021 [5 favorites]

WallStreetBets was always pretty much what it says on the tin; it was weird stock market side-bets, which I assumed were coming from either day traders or actual career traders who for whatever reason were bored. There were people in there with screenshots of Bloomberg terminals, not something you'd probably have at home.

Anyway, the rallying cry seems less to do with economic inequality but a generational feeling of screwed-ness. The WSB crowd is a lot younger than the finance industry taken as a whole, and is solidly Millenial/Gen-Z — and sees the financial establishment as run by Boomers for their own benefit. It doesn't seem to necessarily map to any single political axis.
posted by Kadin2048 at 4:12 PM on January 27, 2021 [5 favorites]

Stuff like this makes me want to start playing/learning the investing game, but I wouldn't know where to start and the implications are terrifying, and so then I remember my place as an overeducated self-identified millenial Marxist with other talents and interests
posted by polymodus at 4:38 PM on January 27, 2021 [7 favorites]

To shore up their finances those investors may have to sell large capitalization stocks.

So, in summary, /r/WSB will be the Leeroy Jenkins of the 2021 Financial Crash.
posted by JoeZydeco at 4:39 PM on January 27, 2021 [8 favorites]

then I remember my place as an overeducated self-identified millenial Marxist with other talents and interests

FWIW, Marx and Engels were no strangers to taking advantage of how stupid the stock market is. "It's worthwhile running some risk in order to relieve the enemy of his money"
posted by Mr.Encyclopedia at 4:50 PM on January 27, 2021 [4 favorites]

Indeed, I know that quote, and Marx himself was a class-privileged intellectual, but the critical line in that same quote is his understanding that the operation takes a toll of time and attention on the part of the person doing it
posted by polymodus at 5:04 PM on January 27, 2021 [4 favorites]

Write a bot to monitor various reddit boards and the like, with an eye toward creating an ML model on the dataset. Once your model is trained, write another bot to trade on the predictions that develop out of ongoing post activity.

Sure, I'll just write a computer program, that thing everybody can do
posted by Ray Walston, Luck Dragon at 5:09 PM on January 27, 2021 [6 favorites]

Sentiment analysis is already a thing a lot of fund firms do.
posted by asra at 5:16 PM on January 27, 2021 [1 favorite]

This whole gamestop affair sort of indicates that this once burdensome understanding, actually can be crowdsourced... to what end and whose benefit, we shall see...

That collectivized understanding can then self-organize or be leveraged/induced into behaviors that, through shared knowledge, and I suppose shared risk, benefit ...someone...

It certainly seems like some people are making from this who have never made money like this before... and it seems to have ruffled a couple of big money feathers so it seems to be a shift in some kind of established operating narrative...

Speaking as a fellow marxist millenial, with an couple of relatively affordable solidarity shares, it is telling the platform that enabled this is called ROBINHOOD...
posted by albion moonlight at 5:28 PM on January 27, 2021 [1 favorite]

Quite the opposite, actually. The best way to avoid taxes is for corporations to reinvest their profits in capital equipment and R&D. Those are deductible expenses so that any profits reinvested become tax free.

The deductible expense portion of capital equipment gets depreciated over their lifetime (as long as 30 years) so you can't realistically use capital expenditure to offset a profit you're showing today. If you showed a profit of $30 mil this year, and thus owed a $10 mil tax bill (33% corp rate) and you decided to invest $30 mil into upgrading your factory, you're in for a bad surprise: for a 30 year life equipment, you'd only expense $1 mil in the first year, so your tax bill is still calculated on $29 mil, that would be $9.7 mil in taxes you'd owe on top of the $30 mil cash you just sunk into capital equipment. It's less clear for R&D but it is possible and in many cases recommended that you capitalize some portions of your R&D as well, you can't expense the whole thing upfront.

Further, I'm referring to the general culture and expectations within the investor community in the country: if most firms pay out 70% of their profits back to their investors as dividends (rather than say 30% in other countries) then it leads to pressure towards other firms to return cash to investors, rather than reinvesting it.
posted by xdvesper at 5:59 PM on January 27, 2021

Maybe the stock market should be heavily regulated? Maybe Glass-Steagal should be re-instated, for starters? Maybe high speed trading etc. should be taxed?

This has been mentioned upstream, but it's hilarious to hear hedge fund managers (hedge fund managers!) cry foul when regular investors start making slightly "sophisticated" moves. The über rich jerk-offs that created the largest housing bubble in history through credit default swaps, and collateral debt obligations, etc. and then left the global economy in a great depression that ruined countless lives are complaining? The same rich guys who were bailed out, and then purchased all the foreclosed homes for a pittance from the same folks –mostly working class black and brown 1st time home-owners who couldn't get better rates for home loans– and were left high and dry? LOL!

This vox article seems to be a pretty good summary of what's going on.

From the article: "When you short a stock, you have to at some point buy back the shares you borrowed and return them. If the trade works, you buy them at a lower price and get to keep the difference. But if the price of the stock goes up, it doesn’t work. At some point, you’ve got to buy the stock back and return it, even when the price is higher and you’re going to lose money.

What happens with a short squeeze is that when the price of the stock being shorted starts to climb, it forces traders betting it will fall to buy it, to try to stem their losses. That drives up the price of the stock even higher, so it’s a bit of a double whammy for shorts. The worst-case scenario is, theoretically, unlimited."
posted by nikoniko at 6:05 PM on January 27, 2021 [14 favorites]

it is telling the platform that enabled this is called ROBINHOOD...

Named after the beloved bandit who stole from the rich and gave to the middle class who fancied themselves poor.
posted by DevilsAdvocate at 6:13 PM on January 27, 2021 [11 favorites]

"The worst-case scenario is, theoretically, unlimited."

One sees this all the time when the risks of short-selling are discussed but the only way the loss would be unlimited is if the shorted stock's price goes to infinity. In Gamestop's case, that would be next Monday or so.
posted by storybored at 6:16 PM on January 27, 2021 [7 favorites]

Metafilter: overeducated self-identified millenial Marxists with other talents and interests
posted by Freelance Demiurge at 6:20 PM on January 27, 2021 [4 favorites]

A normal person explains what's happening on the stock market [SLTwitter]:

But then there was this online reading club that was like, 'Well, not today... we want hedges too.'

posted by theory at 6:28 PM on January 27, 2021 [7 favorites]

I am legitimately a bit worried we're going to find out some school district's entire retirement program or some small municipality's finances were deep into this hedge fund because someone in charge of it was an asshole, and now a lot of ordinary people will be completely screwed. If that happens, I'm gonna feel really bad for the normal folks whose savings were run by jackasses for reasons beyond their control.

But yeah, fuck the hedge fund bros.
posted by scaryblackdeath at 6:35 PM on January 27, 2021 [8 favorites]

if i understand shorting correctly, i borrow some shares, sell them, and then (hopefully) buy them back at a lower price to "repay" the loan. but what if there are no shares to buy, or i just decide not to return them? people default on other types of loans all the time... how does defaulting on a loan of shares act differently? are the cops brought in? do i get to fight it out in court? if you're on the hook for $3B, spending $10M on lawyers to make it go away might seem like a rational decision.
posted by bruceo at 6:43 PM on January 27, 2021 [2 favorites]

Ezra Kaplan, NBC: "Just got off the phone with @S3Partners [data analytics firm] who say that as of the market close, short-sellers lost $14.3 billion TODAY on $GME stock. On the year, short-sellers are down almost 900%, $23.6 billion."
posted by JoeZydeco at 7:28 PM on January 27, 2021 [9 favorites]

So, like, if I want to buy 1,000 shares of Acme Widgets, Inc. at $10 apiece, it's pretty easy to validate that transaction. Maybe I just have the cash. Maybe I'm backed up by a big fish with far more than that. Since the downside to the investment is capped at $10,000 we can all measure our risk exposure.

But how do you validate that someone can afford a short position? It's mathematically unlimited, and there's no infinite fish to underwrite it. So allowing shorts at all requires some consensus of plausible outcomes (that a penny stock won't jump to $1,000 overnight), and an understanding that the biggest players can absorb the occasional black swan event.

Well, that's not entirely true... allowing short positions to be a thing is easy: just do nothing and the market can let its freak flag fly. Those extra safeguards are if you want to ensure the continuity and solvency of the market and allow people to take short positions.

So where are we? I don't mean that rhetorically... I'm not an expert on this at all.

My instinct is that this GME clusterfuck, theatrical though it may be, would be chump change to the biggest players in the market. But I also suspect they've been incentivized to play as aggressively as they can, that none of them are situated to take even a modest unexpected hit right now. And the biggest fish of them all, the U.S. Government, is already dealing with years of mismanagement and trying to mitigate the effects of a worldwide pandemic.
posted by Riki tiki at 7:34 PM on January 27, 2021

As an individual with an online brokerage account (these answers may be different for RobinHood and will be spectacularly different for a billion dollar hedge fund), if I want to short 1000 shares of Acme Widgets at $10, that is borrowing $10K of stock to sell, I need a margin account; the brokerage will require me to have enough value in my account to back up that sale and then some.

At my brokerage (so I understand; I just looked this up), I'll need at least $15K; 50% more than the shares are worth. If I have $20K in the account, then once the stock goes up to $20 per share, the brokerage has the right to automatically close the short position, and buy back the stock for me which it will return to the borrower automatically, at which point I'll have absolutely nothing. They'll also be charging me fees for this helpful process.

If I'm double sure that the stock will go down eventually, I can shovel cash into my account so that the value remains positive and my brokerage doesn't close the position. Ultimately the thing (beyond 'sanity') that stops me shovelling cash into my brokerage account to keep the short alive is the amount of cash and my speed of shovelling.

The article at the top of this post has (most of the way down, subhead "Oh, Melvin") a description of the hedge fund caught in this short who had to shovel cash into themselves by selling a substantial share of themselves to two other investors to the tune of $2.75 billion; I'm willing to assume that the terms resulting from panicked phone calls to your rivals to make a deal today to keep your fund afloat are not the most generous terms available.
posted by Superilla at 8:18 PM on January 27, 2021 [7 favorites]

I just started an “instant transfer” from my checking account of an amount of money not in that account, a couple thousand USD, so I had enough available cash available temporarily to back up the options I wanted (had enough cash for the actual options contracts).

*blink* All of this business has really just underlined how much of a coward I really am.
posted by Literaryhero at 8:36 PM on January 27, 2021 [7 favorites]

I'm following this news hoping now of my country's sovereign wealth funds and provident funds didn't get involved. From my pov of the irrational 2020 stock market: my employee provident fund has now allowed us to take out some of our capital into their private investment partners to directly invest in unit trusts (index funds don't exist here, so some unit trusts can take on this role from a low-risk investor pov but it takes more skills and analysis imo) at low or zero fees, so I decided to dabble a bit and put in a couple of thousand in a couple of unit trust funds (just semi-educated guesses on my part).

Checked in at the half-year mark and one of them was registering (what to my barely educated eyes) a 30% ROI. Truly bugged my eyes out, and decided to sell it off and plug it back into my provident fund (can't actually withdraw it as it's not yet at maturity ie my retirement age). It sparked a round of reading up on the sector because it just didn't make sense, and in any case I'm not trying it again just because I lucked out to be in a run of insanity.
posted by cendawanita at 9:18 PM on January 27, 2021 [1 favorite]

If you own a total stock market fund in your retirement plan, you already own Game Stop shares and are benefiting from the run up in price, at least on paper.

For example the Vanguard Total Stock Market Fund holds about 2.4 million shares of Game Stop which were valued at $15 million last year but are worth almost a billion dollars today. A nice tidy gain and you didn't have to do anything except stand by and watch the show.

Unfortunately that billion dollar gain is just a tiny fraction of a percent of the fund's total value so you are unlikely to notice.
posted by JackFlash at 9:50 PM on January 27, 2021 [4 favorites]

> not even "they have more chips so at that level the metagame changes," there are special rules for the big players

short sellers are especially terrible in that their profit is made directly from someone else's loss, sometimes putting the final nail in a whole company's coffin

Reading about all of this made me think of and read up on some more history: the catalyst for the 2008 global financial crisis was essentially the American upper class and corporate persons shorting the lower classes' financial lives through the mortgage-backed security schemes, plus house-always-wins rules.

The subprime mortgages were bets that lower-class, financially precarious people would be unable to keep up payments and the lender institution would be able to take the house, cha-ching. From atop the commanding heights of the financial system, they were also playing Jenga with the social safety nets and employer predation on employees and pushing through right-to-work/right-to-fire legislation and stuff.

Then it all collapsed when they won the bets too many times at once. Plus, CDSs, circular firing squad bets between companies... all owned by the same shareholders, so the house always wins again. But despite losing “dollars”, the fat cats ended up with a bigger slice of the overall economic pie afterwards.
posted by XMLicious at 12:13 AM on January 28, 2021 [6 favorites]

> This has been mentioned upstream, but it's hilarious to hear hedge fund managers (hedge fund managers!) cry foul when regular investors start making slightly "sophisticated" moves.

Looks like someone listens when the hedge funds cry foul:

Buzzfeednews: Two Wall Street Firms Took Huge GameStop Losses After Admitting Defeat To Redditors

...

Adena Friedman, the CEO of Nasdaq, said her exchange would possibly temporarily halt trading so investors could "recalibrate" if one of the stocks was being targeted online in a similar manner to what's happened with GameStop.

"If we see a significant rise in the chatter on social media channels," Friedman told CBNBC, as reported by Mediate, "we also match that up against unusual trading activity, [and] potentially halt that stock to allow ourselves to investigate the situation, to be able to engage with the company, and to give investors a chance to recalibrate their positions."

...

posted by sebastienbailard at 1:16 AM on January 28, 2021

My best friend cashed out a cool 10k profit on this nonsense in 10 days. Bought at $40, sold at $320.

We used to go to the casino a few rimes a year and so he did this as a COVID replacement for that. I told him he would be buying pizza until 2023.

I just thought about the fact that the government is going to collect SO MUCH MORE in taxes from this because individuals will be paying full capital gains and Robinhood reports everything. Incredible to think about.
posted by lattiboy at 1:57 AM on January 28, 2021 [9 favorites]

And I did put $400 in. Evenly split between Nokia, BlackBerry, and GameStop. Welcome to 2004 fuckers!
posted by lattiboy at 1:59 AM on January 28, 2021 [7 favorites]

From the Buzzfeed article linked to above:
Sen. Elizabeth Warren, who has long fought to hold Wall Street accountable, called out the big financial players for freaking out when everyday investors used the same techniques against hedge funds that the firms used to build their own wealth.

"For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino, while everyone else pays the price," she said.
posted by Bella Donna at 2:01 AM on January 28, 2021 [5 favorites]

Alexis Goldstein's latest newsletter post: "What Happened With Gamestop?" - Why it's not Robinhood/Reddit vs. Hedge Funds. It's Hedge Funds vs. Hedge Funds vs. Wall Street, with Robinhood as a fig leaf
posted by cendawanita at 6:06 AM on January 28, 2021 [1 favorite]

I checked r/wallstreetbets this morning to see what the latest was. It sounds like robinhood has blocked users from further purchase of GME and AMC. They're only handling sell orders.
posted by cmfletcher at 6:17 AM on January 28, 2021 [2 favorites]

So, to summarize:

1) Citadel accounts for the majority of Robinhood's stock executions, and more than 55% of its equity option executions (from the "What Happened With Gamestop?" article above)

2) Gamestop tulipmania allows Citadel to purchase a substantial chunk of rival Melvin Capital at a song.

3) Robinhood declares "Okay, kids, you've had your fun," and shuts down purchases of "meme stocks" so that the big players can "adjust their positions."

You don't have to be Picasso to draw THAT picture accurately.

The early response on Twitter seems to be interesting. Any time you can get AOC, Dave Portnoy of Barstool, Donald Trump Jr. and the Iron Sheik all lambasting the same people, it's an odd morning.
posted by delfin at 6:28 AM on January 28, 2021 [25 favorites]

Nick Wing: Thus reinforcing a core tenet of capitalism: massive financial institutions can profit off the pain of normal people, but normal people can never profit off the pain of massive financial institutions.
posted by cendawanita at 6:30 AM on January 28, 2021 [11 favorites]

I missed being able to buy GME at a price I'm comfortable with doing this for laughs, but found an old e*trade account (carried over from sharebuilder whenever they merged) and threw a few hundred dollars at AMC, BB and NOK just to be in on the fun.

Not sure if there's any moves to be made on GME via calls at this point, the hedge funds originally involved claim to have closed out their shorts but apparently others are piling in to replace them, hoping to fleece the rubes. I'd be pleased to see the tables turned on that move.

~~Robinhood~~ Citadel declares "Okay, kids, you've had your fun," and shuts down purchases of "meme stocks" so that the big players can "adjust their positions."

I don't know anything about securities regulations beyond the basics needed for startup planning and investment, but this seems problematic.
posted by snuffleupagus at 6:39 AM on January 28, 2021 [1 favorite]

twitter:

Not A Leftist@GeneralStrikerr

Remember when Americans were complaining about how their stimulus checks were not enough and some members of the 1% blowjob squad told them to invest it?

Ah, the irony
5:10 AM · Jan 28, 2021

posted by sebastienbailard at 6:57 AM on January 28, 2021 [12 favorites]

Any time you can get AOC, Dave Portnoy of Barstool, Donald Trump Jr. and the Iron Sheik all lambasting the same people, it's an odd morning.

And, I hate to even have the name come out of my mouth (keyboard), Tucker Carlson.

threw a few hundred dollars at AMC, BB and NOK just to be in on the fun.

Don't know anything about AMC, but both BB and NOK might be undervalued atm. Of course that is what caused this GME business in the first place (if you want to (reddit cw for basically everything), reading DFV's posting history might be the greatest story ever).
posted by Literaryhero at 7:25 AM on January 28, 2021 [3 favorites]

RobinHood is restricting trades on GME, AMC stock.

Their press release is couched in the language of protecting consumers and reducing volatility, but I have a feeling it's going to read as relatively arbitrary by a lot of people and really strengthen the impression that people have that stock market trades are rigged against common people.

I also think that if this gets much worse, it'll just create a new version of the Tea Party for the Biden Administration (similar to how the Wall Street bailouts did for Obama), and that this new Stonks Party or whatever will just be a funnel for more people to go alt-right.
posted by i used to be someone else at 8:05 AM on January 28, 2021 [4 favorites]

I love that people were laughing at and insulting (though obv in -ist and -phobic fashion, it being reddit) DFV for a year. And now the dude is worth 50 million dollars.
posted by Justinian at 8:05 AM on January 28, 2021 [2 favorites]

Well, GME is down to 150 so he's not worth that much.

The sheer brazenness of the move that Robinhood and Citadel are pulling is quite breathtaking.
They have conspired to tank the price saving Melvin billions in losses off the back of their own customers.

Anyone remember the phrase Moral Hazard?
posted by fullerine at 8:19 AM on January 28, 2021 [8 favorites]

Merril Edge (their retail platform) has now restricted trading of the meme stocks, posting this:



Due to recent volatility in certain securities and to reduce risk of market volatility, we will be placing restrictions on certain securities, including increased margin requirements and/or limiting transactions. Game Stop (GME) and AMC Entertainment Holdings (AMC) are now blocked for opening transactions and they have also been moved to a 100% margin requirement for existing positions.

Am I reading that right? Merril is imposing some kind of margin call on those on the upside of this trade?

this new Stonks Party or whatever will just be a funnel for more people to go alt-right.

Well, it will push them further towards an-cap. The trick is slicing the -cap off and replacing it with something better, rather than slicing the an- off and replacing it with fascism.
posted by snuffleupagus at 8:21 AM on January 28, 2021 [6 favorites]

it'll just create a new version of the Tea Party for the Biden Administration (similar to how the Wall Street bailouts did for Obama), and that this new Stonks Party or whatever will just be a funnel for more people to go alt-right.

And the thing is, it doesn't have to be that way. I've been cruising around WSB and I don't see a lot of right wing politics. In fact here's a comment quote:

"We shouldn't be divided as Democrats vs. Republicans. Its the people who work hard every day to save up their dollars for that old school American dream of owning a home and having an education while raising a family versus the greedy, irresponsible fucks that have never had a callous, who speculate and gamble our meager 401Ks away, for fun and a 3rd yacht. Its the rich versus the poor. I've never traded in my life, but I'm going to throw a little money at a dip today, 'cause I like the stock."

The WSB'ers are cheering when they get nods from AOC, Elizabeth Warren, Mark Cuban... The Dems/left could win them over just as easily if they try.
posted by dnash at 8:27 AM on January 28, 2021 [16 favorites]

Well, GME is down to 150 so he's not worth that much.

True. Today's action was so brazen. I prefer Wall Street screwing me in more subtle fashion.

He did take 1/3 of his position in profit yesterday though, to the tune of 14 million dollars. So he'll wipe away his tears with $100 bills.
posted by Justinian at 8:33 AM on January 28, 2021 [3 favorites]

In addition to GameStop, Nokia, AMC, and Blackberry, Robinhood is also restricting transactions to American Airlines, Best Buy, Castor Maritime (?), Express (the fashion store), Koss (headphones), Naked Brands (intimates), Sundial Growers (cannabis), Tootsie Roll (candy), and Trivago (travel).

The person that's writing an algorithm to auto-pick these? Feel like their job just got a lot harder.
posted by box at 8:36 AM on January 28, 2021

This is all so fascinating. It would be difficult, since it's all playing out in Reddit threads and stock charts, but someone should figure out a way to make a documentary about this.
posted by oulipian at 8:39 AM on January 28, 2021 [2 favorites]

Popping by again to note that I was on WSB from about March - May of last year while the market tanked and then started its huge rally. It is not an alt-right sub - don't take the media bait on that, because it's a narrative now. There were many, many young and seemingly poorly educated people on that sub who were gaining consciousness about how this country operated financially. There was especially a lot of talk about the PPP loans once it was shown that by and large the wealthy were getting the money.

The problem, of course, is there isn't much of a left wing movement for these folks to get into, while there are still frictionless mechanics to shunt people into alt-right movements.
posted by MillMan at 8:46 AM on January 28, 2021 [18 favorites]

A couple others that have been fluctuating a lot lately (and/or are among the most heavily traded stocks on Robinhood today) that might fit into some sort of category: Genius Brands (children's entertainment), Fossil (watches and wallets and whatnots), PetMed Express, and National Beverage (LaCroix, Faygo, etc.) ($82/share on Christmas, $147 today, seems like somebody's doing something there).

I'm still not sure what the common factor is--things you might find in a dead mall? Things that are unfashionable?
posted by box at 8:46 AM on January 28, 2021 [1 favorite]

Adena Friedman, the CEO of Nasdaq, said her exchange would possibly temporarily halt trading so investors could "recalibrate" if one of the stocks was being targeted online in a similar manner to what's happened with GameStop...

Citadel declares "Okay, kids, you've had your fun," and shuts down purchases of "meme stocks" so that the big players can "adjust their positions."

Isn't this akin to industry cartels getting together and price-fixing? The government used to send executives to prison over that, no?
posted by They sucked his brains out! at 8:49 AM on January 28, 2021 [5 favorites]

Rashida Tlaib on Twitter:
"This is beyond absurd. @FSCDems need to have a hearing on Robinhood's market manipulation. They're blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who've used the stock market as a casino for decades."
posted by dnash at 8:54 AM on January 28, 2021 [24 favorites]

Robinhood's market manipulation. They're blocking the ability to trade to protect Wall St. hedge funds

Who do you think was filling all of Robinhood's orders?
posted by JoeZydeco at 8:57 AM on January 28, 2021 [2 favorites]

And the moral of the lesson is you can't beat Wall Street at their own game. If Robinhood is not doing is illegal it is the largest story here. I doubt there was an outright conspiracy to cause Melvin to go bankrupt and Citadel to move in, they just saw an opportunity and killed anyone else from making money on their investments.
posted by geoff. at 8:57 AM on January 28, 2021 [3 favorites]

Isn't this akin to industry cartels getting together and price-fixing? The government used to send executives to prison over that, no?

Yeah we don't do that here anymore.

Reading the financial press's coverage is super interesting. It's all about pushing long-term investing, and minimizing volatility, classical bullshit that everyone was told over and over.

Casino for me but not for thee.

(Disclaimer - I own 1 share of gme bought out of spite, and 30something shares of amc also bought out of spite)
posted by Lord_Pall at 8:58 AM on January 28, 2021 [9 favorites]

Reminds me of my favorite chapter of Robin Hood, the one where he, Friar Tuck and Little John decide they're happy with what they've carved off of Nottingham, so they kick all the Merry Men out of Sherwood Forest and call it a day.
posted by EatTheWeek at 9:00 AM on January 28, 2021 [6 favorites]

I hope the house financial services committee are keeping an eye on this. I'd love to see Maxine Waters and Katie Porter get some Citadel/Robinhood execs under oath.
posted by cmfletcher at 9:02 AM on January 28, 2021 [5 favorites]

Also wait a second. Stupid connect the dots question

Melvin shorts 140% of the stock (which is not allowed?)
Melvin claims to have closed the short position, which is not true (they closed 10%?)
Melvin bailed out by citadel
Citadel fills robinhoods orders.
Citadel doesn't want Melvin to collapse.
If melvin has to close out their shorts, they go bankrupt. They don't pay. Debt goes up to ??? who either pays or goes out of business, etc.

I mean, if the company you use to buy and sell shares has a vested interest in having those shares go up or down in value, and has access to all the buying and selling information..

Nevermind. This whole thing just makes me super angry.
posted by Lord_Pall at 9:04 AM on January 28, 2021 [7 favorites]

In response to recent Robinhood restrictions their app went from a 4.9 to a 1.1 in about 30 minutes. Long term they may have just killed this iteration of their business.
posted by Mitheral at 9:09 AM on January 28, 2021 [6 favorites]

This is all so fascinating. It would be difficult, since it's all playing out in Reddit threads and stock charts, but someone should figure out a way to make a documentary about this.

Oh, there will be tons and tons of video essays. I'm sure a bunch are being edited right now.
posted by snuffleupagus at 9:15 AM on January 28, 2021 [2 favorites]

Long term they may have just killed this iteration of their business.

Doesn't matter this is exactly mob behavior. As in not even exaggerating. They drive someone into debt, use their credit to wipe them out, when they can't get anymore they move onto the next target.

I was always suspicious of Robinhood and Citadel (not them in paticular) controlling trade order (see my AskMetafilter from at least a couple months ago) as it didn't feel right and I thought it would going to go bad when we had say a market crash and a bunch of people using Robinhood lost their money. So I don't want to say this coming, but I saw this coming not just remotely in this way. Basically I knew the whole free stock trade thing had a catch, I just didn't know how or when it would come back to screw people.

Even if people find another platform, and they will, it totally killed GME. So Robinhood/Citadel presumably made a killing filling orders for GME/AMC, then made a killing buying Melvin. They won on both sides. My bookie always wins too, but see the difference is I know he will and I know how he does it, he has a vig.
posted by geoff. at 9:16 AM on January 28, 2021 [4 favorites]

"There must be in-groups whom the [rules] protect but do not bind, alongside out-groups whom the [rules] bind but do not protect."
posted by seanmpuckett at 9:17 AM on January 28, 2021 [7 favorites]

And the thing is, it doesn't have to be that way. I've been cruising around WSB and I don't see a lot of right wing politics.

It's not that I think WSB has a lot of right-wing politics, it's that I think this situation is creating an environment ripe for the alt-right to make a bunch of YouTube videos and other social media posts that start that pipeline to take advantage of people who are rightly angry and have been cheated by the financial system.
posted by i used to be someone else at 9:17 AM on January 28, 2021 [2 favorites]

Robinhood is protecting their idiot users from throwing further money away on this pump and dump, but no good deed goes unpunished I guess.
posted by save alive nothing that breatheth at 9:21 AM on January 28, 2021

Robinhood is protecting their idiot users from throwing further money away on this pump and dump

What a load of shit. Where is the evidence for this newfound altrusim?
Citadel is refusing to make the market.

Other brokerages are forcing users to sell their positions to the brokerage during a dip.

But sure, it's all for our own good.
posted by snuffleupagus at 9:24 AM on January 28, 2021 [31 favorites]

In some ways, sure, Robinhood could be attempting to protect their users--but it's ineffective in a system where it has no control over other actors who still take advantage of the current rules.

In their attempts at protecting their users, if we grant that, these policies will come across as arbitrary to the large number of users who don't have as much familiarity with stock markets, while still having enough knowledge to be a danger to themselves and others.

It's that seeming arbitrariness that poses a huge problem--because those people won't see or feel that they were part of a pump-and-dump, but rather have the real experience of losing money while other hedge firms who were able to short it now made off with a lot more.
posted by i used to be someone else at 9:26 AM on January 28, 2021 [1 favorite]

If Robinhood had an conscious they would have (1) done this BEFORE the firm that fills their orders bought the company they brought down by filling orders (2) wouldn't let retail investors engage in complex financial transactions without a fee.
posted by geoff. at 9:27 AM on January 28, 2021 [4 favorites]

protecting their idiot users from throwing further money away

Why didn't they protect me from investing in Rio Tinto?
posted by aramaic at 9:27 AM on January 28, 2021 [3 favorites]

It's not that I think WSB has a lot of right-wing politics, it's that I think this situation is creating an environment ripe for the alt-right to make a bunch of YouTube videos and other social media posts that start that pipeline to take advantage of people who are rightly angry and have been cheated by the financial system.

If only the Left were any good at, uh, doing things!
posted by atoxyl at 9:28 AM on January 28, 2021 [3 favorites]

(As somebody else said it may not actually be as bad as all that. Rashida Tlaib’s tweet against RH is one of the top posts on WSB right now).
posted by atoxyl at 9:32 AM on January 28, 2021 [2 favorites]

Yeah, no, Robin Hood got a call from King John who said, "it's all fine you fucking around in the woods on the hiking trails and giving that dumb ass shiriff a hard time, God knows he deserves it, what an ass, but anyway, you literally stop fucking around on the highway with People That Matter or the next thing you know there will be 40,000 soldiers combing the forest and we will pick the flesh from your bones with toothpicks, are we clear?"
posted by seanmpuckett at 9:33 AM on January 28, 2021 [8 favorites]

If only the Left were any good at, uh, doing things!

i mean it's fun to snark, and yeah, i guess breadtube could try doing the same thing, but to pretend that the alt-right might not try to take advantage of this is a take, i guess ¯\_(ツ)_/¯

breadtube and the left, by and large, aren't trying to create a white ethnostate that brutalizes minorities, while the alt-right is, and given how some on the left seem to be perfectly happy making common cause with the extreme right when it comes to class-first analyses and agitating for revolution, let me perform a massive and enormous performative apology for not focusing on how the left could use this to recruit too
posted by i used to be someone else at 9:33 AM on January 28, 2021 [3 favorites]

protecting their idiot users from throwing further money away

1. How do they know its throwing away money?
2. Do they stand to make more money if people throw away more or less money?

If these brokerages were truly neutral it would be one thing. But they most assuredly are not.
posted by Lord_Pall at 9:35 AM on January 28, 2021 [6 favorites]

We've got ourselves a big speculative orgy here. The claim is that some evil billionaires paid for the band. But do we really know who's paying for all of the food and drinks?

Every scam needs a story. This is a social-justice themed pump and dump. I can't believe we're seeing people pushing their trades here on metafilter. Maybe that's something we ought to reconsider. But, today, just this once, pushing stocks is for the good of the little man.
posted by Wood at 9:40 AM on January 28, 2021 [2 favorites]

GME is going back up anyways. It is not only US/Robinhood that was buying even if they tried to shut off that one avenue. I know people in Europe still buying through DeGiro and other brokers.
posted by vacapinta at 9:43 AM on January 28, 2021

I hope the house financial services committee are keeping an eye on this. I'd love to see Maxine Waters and Katie Porter get some Citadel/Robinhood execs under oath.

AOC is on the case:

This is unacceptable.

We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.

As a member of the Financial Services Cmte, I’d support a hearing if necessary.

Inquiries into freezes should not be limited solely to Robinhood.

This is a serious matter. Committee investigators should examine any retail services freezing stock purchases in the course of potential investigations - especially those allowing sales, but freezing purchases.

posted by Apocryphon at 9:44 AM on January 28, 2021 [10 favorites]

Ted Cruz agrees
posted by bq at 9:52 AM on January 28, 2021

This really should be bipartisan.
posted by geoff. at 9:53 AM on January 28, 2021 [3 favorites]

Or even nonpartisan. Dare to dream.
posted by snuffleupagus at 9:54 AM on January 28, 2021 [6 favorites]

i mean it's fun to snark, and yeah, i guess breadtube could try doing the same thing, but to pretend that the alt-right might not try to take advantage of this is a take, i guess

Not entirely sure what you think I’m snarking at, so:

complaint that the left isn’t good at doing things: self-deprecatingly sincere

first thought being about whether the alt-right might benefit instead of what play we should fucking make: an example of how and why the left isn’t good at doing things

okay maybe you who said that don’t actually consider yourself to be part of “the left”: fair enough, but given your own framing of historical cause and effect I think it might be a good idea to focus more on not repeating historical mistakes in dealing with Wall Street
posted by atoxyl at 9:54 AM on January 28, 2021 [1 favorite]

So GME closed yesterday at $347, around 11:15am Eastern today it dropped down to $126 and now, a few hours later, it's bounced back up to ~$250. I'm wondering what the mental model is of the people who see that drop and think "o-ho! a buying opportunity!"
posted by mhum at 9:56 AM on January 28, 2021

Well the idea for the people on WSB is that there's a deadline coming when the Hedgefunds will have to close out their short positions, it hasn't happened yet, and when it does the price will then increase from wherever it was. Nw there are issues with these assumptions of course, but there is a plan and if that's the case then I don't see why they wouldn't?
posted by Carillon at 10:00 AM on January 28, 2021 [1 favorite]

That short options are still out there and even more may exist than 2 days ago. That they'll be due on Friday night and you could get 5 or 10 to 1 on your money.
posted by cmfletcher at 10:01 AM on January 28, 2021

Ted Cruz agrees

And then AOC bodied Ted Cruz so hard he probably died

(Ted Cruz' wife is management-level at Goldman Sachs. Assuming Ted Cruz really cares about this is a mistake.)
posted by mightygodking at 10:03 AM on January 28, 2021 [36 favorites]

I'm wondering what the mental model is of the people who see that drop and think "o-ho! a buying opportunity!"

That's called a dead cat bounce.
posted by JoeZydeco at 10:04 AM on January 28, 2021 [1 favorite]

> Carillon: "Well the idea for the people on WSB is that there's a deadline coming"
> cmfletcher: "That short options are still out there and even more may exist than 2 days ago."

Ah ok. I guess that makes sense. My intuition would have been that the shorts have already had to close out everything but I realize that I don't have any particular reason to believe that.
posted by mhum at 10:08 AM on January 28, 2021

I'm still not sure what the common factor is--things you might find in a dead mall? Things that are unfashionable?

I like the idea that this whole thing might really be just a big game of reverse Family Feud (or, even closer, the last round of $10,000 Pyramid) played amongst people for whom the money involved is merely an afterthought.
posted by nobody at 10:18 AM on January 28, 2021 [2 favorites]

Like if you can’t find a way to leverage a clip like this to the advantage of your redistributive politics, that’s on you.
posted by atoxyl at 10:25 AM on January 28, 2021 [1 favorite]

"So, in summary, /r/WSB will be the Leeroy Jenkins of the 2021 Financial Crash."

That's the only thing holding me back from a gleeful "let them fight" reaction; the knock-on effects. Lehman Brothers deserved to die, but it still froze up the entire economic system.
posted by tavella at 10:25 AM on January 28, 2021 [6 favorites]

a big game of reverse Family Feud

It feels more like Twitch Plays ~~Pokémon~~ Stockémon
posted by oulipian at 10:27 AM on January 28, 2021 [3 favorites]

“BUY THE DIP, YOLO! Stonks go up”

Take with grain of salt since it's from reddit.

After all the retail investors got shut out last night, the drop was large, but with super low volume. The term used is a "short ladder attack". No idea if that's a real thing.

But the drop wasn't everyone selling. It was (supposedly) hedge funds selling to each other to drive the price down.

So it's not a drop. It's another bullshit manipulation of a stock price.

Sure, GME has no value. I fucking worked at babbages when they were owned by neostar which eventually was gamestop. They've always sucked and are a dying retail brand.

Buuut.

Those fuckers shorted >140% of gamestop stock. Which is not supposed to be allowed.

They didn't bet naturally that it would go down, and use market fundamentals to do that. They cheated. They work together to move the price around, either big swings or small swings(hft), and make money on that.

And someone noticed. And then told everyone else.

So this is either a massive headfake from wall-street, and all of the retail investors are going to get fucked, or this is real.

I don't claim to know, but I'm hesitant to blow this off as hurr durr dead cat.
posted by Lord_Pall at 10:31 AM on January 28, 2021 [18 favorites]

We surveyed 100 online forum lurkers what group of businesses were big 10 years ago and fading fast today. We got:
1. pre-smartphone phone manufacturers
2. mall based retail franchises
3. movie theaters
posted by cmfletcher at 10:35 AM on January 28, 2021 [3 favorites]

So instead of letting the r/WSB YOLO'ers and neophytes and FOMO bandwagoners (who are blindly following the DFV and other shadowy poster thought leaders) lose on their own when the incredibly overvalued stock inevitably reaches a correction and the dump follows its natural course, these hedge fund elites have preemptively driven down the price, and in doing so, assumed all of the blame for themselves. Brilliant optics, Wall Street! Really sliding your head into the guillotine on this one.
posted by Apocryphon at 10:35 AM on January 28, 2021 [2 favorites]

I think they might have a problem with how much they shorted?

Folks were saying >140% of GME has been shorted. Which is not allowed?

Also it's such a massive amount that if they can't cover the shorts, something bad happens. I don't grok "something bad happens" in terms of scale, but that might explain the desperation?
posted by Lord_Pall at 10:37 AM on January 28, 2021

Lol the reddit has gained almost 3 million subscribers in... a couple of days I think?
posted by atoxyl at 10:40 AM on January 28, 2021 [1 favorite]

Man when I was trying to come up with app ideas I was trying to hard. I should have just come up with one that let people buy or sell depending on what positions my hedge fund held at the time.
posted by geoff. at 10:43 AM on January 28, 2021 [1 favorite]

Robinhood makes a lot of money selling their trading information to hedge funds.

So you'd need to call it whatever the opposite of Robin Hood is.
posted by Lord_Pall at 10:45 AM on January 28, 2021 [1 favorite]

Lol the reddit has gained almost 3 million subscribers in... a couple of days I think?

Yeah, and it's showing - they've been having server issues all morning.
posted by zbaco at 10:46 AM on January 28, 2021

So you'd need to call it whatever the opposite of Robin Hood is.

Gordon Gekko.
posted by Pendragon at 10:48 AM on January 28, 2021 [2 favorites]

Robinhood makes a lot of money selling their trading information to hedge funds.

"You're not the customer, you're the product," repeated ad infinitum, across every single sector that touches tech, in innumerable slick apps marketed to the end-user as free
posted by Apocryphon at 10:48 AM on January 28, 2021 [7 favorites]

Also it's such a massive amount that if they can't cover the shorts, something bad happens. I don't grok "something bad happens" in terms of scale, but that might explain the desperation?

Too big to fail? Think Biden and Congress will bite the bullet this time now that the likes of AOC and Warren are around to call out the establishment?
posted by Fukiyama at 10:52 AM on January 28, 2021

Gamestop fucking up the us economy at an existential level is a dumb plot point.
posted by Lord_Pall at 10:57 AM on January 28, 2021 [8 favorites]

Man when I was trying to come up with app ideas I was trying to hard. I should have just come up with one that let people buy or sell depending on what positions my hedge fund held at the time.

MyBroker.app

Trump killed the fiduciary rule. Sales of questionable investment products soared [LAT]
posted by snuffleupagus at 11:00 AM on January 28, 2021 [4 favorites]

Matt Zeitlin: who would have predicted that a left-right populist alliance would form over day traders rights
posted by Going To Maine at 11:03 AM on January 28, 2021

Anyone else go long on popcorn during all of this?
posted by loquacious at 11:04 AM on January 28, 2021 [4 favorites]

Robinhood selling shares automatically. Robinhood blocking trades.

And here come the lawsuits...
posted by JoeZydeco at 11:06 AM on January 28, 2021 [7 favorites]

I'm already all-in on guillotine futures.
posted by cmfletcher at 11:07 AM on January 28, 2021 [13 favorites]

Robinhood, "Where did you get this money? You become a trader over night?"
User, "I worked for it ... doing things"
Robinhood, "Don't lie to me just tell me the truth I won't get upset"
User, "I looked at Reddit and they gave me tips."
Robinhood, "WHAT SUBREDDIT AND WHAT TIPS? I'm taking it back! I taking this money back bringing it right back into your account. You know where this money comes from I don't want you to have this kind of money"
posted by geoff. at 11:13 AM on January 28, 2021 [2 favorites]

Matt Zeitlin: who would have predicted that a left-right populist alliance would form over day traders rights

Ted Cruz responds to AOC
AOC responds to Ted Cruz
posted by Going To Maine at 11:16 AM on January 28, 2021 [8 favorites]

The Guardian—GameStop's three largest shareholders earn over $2bn amid stock surge

“Earn”.
posted by XMLicious at 11:20 AM on January 28, 2021 [14 favorites]

Don't forget to have Robhinhood yell conspiracy in your script.
posted by Carillon at 11:22 AM on January 28, 2021

Ted Cruz responds to AOC
AOC responds to Ted Cruz

Excellent response from AOC, and pretty much exactly what I hoped for.
Cruz needs to distract from that whole "supported a murderous insurrection" somehow. If he and other Republicans want to get out of the way on this, that's good, but nobody should lose sight of his motives or the broader context.
posted by scaryblackdeath at 11:29 AM on January 28, 2021 [5 favorites]

Millions of people have woken up to how the market reacts if they act collectively; meme stocks are not a genie that will go back into the bottle easily. I don't see where this goes without either Wall Street dramatically changing their strategies/facing new regulations or retail investors being seriously limited in how they're allowed to trade.
posted by Mr.Encyclopedia at 11:32 AM on January 28, 2021 [5 favorites]

The people who are putting big numbers into GME are obviously grabbing headlines. But an absolute fuckton of people are putting $10-$100 in GME, literally not caring if they lose it all, as long as they can be part of this crowdsourced effort to take down a hedge fund.

People aren't buying the dip because they think they're going to get rich. They're buying the dip because they want to help fuck over the hedge fund and they've caught on that if the little people are going to win for once, the play is to make sure that GME can't dip.
posted by the turtle's teeth at 11:38 AM on January 28, 2021 [19 favorites]

I don’t know that there was a future in “meme stocks” as a movement, exactly. I mean, once the big guys catch onto things like that they presumably know what to do them! And some retail folks definitely would have missed a seat in the musical chairs game at the end.

It’s just the way everybody got shut down really reinforces the feeling that regular people aren’t even allowed to win one.
posted by atoxyl at 11:39 AM on January 28, 2021 [3 favorites]

Bill Galvin says the market should be an honest place. What would 30 days do? Protect the investors in Massachusetts only?
posted by brent at 11:50 AM on January 28, 2021

The coming aftermath is what I don't understand; most of the $100 investors will lose their money (i.e. hold worthless stock) and the hedge funds will largely be coddled and protected, because the r/WSB notion of malicious compliance or challenging the system by its own rules is a hopelessly naive one: the powerful will simply change the rules. Why can't r/WSB have predicted the actions of Robinhood, etc.? It does seem intellectually immature and irresponsible to be encouraging people to buy the stocks without the clearest understanding that it will be a very Pyrrhic victory, or am I missing something in the explanations they are giving?
posted by polymodus at 11:51 AM on January 28, 2021 [1 favorite]

It does seem intellectually immature and irresponsible to be encouraging people to buy the stocks without the clearest understanding that it will be a very Pyrrhic victory

The only thing “responsible” about WSB is that they do tell you up front that they’re gambling. But I don’t know that anybody really knew exactly what was going to happen here.
posted by atoxyl at 11:58 AM on January 28, 2021 [1 favorite]

A class-action suit has been filed against Robinhood in the SDNY.
posted by cmfletcher at 12:03 PM on January 28, 2021 [4 favorites]

Sure, it's not that anybody really knows, but even a leftist analysis like Chomsky would've raised the issue of neoliberal institutions deciding suddenly to change the terms. And that prediction is ostensibly not part of the psychic/social narrative that redditors are saying; what they are saying is that they are doing it to crush the hedge funders, join us, etc.
posted by polymodus at 12:03 PM on January 28, 2021 [1 favorite]

if you're on the hook for $3B, spending $10M on lawyers to make it go away might seem like a rational decision.

This seems to be the current gamble: Rig the stock price long enough to maybe mitigate the damage, and work to fend off lawsuits, in the meantime.
posted by They sucked his brains out! at 12:14 PM on January 28, 2021 [2 favorites]

Those fuckers shorted >140% of gamestop stock. Which is not supposed to be allowed.

They didn't bet naturally that it would go down, and use market fundamentals to do that. They cheated. They work together to move the price around, either big swings or small swings(hft), and make money on that.

Why wouldn't that be allowed? I grant that it's not common, and seems odd at first notice. I don't have a car, and Brad is having a poker game tonight, so I'll borrow my friend Ali's car. Halfway through the game, Diane volunteers to go for a beer run. She lives nearby and walked, so she asks to borrow someone's car and I lend the one I drove to her. At that point, there is 200% short interest in Ali's car. Which should be even harder to do than a stock, since it's two tons of metal rather than a series of ledger transactions.

Further, what would betting naturally that GameStop would go down look like? There are only two ways to do that; if you owned it, you can sell it. If you didn't own it, you could... borrow some shares and sell those, which is a short, and that's the exact thing that makes them fuckers?

I'm not saying that the entire edifice of Wall Street is good or bad (perhaps it's nuanced?), or that any particular course of action should be taken; merely that the ratio of fuck-those-fuckers to actual basic fundamental knowledge seems a little off right now.
posted by Superilla at 12:32 PM on January 28, 2021 [2 favorites]

$10M on $3B is approximately the same rate that gamestop would use to buy your used stuff
posted by i used to be someone else at 12:33 PM on January 28, 2021 [22 favorites]

Dave Troy chimes in (Twitter thread, unrolled) : Hey guys, remember that time Steve Bannon ran an army of game virtual currency miners in Asia, for sale to westerners at discount prices, arbitraging attention for profit?

It's undeniable that a phenomenon, a spectacle, as visible as the GameStop drama is going to hook in big players. There are people who are undoubtedly going to be using this as a playbook in the future, learning tactics from it, etc. And already, it's acknowledgeable that big financial interests are interested playing all sides of this trading war. Just as it's true that there are day traders with access to big capital on the subreddit, there may be bored hedge fund employees, actively engaged investment firm employees, wealthy opportunists of every stripe.

But to mention all these other players suddenly? Bannon, a creep who's been washed out of the Trump administration, convicted of mail fraud and money laundering, who stooped to doing yacht-board photo ops with a Chinese exile billionaire for some fantasy Falun Gong-esque astroturf opposition government? Honestly, this Dave Troy thread makes him sound like he regards Bannon the same way the QAnon and Parler set regard George Soros. He also appears to take Bannon's "Fourth Turning" as seriously as the conspiracy theorists on Bannon's side take "the Great Reset" do!

He also cites Brock Pierce, as a figure involved in the '2014 film “An Open Secret,” helped to lay the foundation for the child sexual abuse and trafficking narrative that undergirded Pizzagate and QAnon.' Well, the implication there is that he was behind the movie which gave rise to those allegations. As it turns out, Brock Pierce is more like one of the subjects of that film as a figure connected to actual child abuse scandals, and the Digital Entertainment Network scandal is real and substantiated, unlike Pizzagate. Troy is being lazy in his connections here.

He mentions reactionary dickhead Jack Posobiec praising this situation- so? From Tucker Carlson to Josh Hawley to Donald Trump and to even Bannon himself, whose whole self-proclaimed origin story is that his father losing his pension in 2008 led to his economic nationalism, right-wingers try to co-opt legit economic grievances and populist energy for their own. It's not crazy that there would be these reactions from these grifter opportunists. Not to mention, this story has gotten big enough that everyone is talking about it, it's not crazy nor alarming that AOC and Don Jr. are tweeting. Russian shill Zero Hedge is commenting? Every financial blog or outlet worth its salt is commenting, Dave.

He does have valid points that this whole situation needs to be watched because it certainly could potentially be weaponized by state actors. Online social phenomena such as GamerGate should invite scrutiny and analysis, because tactics from them can be used on greater scales for even more nefarious designs. Though I am skeptical why Russia would be the natural one to blame, as they are far more connected to the global economy than say pariah states like North Korea is. Remember when terrorism was still a threat in the public consciousness- don't people remember that al-Qaeda and the Islamic State had hackers of their own? Surely there are better culprits with less to lose from blowing up financial markets.

The Elon Musk-Gabe Hoffman feud is interesting, though I'd imagine that Musk is mainly getting into this because he's an attention hog who's just casually manipulating markets via tweet at this point. At least this allegation has an actual financial motivation present. His description of Hoffman as simultaneously a producer of "An Open Secret" and suing people linked to QAnon seems, counter-productive, though?

Ultimately, this thread brings up a lot of fascinating connections, Pepe Silvia style. It's breathtaking to see such a well-informed and knowledgeable person string together random factoids in realtime to support a narrative out of whole cloth. Perhaps "disinformation specialists" should take heed of Nietzsche's hoary saw about "those who fight with monsters"...

I suppose the GamerGate/QAnon/Russiagate accusations are particularly tiresome to me because there is a rich and sordid history of internet drama and mobs of all kinds, why do all comparisons have to follow this? Why QAnon and not Occupy Wall Street? Why this Bannon WoW gold farmer op and not Project Chanology or Operation Payback? It's certainly true that not all of these movements are equal in terms of morality and impact. But it's just as silly and tedious to keep bringing up the same bogeymen.

Learn your damn history, people.
posted by Apocryphon at 12:40 PM on January 28, 2021 [8 favorites]

Millions of people have woken up to how the market reacts if they act collectively; meme stocks are not a genie that will go back into the bottle easily.

I hope the left can harness this narrative to wake people up to the possibilities of collective action in general.
posted by myelin sheath at 12:42 PM on January 28, 2021 [22 favorites]

why wouldn't that be allowed? I grant that it's not common, and seems odd at first notice.

Honestly, I'm not sure. I think it's naked shorting? Which seems to be shorting stock that doesn't actually exist?

And that's not supposed to be legal? Or something. I guess this is just a game of find the loophole.
posted by Lord_Pall at 12:45 PM on January 28, 2021 [1 favorite]

He does have valid points that this whole situation needs to be watched because it certainly could potentially be weaponized by state actors.

Yeah, I wish he'd talk more about the implications going forward rather than doing the whole summation gathering thing. Because this whole episode showing that there's a large audience willing to spend time and real money for maybe profit but mostly dopamine hits in service of a vague ideological goal that can cost a target billions in days is a hell of a Chekhov's Gun.
posted by jason_steakums at 12:53 PM on January 28, 2021 [5 favorites]

Why wouldn't that be allowed? I grant that it's not common, and seems odd at first notice. I don't have a car, and Brad is having a poker game tonight, so I'll borrow my friend Ali's car. Halfway through the game, Diane volunteers to go for a beer run. She lives nearby and walked, so she asks to borrow someone's car and I lend the one I drove to her. At that point, there is 200% short interest in Ali's car. Which should be even harder to do than a stock, since it's two tons of metal rather than a series of ledger transactions.

I don’t think it is actually illegal to have > 100% short interest in that sort of scenario. It is (partially?) illegal to make a “naked” short sale i.e. one of shares you have not actually, at that point in time, borrowed?

I think.
posted by atoxyl at 12:54 PM on January 28, 2021

I'm already all-in on guillotine futures.

Don't mine gold, sell pick-axes.
posted by snuffleupagus at 12:58 PM on January 28, 2021 [6 favorites]

I don’t mean to be hyperbolic, but this is the craziest political moment I’ve ever seen. Including the Jan 6th riots. The real-time buy-in from across the political spectrum is just jaw dropping. I’m watching it unfold in real time. This is maybe actual populism?

I don’t in anyway think the Limbaugh’s or Shapiro’s understand what they’re pushing here, but the AOCs absolutely have a plan. It’s asymmetrical in that regard. The right has no actual answers, just glomming onto this. AOC and the like have committee power, theories and actual, you know, ideas.

Who knows what happens but I PRAY Biden just stays out of this. He can only fuck it up.
posted by lattiboy at 1:06 PM on January 28, 2021 [4 favorites]

This is maybe actual populism?

Which is only as good or bad as the populists involved. A large segment of Trump's base are deranged populists. Modern-day know-nothings.

As I'd expect a lot of commentaries over the next few weeks will point out while drawing comparisons of the moment to the collapse of the Whigs.
posted by snuffleupagus at 1:11 PM on January 28, 2021 [7 favorites]

@jangelooff: Listening to irate New York hedge fund billionaire Leon Cooperman on CNBC right now lamenting people "sitting at home getting their checks from the government, trading their stocks."

“This fair share is a bullshit concept," he shouts. "It’s a way of attacking wealthy people."

Attacking wealthy people, of course, is the exclusive domain of other wealthy people. Pretty sure that's in the footnotes of the Constitution, or on the back, or something.

Must be nice to be so insulated from the consequences of your actions that having someone beat you at your own game is "an attack" instead of "a teachable moment".
posted by tonycpsu at 1:11 PM on January 28, 2021 [13 favorites]

The rich: If you can't eat 'em, join 'em!
posted by oulipian at 1:13 PM on January 28, 2021 [2 favorites]

Sherrod Brown joins in the fray!

People on Wall Street only care about the rules when they're the ones getting hurt.

It's time for SEC and Congress to make the economy work for everyone.

As Incoming Chairman of the @SenateBanking Committee, I will be holding a hearing on the current state of the stock market.

posted by Apocryphon at 1:17 PM on January 28, 2021 [9 favorites]

For a while now (40-50 years?) the stock market has been an even bigger scam than it historically was. The amount of money being traded is mind-boggling and only has a tenuous relationship to "actual commodities," not to mention the associated human and environmental costs. Most of the money being "spent" is being borrowed from some hypothetical future, where both labor costs and environmental costs don't exist, and where the borrowers have borne little accountability for their actions, and usually benefit even when they fuck up.

The fact that a hedge fund is being beaten at their own game by "regular folks," via the "investment" shenanigans they created is kind of exciting.
posted by nikoniko at 1:28 PM on January 28, 2021 [11 favorites]

Did somebody already post this? Lol.

(I don’t actually care how stupid the idea of RH as a political cause is, though, I just like seeing people get riled up about the stock market being bullshit.)
posted by atoxyl at 1:32 PM on January 28, 2021 [3 favorites]

He does have valid points that this whole situation needs to be watched because it certainly could potentially be weaponized by state actors.

Sure, and the warnings about home-grown trashbags like Bannon, the alt-right, etc. are worth a sober note for the future.

I kinda feel like we could resolve all that by implementing some positive regulatory reform, making sure the stock market really is open to everyone, and probably holding millionaire & billionaire white-collar criminals accountable for realsies.
posted by scaryblackdeath at 1:32 PM on January 28, 2021 [4 favorites]

What's the "COND" column on Bloomberg mean and what are those status codes. I really need to learn more about Bloomberg terminals.
posted by geoff. at 1:49 PM on January 28, 2021

GME still at 193.

Someone may have posted this but people with actual money have jumped in.

A lot of rich people don't like the hedge funders gaming shit and are taking their piece of flesh.
posted by Max Power at 1:50 PM on January 28, 2021 [1 favorite]

Whoa, whoa. Everyone on Robinhood were Reg T margin accounts requiring 100% cash? Even the Robinhood "Gold" which didn't change you to a cash account, that was just a Robinhood distinction? So all this preventing from buying shares and early cashing out doesn't matter because it is a margin account, right? It technically was all lent money even if there was a required 100% cash backing for all lent money? That's ... just terrifc. Someone please correct me.
posted by geoff. at 2:02 PM on January 28, 2021

Ranjan Roy of Margins (of pizza arbitrage fame, previously) does not like the irrational exuberance:

But if you really believe this is about a bunch of 'little guys' taking on 'Wall Street' and the 'establishment', I'll assume you also believed Donald Trump was going to take on the establishment and drain the swamp, or something.

That is not what is happening here. [...]

Professional Money is on both sides of the trade. There are very openly 'hedge funds and professional money managers' on both sides of all these trades, not just on the short side. They’re openly talking about it. [...]

Even the "retail" is plenty of well-off people. While most of the media coverage focuses on laid-off college-aged kids and uses the term "mom and pop" investors (is that even okay in 2021?), I can promise you plenty of friends in tech (who often make a lot more than friends in finance nowadays [Haha, sorry -Can]) and doctors are sending me $GME or $AMC gain porn. [...]

Then there's the conspiracy. Citadel Securities pays Robinhood a lot of money for their order flow, so the theory is that they could be front-running these orders, riding and amplifying the moves. [...] I'd still contend, as someone who was a tick-by-tick trader, catching the second-by-second wave in a scenario like this is far more valuable than the simple knowledge that r/WSB is going to buy $GME. The timing is everything. [...]

Fast, hot money has been a problem in emerging markets that has often resulted in severe economic catastrophe.a [...] First, when the tourists leave, Gamestop's stock will come crashing down. Gamestop is a real company. It has over 53,000 employees. There's a reason you have not heard from anyone at Gamestop. This must be terrifying. [...]

But when that stock starts absolutely tanking - what happens? Does it stop exactly at some reasonable enterprise valuation? That's not how momentum works. In trading, everyone loved the adage "don't try to catch a falling knife" but while everyone enjoyed the lulz on the way up (other than Melvin Capital), it will be Bell's job to catch the knife on the way down to try to keep as many of these people still employed as possible. Whatever happens, it will dangerous and ugly. Real employees could lose their real jobs thanks to the lulz. [...]

We all know this, yet I can't stress this enough: things can (and likely will) move just as fast on the way down.

He's got three other points he thinks will happen after all of this is over: U.S. financial markets resembling those of emerging markets, Robinhood profiting over the whole situation while retail investors are screwed, and retail traders continuing to get enmeshed in this risky world instead of taking their winnings and leave. A good, sobering read overall, that throws some cold water over the David and Goliath narrative.

Incidentally, I'd like to do an FPP on Margins' ZIRP explains the world article sometime. Matt Levine and Margins are my go-to financial writers, they break things down quite well to laypeople and point out all of the grotesqueries that are going down in today's markets.
posted by Apocryphon at 2:10 PM on January 28, 2021 [14 favorites]

SamNChiet: Feels like a good time to retweet this thread I did about Robinhood's UI.
posted by RobotHero at 2:20 PM on January 28, 2021 [1 favorite]

The right has no actual answers, just glomming onto this. AOC and the like have committee power, theories and actual, you know, ideas.

Oh, the right has ideas and "answers" here, but spoiler alert: it's going to end up being antisemitism.
posted by jason_steakums at 2:31 PM on January 28, 2021 [6 favorites]

Worth mentioning that the 58k trade followed by small trades shown in the Bloomberg terminal in atoxyl's link was from 1:32pm yesterday, the 27th. It wasn't part of today's rollercoaster.
posted by Riki tiki at 2:32 PM on January 28, 2021

It technically was all lent money even if there was a required 100% cash backing for all lent money? That's ... just terrifc. Someone please correct me.

I think a real cash account is an option but the default “instant” account is actually a margin account (the promised upside to the user being that you don’t have to wait for deposits to clear).

Worth mentioning that the 58k trade followed by small trades shown in the Bloomberg terminal in atoxyl's link was from 1:32pm yesterday, the 27th. It wasn't part of today's rollercoaster.

I don’t have any insight into who that trade was, either, it’s just sort of a remarkable juxtaposition.
posted by atoxyl at 2:50 PM on January 28, 2021

> Dave Troy chimes in (Twitter thread, unrolled) : Hey guys, remember that time Steve Bannon ran an army of game virtual currency miners in Asia, for sale to westerners at discount prices, arbitraging attention for profit?

I've found myself mentioning this one frequently lately, but MeFi's Own™ cstross's prescient novel Halting State (2007, among many prescient novels) features a scenario like this.
posted by XMLicious at 2:55 PM on January 28, 2021 [4 favorites]

But when that stock starts absolutely tanking - what happens? Does it stop exactly at some reasonable enterprise valuation? That's not how momentum works. In trading, everyone loved the adage "don't try to catch a falling knife" but while everyone enjoyed the lulz on the way up (other than Melvin Capital), it will be Bell's job to catch the knife on the way down to try to keep as many of these people still employed as possible. Whatever happens, it will dangerous and ugly. Real employees could lose their real jobs thanks to the lulz.

Was the company still afloat *checks watch* a month ago, when it was trading at $17.25 a share instead of $193.60?

Or a year ago today, when it was at $4.13?

I do suspect that, should it descend back down to that kind of valuation, they will get by.
posted by delfin at 3:00 PM on January 28, 2021 [5 favorites]

Or a year ago today, when it was at $4.13?

Yeah I don’t get this. Isn’t the whole deal that people were betting on its failure to begin with? On paper it was literally the company investors most expected to do poorly!
posted by atoxyl at 3:06 PM on January 28, 2021 [5 favorites]

GME still at 193.

No, it's at around 291 in after hours trading. 193 was the close and shows on the top line if you google the stock.

Mouse over the grey trend line.
posted by snuffleupagus at 3:12 PM on January 28, 2021

prescient novel Halting State

I kinda really enjoyed some of the neat background details in that one, which are both quaint yet vaguely on-point today. Outsourced taxi cabs driven via webcam by remote drivers in the developing world, instead of ridesharing wage slaves to be obsoleted once self-driving AI is realized. Weaponized ARGs that are nonetheless still actually presented as commercial games, instead of alternate realities people submerge themselves into via social media filter bubbles.

There's also a whole bit where the Interpol agent discusses the novel's speculative geopolitics- the hyperpowers are China (learned from that book that the Guoanbu is the PRC's equivalent to the CIA/MI-6/FSB), India, and an EU with the Russia merged in, "while the USA takes time out".

the USA went post-industrial first. Their infrastructure is out-of-date and replacing it, now oil is no longer cheap, is costing them tens of trillions of euros to modernize. Plus, they’ve got all those rusty aircraft carriers to keep afloat. It’s exactly the same problem Britain faced in the 1930s, the one that ultimately bankrupted the empire. But today, our infrastructure—Europe’s—is in better shape, and the eastern states are even newer. They went post-industrial relatively recently, so their network infrastructure is almost as new as the shiny new stuff in Shanghai and New Delhi.

Also an independent Scottish Republic part of something called the "British Isles Derogation Zone" in the EU. The money quote is how cstross predicted modern information war:

More likely, it would be a lot more subtle. Footnotes inserted in government reports feeding into World Trade Organization negotiating positions. Nothing we’d notice at first, nothing that would be obvious for a couple of years. You don’t want to halt the state in its tracks, you simply want to divert it into a siding of your choice.

posted by Apocryphon at 3:16 PM on January 28, 2021 [4 favorites]

Yeah I don’t get this. Isn’t the whole deal that people were betting on its failure to begin with? On paper it was literally the company investors most expected to do poorly!

And that's why the WSB folks latched on to this stock because they saw that Melvin Capital was betting heavily on GameStop's failure, and they (WSBs) thought that that position was not only wrong, but could be taken advantage of, and were able to garner enough support to act on that info.

Hedge funds have been operating for the lolz (and lots of $$$) for decades, so if this is in fact just big money screwing over big money, and the collateral damage is borne by the 53,000 employees of GameStop, and possibly taxpayers whose money would be used to shore up the losses of the largest players (to preserve market integrity or whatever lie they can come up with), then maybe nothing's changed and it's all just business as usual.

That said, hopefully the attention this has garnered forces some positive action from regulators, and increases accountability for the hedge fund industry, and Wall Street in general.
posted by nikoniko at 3:22 PM on January 28, 2021 [5 favorites]

The GameStop Craziness Pulls Back the Curtain on the Stock Market

This is, and there’s no other way to put it, hilarious. A bunch of people trading stocks on their phones have brought some of the lords of finance to their knees. They weren’t using some amazing or novel strategy: The run-up in GameStop is just the “pump” of a pump-and-dump scheme, where hype pulls people into a stock before the rug gets pulled out. In fact, that’s what hedge fund managers do all the time, making bets and using research to puff up a stock, then taking the profits off moving a stock, through force of will—theirs—rather than the inherent value of the company.

The only real difference here is that ordinary investors are driving the train, and the hedge fund guys are getting run over. The hedge funders are mad because distorting corporate stock prices beyond the fundamentals is supposed to be their thing, not the work of the hoi polloi. Now, they’ve been outfoxed. If you can think of a better use of $600 stimulus checks, let me know. Never was there a more apt name for an app in this moment than “Robinhood.”

Now, this will not stay hilarious forever; we still have the “dump” part of the pump-and-dump scheme to reach. And there appears to be a lot of institutional money front-running the whole thing, capitalizing on the populist story line to take their winnings. But that’s why this can also be a teachable moment, and a moment to fully re-regulate this entire casino. [...]

GameStop and these other companies really don’t have much of a future, and if those fundamentals mean anything, at some point the bottom will fall out. As righteous as it is, I don’t think app trading heralds some new dawn for our economy. But you can see it as the inevitable by-product of a system built on massive inequality. The little guys figured out how to band together and stick it to the big guys. In so doing, they protected retail companies with lots of workers who now get a reprieve, however brief. They revealed the rot in our system, essentially took over Wall Street, and made a lot of rich and amoral people cry.

posted by tonycpsu at 3:37 PM on January 28, 2021 [6 favorites]

Bernie Sanders:
"The business model of Wall Street is fraud."
posted by snuffleupagus at 3:48 PM on January 28, 2021 [8 favorites]

Further, what would betting naturally that GameStop would go down look like? There are only two ways to do that; if you owned it, you can sell it. If you didn't own it, you could... borrow some shares and sell those, which is a short, and that's the exact thing that makes them fuckers?

Assuming for a moment that the stock market ought to exist, and that money should not instead go directly to workers, or welfare programs, then I think the only rational conclusion should be if you bet on a stock and it goes down you should fucking lose your shirt like the rest of us. I guess it makes me weird to think that wall street shouldn't just constantly amass and hoard wealth all the time no matter what? I dunno.
posted by Mr.Encyclopedia at 4:26 PM on January 28, 2021 [2 favorites]

So much about the stock market and financial instruments just sounds illegal on its face. It isn't, though.
posted by Ray Walston, Luck Dragon at 4:27 PM on January 28, 2021

I just watched Warren on CNBC; while her message is the need for SEC regulation, more interesting is her continued insistence that "We don't know" who is behind the short squeeze, suggesting that it could be the work of competing hedge funds or rich entities conspiring to exploit the situation.

While technically true, I think her position cleverly dismisses the ongoing narrative that this has mainly been driven or triggered by a collective action of online investors. The NYTimes front page says it was "gleeful online hordes" that turned the stock market "upside-down." So for example, either the NYTimes is right or Warren is calling mainstream journalists a liar (or premature). Who is closer to the truth?
posted by polymodus at 4:45 PM on January 28, 2021

This is now an epistemology thread.
posted by Nonsteroidal Anti-Inflammatory Drug at 5:10 PM on January 28, 2021 [11 favorites]

As I always say, Bush v. Gore broke consensus reality.
posted by Apocryphon at 6:07 PM on January 28, 2021 [7 favorites]

Outsourced taxi cabs driven via webcam by remote drivers in the developing world, instead of ridesharing wage slaves to be obsoleted once self-driving AI is realized.

Another great work of speculative fiction of the aughts on this theme, a film this time: Traficantes de Sueños / 夢遊交易所 / Sleep Dealer.
posted by XMLicious at 6:28 PM on January 28, 2021 [1 favorite]

Apologies for again spamming this thread with thinkpieces that I like, but Ryan Broderick, the former BuzzFeed writer who wrote about how a Star Wars: the Rise of Skywalker fan conspiracy theory demonstrate that we're living in a post-QAnon world of constant disinformation warfare, has a couple good pieces on r/WSB. I think this one does some good internet history in charting out that subreddit's possible cultural roots:
Reality Now Is Just Different Dril Tweets Combined At Random:

I’ve thought about what 4chan was like during the Occupy Wall Street era. It’s strange to think that the anonymous message board — though wildly racist and abusive — was considered, in the late-00s, to be a somewhat progressive space. 4chan’s hacktivist arm, what would formally become Anonymous, regularly battled right-wing and authoritarian bogeymen like the Westboro Baptist Church, ISIS, Scientology, and the US security state. [...]

activist Gwen Snyder pointed out something I had never considered about 4chan during the Occupy years — that the users assumed they’d be considered the heroes of the movement for leading the digital warfare of the protests and, when they weren’t, it initiated (or sped up) the site’s radicalization:

"With Occupy, that was one of the first moments where that 4chan gamer culture, that had really become enamored with doing a lot of online stuff, anonymous pranks, like the capital-A Anonymous hacker group, actually showed up in person for something. What we saw there were a lot of these white guys who had been online and came in and thought they were going to be the messiah of Occupy and were just deeply resentful and angry in a lot of cases that they weren't immediately hailed as saviors of the Left, or whatever. And so there was this deep reactionaryism. And it drove a lot of that 4chan backlash."

[...] And, as it happened with 4chan in 2011, r/WallStreetBets’ idiotic shitposting and petty trolling has quickly reached a scale in which it must become political. This is the strange paradox of social media — things that are earnest and serious from the start rarely get enough traction to go viral, but things that go viral at a big enough scale must eventually pivot into something that matters. This explains both the Trump campaign and Fall Out Boy’s career.

[...] But, just 27 days into 2021, it’s clear that the binaries of the Trump era are breaking down. r/WallStreetBets users are extremely politically incorrect (to put it mildly), use Pepe the Frog memes, love Elon Musk, and their logo looks a lot like Trump. They’re also now waging a multi-day campaign to bankrupt hedge funds and have moved billions of dollars into the pockets of individual investors. It’s Occupy Wall Street 2.0, only inverted. Instead of occupying the physical heart of Wall Street, they’re DDOSing its machinery until it starts to literally break down.

He's got a newer article about Who will we be after GameStop? in which we learn that there's a another subculture out there (unrelated to r/WSB) called "weird left finance Twitter", and how cryptocurrency basically follow web traffic data.
posted by Apocryphon at 7:04 PM on January 28, 2021 [11 favorites]

Musk’s tweet sent the stock even higher and it’s really hard not to see it as a slightly veiled threat to anyone who’d short Tesla that he’d send his flying monkeys out to do the same thing.
posted by sjswitzer at 7:29 PM on January 28, 2021 [3 favorites]

The story of the Hunt Brothers attempt to corner the silver market seems relevant here.
posted by anshuman at 8:18 PM on January 28, 2021 [1 favorite]

> Professional Money is on both sides of the trade. There are very openly 'hedge funds and professional money managers' on both sides of all these trades, not just on the short side. They’re openly talking about it. [...]

I found this discussion of what's allegedly going in that subreddit:

https://www.reddit.com/r/AskReddit/comments/l7bl3z/brokers_of_reddit_how_crazy_is_it_where_you_work/ ...

The_Law_of_Pizza
4 hours ago
· edited 3 hours ago
GoldI'd Like to Thank...Helpful3Wholesome2

I don't work on the trading floor, but I'm an attorney who services a variety of financial institutions, including broker/dealers.

This isn't the exciting, hilarious answer you want, but a lot of people had no idea it was even happening until the past 48 hours, and even now, it's mostly just a funny news article about some internet trolls making a bubble.

This is a big deal to the shorting community, but to the other 99% of the financial world, nobody gives a shit.

As much as young people on the internet like to imagine this as an epic, David vs Goliath, Wall Street vs Main Street showdown for the history books, from a bird's eye view it's actually just a brief dumpster fire where a couple hedge funds lost their shirts betting on one little small cap stock. It has happened before, and it will happen again.

In 6 months, nobody will remember or care, except that (maybe) it will become more difficult for retail investors to trade options.

And not because the greedy hedge fund oligarchs forced the SEC to crack down on retail investors. But rather because, when this is all said and done, there is going to be a black hole where most of these retail investors' brokerage accounts used to be, and the SEC and brokerage community will be lambasted for failing to protect unsophisticated investors from a bubble.

I have been monitoring the WSB threads, and while the WSB veterans know that they're making a suicide charge for the memes, they have brought thousands of naive, new investors with them - who predominantly think that they're going to somehow come out on top, not realizing that they're cannon fodder for the more savvy WSB users to exit with gains.

Redditors never seem to stop and think about why the WSB guys know so much about advanced derivatives trading. Or how they seem to know how to access and read from a Bloomberg terminal. Or why there are so many posters there that can seem to drop tens or hundreds of thousands of dollars on complicated meme plays.

How do you think that WSB knew what a short squeeze and a gamma squeeze was, in order to recommend it to all of Reddit?

WSB is a forum for younger finance bros. It's 30-something investment bankers and portfolio managers memeing with each other, and cosplaying as "autists."

If you didn't know what a gamma squeeze was 48 hours ago, you are their exit strategy and the down payment on their next Porsche.
admiralsponge1980
3 hours ago

There’s people on WSB with literal millions tied up in GME. They’re gonna sell waaaaay before $1,000 and screw all the small investors. It’s a gigantic financial prisoners dilemma, and it’s like the world doesn’t realize that WSB used to literally have Martin Shrkeli as a mod. It’s not driven by altruism, it’s driven by greed. The entire thing reeks of astroturfing so some tech bro’s and finance bro’s can make some money.

posted by sebastienbailard at 8:45 PM on January 28, 2021 [49 favorites]

Sebastienbailard, thanks for posting that, because through this whole thread I feel like I've been missing something and it was just me. Now, I may still be missing things, but at least I know that I'm missing something that at least one person who knows about finance would also then be missing.

I don't know almost anything about finance; I know what shorting is, I understand the "short squeeze," (though I only learned about it in the last few days), but that's about it.

With my limited understanding, I don't get is why this is being seen as so monumental as to affect the very foundations of the economy/Wall Street/finance.

GameStop started out at around $18 per share before all this ramped up. It now seems to be hovering around $300 to $350. Let's call it $350. It has around 51 million floating shares. That means the total floating share value is $17.85 billion, right?

The NYSE as a whole has a market cap of over $30,000 billion, right? So this GameStop bubble accounts for 0.056% of the NYSE. Heck, even if GameStop stock were to quadruple in value from its current high level, it would still be 0.2% of the NYSE. While I'm sure that the short squeeze is going to mean a whole lot to the people who have bought or shorted GME, and for Robinhood, and to the SEC (less because of direct impact but more in the sense of leading it to take steps in anticipation of larger, similar future issues), in the overall scale of the NYSE, and the economy as a whole, it seems to me that it would be a little tiny blip.

Why is driving Melvin Capital (which has around 33 employees) and Citron (which apparently is one person) out of business being seen as such a massive blow to the system? I understand that it's not just them, but the folks that lent them money, but in the end it's 0.056% of the value of the NYSE.

Am I (and, by extension, the person sebastienbailard quoted) missing something here?
posted by Bugbread at 9:25 PM on January 28, 2021 [3 favorites]

Edit: To be clear, I can see how this would be a big deal as a precedent, as in "if the SEC does nothing, this could be leveraged again to greater effect in the future," but it feels like this is being discussed as a major blow to the system in and of itself, which is what I don't follow.
posted by Bugbread at 9:27 PM on January 28, 2021

This seems remarkably optimistic.
posted by They sucked his brains out! at 9:28 PM on January 28, 2021

The GME stuff is done now I think (or will be tomorrow), but the idea of targeting specific hedge funds with collective action is kind of incredible. Sure, there’s been “moral investing” for a while, but this is more like financial terrorism.

It’s bold and messy and there will be collateral damage, but it’s gotten more attention to how corrupt the financial system is in 3 days then Occupy did in 12 years. Not to diminish occupy, but the missing ingredient then was organizational tools. That is now a solved problem.
posted by lattiboy at 9:50 PM on January 28, 2021 [10 favorites]

As someone looking in from the outside on both fronts, I think the issue with Occupy wasn't a lack of "organizational tools" but a steadfast desire to not be about any one thing. I read a ton of links about Occupy while it happened, and a ton of MeFi threads about it, and I still don't know what it was about. Anytime someone said "Occupy is about X" ten people would pop up to say "No, it's not".

This time, on the other hand, people are saying "The stock trading system allows the rich to take money from the poor but not for the poor to take money from the rich" and ten people are popping up saying "Yeah, exactly!"
posted by Bugbread at 11:06 PM on January 28, 2021 [7 favorites]

the idea of targeting specific hedge funds with collective action is kind of incredible

Market Forces has been doing good work in this space for some while now, if you're looking to get involved in something that doesn't require cozying up to a pack of pepe-pushing manbabies trolling for the lulz.
posted by flabdablet at 11:26 PM on January 28, 2021 [1 favorite]

The Angry Philosopher On #Stonks
@OfficialAPoD

"Oh you silly poors, six hundred dollars is a *lot* of money if you invest it wisely and NO WAIT NOT LIKE THAT HOLY SHIT NO STOP WHAT ARE YOU DOING?!?!?!?"
5:48 PM · Jan 28, 2021

posted by sebastienbailard at 3:07 AM on January 29, 2021 [8 favorites]

> Edit: To be clear, I can see how this would be a big deal as a precedent, as in "if the SEC does nothing, this could be leveraged again to greater effect in the future," but it feels like this is being discussed as a major blow to the system in and of itself, which is what I don't follow.

My impression is that few if any thinks this is somehow a blow to "the system", if they're paying nominal attention. It's like imagine Trump as somehow a blow to "the system" rather than one of the many inevitable and natural products of the system itself. Even the "fuck the Wall Street, GME!" people are a bit analogous to the "fuck the RINO, MAGA!" cohort, except they may be even much smaller a minority than the MAGA. Like the MAGA, they may imagine themselves as winners against "the system", but really they are the material means of the system's working-as-intended functioning.
posted by runcifex at 3:11 AM on January 29, 2021 [2 favorites]

CNBC has recently outed DeepFuckingValue aka the guy who went from 55k->22M as a former MassMutual financial advisor. Not exactly a stimulus check reddit bro everyone keeps talking about. I identified this upthread simply based on the fact that non-investment types don't have 55k to invest on a shitty stock based on speculation, let alone years this whole thing happened. He obviously identified the gamma squeeze early.

Big thanks to Metafilter for keeping this discussion civil. I got downvoted on WSB because the FT printed an article and quickly a retraction on WSB being linked to the alt-right. I pointed out they did what good reporting does, issued a retraction quickly and that the FT is a well respected institution. Furthermore, the insular nature and use of in-group language reflects the alt-right. It'll be years before we get a real Bethany McLean like indepth story on what happened, again what good journalists do, but daily financial reporting is struggling and doing their best as they're used to trying to decipher the language financial firms, not online message boards.

My local decidedly non financial city has their own subreddit (Kansas City). They were going nuts over this and I pointed out that Robinhood has everyone on a margin account (Reg T), and thus have a lot of say over what they can do with your trades. I also pointed out a couple other things that were neutral but gave to the complexity of what firms like Melvin were doing to get to 140% short, while stressing it was speculation. Again, no one is liking anything but the populist narrative that this is all a bunch of normal people getting rich off a bunch of evil hedge fund guys.

Melvin was not making a bad bet except that they were being too risky on a company that was worth more cash than their market cap. Except that value alone doesn't really value a company, who knows what Melvin saw in their financials that made them think a 140% short was good. They're certainly not going to give away their models.

I am not in finance, I only have an interest in it as I wanted to go into finance until I realized in 2007 to be a quant I need a phd in math or something similar to even begin to understand the models. I now know a lot of models aren't run so rigorously and some of the mystique is based on that but I do know enough to know that trading is not what it was in the 1950s. I also know that you don't move a stock like GME without having a lot of other professional traders moving large amounts of money into it. If you didn't know about the Greeks and more importantly if you didn't know how Robinhood worked before this I'm not saying you shouldn't be trading, but you're not Gordan Gekko you're just gambling. Whether or not that's okay is debatable.

I guess there's two types of people: those that saw the movies like Big Short, snorted, and acted like they knew everything and people like me who read about LTCM, Black-Scholes, Mandelbrot and realized that the markets are incredibly complex, random (but not Gaussian!) and are way more complex than an average investor can comprehend. I personally just put my money in an index fund and don't touch it. If I want to gamble I gamble on sports. Mostly because my bookie is from Brighton Beach and not some dip that uses the terms "tendies" and other insider lingo. What's interesting is that he often hedges his bets with other bookies, and I've often thought about creating synthetic options and things like that on games between different bookies but don't really want the shit kicked out of me.

My point being is that I love Metafilter because if I'm wrong I'm corrected and it is usually cordial. On Reddit I could be wrong, or in many case right as I strive to be as close to the truth as possible, and if it doesn't fit the populist narrative it gets thrown in the memory hole. Some already comfortable but probably not rich rich people will get rich off this. I'm sure things like Robinhood will be correctly regulated (I had more issues with the fact that they made it look like a game with the way they did charts and UX). This is not one voice, one vote, power to the people.

To me the interesting parts of trading are not the money but the mathematics and the technology behind it (FPGA, microwaves, etc), but at this point I digress.
posted by geoff. at 6:53 AM on January 29, 2021 [20 favorites]

Robinhood App back to a 4 star rating: Google is actively removing negative reviews of the Robinhood app from the Google Play Store, the company confirmed to The Verge. After some disgruntled Robinhood users organized campaigns to give the app a one-star review on Google’s Play Store and Apple’s App Store — and succeeded in review-bombing it all the way down to a one-star rating — the company has now deleted enough reviews to bring it back up to nearly four stars.

posted by Mitheral at 7:17 AM on January 29, 2021 [2 favorites]

Do app ratings really mean anything to anyone? To me they're like the BBB - a known place to vent your complaint but in the end doesn't change a thing.
posted by JoeZydeco at 7:19 AM on January 29, 2021

If I'm looking for an app I don't even consider apps below a 3 or often even 4. If there are a 100,000 reviews saying the app company is scammy, doesn't do what it claims, takes ypour money and they won't let you buy anything, etc. I wouldn't even consider a 4.
posted by Mitheral at 7:22 AM on January 29, 2021 [4 favorites]

IE: anyone here ever install any app, especially an app wanting banking information, with a 1.1 star rating?
posted by Mitheral at 7:24 AM on January 29, 2021 [5 favorites]

Google salvaged Robinhood’s one-star rating by deleting nearly 100,000 negative reviews

That's a spectacular self-own on Google's part. Who is going to trust its app ratings system at all once it becomes widely known - and it will - that Google will actively screw with ratings to suit its money-market mates?

If the company behind the Robinhood app pissed 100,000 people off that badly then the app deserves its one star rating. What was Google thinking?
posted by flabdablet at 7:33 AM on January 29, 2021 [11 favorites]

Sure, but if I want to get Robinhood and start daytrading because my friends say it's awesome, am I really going to bail because it's not a 4 or 5-star app? It's not like I'm browsing for the best astrology app or Cwazy Cupcakes game or something.
posted by JoeZydeco at 7:33 AM on January 29, 2021 [1 favorite]

The trick is to buy the app when it has a 1-star rating and then sell when it has a 5-star rating.
posted by oulipian at 7:37 AM on January 29, 2021 [53 favorites]

I am intrigued by your advice and wish to subscribe to your newsletter.
posted by flabdablet at 7:39 AM on January 29, 2021 [1 favorite]

but if I want to get Robinhood and start daytrading because my friends say it's awesome,

Robinhood does a lot of advertising ( I knew what it was previously just because of it), presumably because it grows their user base. At a minimum it would give me pause. But then I'm not someone who gambles on the stock market, I'm probably more risk adverse than their user base.
posted by Mitheral at 7:55 AM on January 29, 2021

Oh boy. Between the class action suits already being filed and more spinning up in the wings and now the app review removals this is going to blow up in spectacularly dumb ways.

Way earlier in this thread I almost posted a comment related to comparing and contrasting previously imagined cyberpunk futures to the present and how instead of getting nihilist/anarchist tech gangs like the Panther Moderns from Neuromancer we got the chansites and legit cultural meme wars with intentionally weaponized stupidity and I just don't know any more.

I do know that the establishment just jammed a very short stick into a very large and angry beehive and I'm not at all surprised by it.

It's like we're getting Occupy Wall Street 2.0 but with one of the other definitions of the word occupy. Instead of occupy as in residing in and taking up space it's going to mean keeping someone/something busy.

I'm really curious how the establishment is going to react to this. A major part of me is hoping it will result in legislation like taxes/fees per trade or share or other major changes to stock trading rules that turn around and bite the financial establishment's ass real good, but I don't have a lot of hope that they're that myopic - but here we are and it is doubling and tripling their bets on the "rules for thee, not for me" betting line.
posted by loquacious at 8:19 AM on January 29, 2021 [8 favorites]

this is going to blow up in spectacularly dumb ways

"Spectacularly dumb" is to the USA as the pink bath ring is to the house in The Cat In The Hat Comes Back.

Not sure I want to know what VOOM is going to look like.
posted by flabdablet at 8:41 AM on January 29, 2021 [2 favorites]

Jon Sarlin at CNN Business With a deep dive: “Inside the Reddit army that's crushing Wall Street”
posted by Going To Maine at 9:05 AM on January 29, 2021

CNBC has recently outed DeepFuckingValue aka the guy who went from 55k->22M as a former MassMutual financial advisor.

This is really fucking funny.
posted by atoxyl at 9:11 AM on January 29, 2021

The only guaranteed outcome of this is that barstool will hire or sponsor a DFV YouTube or twitch channel.
posted by cmfletcher at 9:25 AM on January 29, 2021 [1 favorite]

Janet Yellen, Biden's new Treasury Secretary, received $800,000 for a couple of speeches to the Citadel hedge fund at the center of this financial commotion.
posted by JackFlash at 9:54 AM on January 29, 2021 [4 favorites]

John LeFevre: "The “keynote speech” (cost > $100k) at every single banking conference I’ve ever been to (and I helped organize a few) is so dry, tedious, and vapid that we all knew it was a legalized bribery/kickback scheme."
posted by JoeZydeco at 10:00 AM on January 29, 2021 [7 favorites]

The only guaranteed outcome of this is that barstool will hire or sponsor a DFV YouTube or twitch channel.

He’s already got a YouTube channel.
posted by atoxyl at 10:15 AM on January 29, 2021

Janet Yellen, Biden's new Treasury Secretary, received $800,000 for a couple of speeches to the Citadel hedge fund at the center of this financial commotion.

Has she adjusted any department policies in favor of Citadel or other hedge funds connected to meme stocks?
posted by They sucked his brains out! at 10:16 AM on January 29, 2021 [3 favorites]

Yeah, the whole "received money for speeches" thing is, like, the least convincing criticism of anybody I can imagine.
posted by Justinian at 10:16 AM on January 29, 2021 [10 favorites]

So when is the Fund that tracks WallStreetBets and "professionalizes" the Reddit army mobilization going to appear? A WallStreetBets index fund sort of thing. Asking for us folks who are unable to follow along in real time.
posted by inflatablekiwi at 10:21 AM on January 29, 2021 [5 favorites]

If the company behind the Robinhood app pissed 100,000 people off that badly then the app deserves its one star rating. What was Google thinking?

From my admittedly biased point of view, I imagine Google was thinking the review system is intended to rate apps not companies. I mean sure, on a micro scale, a 1 star review over a customer service issue is fine, but review bombing feels like it crosses a line. Yes, it sucks that you can't buy the shares of a stock during a community incited pump and dump scam, but everyone can still buy shares of VOO just fine.

There's also a mild risk of copycats outranking the official app; I don't think it's in the best interests of consumers for a scammy knockoff with no reviews to be presented ahead of the official app, but it looks like that's being well policed at the moment.
posted by pwnguin at 10:24 AM on January 29, 2021 [1 favorite]

if google is removing negative reviews because they are about the company and not the app, this seems like extremely poor judgment on their part. i'm going to make my opinion known by giving one star to every google app i can find on the play sto...

...curses.
posted by logicpunk at 10:31 AM on January 29, 2021 [1 favorite]

So when is the Fund that tracks WallStreetBets and "professionalizes" the Reddit army mobilization going to appear? A WallStreetBets index fund sort of thing. Asking for us folks who are unable to follow along in real time.

May it please the court, I present: URTY, a triple leveraged smallcap ETF:

This investment seeks daily investment results that correspond to three times (3x) the daily performance of the Russell 2000® Index. The fund invests in financial instruments that ProShare Advisors believes, in combination, should produce daily returns consistent with the fund's investment objective. The index is a measure of small-cap U.S. stock market performance. The fund is non-diversified.

Or, if you want the TSLA version:

The investment seeks daily investment results, before fees and expenses, that correspond to three times (3x) the daily performance of the NASDAQ-100 Index®.

posted by pwnguin at 10:31 AM on January 29, 2021 [2 favorites]

Yeah, the whole "received money for speeches" thing is, like, the least convincing criticism of anybody I can imagine.

Yellen has received over $7 million in just the last two years from, among others, Citi, Goldman Sachs, City National Bank, UBS, Citadel LLC, Barclays, Credit Suisse.

These are the very same entities that have paid over $250 billion in fines and penalties for fraud and corruption. That's one hell of a lot of fraud and corruption, $250 billion is. These are the very same entities that Yellen is supposed to directly regulate who have magnanimously given her millions of dollars.

Not as bad as Mnuchin is a very low bar. Can't we do better?
posted by JackFlash at 10:34 AM on January 29, 2021 [15 favorites]

There is also RETL, which is a 3x levered ETF of retail companies, of which GME is some ridiculously outsized percentage of the NAV these days.
posted by notoriety public at 10:34 AM on January 29, 2021 [2 favorites]

Yeah, the whole "received money for speeches" thing is, like, the least convincing criticism of anybody I can imagine.

$800,000 is more than a person can expect to earn in their entire life working at minimum wage. It shouldn't be hard to see why this is a problem.
posted by Mr.Encyclopedia at 10:47 AM on January 29, 2021 [14 favorites]

Obligatory xkcd and also this one.
posted by Riki tiki at 10:50 AM on January 29, 2021 [3 favorites]

This whole thing has me thinking WSB discovered the financial equivalent of counting cards at the blackjack table. Not illegal but the casinos will have two burly meatheads take you out via the back door and rough you up a bit before making it clear to never come back.

When the collapse comes (and it WILL come), the last person holding GameStop stock will be supremely fucked. Capital will make sure it is not them.
posted by Big Al 8000 at 11:32 AM on January 29, 2021 [7 favorites]

And 15 Republicans voted against her, presumably for being not corrupt enough.
posted by notoriety public at 12:58 PM on January 29, 2021 [7 favorites]

I keep seeing articles, tweets, suggesting that the crash will hurt regular people who didn't sell their stock fast enough (versus any professionals and firms who might be participating), but I thought that their motive and message has been to collectively hold their stocks to help create the short squeeze (for moral/ideological reasons), so a rational individual participant should be prepared to lose whatever money they spent in this exercise. I never studied finance, is that somehow incorrect? Is there more to it?
posted by polymodus at 1:25 PM on January 29, 2021 [1 favorite]

I think Robinhood is in a damned if you do damned if you don’t situation. Do they want lots of their customers to end up as bag holders in a pump and dump scheme / obvious bubble.
posted by interogative mood at 1:32 PM on January 29, 2021 [1 favorite]

There are people who are in this to take advantage of the situation and make money at the expense of the hedge funds. They would be, presumably, among the first to cash out when it seems prudent.

There are people who are in this to stick it to the hedge funds one way or another, literal economic suicide bombers holding onto their stock until it is absolutely certain that it has hurt Melvin et al. It is hoped that they are either fully cognizant of their actions or have sufficiently discretionary income not to care.

The worry is that there are also people who are now bandwagoning in the mistaken belief that the stock is up and will STAY up. People who are, let's say, jumping in heavily at $300 in the belief that it will rise to $500+. Or who are now buying heavily in AMC or Nokia or Blackberry hoping for a big payday, not realizing that the payday (if there will be one) belongs to those who bought it at rock bottom and who cash out at the right time.

So when Junior's college fund plummets because GME went from $300 to $30... which it will, but we do not know precisely when yet... that's whom the worry is about.
posted by delfin at 1:36 PM on January 29, 2021 [4 favorites]

Dan Davies (longtime, very entertaining writer/blogger, but this is actually hits his day job expertise in finance) has his take. He points out any experienced investor would expect this to be shut down (as it was)--the RobinHood crowd is offended but it wasn't changing the rules so much as applying them.

He's not unsympathetic though:

Most importantly, it was a largely self-organising phenomenon. For most of stock market history, orchestrating a pool of people to manipulate markets has been something only the most skilful could achieve. Some of the finest buildings in New York were erected on the proceeds of this rare talent, before it was made illegal. The idea that such a pool could coalesce so quickly and without any obvious sign of a single controlling mind is brand new and ought to worry us a bit.
[ . . . ]
Speculation is genuinely necessary on a stock market – without it, you could be waiting days for someone to take up your offer when you wanted to buy or sell shares. But it’s a necessary evil, and it needs to be limited. It’s a shame that the Redditors found this out the hard way.

posted by mark k at 2:31 PM on January 29, 2021 [1 favorite]

> I imagine Google was thinking the review system is intended to rate apps not companies.

What are the crucial differences between the app and the company?
posted by sebastienbailard at 2:38 PM on January 29, 2021 [2 favorites]

Do they want lots of their customers to end up as bag holders in a pump and dump scheme / obvious bubble.

One of their former customers committed suicide over what was effectively a software bug with the UI. Robinhood probably doesn't care who loses money, unless it is the bosses, or there are liability issues.
posted by They sucked his brains out! at 3:01 PM on January 29, 2021 [5 favorites]

May it please the court, I present: URTY, a triple leveraged smallcap ETF

I read the prospectus as best I could as a lay person. So that's really a "feel like gambling a little?" fund right? Like something you may hold for very short periods and then scuttle out of. I see their fourth largest stock holding by value today is Gamestop....
posted by inflatablekiwi at 3:02 PM on January 29, 2021

I read the prospectus as best I could as a lay person. So that's really a "feel like gambling a little?" fund right? Like something you may hold for very short periods and then scuttle out of. I see their fourth largest stock holding by value today is Gamestop....

Any of the levered ETFs should only be held for short periods, because going to zero over time is literally baked in! They intend to model "if X goes up 1% today, we go up 3% that day, and if it goes down 1% today, we go down 3% that day". But- if X goes up 1% in a day, and then down 1% the next day, X is where it was before. You, however, are at 0.9991 of where you were before, because the 3% down is off of a larger basis than the prior day's 3% up! Same decay happens if you go down before you go up. The decay happens faster if the volatility is higher, but there is always decay. These things periodically have reverse splits to ratchet themselves back up the hill to fall again.

As for Gamestop being a grossly overweight part of the composition, that's simply a function of the price having ballooned so fast. These funds rebalance only occasionally, and the very reasonable small fraction of shares of GME it had at the rebalance contributed only a small fraction of the total net asset value. But if that same number of shares is suddenly worth 100 times as much? Something that was only a tiny fraction of your composition before is now a MUCH larger piece. It's not like they bought in on it! That's just from them holding it!
posted by notoriety public at 3:16 PM on January 29, 2021 [4 favorites]

Not to abuse the edit window, I checked up on this and my reasoning is wrong but the conclusion is still right. I work in the industry, I should be more diligent in writing about it.

The better description is that the fund has to use leverage (via options, futures, etc) to achieve these returns, and continuously hedge and rebalance. Those processes are expensive, and this is on top of the expense ratio of the fund. So there is a constant drag on the fund's assets in order to continuously achieve the leveraged movement. They DO go to zero over time, just look at any of their long-term charts. You get short term bumps from whatever market event they are intending to price for, but it gets constantly chipped away by the rebalancing and the expense ratio.
posted by notoriety public at 3:25 PM on January 29, 2021 [2 favorites]

Robinhood has opened limited options contracts for the stocks they'd previously suspended from using them. It seems like they've expanded the list of affected stocks, too--someone who knows more about investing than I do might be able to explain what's happening here.

(I use Robinhood, but just to buy and hold index funds. This whole to-do is making me reconsider whether Robinhood is the place I want to do that.)
posted by box at 3:34 PM on January 29, 2021 [2 favorites]

Michael Burry says this can't happen again:

There really can't be another GME. Nothing else is/was even close to as shorted (100+% of float), so small (microcap) and so hated/ignored/dismissed prior to the #thebigshortsqueeze. It was a uniquely perfect set up. There won't be another like it. Much like #thebigshort.

A situation where hedge funds got greedy and over-shorted a stock beyond their capacity to sell, and non-institutional investors caught on and dogpiled on them? Sure, the firms will probably put in procedures to prevent it. But I doubt this will be the last spectacular r/WSB stock raid, as with other stories in the news like Hertz last year, the internet will find a way.
posted by Apocryphon at 3:42 PM on January 29, 2021 [3 favorites]

Has she adjusted any department policies in favor of Citadel or other hedge funds connected to meme stocks?

She hasn't that I know about but I don't follow her. I do live in Illinois though so I know that Ken Griffin dropped $60 million dollars to torpedo Illinois's progressive income tax ballot initiative and so he has directly cost me and most of the population of Illinois hundreds to thousands of dollars a year depending on how the state increases the flat rate income tax that it currently has and given the state's finances it is going to be a big increase that will have to last a long long time.

So I am by default suspicious of anyone who takes money from Citadel.
posted by srboisvert at 4:06 PM on January 29, 2021 [4 favorites]

The CEO of Robinhood is claiming that the problem involves clearing house deposit requirements
posted by interogative mood at 4:22 PM on January 29, 2021 [1 favorite]

My understanding of the Google store situation is that automated pruning kicked in when review bombing was detected. Presumably, after the bombing ends and the review flood slows, pruning will stop and reviews will start being reflected again, good or bad. Can someone with access to the US Google store tell me what the review score is now? (The app store shows different things depending on where you live, and Robinhood doesn't show up in the app store from here in Japan)
posted by Bugbread at 4:30 PM on January 29, 2021 [1 favorite]

Can someone with access to the US Google store tell me what the review score is now?

3.4/5
posted by No One Ever Does at 4:32 PM on January 29, 2021 [2 favorites]

Thanks!
posted by Bugbread at 4:37 PM on January 29, 2021

Oh, so the begging-for-ageist-insults CEO is gonna tell us "what really happened." Part 1 in his "avoid prison" strategy after his confessions yesterday.
posted by rhizome at 5:06 PM on January 29, 2021

So, the “meme stock” movement apparently saved AMC.

Their creditor made a tidy 5%-7% return instead of taking a haircut on the debt in bankruptcy.

So how is this sticking it to the man, again?
posted by Big Al 8000 at 5:24 PM on January 29, 2021 [3 favorites]

The better description is that the fund has to use leverage (via options, futures, etc) to achieve these returns, and continuously hedge and rebalance. Those processes are expensive, and this is on top of the expense ratio of the fund. So there is a constant drag on the fund's assets in order to continuously achieve the leveraged movement.

So basically an automated WSB, rite?
posted by pwnguin at 5:26 PM on January 29, 2021

So how is this sticking it to the man, again?

As always, I'm confused. So, from the article, "a private equity firm named Silver Lake — and private equity firms are popularly considered the “bad guys” in this snobs-versus-slobs drama" ended up saving AMC because of this whole meme thing, and "although the theater chain’s stock price has tumbled and soared since the move, the debt relief is permanent."

So, if I'm reading this right, a company that was poised to go bankrupt got saved, so lots of people are keeping their jobs, and if the stock takes a tumble now, that won't affect the company, it will only harm the private equity firm.

If "the man" in this scenario is private equity firms, is this not an example of "sticking it to the man"? Or, at the very least, "doing something which gets the man to bail out people who are hurting, and in the process take on all the risk themselves"?

Or is AMC "the man" here? If so, why?
posted by Bugbread at 5:55 PM on January 29, 2021 [6 favorites]

Well, the consensus on the sub itself is that they saved AMC and it's a good thing.

The message on GME still seems to be HOLD! HOLD! HOLD!

My favorite comment is, "I will leave this stock to my grandchildren and tell them I'll haunt them if they ever sell it." The memes are fascinating. But, these being generally terrible people I'm not really sure how genuine any of it is.
posted by VTX at 7:19 PM on January 29, 2021 [2 favorites]

So basically an automated WSB, rite?

Not to stuff the thread full of cstross literary allusions (though would it be so bad?) but a very entertaining worldbuilding element of the part of Accelerando (Creative Commons freely-licensed! So free to read on his web site and elsewhere on the intertubes, though I'm sure he wouldn't mind some remuneration.) that takes place in the twenty-first century is, the international legal system has been augmented with smart contracts (like present-day real-world Ethereum and other blockchainery) and one of the elite hacker protagonists makes what's almost like Conway's Game of Life hybrid software/legal constructs, networks of smart corporations that create and dissolve other self-reproducing corporations for a variety of purposes.
posted by XMLicious at 9:09 PM on January 29, 2021 [3 favorites]

Ah, yes, vulgarity is a signifier of the working classes, and thus this paradox of stock investors using such language is best contextualized as the unconscious performativity of the petite bourgeois (apparently in order to prevent their threads from being displayed on powerpoint by company analysts in the aftermath)
posted by polymodus at 10:50 PM on January 29, 2021 [2 favorites]

If "the man" in this scenario is private equity firms, is this not an example of "sticking it to the man"? Or, at the very least, "doing something which gets the man to bail out people who are hurting, and in the process take on all the risk themselves"?

Or is AMC "the man" here? If so, why?

The private equity creditor isn’t holding the stock. They promptly resold those shares back into the market, netting a profit of somewhere between five and seven percent. AMC effectively settled their debt for nothing, Which, yay? The jobs were saved? By being a poorly-run commodity business with excessive debt, they somehow got Joe Random Speculator to pay their bills and take all the risk off AMC and Silver Lake’s hands. And there are still tons of AMC theatres sitting idle and workers furloughed because of COVID. Nothing changed for the workers.

Again, who played who in this scenario?
posted by Big Al 8000 at 11:35 PM on January 29, 2021 [3 favorites]

On the other hand, nothing changed for the workers.
posted by rhizome at 11:49 PM on January 29, 2021 [5 favorites]

I mean everything is made up and the points don't matter.
posted by Carillon at 1:26 AM on January 30, 2021 [2 favorites]

Brockian Ultra-Cricket
posted by XMLicious at 2:02 AM on January 30, 2021 [2 favorites]

By being a poorly-run commodity business with excessive debt, they somehow got Joe Random Speculator to pay their bills and take all the risk off AMC and Silver Lake’s hands. And there are still tons of AMC theatres sitting idle and workers furloughed because of COVID. Nothing changed for the workers.

The really perverse move would be if they tried to save MoviePass, next. (Does that still trade, even?)
posted by nobody at 4:37 AM on January 30, 2021 [2 favorites]

DogeCoin is up again.

its like the writers are like :

"i'm out. i'm dry. covid, trump, brexit, bolsonaro, wildfires. i can't do this any more. i've got no new material for 2021 .......what are we gonna do"

"weellllllll your nephew chad is over there ripping giant bong hits?"

"ok lets give him the pen"
posted by lalochezia at 5:33 AM on January 30, 2021 [6 favorites]

I think the intended self-deprecation needs to be considered in when one judges their name calling.

I do not.
posted by EatTheWeek at 6:55 AM on January 30, 2021 [1 favorite]

if they tried to save MoviePass, next. (Does that still trade, even?)

Its parent company does. It's doing about as well as you might expect.
posted by DevilsAdvocate at 9:01 AM on January 30, 2021

Ethereum and other blockchainery

I swear I read that first as “blockchicanery” and I was utterly delighted and awed at your talent with phrasing.
posted by nickmark at 9:19 AM on January 30, 2021 [18 favorites]

A question for folks: my finance understanding is enough better than that of a wooden post that I know what “ETF” stands for, but not so much better that I really feel confident I know what it means. Am I right that it basically means “a mutual fund you can buy and sell as if it were a single stock” (as opposed to “a mutual fund you can only invest in by handing your financial adviser a check to invest for you”)?
posted by nickmark at 9:23 AM on January 30, 2021

Brockian Ultra-Cricket

Ah, belgium! Not again!
posted by loquacious at 9:26 AM on January 30, 2021 [1 favorite]

Re: AMC several weeks before this went down I heard from auditors at a bar (AMC HQ is maybe 10 minutes away from me) that some locations were really profitable and AMC was actually not doing that poorly. They didn’t expand further but I was sober and they were not but I have no idea why KMPG auditors would lie about something like that. I’m guessing AMC owns a lot of adjacent property to freestanding theaters, negotiated good leases where they could as replacing a theater is hard and expensive for landlords, and probably received kickback from theaters from pulling movies and going VOD. Where they are open apparently they’re doing great showing second run movies which I guess the costs to them are near zero while still reaping high concession prices.

I know nothing about the movie theater business but it does not surprise me there’s a complex financial web that triggered all kinds of payoffs when studios were forced to skip theaters. I’m not saying they’re doing great but when you’re making money off that and having people see movies where distribution cost is near zero yet still charging the same the math isn’t hard to do.

Also renting out theaters was a thing before the pandemic. I had some wealthy friends do it for kid’s birthday parties and they swear by it. The kids can talk and have fun and it makes them feel special. I’m sure it wasn’t cheap but it wasn’t Jay-Z expensive. I’m sure a couple hundred bucks off peak, I might do it for my next birthday party as it allows people something to do and makes the non-drinkers feel less awkward. Also let’s my friends with kids participate without needing a babysitter.

Bit off topic but WSB might have pumped life into GameSpot but AMC was not doing well but not on the brink of collapse. Especially after the pandemic lifts I would totally binge something like WandaVision over several nights in a theater with friends rather than at home. Would be nice if theaters could create a lounge area for friends to quietly discuss things if they go down this route of non-traditional showings.
posted by geoff. at 10:05 AM on January 30, 2021 [3 favorites]

Louis Rossmann who is no stranger to dealing with large companies that make up the rules to suit themselves has a good take on the GME market manipulation.
posted by Lanark at 10:13 AM on January 30, 2021 [1 favorite]

I right that it basically means “a mutual fund you can buy and sell as if it were a single stock”

A key difference is that the price of ETFs is generally just a reflection of the stocks they hold, but for mutual funds/investment trusts part of their value is the markets opinion of how well managed the fund is. There are pros and cons to this, sometimes a fund will trade at a discount allowing you to buy a bucket of stocks for less than they would cost individually. On the other hand if you buy this years superstar fund and then things go wrong, the value can fall further than the same stocks would in an ETF.
posted by Lanark at 10:26 AM on January 30, 2021

(On a personal note near my first job out of college nearly 20 years ago AMC was having real trouble reconciling online sales with in person sales. If something sold out they faced the classic problem of perhaps someone was in the middle of paying online when someone in person bought the ticket. I proposed a CQRS messaging system the inventor of Rhino Service Bus used at Amazon which is let the order go through and send an email after informing it was sold out with a coupon. This is the classic way of dealing with the problem now. At the time they were really conservative and allowed no dependencies that weren’t in the Microsoft namespace and had some cludgy database way of dealing with it like cutting off online orders if it got to a certain capacity. They even had a Microsoft “architect” on-site. Very not innovative and classic example of a company not needing to innovate because they were making so much money. See NFL and ReactJs as another example of a brand so strong they ignored some huge innovation potential. Hopefully with shakeups and layoffs they realize there’s huge room for innovation and that this will come before they get bought out by a high tech streaming service. They just need to create an innovation lab and foster new ideas. Would love to see them get a new CEO from Netflix or big tech who isn’t afraid to fail fast and not upset the cash cow.)
posted by geoff. at 10:26 AM on January 30, 2021 [1 favorite]

There's a Wikipedia article on this of course, featured in the front page current events section, entitled “GameStop short squeeze” at the moment.
posted by XMLicious at 5:15 PM on January 30, 2021

The CEO of Robinhood is claiming that the problem involves clearing house deposit requirements

This is also one of the reasons some people think there's potential for wider contagion -- paralysis of the clearinghouses if a further short squeeze does occur, such that trading of other stocks is impossible, not just GME. But then you'd expect its trading to be halted and the mess unwound slowly? By the government, if necessary. Rather than the clearinghouses self-immolating and leaving their insurance companies to clean up the mess. (The other reason is sell-offs of other stocks by hedge funds caught in the squeeze, as was speculated contributed to the Dow & SP's minor slide at the end of the week.)

And whatever the CEOs of the brokerages are saying, there is something at least unwholesome in appearance about brokerages restricting purchases but not sales amidst a PR blitz and what appeared to be short ladder attacks -- hedge funds selling back and forth to each other at lower prices at small volumes to push the price down, together scaring people into selling scarcely available shares. Share the funds can then snap up at the depressed price to cover their shorts at less of a loss and relieve the pressure.

However that was cut short on Friday at around $250 (rather than well under $200 as earlier in the week) when other large entities with access to HFT stepped in on the long side and started intercepting those ladder trades.

So it's not just WSB lunatics on the long side of this now. Other big players are wading in. With enough heft to perhaps give credence to the worries about contagion. But, on the other hand, those players are likely to throttle their plays to avoid that, in a way WSB's herd behavior can't.

The most recent data freely available says GME has a short interest of 68.13M shares against 69.75M shares outstanding, with a 249.67% float and 6.31 days to cover.
posted by snuffleupagus at 6:22 PM on January 30, 2021 [4 favorites]

The reason GME became gameified was because they did naked short selling right out in the open. Naked shorting is when you sell stocks that you don’t own, and haven’t even bothered to borrow. It’s illegal, but hedge funds do it. In this particular case, they were naked between 30-40% above all the shares that exist on planet earth.

When you borrow a stock to short it, you pay a fee, and an APR that compounds daily. Example, I have shares of GME, and I’ve set the lend fee at 32%, and the apr at 89%. If you want to borrow my shares, it will cost you, and I can call those shares back at market value whenever I want.

Currently, the two largest holders of GME, blackrock and someone else, have between them more than 50% of the available shares, and they are holding. Their lending rates are close to mine.

Melvin put them selves in an infinite loss loop, by naked shorting, then trying to drive the price down below their short. It didn’t work because wsb collectively snapped up shares as soon as Melvin dumped them. Once it got attention, whales started buying.

Companies like Melvin and citadel destroyed our economy by shorting human needs like housing. Every dollar I spent buying GME was money I’m willing to lose. This is a casino, sir. If I can help burn just one billionaire to the ground, then it’s money well spent.

Also, /wsb is not the horrible pit of terrible that people have made it out to be. It skews young, and they use young language, but just in the last couple of days, multiple people have taken winnings off the table and bought games, toys, and equipment for children’s hospitals. As someone openly female on wsb, I’ve gotten no shit.

That said; To the mooon, my fellow monkeys. GME go brrrrr.
posted by SecretAgentSockpuppet at 7:01 PM on January 30, 2021 [21 favorites]

But then you'd expect its trading to be halted and the mess unwound slowly? By the government, if necessary.

So the government divvying up private assets, you say? I previously was just watching this out of curiosity, but now I know what I want to see.
posted by Literaryhero at 7:11 PM on January 30, 2021 [2 favorites]

GME's biggest holders.

AFAIK, short positions don't have to be reported except in aggregate for a stock, to FINRA, twice a month.
The more granular data on shorts is third party analysis using private data sources.
posted by snuffleupagus at 7:31 PM on January 30, 2021 [3 favorites]

somewhere someone said they put in the amount they would pay to punch a billionaire hedge fund manager squarely in the balls. i can understand that.
posted by lazaruslong at 7:36 PM on January 30, 2021 [10 favorites]

Edit to add: WSB is the punch and judy of this entire escapade. The real action is happening with hedge funds after hours and behind the scenes. It's why you'll see tranches "ask and sold" in lots, driving the price lower with each transaction.

Melvin has enemies besides redditors. WSB is being paraded around on the news, and yes, some folks did get in early enough that this is life changing levels of gain for them. But that's not true for everyone, or even most.

As a rule, when someone on the forum has said "should I gamble my rent", the resounding answer has been "JESUS, NO!" Just like many, many, many people, myself included, told people not to buy on margin, don't use credit to buy poker chips.

There was a thread asking people what they paid for their shares, not for loss/gain porn, but because there is a large sentiment amongst the crowd, that we should hold the squeeze until we've met the buy in of the highest bidder on day X. In other words, try to hold the squeeze until at least $y. But wsb has no real control. Collectively, we can't come anywhere near the millions of shares being held by other hedge funds. Any of the large industrial stockholders could dump at any minute, but I'm guessing they're making more in lending fees/interest than they would by selling and relieving pressure on Melvin/Citadel.

What is true about /wsb is the David vs Goliath mentality. They want to kill the Gibson.
posted by SecretAgentSockpuppet at 7:48 PM on January 30, 2021 [11 favorites]

I'm not sure who needs to hear this, but it's really been preying on my mind, and well I guess there's no easy way to say it so I'll just put it out there: that robinhood CEO looks like mid-80s Steve Perry and it feels so good to get that off my chest
posted by logicpunk at 8:19 PM on January 30, 2021 [1 favorite]

Any of the large industrial stockholders could dump at any minute, but I'm guessing they're making more in lending fees/interest than they would by selling and relieving pressure on Melvin/Citadel.

I also assume that if say Fidelity just dumped 10m shares right now it would both piss off a large number of people and probably generate interest from the SEC, so I doubt we will see anything like that happen. Besides, the dollar amount might be huge to us, but Fidelity controls like 3.5 trillion dollars in assets (Blackrock nearly 9 trillion and Vanguard over 6 trillion).

This is also why I think DFV is in a bind (granted he already liquidated 13 mil so he is fine). If he sells his shares people gonna be pissed, and everyone knows who he is. Plus, even though he didn't really do anything, he is seen as the "leader" of the movement and so if he rolls out now it will probably be seen as a pump and dump by the powers that be.

As an aside, remarking that DFV used to be a fund manager is kind of misleading. I mean so what? If you look at his posting history (in reddit and youtube), he invested in gamestop based on his fundamental beliefs and didn't really ask for any of this. Anyway, even if he was a fund manager, he either quit or got fired and now is some dude with a wife and kids, not a hedge fund bro. He wears headbands and wristbands and tee shirts with kittens on them. I hardly think he is the enemy here.

Anyway I am not financially involved in this in any way, just an interested outsider.
posted by Literaryhero at 8:31 PM on January 30, 2021 [5 favorites]

Didn’t the WSJ profile characterize DFV as working in marketing?
posted by Apocryphon at 8:39 PM on January 30, 2021

Among a ton of wrong reads on this situation, I think Bloomberg takes the cake here for being the wrongest.

The GameStop Corp. saga is another sign of the growing intolerance among those with opposing views that’s roiling the U.S., according to Bridgewater Associates’ founder Ray Dalio.

Lololololol. I hate to break it to Dalio, but this is the first thing my dad and I have agreed on in over a decade, and I know that we are not the only ones.
posted by Literaryhero at 11:37 PM on January 30, 2021 [8 favorites]

And Apocryphon is right:

Mr. Gill—who until recently worked in marketing for Massachusetts Mutual Life Insurance Co.
posted by Literaryhero at 11:49 PM on January 30, 2021 [1 favorite]

Anyway, even if he was a fund manager, he either quit or got fired and now is some dude with a wife and kids, not a hedge fund bro. He wears headbands and wristbands and tee shirts with kittens on them. I hardly think he is the enemy here.

IDK, perhaps the reality of the hedge fund bro look has shifted away from the public's imagination of Patrick Bateman feeding stray cats to an ATM. These days the only people sporting the look are Democratic governors.
posted by pwnguin at 1:12 AM on January 31, 2021 [1 favorite]

this is the first thing my dad and I have agreed on in over a decade

Yeah. Really the only difference on this between folks who lean conservative and folks who lean left is that the leftists are the ones biting their tongues in order to avoid screaming "this is what we've been talking about for years and years and fucking years" at the conservative rellies who are apparently only now starting to get the point.
posted by flabdablet at 1:16 AM on January 31, 2021 [7 favorites]

Didn’t the WSJ profile characterize DFV as working in marketing?

I think it's a misunderstanding based on the phrasing used in the CNBC article. Upthread, for example, was this sentence: "CNBC has recently outed DeepFuckingValue aka the guy who went from 55k->22M as a former MassMutual financial advisor. "

However, if you look at the CNBC article, it says this:

"A YouTube streamer who helped drive a surge in the shares of GameStop is a 34-year-old financial advisor from Massachusetts and until recently worked for insurance giant MassMutual"

That phrasing can leave the reader assuming that he was a financial advisor in MassMutual, but the CNBC article doesn't actually say what he did at MassMutual. He could have been a financial advisor, but he could also have been a typewriter repairman.
posted by Bugbread at 3:34 AM on January 31, 2021 [2 favorites]

I say we go long on typewriter manufacturers.
posted by flabdablet at 7:43 AM on January 31, 2021 [3 favorites]

What happens when the shorts finally go bankrupt?
posted by interogative mood at 7:55 AM on January 31, 2021 [1 favorite]

What happens when the shorts finally go bankrupt?

it be synthetic derivative time of the short shorting variety

Do you like short shorts? WE LIKE SHORT SHORTS!
posted by lalochezia at 8:03 AM on January 31, 2021 [1 favorite]

According to that WSJ article linked above, Mr. Gill/DFV is a CFA. Now, he could have been doing any number of jobs but it’s pretty safe to say he wasn’t hired for his deep interest in the IBM Selectric.
posted by Big Al 8000 at 11:56 AM on January 31, 2021

But I would also say it appears he was investing in GameStop as a more traditional value play. Honestly, it kind of reminds me of when I sold my first house at the height of the real estate bubble in 2006. I bought it in early 2005 with the plan of flipping it in a year. I had a plan that I was pretty sure would work but I did not expect to sell the house for what it ended up selling for 14 months later.
posted by Big Al 8000 at 12:09 PM on January 31, 2021 [4 favorites]

I also think it’s uncool that the media doxxed DFV.
posted by SecretAgentSockpuppet at 12:20 PM on January 31, 2021 [3 favorites]

If being profiled in the NYTimes is "doxxing" the word has lost all meaning? Dude runs a public youtube channel with his face all over it.
posted by Justinian at 1:46 PM on January 31, 2021 [7 favorites]

But he doesn't use his real name, just like the rest of us who don't want weirdos showing up at our houses. He didn't ask to be profiled. It's not like he's the "leader" of wsb or anything else. WSB called him a moron all the way back in '19 when he bought this position, right up until about December, when the naked short got noticed.
posted by SecretAgentSockpuppet at 3:19 PM on January 31, 2021 [1 favorite]

For the record, there is a meme that best describes my relationship to wsb here. I feel really weird defending a reddit, I must say.
posted by SecretAgentSockpuppet at 3:26 PM on January 31, 2021 [10 favorites]

I feel like there's just straight up not enough info to figure out if he's been doxxed or not. Plenty of Tumblr users whose faces were public but who went by pseudonyms have been doxxed, so "their face is all over it" isn't really evidence of non-doxxing. On the other hand, from what I can tell he seems perfectly fine with his identity being known, so I get the feeling it's not so much that he was hiding his identity as just using a nickname. On the other other hand it seems that his identity was determined by looking up records for a former business, which is a super-doxxy approach. On the other other other hand that business was named the exact same thing as his YouTube channel, so it doesn't seem like he was ever trying to hide the connection between the two.

So, yeah, confusing.
posted by Bugbread at 3:39 PM on January 31, 2021 [3 favorites]

Guess r/WSB are a bunch of Populists after all:

Reddit traders switch sights to silver after equities attack

The world’s largest silver-backed exchange-traded fund, the iShares Silver Trust, recorded almost $1bn in inflows on Friday, according to data from BlackRock, the fund’s sponsor. The jolt of new investments came after a user in Reddit’s WallStreetBets forum urged people to buy shares and options to put a squeeze on banks.

Prices for silver rose by 6 per cent to $28.61/troy ounce in early Asia trading on Monday. That followed a 6 per cent jump last week and a rally in shares in miners of the precious metal, with New York-listed First Majestic rising by 29 per cent. “It's a fools' errand, it's financial anarchy; somebody is going to get hurt,” said Ross Norman, a veteran precious metals trader.

Last week the user TheHappyHawaiian said buying shares in the ETF would “force physical delivery of silver” into the fund’s vaults, thereby causing a “short squeeze” on the market, pushing up the silver price.

The article links to that user's post history but I found the due diligence post directly here. No actual memes or slurs, just lots of speculation from everyone.
posted by Apocryphon at 4:33 PM on January 31, 2021 [1 favorite]

I'm barely old enough to remember Silver Thursday as a thing that happened. I recall my dad, for some reason, holding an old silver dollar during that time. A gift from the boss. History does indeed rhyme.
posted by JoeZydeco at 4:48 PM on January 31, 2021

So, does anyone here know if/when the squeeze will actually occur? On January 26, Melvin announced that it had closed out its short position, but for some reason the conventional wisdom was that it was lying and that the squeeze would actually happen on January 29. But the stock price didn't really do anything on January 29. Is it possible that Melvin did close out its short position, and that most of the shorts by other funds are also closed out, so now its just a bunch of people holding stock like normal, assuming that someone else is still shorting? Or is there some figure somewhere that shows that it's still shorted? And, if shorted, is there any way of knowing when the squeeze will happen? Obviously not to the exact day, or that whole "January 29 = short day" meme wouldn't have happened, but is there some kind of ballpark, like "it could be today, it could be next week, we don't know, but it will definitely be before March 1 because, by law, when shorting blah blah blah" or the like?
posted by Bugbread at 5:12 PM on January 31, 2021

IsTheSqueezeSquoze isn't predicting when it will occur exactly, just that it hasn't happened yet.
posted by Celatone at 5:17 PM on January 31, 2021 [5 favorites]

Found another narrative/framing/history I like from tech & pop culture journalist Brian Feldman, following a cute interview for the first half:

a 19-year gamestop bet pays off

r/WallStreetBets describes itself as "4chan with a Bloomberg Terminal" but I think the contemporary understanding of 4chan differs vastly from the one this description is evoking. The post-2016 4chan has been dominated by racists and Nazis and the terrible politics, and largely unfocused.

4chan doesn't really do coordinated action anymore. To my mind, the 4chan that r/WallStreetBets resembles is more the 4chan circa 2009ish. This is the /b/ that was coordinating attacks on Scientology and putting moot at the top of Time polls. Perhaps the 4chan crowd story I remember most is the one in which they tracked down a woman who threw a cat in a garbage bin after video of it went viral. (The 4chan of 2009 was puerile and unredeemable in myriad ways but there was at least an undercurrent of righteousness beneath the proceedings that has since evaporated.)

As an aside, there's probably a joke to be made here about the Biden administration already bringing back the Obama era with the revival of '09 pre-MAGA 4chan-culture, as well as Occupy maybe??

He also makes an interesting suggestion that there's something to r/WSB's culture that strives to go beyond where social media algorithms go:

The front page of r/WallStreetBets is dominated by shitposts and memes and rallying cries (the associated Discord is largely unhelpful for anyone trying to learn anything as well), but to better understand the subreddit, I recommend looking at a section of it known as "DD," which stands for "due diligence." These posts vary in comprehensiveness, convincingness, and tone, but the best ones harness publicly available info that nobody outside of the finance industry and serious retail investors ever pays attention to. It's tough to shitpost your way through a due diligence assessment. The DD posts read a lot like (how I remember) the crowdsourced research into the cat-bin lady did: blunt, casual, occasionally tasteless, but still, accurate or genuinely striving to be, using info that's not tough to find online if you know where to look (or are really motivated).

Absent the infinite number of motivations caught up in the Gamestop rally (profit, justice, instability, laughs), it's this dynamic that is most interesting to me. The modern internet is one of complacency, letting aggregators and algorithms bring stuff to you, rather than seek it out. It has made the internet worse in many ways. But I tihnk what makes the r/WallStreetBets story so novel is that it’s a lot of people doing research, plumbing data, looking for patterns, in addition to talking shit. Aside from the stuff specific to the finance industry, the Gamestop story is about people on the internet making a deliberate effort to seek out information, rather than waiting for a system to deliver it automatically. It’s the increasingly rare story of people being active in substantial ways — which then kicks off countless, mindless Robinhood transactions.

It's an optimistic note, to consider r/WSB as a community interested in organic investigation, contrary to the information bubbles that the content algorithms entrap us all in. Of course, you can apply this description loosely to any number of conspiracy theory communities and subcultures from the ones spawned by District Attorney Jim Garrison to the ones who stormed the Capitol at the start of this month. The one solace I would say here is that at least unlike politically-motivated hiveminds, r/WSB at least fixates around the simple naked motivation of making money. So conspiratorial narratives can only go so far before they're (dis)proven in the market. And at least it ensures the participants have more to win or lose than QAnon'ers casually retweeting "the storm is coming" threats. Skin in the game and all that.*

*On the other hand during the 2020 election, the PredictIt election betting markets were absolutely flooded with "MAGA Money", with possible Trump die-hards placing inordinate bets on ludicrously improbable results such as Biden losing NY or CA.

I should also note that Reddit communities acting as amateur investigators have had a decidedly mixed record, at best.
posted by Apocryphon at 5:49 PM on January 31, 2021 [8 favorites]

A whole bunch of WSB posts explaining why buying silver is a bad idea now.
posted by joannemerriam at 5:54 PM on January 31, 2021 [2 favorites]

Thanks, Celatone.
posted by Bugbread at 6:27 PM on January 31, 2021

Ah, Silver Thursday. I primarily remember that market-cornering attempt as the reason why my father kept finding odds and ends of silver in my grandmother's house after she died. She really liked silverware, and had brought a great deal of it as she travelled around the world. During the great silver runup a gang of silver thieves was working in Arlington and hit her house. Somewhat miraculously, they were caught before they melted down a lot of their goods, and the police had a big identification of items viewing. And as far as we can work out, after she identified her enormous amount of silver, and other victims identified their much smaller amount, they basically dumped all the random leftover pieces on her.

The result was that one set went to each of the 5 children, and my father took the smallest set (which wasn't very small but wasn't 24+ settings like the others) and all the random items, which he used a silver exchange to turn into two additional sets so there would be one for each of his kids.
posted by tavella at 6:51 PM on January 31, 2021 [6 favorites]

So according to the nasdaq site, short positions have to be reported tomorrow (Feb 2), when we will find out if there are still a lot of shorts outstanding. I am going to presume that when those reports are made public (also tomorrow? I have no idea) either we will learn the positions were closed and there will be a rapid game of musical chairs, or we will get proof of a large number of outstanding shorts which should cause interest to grow and further inflate the price.

So, if you are holding GME, I guess you have to wonder how confident you feel about that short report coming out tomorrow.

Edit: it says dissemination date is Feb 9, so I fail at reading comprehension and also guess we have to be patient for a little while longer.
posted by Literaryhero at 5:32 AM on February 1, 2021

Anyway, we have to wonder why this information that is so readily available (I just found it by googling right now) isn't being mentioned at all on WSB.
posted by Literaryhero at 5:36 AM on February 1, 2021 [1 favorite]

Anyway, we have to wonder why this information that is so readily available (I just found it by googling right now) isn't being mentioned at all on WSB.

Unless I'm totally misunderstanding things: because that's the NASDAQ and GME is on the NYSE? They're different stock exchanges with different rules, right?
posted by Bugbread at 7:19 AM on February 1, 2021

Sorry for using the wrong site, the dates are the same. They aren't set by the exchanges.

Anyway it is starting to look like a bloodbath this morning.
posted by Literaryhero at 7:41 AM on February 1, 2021

The WSB folks seems to disagree re: bloodbath. They are saying that these dips are short ladder attacks by hedge funds, which is apparently indicated by low volume during the dips. They also seem to think that the entire silver thing is a red herring psyop by hedge funds.

I have no idea how to evaluate the truth values of these claims.
posted by lazaruslong at 8:07 AM on February 1, 2021 [4 favorites]

Also it has been bothering me so I just feel the need to say:

Also, /wsb is not the horrible pit of terrible that people have made it out to be. It skews young, and they use young language, but just in the last couple of days, multiple people have taken winnings off the table and bought games, toys, and equipment for children’s hospitals. As someone openly female on wsb, I’ve gotten no shit.

I broadly agree w/r/t the larger point as evidenced by the motivations of many of the regular not-wealthy people over there. However - the language they use is not young people language, it is fucking awful. The vernacular is about as ableist and shitty as you can get. Young people do not talk this way as a rule, and these people don't get a pass for it. Assholes, especially the particular flavor of keyboard warrior edgelord reddit assholes, talk this way. I just want to caution folks tempted to dip toes in over there that it is pretty bad.
posted by lazaruslong at 8:12 AM on February 1, 2021 [10 favorites]

So according to the nasdaq site, short positions have to be reported tomorrow (Feb 2), when we will find out if there are still a lot of shorts outstanding.

Short reports at this point tell you very little. The reports only tell you the number of shares outstanding that are short. It doesn't not tell you when they were shorted or the price they were shorted.

Back in December when the GME price was low, it was a reasonable assumption that the short shares were sold probably around $10. But since the price has spiked, there is no way to know whether the current shorts are old shorts at $10 or new shorts at $100 or $200 or $300. That makes a big difference regarding a squeeze. If the current stock price is above the short price, the shorter loses. If the current price is below the short price, the shorter wins.
posted by JackFlash at 8:13 AM on February 1, 2021 [2 favorites]

I really have no idea about the underlying financials or anything financial but it’s hard not to feel like the party is already ending. Regardless of whether there’s anything left to squeeze, given that it didn’t really fly to the moon Friday, and certainly hasn’t so far today, are the reddit crew really going to be able to convince people not to get out (or new money to get in) this week?

The one day it was a sure bet was the day this post was made (was the day it got big positive media exposure).
posted by atoxyl at 10:18 AM on February 1, 2021

I right that it basically means “a mutual fund you can buy and sell as if it were a single stock”

This is correct with the important distinction being that traditional mutual fund transactions (buy/sell) are fielded at the end of day/next day, whereas an ETF can be bought and sold many times throughout the day as long as the markets are open.
posted by The_Vegetables at 10:19 AM on February 1, 2021

If the current stock price is above the short price, the shorter loses. If the current price is below the short price, the shorter wins.

So in other words, we're all way too late to get a piece of the massive gains on the way up, but this might be a good time to short a bunch of GME and make a bundle on the way down!

Maybe I oughta change my plans regarding those tulips...
posted by nickmark at 10:29 AM on February 1, 2021

but this might be a good time to short a bunch of GME and make a bundle on the way down!

But the hitch is that in order to sell short, first you have to find someone willing to lend you their shares for you to sell -- unless you are a hedge fund that is able to sell shares they don't have access to in an illegal "naked" short.
posted by JackFlash at 10:53 AM on February 1, 2021 [2 favorites]

I'm of the opinion that the vast majority of individual investors should not be shorting individual equities. Most probably shouldn't be buying short funds either. They don't know what they're doing.

But what do I know, I don't even own bitcoin.
posted by Justinian at 10:57 AM on February 1, 2021 [3 favorites]

But the hitch is that in order to sell short, first you have to find someone willing to lend you their shares for you to sell -- unless you are a hedge fund that is able to sell shares they don't have access to in an illegal "naked" short.

In my personal (ie: not professional) stock interfacing trading application, short selling any stock is readily available, as long as you have options trading enabled and a margin account.
posted by The_Vegetables at 11:28 AM on February 1, 2021 [2 favorites]

Young people do not talk this way as a rule, and these people don't get a pass for it.

I actually assumed that lots of people under 40 are perfectly capable of such pseudoironic vulgarity, I mean if you look at toxic gamers, or reactionary subs on Reddit, it's par for the course
posted by polymodus at 12:30 PM on February 1, 2021 [1 favorite]

Anyone here still holding?
posted by Freelance Demiurge at 3:10 PM on February 1, 2021

Yeah, for all the good it's done me.
posted by zbaco at 3:12 PM on February 1, 2021

Yes, but I sold off a few earlier to make sure I was whole (didn't put all that much in to begin with). Just have a few left, may as well hold, but am keeping an eye on it.
posted by AwkwardPause at 3:18 PM on February 1, 2021

they use young language

Young people do not talk this way as a rule

I actually assumed that lots of people under 40 are perfectly capable of such pseudoironic vulgarity

Ah, the wonders of the vagueness of language. Does "young language" mean "language which most young people use" or "language which is mostly used by young people"?

Where I live, "paon" is high-school girl slang for "crying loudly". If you hear someone say "paon," 98% of the time it's going to be a young person.

So it's young language.

On the other hand, it's not used by guys much, and even among girls it's nowhere close to universal. Maybe 50% of girls use it? So we're looking at 25% of young people as a whole. That means the vast majority of young people (75%) don't use it.

So it's not young language.

It both is and is not young language, simultaneously.
posted by Bugbread at 3:22 PM on February 1, 2021 [2 favorites]

Anyone here still holding?

Yeah, but I've taken about as much of a hammering as a I care to tolerate, so I'll probably start exiting unless there's some kind of dramatic reversal tomorrow. I'm hoping there's at least a bit of a pop up from the attacks after hours, as liquidating at that price would sting.

This did finally crystalize a lot of stuff I only kinda knew about markets and trading before. So that's neat.
posted by snuffleupagus at 6:43 PM on February 1, 2021 [1 favorite]

Are there good explanations of what's happening to the stock price today and the ramifications? Cause I don't see no moon right now.
posted by polymodus at 10:54 PM on February 1, 2021

Anyone here still holding?

Bought at $90, sold in the mid-300s. Glad to be out and was only in so I could say I was part of history. Probably not doing anything like this again, though.
posted by vacapinta at 2:46 AM on February 2, 2021 [3 favorites]

They also seem to think that the entire silver thing is a red herring psyop by hedge funds.

Apparently there's a lot of bot activity in general in r/wallstreetbets which is not at all surprising and only going to be the norm going forward, but it's especially noticeable around the silver thing.
posted by jason_steakums at 4:47 AM on February 2, 2021 [3 favorites]

The silver story was really really popular with Zerohedge style conspiracy theorists back 9-10 years ago. I think this is those same hard money folks spamming WSB hoping to finally get that trade to work.
posted by JPD at 6:56 AM on February 2, 2021 [1 favorite]

For the real finance people here - is there any reason to believe the stories the reddit people are now telling about a squeeze still in store? My impression right now is basically the same as yesterday, but more so - the thing that was supposed to happen happened a little bit last week, never happened quite on the level promised (because various institutions hit the breaks) and now the party is basically over (and the true believers are spiraling into conspiracy as the veteran gamblers move on).
posted by atoxyl at 10:29 AM on February 2, 2021 [1 favorite]

There were other short squeezes happening at the same time as GME but didn't get as much press. The ride seems to be over for now. Before my spouse jumped on this, she was actually buying SPACs which can take off very suddenly if you pick the right one. That whole area cooled off as it seemed the same "investors" suddenly jumped into short squeezes but seems to be picking up again now.
posted by vacapinta at 11:26 AM on February 2, 2021

WallStreetBets has followed the path trod by Yahoo Finance message boards, Usenet and Motley Fool; all in a single week. A group of clever people get together on the internet and make a couple of epic trades; then the boiler room operations and bots show up with a million pump and dump schemes to follow behind them. A bunch of novice investors lose a ton of money.
posted by interogative mood at 6:55 AM on February 3, 2021 [8 favorites]

Eric Levitz in Intelligencer: “The GameStop Rally Exposed the Perils of ‘Meme Populism’”
posted by Going To Maine at 10:53 AM on February 3, 2021 [4 favorites]

I'm still holding, but I bought low and dollar cost averaged. I mean, it's like betting on black 13 on the roulette wheel. It might happen, but it's not likely.

Now, does part of me wish I'd been smart enough to sell at 400+? Absolutely. But why am I still holding you ask? Because most of the trades in the last few days are synthetic (made up) shares. It's hedge funds trying to cover their shorts with more shorts.

Look at the Fail-to-deliver data, available on the SEC, or in handy chart form here.

There are millions of FtD shares. What that means is that the shorts are still short (ha) of shares they need to cover. How this plays out depends heavily on the industrial shares still being held long; i.e., blackwater et.al.

There absolutely was a squeeze happening. And if every retail broker in the freaking world hadn't shut down trading, it's possible it would have burned multiple hedge funds to the ground. Make no mistake, the squeeze was stopped last week by big money twisting the arms of brokers and clearing houses. They are currently driving down the price to try and cover shorts, which they may be able to do, depending on the naked 30-40% which has to be accounted for somehow. I think? I don't even know anymore.

What GME showed us is that Wall Street is so rigged that they can do illegal actions right out in front of everyone, and there will be no consequences. At this point, for retail traders, your choices are indexes for safety, and diamond hands if you feel like gambling.

(For the record, my portfolio is almost exclusively high dividend blue chips like J&J, with the dividends set to reinvest, Vanguard indexes, and a little fun money for pulling stunts like GME. I hold GME, and BB and a few REITS as gambles.) This is not financial advice, I am clearly an idiot.
posted by SecretAgentSockpuppet at 1:00 PM on February 3, 2021 [10 favorites]

Has is been conclusively established that naked shorting is a significant factor here? I've seen it mentioned a lot as the default assumption of how GME ended up with short positions over 100% of its shares, but that can happen, legally, without naked shorting (Superilla has a good analogy above demonstrating how the number of loans can exceed the number of things being loaned).
posted by Riki tiki at 2:19 PM on February 3, 2021

Riki, I did due diligence, but I'm having trouble finding links on the phone. I'll see what I can dig up later. That said; I don't dabble in shorts or options, so it is entirely possible that I (and a fair number of others) did not fully understand how shorts work.

It's become clear to me that a lot of the market/moneymaker rules aren't fully understood by retail investors, myself included. It's like a layman trying to understand law. You can read the statute, and think you understand it, but you have no real idea how that law has been interpreted, ruled on, or modified by the judiciary.
posted by SecretAgentSockpuppet at 4:02 PM on February 3, 2021

Edit to add: for example, if you or I short a stock, we have a limited amount of time to make that play. When the stock is due back, there's usually a 3 day period for you to return the stock, before it becomes FtD. Hedgefunds, I've learned this week, have a significantly larger window. They can go 21 days before it goes FtD.

I don't know what happens once a stock is declared FtD though. We're really in the deep weeds of the financial market at that point, and it's way over my head.
posted by SecretAgentSockpuppet at 4:08 PM on February 3, 2021 [2 favorites]

It's theoretically possible for there to be more than 100% shorts. For example if Bob can borrow shares from Alice and short sell them to Ted. Carol can then borrow the same shares from Ted and sell them to someone else. So if you are just counting the number of shares that were shorted, it is twice the number originally borrowed. Both Bob and Carol shorted shares, but they are the same shares. To unwind, Carol buys shares back and gives them to Ted and then Bob buys Ted's shares and gives them back to Alice.

But this sort of thing would be rare because once there are a lot of shorts out there it's difficult to find shares to borrow. When shorts get over 100%, you really begin to suspect something dubious is going on.

So instead you get what was shown above in the "Failure to Deliver" reports. Failure to deliver is exceedingly rare. It should never be allowed to happen. If you buy shares from someone, their broker must deliver them to your broker within the three-day settlement period. If they don't deliver, someone has been robbed. They've paid for shares they didn't get.

So Failure to Deliver is evidence of illegal naked shorts, selling imaginary shares that that you don't really have access to. The threshold for being put on the Failure to Deliver list is 10,000 shares a day. In the case of GME there were up to a million shares a day that Failed to Deliver. That's 100 times the suspicious report threshold.

Something very wrong was going on, and this was months before the WSB folks got involved. It seems there was was a lot of illegal naked shorting going on.
posted by JackFlash at 4:38 PM on February 3, 2021 [3 favorites]

Thanks for those clarifications SecretAgentSock and JackFlash. (I'd been meaning to ask the same question as Riki Tiki, suspicious of the 30-40% number showing up twice in what sounded like should be two different claims, thinking that might represent some Reddit-wide misunderstanding leaking in here -- and not necessarily from either of you, for what it's worth).

JackFlash, I don't know enough to vet what you're saying about FtD reports -- though I recognize your username from askMe questions in which you've been really helpful about these topics, so I'd be prone to trusting it -- but this part doesn't sound right to me:

But this sort of thing would be rare because once there are a lot of shorts out there it's difficult to find shares to borrow. When shorts get over 100%, you really begin to suspect something dubious is going on.

Every time someone shorts a stock, aren't they immediately selling the borrowed shares to someone who wants to go long? And isn't that purchaser (or their brokerage, or whatever entity we're for convenience referring to as a person) just as likely as anyone else to be willing to lend those shares out to another short seller afterwards? (They won't even know the shares they've purchased were borrowed shares, right? In fact, the "person" lending shares to a short seller, if they were still interested in increasing their holdings of that stock, could very well by absurd coincidence end up purchasing precisely those shares back from the short seller they just lent them to, no?) In which case it doesn't seem like increased short selling would ever necessarily dry up the pool of available shares to borrow for further shorts.

Am I missing something? (And/or am I misunderstanding something basic about short selling? Or about who makes up the pool of "people" who lend shares out to short sellers, and why it's unlikely they're simultaneously continuing to buy more shares?)
posted by nobody at 10:11 PM on February 3, 2021

In fact, the "person" lending shares to a short seller, if they were still interested in increasing their holdings of that stock, could very well by absurd coincidence end up purchasing precisely those shares back from the short seller they just lent them to, no?

Yes, but this doesn't actually create shares out of thin air. This isn't (or at least isn't supposed to be) fractional reserve banking. Nobody can borrow shares that were never issued, so the total amount of borrowed shares at any time can't exceed the number issued, regardless of who they were borrowed from.

If the total amount of shorted shares does exceed the number issued, then that has to mean that there are non-settled trades outstanding in which somebody has sold shares they never borrowed - that is, they've traded a naked short, which can only work due to the market convention that settlement of share purchases (i.e. the actual transfer of money one way and the transfer of shares the other) happens some days after the trade was made.

To be able to deliver the shares sold in a naked short on that naked short's settlement day, the seller must hold the shares to be delivered. So before the naked short's settlement day, they either have to borrow them, effectively converting the naked short into a covered short, or acquire them from one of their other trades having settled first.

As noted above, retail investors are usually constrained to settling two days after the trade. Apparently hedge funds can get much longer settlement terms because, as a matter of principle, there must be in-groups whom the law protects but does not bind.
posted by flabdablet at 11:17 PM on February 3, 2021 [1 favorite]

In point of fact it's usually brokerages who handle the borrowing of shares for short trades.
posted by flabdablet at 11:39 PM on February 3, 2021

You can mark equities you own as unavailable to trade, FYI. Or you can set your own trade prices and collect the interest yourself if your stake is large enough. One of the ways brokers make money is by lending your shares for shorts and pocketing the vig.
posted by SecretAgentSockpuppet at 11:42 PM on February 3, 2021

...so the total amount of borrowed shares at any time can't exceed the number issued, regardless of who they were borrowed from. If the total amount of shorted shares does exceed the number issued, then that has to mean that there are non-settled trades outstanding in which somebody has sold shares they never borrowed - that is, they've traded a naked short

I'm pretty sure this part isn't right, and the more I think about it the more I suspect the Reddit people are incorrectly making this assumption.

Maybe I'm still missing something fundamental, but you can imagine a desert island in which ShortBetty shorts 1 share -- the only share the desert island company ever issued -- by borrowing it from LongAlice['s brokerage] and putting it up for sale. Luckily for Betty, Alice herself is looking to buy! Alice wants more exposure to this company! (If no one was looking to buy, this would have messed up Betty's short sale plan. Not sure what happens if you borrow the shares and then can't find a buyer. I guess this desert island would need marketmakers who make sure that never happens.)

And luckily for Alice, Betty has one share up for sale so Alice's buy order executes and Alice's balance sheet shows she owns 2 shares now (one of which is currently being lent out). Betty at this point owes 1 share, so nothing's been created out of wholecloth: Alice owns 2 shares. Betty owns -1 shares. It still sums up to 1, the number of shares released in the IPO.

And at this point we know that Alice isn't someone who's marking their equities as unavailable to loan out (thanks, SecretAgent!). So naturally their brokerage is going to still make available one share to lend to any short sellers looking to borrow.

[This is a critical juncture, because the brokerage has to know that while Alice owns 2 shares now, one has been lent out already. Flabdablet, your concern about creating shares out of whole cloth would only kick in if Alice were to try to lend out 2 shares at this point, seeing as her balance sheet shows she owns 2, after all. But she can't do that because she or her brokerage knows that she only has 1 share still available for loaning.]

So when Betty tells her brokerage to make another short sale happen, the process repeats. Betty borrows it from Alice['s brokerage] and immediately puts it up for sale (definition of short sale). Alice buys it, because she's got diamond hands, and now her brokerage has a share that could be lent out again. Balance sheets show Alice owning 3 shares and Betty "owning" -2 shares.

Which is all to say that if there's a bottleneck at some point in the availability of shares to borrow, it doesn't look like it's a necessary result of excessive shorting. It sure looks like that'll only happen if the people holding shares long separately decide to stop loaning them out. Otherwise there's always going to be the full number of existing shares theoretically available to borrow. Over and over again.

And also to point out: from ShortBetty's perspective, none of her shorts are "naked." She really did properly borrow all three of them.

(Though if Alice wants to sell her 3 shares at some point, this desert island market breaks down without more people and more shares for the brokerage to juggle around.)

(Lastly, this scenario shows Betty might really be in trouble when she needs to return her borrowed shares, since she has to buy them back from someone -- as is always the case with any short, naked or not, right? -- and Alice might not be selling at that point. Is it possible that's what's causing the Failure to Deliver spikes?)
posted by nobody at 4:58 AM on February 4, 2021 [2 favorites]

The Wall Street Gambling Is Coming From Inside the House – This era of speculation cannot be blamed on GameStop buyers on Reddit. Look, for example, at SPACs.

Why are we talking about day traders with $600 stimmy checks when this rampant speculation, which is just as dangerous and will come to just as inevitable an endgame, is happening just next door? “It’s a tremendous amount of speculation,” Wealthspring Capital’s Matt Simpson told The Wall Street Journal, in a typical admonishment about how day traders are getting in over their heads with SPACs. But he’s a SPAC investor! “It worries me,” said another investor named Bill Foley. He owns a SPAC!

Maybe there’s no correlation between GameStop’s stock and the value of the underlying company, but there are countless examples of that dynamic throughout the market, including with SPACs that are literally non-companies. The main problem with the GameStop frenzy is the extension of leverage to retail investors through options trading. That’s what creates giant losses, and we can limit that.

But what the SPAC mania reveals is that there’s irrational exuberance all the way down in the markets, with little or no regard for valuations or corporate performance driving the trading volumes. Indeed, there’s massive speculation on both sides of the GameStop bet, just like there is throughout every position on Wall Street. The speculation, not the online trading app facilitating one tiny corner of it, is the problem.

posted by tonycpsu at 6:52 AM on February 4, 2021 [9 favorites]

Nobody can borrow shares that were never issued, so the total amount of borrowed shares at any time can't exceed the number issued, regardless of who they were borrowed from.

My impression is that the measurement is essentially [borrowings]/[issued shares], not [unique borrowed shares]/[issues shares]? In which case it absolutely can exceed 100 percent legally, which many reddit people definitely do not understand. I can’t speak to the other things they think are signs of illegal naked short selling but I think they are definitely wrong in thinking that short sellers are still particularly feeling squeezed by reddit people holding onto their shares.
posted by atoxyl at 10:29 AM on February 4, 2021 [1 favorite]

I mean if you are an institution that loans out shares and then suddenly everybody is trying to extricate themselves from their short position the first thing you are going to want to do when you get shares back is to sell them at an inflated price to somebody else... right? The retail crowd might be able to buy and hold onto some of those but their brokerage apps weren’t even working a week ago.
posted by atoxyl at 10:46 AM on February 4, 2021

From the Prospect's SPAC article -

We’ve created a massively over-financialized economy where secondary market trading is a more reasonable ticket to wealth in America than finding a high-paying job.

I guess it isn't just ZIRP explains the world, ZIRP is eating the world.

A rich financier sets up a shell company that it puts on the stock exchange. Investors can then buy shares in the SPAC, even though it has no business and no products. They are often called “blank-check companies.” Within two years, the SPAC must use the money it’s raised to purchase a private company. The merger makes that private company go public, without having to do an IPO.

There's an entire documentary, The China Hustle (2017), about reverse-mergers between moribund American companies and Chinese firms to allow investors to invest in those China-based businesses. Many of which, as the film shows, were completely fraudulent. This mostly happened in the post-Great Recession era, 2008-2016. Sounds like this is happening again, except between U.S. companies!

Incidentally, that movie centers a lot on the activities of Muddy Waters, a short-seller firm that did a lot of investigation that broke the news on these fraudulent activities. Which does- muddy the water- a bit on this past week's narrative that "all short-sellers are evil."

Nobody is being turned away from the SPAC banana stand. Former Boeing CEO Dennis Muilenburg, literally one of the most disgraced people in corporate America, started a SPAC and plans to raise $200 million for it. Muilenburg was ousted as CEO at the end of 2019 after presiding over two deadly 737 MAX crashes, despite warnings the company failed to convey to federal regulators. Muilenburg’s SPAC office is a few blocks from Boeing’s corporate HQ in Chicago; it’s like nothing ever happened. Almost more incredibly, WeWork, which had the most disastrous IPO in recent memory just a couple years ago, is in talks to merge with a SPAC in a deal that would value the company at $10 billion. WeWork couldn’t become a public company the normal way because its finances were appallingly bad, but it’s taking the SPAC route, because nothing matters.

This is appalling and makes me wonder why regulators aren't going after this seeming loophole. Speaking of which- perhaps these plotlines will converge, and GameStop's stock will moon again if they were to launch a SPAC?
posted by Apocryphon at 10:46 AM on February 4, 2021 [7 favorites]

I mean if you are an institution that loans out shares and then suddenly everybody is trying to extricate themselves from their short position the first thing you are going to want to do when you get shares back is to sell them at an inflated price to somebody else... right?

No, you don't. Prices are going up, rapidly. You don't want to quickly sell when prices are rising. You try to hold on hoping to sell out for a higher profit. That's the essence of a short squeeze. Short sellers desperately need to buy back shares but nobody wants to sell to them because prices are going up. And the more desperate the short sellers are to buy, the higher the price they are willing to pay, which pushes prices yet higher. The faster prices go up, the fewer people want to sell. That's the squeeze, a rising price spiral.
posted by JackFlash at 10:53 AM on February 4, 2021 [2 favorites]

Well yes, if shares were infinitely available the price wouldn’t go up, obviously. My point is that if a large financial institution lets a short seller borrow shares when they are going for $20, and gets them back at $300, are they really going to hoard them hoping the price will squeeze all the way to $1000? Or will they sell them for immediate huge profit (when they weren’t necessarily originally counting on anything except fees and interest)? The squeeze is on, the price they will ask is already outrageous, but the people who do this professionally at large scale don’t have the pie-in-the-sky hopes or the ideological motivations or the explicit collusion of the WSB folks that would make them hold out forever rather than taking a good deal when they can get it.
posted by atoxyl at 1:44 PM on February 4, 2021

The large financial institution isn't getting back their shares because there are too few shares to be had, at least during the squeeze. They don't get them back unless the short seller is willing to take a huge loss to buy back at $300. That's why there is a squeeze.

Eventually the short sellers will capitulate, taking billions in losses, buying at any price, and then the whole thing collapses as the hedge funds transfer billions to the holders of the stock and prices collapse. Only then does the "large financial institution" get back the shares they loaned out.
posted by JackFlash at 1:56 PM on February 4, 2021 [1 favorite]

Another way to put what I’m thinking is - the higher the price, the greater the incentive to sell, which should ultimately be a negative feedback on price, unless you are a motivated reddit weirdo? Which is why a squeeze tends to be a short-lived event?

I don’t know how some of this interacts with aspects like the lending of shares that technically belong to a client. That stuff is out of my depth.
posted by atoxyl at 1:57 PM on February 4, 2021

We’re actually pretty much on the same page, I think. I understand how the squeeze works, I’m saying some reddit people seem to act like it’s literally impossible for the short sellers to have gotten out and I’m saying - no, they just have to accept huge losses, which they have done.
posted by atoxyl at 1:59 PM on February 4, 2021

They think it’s impossible/will inevitably hit absurd heights because they think fully 40 percent of the shorted shares do not exist, but that’s a misunderstanding of the figures.
posted by atoxyl at 2:04 PM on February 4, 2021

Another way to put what I’m thinking is - the higher the price, the greater the incentive to sell, which should ultimately be a negative feedback on price, unless you are a motivated reddit weirdo? Which is why a squeeze tends to be a short-lived event?

Right. You have two sides playing chicken. Nobody knows who is going to blink first or when. But it almost always ends with a crash. Once the dominoes starts to fall, the whole thing collapses.
posted by JackFlash at 2:07 PM on February 4, 2021 [2 favorites]

Or I guess 40/140 =
28 percent? That’s not really the key detail, just that they have an unreasonable faith in their ability to manipulate the market, partly due to an incomplete understanding of it.
posted by atoxyl at 2:20 PM on February 4, 2021

On the meme front, Ryan Broderick of Garbage Day has a decent account of the 4chan > Reddit > r/WSB, and now, > corporate Twitter journey, and the dark side of the culture.

Know Your Meme puts the first use of the word “tendie” around 2014. That was the year that users of 4chan’s /r9k/ board started writing tendies greentext stories and building out the idea that all members of the board were violent autistic shut-ins who only ate microwaveable chicken tenders. This was during an era where 4chan, as a community, was changing how it perceived itself.

Instead of being Guy Fawkes-wearing hacktivists and underdog nerd-pranksters defending the world from corporate greed, the NSA surveillance state, and the religious right, 4chan became fixated on its hatred of women — a la Gamergate — and what it perceived as an overbearing liberal and progressive establishment. We now know that there was a concerted push from both white nationalists and Men’s rights activists around this time to infiltrate the influential message board, radicalize it, and use it as a recruitment tool. And that wasn’t a particularly hard thing to accomplish because he site was always pretty comfortable with racism and misogyny.

Part of this radicalization process, between 2013-2015, was the reimagining of what a typical 4chan user was like. The site always had an intense self-deprecation, a holdover from its roots as a spill-over site for banned Something Awful goons. But before 2013, a 4chan user was a smart, but awkward pervert who liked anime and had an encyclopedic knowledge of all the best gross memes and filesharing sites and hatred authority. This started shifting before Gamergate, but after Gamergate there was really no going back. Instead of a Star Wars cantina-style waystation for rough, but reasonable internet addicts, 4chan rebranded itself as a hub for psychotic white supremacist spree killers.

On the relationship between 4chan and reddit:

Most of 4chan’s cultural touch points — Pepe the Frog memes, referring to yourself as autistic, violent misogyny — have been embraced by Reddit. Over the years, the community has had a tremendously hard time divorcing its own culture from 4chan’s. Sometimes 4chan is in charge, sometimes Reddit is in charge. But the two are inextricably linked and when they align, they can achieve a devastating level of network effect. This happened during Gamergate when 4chan’s /b/, /pol/, and /vg/ boards began working in tandem with Reddit’s r/KotakuInAction. This happened when 4chan’s /r9k/ board started working with r/incels and r/mensrights. This happened when /b/ and /pol/ worked with r/The_Donald during the 2016 election. And this is sorta-kinda happening right now with r/WallStreetBets and the GameStop pump, though it’s not as nearly well-coordinated as it has been in the past.

He charts the progress of the chicken tendies meme and the semantic drift-

The anarchic stock trading community r/WallStreetBets, in many ways, doesn’t need 4chan. They absorbed most of the site’s culture and have evolved beyond it. I suspect this is because trading stocks requires a level of professionalism that is slightly beyond what 4chan is able to achieve. r/WallStreetBets uses a lot of 4chan-speak though, including the term “tendies,” which they have repurposed to just mean “making money”.

Jumping upon the news attention from last week's drama, Popeye's Chicken used tendies in an ad. Broderick's take:

Comparing Pepe to tendies isn’t a perfect 1:1, but it does go to show you have much 4chan culture has just become culture now. It’s not dissimilar from the way 80s punks started using the suffix “-core” to delineate different sub-genres of hardcore and then it just became a thing we slap on any aesthetic that comes along. Countercultures, at least in America, tend to create what will be cool for the next generation. People have suspected this may happen with 4chan, but this Popeye’s video might be the clearest indicator I’ve seen so far that this is absolutely happening and will continue to happen. Uh oh!

The comments section is quite decent, as one of the commentators has gone ahead and attempted a taxonomy of the reactionary (and other) subcultures involved in populating today's r/WSB.
posted by Apocryphon at 4:46 PM on February 4, 2021 [8 favorites]

Didn't see this posted here, yet.

Where are the Shares?

What am I looking at?

This chart shows outstanding shares of the company GameStop (in black) and the percent of those shares that failed to deliver (in red) on any given day. You can zoom in using the buttons above the chart.

Understanding the relative value (ie the percent) of fails-to-deliver to outstanding shares gives a better picture of the scope of the issue.

Not enough people are talking about this. Would it be okay if 1%, 2%, 4% of your bank deposits failed to show up? If 3% of airplanes crashed?

posted by Ahmad Khani at 5:31 PM on February 4, 2021 [2 favorites]

The iBorrow chart is interesting too.
posted by SecretAgentSockpuppet at 6:20 PM on February 4, 2021

...luckily for Alice, Betty has one share up for sale so Alice's buy order executes and Alice's balance sheet shows she owns 2 shares now (one of which is currently being lent out). Betty at this point owes 1 share, so nothing's been created out of wholecloth: Alice owns 2 shares. Betty owns -1 shares. It still sums up to 1, the number of shares released in the IPO

I don't think that's right.

At the step in a short sell where the share actually changes hands - that is, when the buyer acquires it - ownership of the share gets transferred from the party who lent it to the party who bought it, not from the short seller to the party who bought it. This is because the short seller never actually owns the parcel of shares they're short selling. The short seller does get the money that the buyer paid for the share, and also becomes obligated to supply the lender with as many shares as were borrowed, on request.

So in the scenario where Betty short-sells to Alice a share that's she's also borrowed from Alice - a share which is in fact the only one issued on the island - the transaction ends up leaving Alice as the holder of record for that one share that was sold. Meanwhile, Betty has the money that Alice paid for her buy order, and also has an obligation to supply Alice with the borrowed share on demand.

Alice ends up holding one share, not two, but she has also acquired a right to demand that Betty supply her with one share at any time. Which is something Betty will not now be able to do unless she can persuade Alice to sell the one share she holds, which Alice now has the ability to price at the highest level she thinks Betty will pay without declaring bankruptcy and ruining the game.
posted by flabdablet at 2:25 AM on February 5, 2021 [4 favorites]

Ah, thanks, that makes sense as a technical adjustment, that it would all be worked out in one step without the short seller ever receiving the shares in their account (though for a normal retail investor, I think Alice's balance sheet might still show 2 shares if it was her broker who was lending out her share and pocketing the fees behind the scenes; it sounds like with a margin account they get to do that without transparency, according to the article you posted earlier, which also answers my question about what happens if Alice subsequently wants to sell her share(s):

In the event that the lender of the shares wishes to sell the stock, the short seller is generally not affected. The brokerage firm that lent the shares from one client's account to a short seller will usually replace the shares from its existing inventory. The shares are sold and the lender receives the proceeds of the sale into their account. The brokerage firm is still owed the shares by the short seller.

which is where the one-share-in-existence desert island example breaks down, of course.)

But it's still worth pointing out that regardless of what the balance sheet shows (one share or two), Alice still has one fully owned, non-lent-out share to lend out again at the end of each round of the desert island example, even with your technical fix, after the second round of which Betty will have shorted 200% of the shares in existence without either of her short sales being naked ones.
posted by nobody at 4:54 AM on February 5, 2021 [2 favorites]

It just struck me that my fixation on whether the shorts were naked or not is also just trimming around the edges of the bigger picture, in which the nakedness or not of the shorts might not really be so pertinent (except insofar as the redditors were marshaling it as fact to encourage people to keep holding, I guess).
posted by nobody at 5:39 AM on February 5, 2021 [1 favorite]

Yep. I was clearly wrong about excess shorted shares necessarily revealing naked short selling. But the point about excess shorted shares necessarily leading to a squeeze where prices can be pushed up to bankrupting levels is indeed the main one.

I guess in theory the parties who lent the GME shares that have been shorted could choose never to trigger a squeeze by callling those loans in, instead just continuing forever to collect whatever revenue they're charging the short sellers for having provided the loans. Which, at this point, would have to be more than GME pays in dividends.
posted by flabdablet at 6:54 AM on February 5, 2021

choosing to be a short seller should hurt you in the same way it would hurt if you chose to swallow a demon

Incidentally, that movie centers a lot on the activities of Muddy Waters, a short-seller firm that did a lot of investigation that broke the news on these fraudulent activities. Which does- muddy the water- a bit on this past week's narrative that "all short-sellers are evil."

I was going to write a comment earlier this week about this but changed my mind. I don't know why short sellers get particular hate from non-investors. I can see possibly on Wall Street, mostly though because of in/out group dynamics than anything else. Seriously, anytime someone goes long, someone on the other side is short, which I know is different from a "short sell" but you're essentially betting on the price decreasing., and Wall Street doesn't like that.

I don't think there's anything particular about short-selling that makes it more deserving of hate than other wall street strategies. They're essentially all capital and all ruining the planet.

However, if I had a second career, I would absolutely be a short seller, in the same way someone can be an activist investor. The China Hustle mentioned above is a great example of how short sellers can be forces for good. Another example is the short on Herbalife (an MLM) in the documentary Betting on Zero. I would love so much to be a short seller that's looking for companies committing fraud. It seems like it would be my dream job, but unfortunately you need money to be able to short-sell.
posted by LizBoBiz at 7:04 AM on February 5, 2021 [4 favorites]

I don't know why short sellers get particular hate from non-investors.

GameStop has 14,000 employees. The short-sellers were trying to drive GameStop out of business and put 14,000 people out of work and get rich doing it. Short-sellers call it creative destruction. Some people might take offense at that.
posted by JackFlash at 7:41 AM on February 5, 2021 [2 favorites]

I don't think the number of shares shorted is what makes the short squeeze possible, just that having a higher proportion of shares shorted makes the squeeze easier to accomplish.

If there are 100 shares in existence and only 1 of them is shorted but I own all 100 shares then I pretty much get to dictate the price.

If the 100 shares are all owned by 100 different people, you can still get basically the same thing if they, say, coordinated their actions via the internet and everyone agreed not to sell and to share the proceeds with the other owners once everyone agrees on a sale price.

Of course in that scenario, the short-seller just has to convince any one of the owners to screw over the rest of the group. Your standard prisoner's dilemma scenario.

Incidentally, that movie centers a lot on the activities of Muddy Waters, a short-seller firm that did a lot of investigation that broke the news on these fraudulent activities.

I think this could also be framed as saying that he profited privately by exposing fraud perpetuated against the public. In a more perfect world that fraud would have been uncovered by the relevant regulatory agency. So it's just more shoveling government functions off to private companies. The expenses are public, the profits private. I suppose that shouldn't really count against the particular short-seller but it doesn't really smell like roses to me either.
posted by VTX at 8:03 AM on February 5, 2021 [4 favorites]

I don't think the number of shares shorted is what makes the short squeeze possible, just that having a higher proportion of shares shorted makes the squeeze easier to accomplish.

Certainly the number of shorted shares makes a difference. If the price unexpectedly goes up due to a squeeze, every one of the short sellers suddenly becomes a desperate buyer to cover their short. As all of these buyers flood into the market, the price rises even higher. The more shorts, the more the demand to buy and the more the demand to buy, the higher the price goes.

If there are only a few shorts, they have no problem finding the shares to buy to cover their bets. But if there are lots of shorts, they are all competing with each other to find enough shares to buy before they go bankrupt.
posted by JackFlash at 8:14 AM on February 5, 2021 [1 favorite]

Right, like I said, it's not a requirement to make the squeeze possible but the higher the ratio of shorted shares to share float makes the squeeze more likely.
posted by VTX at 8:49 AM on February 5, 2021

GameStop has 14,000 employees. The short-sellers were trying to drive GameStop out of business and put 14,000 people out of work and get rich doing it. Short-sellers call it creative destruction. Some people might take offense at that.

(just a joke to start off, but I think you have short-sellers confused with private equity firms that do exactly that)

The stock price itself has no effect on the company unless they are trying to raise money.* And since we're talking specifically about GameStop, as far as most people know, they aren't. But why the particular hate for short sellers? All of Wall Street is destroying our global financial system with their own shenanigans. I could see the hate for traders in general, and I could not be a normal one without completely dying inside, but short sellers aren't actually affecting this company's bottom line, just like this price surge is not affecting the actual business of GameStop at all except some CxO's just got a huge bonus from their stock options.

A short position is one that believes the price will go down, some people don't like that apparently and think its destructive. But if you're going to make a bet that the price is going up, someone else is on the other side betting the price will go down. Short selling is essentially being in a short position without anyone long on the other side. What makes that set-up worthy of more hate than if there was someone on the other side?

I am very glad that the overall narrative has been "hell yeah, fuck the hedgefunds" but there is an undercurrent of "and fuck the short-sellers in particular".

*And my guess is that if they are trying to raise money, at this point in their life cycle, they're getting bought by a private equity firm to raid the assets and close the company as we have seen happen so many times to retailers in the last couple of decades. But that's just speculation on my part.
posted by LizBoBiz at 9:03 AM on February 5, 2021 [3 favorites]

The stock price itself has no effect on the company unless they are trying to raise money.*

You would have to be incredibly naive to believe that is true. Of course the stock price affects the ability of a company to borrow money or in the case of GameStop to invest to reorganize. And more than just capital investment, it affects their daily line of credit which is needed to handle inventory and payroll flows. They can have their line of credit restricted and their interest rates increased. And if the shorts are able to depress the price such that the stock is delisted, it becomes even worse.

I have no problem with ordinary shorting but in the case of GameStop there is strong evidence of illegal market manipulation through naked shorting. GameStop was consistently on the SHO list for months with Failure to Deliver of up to a million shares a day. That an astonishing and extraordinary condition. That's prima facie naked shorting. You have Failure to Deliver because traders are shorting stocks they cannot borrow.

As I see it, the shorts were illegally manipulating the market to drive the company out of business. And the WSB folks correctly saw that the evidence for naked shorting made the shorts unusually vulnerable to a short squeeze. So the WSB folks tried to manipulate the market in the other direction.

Markets should not be manipulated but in this case you had bad actors on both sides trying to profit off each other. The only difference is that in the case of the shorts, what they were doing, naked shorts, is explicitly illegal. What the WSB folks were doing was also manipulation but it wasn't explicitly an illegal "pump and dump" fraud. They were quite open and transparent about what they were doing and hoped to accomplish. Neither is good.
posted by JackFlash at 10:01 AM on February 5, 2021 [4 favorites]

But why the particular hate for short sellers?

Without claiming all of this is rational or consistent, here's some of the things that influence psychology:

Someone with a long position could be considered an investor. For many stocks long term investors (through mutual funds for example) own most of the stock. A short seller is always a speculator.
In some cases short sellers actually try to cause companies to fail (see Herbalife). Long investors don't.
Short sellers are like someone betting that a kid's soccer team is going to lose. Sure, technically they don't cause the loss but they are rooting for it, profiting from it and that's not something a friend would do.
If you own the stock short sellers actually do lower the price.
If you own stock and hang out on message boards, people taking shorts will be there, telling you you're going to lose money because only stupid people are investing in this company.

In principle short sellers have no impact on the long term value of a stock and they actually reduce volatility in general. There are, as they say, notable exceptions to this.

From my point of view, anyone worried about the stuff I listed falls into the "speculator, not investor" category. This definitely includes people going long on Gamestop because of the short squeeze (unless they expect to lose money and are doing it for the lolz). But that's not going to be their self-image.

*And my guess is that if they are trying to raise money, at this point in their life cycle, they're getting bought by a private equity firm to raid the assets and close the company as we have seen happen so many times to retailers in the last couple of decades. But that's just speculation on my part.

Worth noting that while people often overrate the benefits "investing" in a company after IPO bring to the company itself, it is still true high, healthy stock price can let a company raise money, even late in its life cycle. Often by loans and warrants to buy stock later, instead of outright stock sales. Taking on debt makes you less attractive to raiders, since they now have to pay market cap plus debt. It can absolutely get you past a rocky time in your life, like a recession or restructuring.

I can't imagine anyone will loan to you when everyone knows your stock price is inflated due to a squeeze and ready to crash. On the other hand one thing that won't happen during a short squeeze is corporate raiding--it's too expensive right now.
posted by mark k at 10:03 AM on February 5, 2021 [3 favorites]

The only difference is that in the case of the shorts, what they were doing, naked shorts, is explicitly illegal. What the WSB folks were doing was also manipulation but it wasn't explicitly an illegal "pump and dump" fraud. They were quite open and transparent about what they were doing and hoped to accomplish. Neither is good.

Unless I missed a story, WSB were/are just buying and holding. Where is the manipulation in that, by not selling back to the (illegally naked) shorts when the shorts said "gimme sharz now?" By responding to interview requests? I know there is institutional presence on the Squeezer side, but the only "pump" I can see is outside attention.

But why the particular hate for short sellers?

Shorts are essentially corporate hecklers with an interest in ruining the show for everybody that the company and its shareholders are trying to put on.
posted by rhizome at 2:41 PM on February 5, 2021

Where is the manipulation in that?

Buying and holding large numbers of shares is one of the classic manipulation techniques. Here the plan is to hold so many shares that ownership, rather than company fundamentals and valuations, will drive the stock price. I don't see how you can *not* look at it as manipulation.

Doesn't matter which side of the trade you find more sympathetic.
posted by mark k at 3:24 PM on February 5, 2021

Shorts are essentially corporate hecklers with an interest in ruining the show for everybody that the company and its shareholders are trying to put on.

I have no problem at all with people who spend big money to heckle Herbalife.
posted by flabdablet at 7:03 PM on February 5, 2021 [3 favorites]

Buying and holding large numbers of shares is one of the classic manipulation techniques.

Maybe I'm reading too much into it or posting incomplete thoughts, my curiosity is oriented around illegal manipulation. Wikipedia says the Hunt brothers were convicted of conspiracy for the effects of Silver Thursday, but that's the only thing I can find about any legal exposure, and it's quite vague.
posted by rhizome at 7:12 PM on February 5, 2021

Michel Feher: Another speculation is possible

"regardless of their motives and of the causes they choose to embrace, the Redditors’ actions attest to the fact that speculation is now available to a vastly wider population than the usual suspects. That high stake gambling is not just the game of banks, mutual funds, pension funds, and hedge funds raises the political question of whether what can be done for the luster of video game consoles and antiquated cell phones can be put to other uses."
posted by nikoniko at 11:29 PM on February 9, 2021 [2 favorites]

I question if any hedge funds were really permanently harmed by GameStop (though no great loss to society if it did), but one thing it definitely did do was reveal that there are a a shitload more people with money and willingness to throw it around than seems to have been previously assumed.

It will be interesting when/if people start figuring out ways to use crowd psychology to do something more than just the "pump" phase of a pump-n-dump scheme.

Off the top of my head, you could probably use it to kill an acquisition you didn't want to see happen, and I can kinda see the GameStop/Reddit crowd getting behind that if the circumstances were right.
posted by Kadin2048 at 1:53 PM on February 10, 2021 [2 favorites]

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