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I fully agree that hedge funds shouldn't get a bailout, and I don't think they will. Banks and hedge funds might both be "Wall Street" but they have very differ

I fully agree that hedge funds shouldn't get a bailout, and I don't think they will. Banks and hedge funds might both be "Wall Street" but they have very different relationships with the government. Hedge funds are not systemically important. On the other hand, I don't understand why you hope they go out of business. Have they done anything bad by shorting GameStop? If they believed the stock was overvalued, are they wrong to bet on that belief?

addicted 6y ago
Because people don't understand the importance and even necessity of shorts. They seem to think that shorts = bad.
- fileeditview 6y ago
  No because instead of counting their money after shorting they were greedy and shorted again and again which led to a ridiculous amount of shorts (140% of shares). As we can see now this was not only foolish but self-destructive. The only scenario where I see this paying off is when GameStop went bankrupt and there was no sign for this at all. People love when greed gets punished and this is what we are seeing here.
- cannabis_sam 6y ago
  Shorts are fine, the problem is having an underregulated risk mitigation tool that’s effectively limited to the wealthy. But even disregarding that, a hedge fund’s job is literally to manage risk using more complex financial instruments. A complacent hedge fund that overextends itself don’t just need to fail, they need to burn long and hard Sadly, they usually get “bailed” out (by their buddies in their industry, not the government), like we just saw with Melvin. Which in turn creates enormous inefficiencies in our economy..
  - dingaling 6y ago
    > Shorts are fine Why so? They're based on asymmetry of information, the shorter having more insight than the lender. And their purpose is to convert that information into money at the lender's expense; by the time he gets his shares back, they've tanked.
    - thekyle 6y ago
      You could say the same thing about Longs. They're based on asymmetry of information where the person buying has more insight than the person selling. If the stock goes up then the seller will have effectively lost money (via opportunity cost).
    - cannabis_sam 6y ago
      Then the lender should not lend out their shares, no? There are obviously problems with who actually has access to short stocks, but in theory they are a reasonable counterbalance: If you believe in the stock, buy it, if you don’t believe in it sell it. And if you don’t currently own any shares, you can borrow shares from the people who believe in the stock, sell them now and cash out when/if the stock goes down. The information imbalance is fundamentally a part of how we operate our markets, since information literally can’t instantly be distributed to everyone (regardless of what faith-based “economists” try to convince people to believe about the efficient market gospel)
- minikites 6y ago
  I think shorting stock is fine and I understand why taking short positions is useful in creating downward pressure on stocks. I'm angry because "the free market" is anything but free and it's people like me who have to fund bailouts for millionaire gamblers. In other words, I'm mad at our society's rules of privatized gains and socialized losses.
minikites 6y ago
>If they believed the stock was overvalued, are they wrong to bet on that belief? You characterize it as a "bet". The whole point of a bet is that sometimes you lose. We don't allow for corporations to lose in the USA, only the common person.
Aperocky 6y ago
Yeah not sure why people hate the firms who just practically donated $5 billion to them (assuming they don't buy on the top). It's a game and some one are going to lose.

addicted 6y ago

Because people don't understand the importance and even necessity of shorts. They seem to think that shorts = bad.

fileeditview 6y ago
No because instead of counting their money after shorting they were greedy and shorted again and again which led to a ridiculous amount of shorts (140% of shares). As we can see now this was not only foolish but self-destructive. The only scenario where I see this paying off is when GameStop went bankrupt and there was no sign for this at all. People love when greed gets punished and this is what we are seeing here.
cannabis_sam 6y ago
Shorts are fine, the problem is having an underregulated risk mitigation tool that’s effectively limited to the wealthy. But even disregarding that, a hedge fund’s job is literally to manage risk using more complex financial instruments. A complacent hedge fund that overextends itself don’t just need to fail, they need to burn long and hard Sadly, they usually get “bailed” out (by their buddies in their industry, not the government), like we just saw with Melvin. Which in turn creates enormous inefficiencies in our economy..
- dingaling 6y ago
  > Shorts are fine Why so? They're based on asymmetry of information, the shorter having more insight than the lender. And their purpose is to convert that information into money at the lender's expense; by the time he gets his shares back, they've tanked.
  - thekyle 6y ago
    You could say the same thing about Longs. They're based on asymmetry of information where the person buying has more insight than the person selling. If the stock goes up then the seller will have effectively lost money (via opportunity cost).
  - cannabis_sam 6y ago
    Then the lender should not lend out their shares, no? There are obviously problems with who actually has access to short stocks, but in theory they are a reasonable counterbalance: If you believe in the stock, buy it, if you don’t believe in it sell it. And if you don’t currently own any shares, you can borrow shares from the people who believe in the stock, sell them now and cash out when/if the stock goes down. The information imbalance is fundamentally a part of how we operate our markets, since information literally can’t instantly be distributed to everyone (regardless of what faith-based “economists” try to convince people to believe about the efficient market gospel)
minikites 6y ago
I think shorting stock is fine and I understand why taking short positions is useful in creating downward pressure on stocks. I'm angry because "the free market" is anything but free and it's people like me who have to fund bailouts for millionaire gamblers. In other words, I'm mad at our society's rules of privatized gains and socialized losses.

minikites 6y ago

>If they believed the stock was overvalued, are they wrong to bet on that belief? You characterize it as a "bet". The whole point of a bet is that sometimes you lose. We don't allow for corporations to lose in the USA, only the common person.

Aperocky 6y ago

Yeah not sure why people hate the firms who just practically donated $5 billion to them (assuming they don't buy on the top). It's a game and some one are going to lose.