26 ms·

> These points doubtless make me appear to be a complacent shill for the financial industry, talking down to the rubes. For the record, I’m still angry about th

> These points doubtless make me appear to be a complacent shill for the financial industry, talking down to the rubes. For the record, I’m still angry about the way workers were ripped off in Britain more than three decades ago, and about the way the little guy ended up bearing the brunt for the financial implosions of 2000 and 2008. But it looks horribly to me as though the same thing is going to happen again — and I don’t think the answer to today’s many ills is to empower poor people to bankrupt themselves with margin accounts and derivatives. Who is this hurting, exactly? The author is making it sound like messing up the short stock is somehow hurting "the little guy" in the long run, and I wouldn't see that happening unless: a) Gamestop is somehow in a bunch of mutual funds tied to employee pensions/401k's b) The "little guy" refers to the Reddit traders that are making a killing right now, with the expectation that eventually the stock price will crash again. As best I can figure, most of the /r/ guys are doing this as a form of trolling and aren't expecting to get rich off it or pour their live-savings into it. And again, as best I can figure, the only people this "hurts" are the ones who were originally shorting the stock. So if this comes down to guys on Reddit pissing in Wall Street's cornflakes, it's hard for me to feel sympathetic for Wall Street.

chrisseaton 6y ago
Aren't almost all companies like this an integral part of almost everyone's pensions? Through your pension you're probably an investor in tens of thousands of companies and funds.
- yellowapple 6y ago
  Right, which means that a single company having a weird day probably won't have much of a noticeable impact on those pensions at all.
- Apocryphon 6y ago
  You’re not wrong, but are there pension funds that include revenue made from shorting stocks? Seems like a reckless practice if there are.
  - gnicholas 6y ago
    I am far from the most knowledgeable HNer on this topic, but my understanding is that pension funds are more conservative than most, but that they do get involved in riskier asset classes as well. They probably allocate a portion of their assets to hedge funds or VCs because otherwise they miss out on lots of upside. Of course, there can be downside as well...
  - maigret 6y ago
    Shorts are often (usually) a legit way to reduce risk - if the stock falls, you’re not losing everything. But that’s less entertaining to report about, so you rarely read about this in the non-technical news.
    - admax88q 6y ago
      And if it doesn't fall you lose money. You can't just reduce risk without also reducing gains.
      - bee_rider 6y ago
        But in the case of something like a pension, reducing risk is often the goal, right?
        admax88q 6y ago
        The goal is to make enough money for pensioners to live off. If the goal was to reduce risk then pensions would be better off being held in cash. But pension funds dont have enough cash to meet needs so they have to grow.
        GordonS 6y ago
        Pension pots actually often do follow a path of minimising risk, with the percentage held in cash and government bonds increasing as pensionable age nears.
- Nimitz14 6y ago
  No.
- xxpor 6y ago
  Who the hell has a pension any more?
  - iancmceachern 6y ago
    J&J employees do
  - csa 6y ago
    Many/most federal, state, and local government employees (including teachers), among others.
  - chrisseaton 6y ago
    I have a pension from my tech job. Almost all professional full-time jobs offer pensions. It might be in the form of a 401k in the US, but a 401k is just another kind of pension.
    - fragmede 6y ago
      They're both forms of retirements savings, but a 401k is a totally different form of retirements savings from a pension.
      - chrisseaton 6y ago
        I don't know why people get confused about this! It's a fund to give you income in retirement. That's a pension! You can have both defined-benefit and defined-contribution pensions. Not all pensions are defined-benefit: 401(k) is a defined-contribution pension. Wikipedia say it's a pension: > a 401(k) plan is an employer-sponsored defined-contribution pension https://en.wikipedia.org/wiki/401(k) https://en.wikipedia.org/wiki/401(k) The US Code also says it's a pension - 401 is 'Qualified pension, profit-sharing, and stock bonus plans' and 401(k) is covered under the 'qualified pension' clause ('qualified' meaning the same as 'defined contribution' in this case.) If it looks like a pension and quacks like a pension and is called a pension in law and is called a pension in non-technical resources like Wikipedia then... it's a pension!
alfl 6y ago
If there is a reversion to mean it will slaughter the retail investors.
- TuringNYC 6y ago
  It happens all the time, and retail investors dont get bailed out. Here is a lowly perspective from the retail investor: https://twitter.com/inactivist_/status/1354537152445521923/photo/1 https://twitter.com/inactivist_/status/1354537152445521923/p...
  - ISL 6y ago
    The retail investor only wins if they realize their profits. If they don't, those profits are shifted to a third actor (or never removed from their tormentor's pocket).
    - imtringued 6y ago
      The real winners are those who bought GME at $10 or less and the WSB userbase is well aware of that fact.
krok 6y ago
> These points doubtless make me appear to be a complacent shill for the financial industry, talking down to the rubes For context, in 2008 John Authers was a (very senior) Financial Times reporter on Wall Street. He became aware that there were queues of financial workers outside retail branches of banks in South Manhattan. These people had cash in various US banks, more than the insured deposit limit, and were withdrawing it and/or shifting it between accounts to protect themselves against the bankruptcy of major banks. They has a better idea than the newspaper-reading public of what was about to go down. John decided that this wasn't worthy of being covered in the FT. He did however queue up himself to move his own money so it was protected. You can judge for yourself whether that makes him likely to be a complacent shill for the financial industry, talking down to the rubes.
- scarmig 6y ago
  For the interested: https://www.ft.com/content/1fcb4d60-b1df-11e8-99ca-68cf89602132 https://www.ft.com/content/1fcb4d60-b1df-11e8-99ca-68cf89602... "Was this the right call? I think so. All our competitors also shunned any photos of Manhattan bank branches. The right to free speech does not give us right to shout fire in a crowded cinema; there was the risk of a fire, and we might have lit the spark by shouting about it." Enraging. You're allowed to shout fire in a crowded theater if there is, you know, a fire. Tapping all the people in the box seats on the shoulder to give them a heads up about the fire so they can get to the exit before everyone stampedes for it is sociopathic, not social-minded. I guess it's to his credit that he admitted to this, in the same sense that I'd credit a murderer confessing his crime and bringing the police to the body.
  - jerry1979 6y ago
    unwalled: https://www.businesstelegraph.co.uk/in-a-crisis-sometimes-you-dont-tell-the-whole-story/ https://www.businesstelegraph.co.uk/in-a-crisis-sometimes-yo...
  - SimonPStevens 6y ago
    While I mostly agree, it is a touch more subtle than this metaphor. Shouting fire in a crowded theatre doesn't typically cause the fire to get worse. A major newspaper breaking news of an impending bank run, does have the likelihood of actually being the thing that triggers the bank run, or maybe making it much worse.
deleted 6y ago
[deleted]
biolurker1 6y ago
Reddit guys do expect to get rich from it and they are pouring their life savings on it. Come by wsb and take a look.
admax88q 6y ago
> The "little guy" refers to the Reddit traders that are making a killing right now, with the expectation that eventually the stock price will crash again. The reddit traders are only making a killing if they're selling these inflated positions. At some point somebody will be left holding the bag, odds are it will be a bunch of people from wallstreetbets and other retail investors that are late to the party. There's no chance game stop is worth the its current price.
- fredophile 6y ago
  It's a short squeeze. The guys left holding the bag are people that are covering their short positions in the company. The average retail investor is not shorting stocks.. There will probably also be some people that try to jump on the trend too late but that isn't who is being hurt right now.
  - Traster 6y ago
    The second that the shorts have covered the price isn't going to drop to $90, it's going to drop back to $20 and most of the WSBers who were holding out for $2000 will lose their shirts. The shorts are going to lose, no doubt. But once they've lost, the stock price is probably $20. A lot of WSBers are going to be holding stock at that point, and possibly on margin. And that stock is going to be a crappy retail stock. At which point it'll be a slow drift as they cut their losses and move onto the next meme stock. The stock price today is irrelevant if you're not going to sell, and that's what WSB Thto be saying. The price is going to drop much faster than it rose.
    - Aloha 6y ago
      I dont feel bad for the guy who loses two grand at the casino, why should I feel bad for them?
      - coryfklein 6y ago
        You should feel bad for the human being who loses two grand at the casino!
teekert 6y ago
"Making a killing"... I got my first experience in trading with Crypto currencies, it always surprises me what stock traders call "crazy". Just an observation, I know the downsides of crypto etc, etc, it's just... another world.
polote 6y ago
> Reddit traders that are making a killing right now How can you know that ? Some of them are making a killing, but how can you be sure it is the majority of them ? It is easy to say that some hedge founds made bad bet, but I strongly think that some other hedge founds were winners. These people are professionals at making money from such events !
- ric2b 6y ago
  > Some of them are making a killing, but how can you be sure it is the majority of them ? Because they're mostly opening long positions (buying and holding the stock) and the price is way up?
TuringNYC 6y ago
This Reddit Post is very revealing: https://twitter.com/inactivist_/status/1354537152445521923/photo/1 https://twitter.com/inactivist_/status/1354537152445521923/p...
- MisterBastahrd 6y ago
  Not really. The people who are moving this money are largely not the people with a few hundred bucks to their names. The entire lot of those types don't even move the needle.
- deleted 6y ago
  [deleted]
- pera 6y ago
  this actually makes me want to buy a couple of gme stocks
- anotherman554 6y ago
  Being without a relationship has never made me want to go to Vegas and gamble my 401k on blackjack.
  - TuringNYC 6y ago
    Being without a relationship was Galloway's take. This poster's take is that he's find going to zero because him and many others would rather stick it to the man, even if it means the stocks go to zero eventually.
- hnuser847 6y ago
  That's the lamest take I've seen yet. They identified a short squeeze opportunity and exploited it. No Freudian analysis needed.
  - taigeair 6y ago
    if you check out the forums, most of them have wives
VectorLock 6y ago
>As best I can figure, most of the /r/ guys are doing this as a form of trolling and aren't expecting to get rich off it or pour their live-savings into it. I saw a lot of those "pour their life-savings" into it postings. A lot of "yacht or food stamps" type sentiments being shared.
- city41 6y ago
  On the flip side, if you watch the comments go by in the megathread, quite a few people are just buying 1 stock (often times just a fraction of a stock).
  - VectorLock 6y ago
    The fact that there are many people who are only gambling a small amount doesn't mean there aren't great amounts of people who are putting themselves in financial peril. It just means you have to look harder for them.
deleted 6y ago
[deleted]
stephen_greet 6y ago
I think the author is arguing here that the solution to combating institutional gambling via trading is not to allow retail investors to also gamble. Should someone who has no idea what they're doing be able to leverage themselves up 100X to buy a call/sell option by pressing a few buttons in Robinhood because they read about YOLO stock on Wallstreetbets? As someone who has lost a lot of money by following the Reddit sentiment on an investment, I think the author's point here is fair. This is not to say I wasn't an idiot. I was. But at a hard time in my life I needed more money so I gambled big and lost big. I worry other people will fall into the same trap.
- mancerayder 6y ago
  It ruffles my feathers when I read that we should "combat institutional gambling via trading and not allow retail investors to gamble." Who died and made the author a moral decision-maker? Is the problem that gambling is a 'sin' or is the problem that we're TRULY worried about people losing all their money and we want to protect them from themselves? Do you want to put them in prison when they bet money on fantasy football or a poor person spends their paychecks on lottery tickets? How far do you want to take this? FYI: states are moving to legalize gambling.
  - CrazyDave 6y ago
    Irresponsible gambling costs the government money because we have safety nets. This applies to both institutions and individuals. The government needs to bail out banks and provide social welfare. It's not a moral issue to me. Gambling through leveraged stocks should to be taxed more heavily to offset its cost. Something like the rate on lottery tickets.
    - mancerayder 6y ago
      That's a clear straw man argument, that there exists a sequence of events between people buying stocks on margin, going bankrupt, and living off of government assistance. And this occurrence is so commonplace as to warrant a proposed punitive tax on margin trade profit? What evidence do you have that this actually happens? I think you ARE making a moral argument, namely around 'risk taking' being something that society should punish and discourage via taxation. You left the second part, the societal cost (which may be real, who knows, you only offered a hypothetical government assistance scenario) completely in the realm of speculative fancy. Not to mention, if you really truly wanted to morally punish and discourage gambling, I seriously doubt a tax on profit would make a dent in it! Have you ever met a real gambler?
onetimeusename 6y ago
It looks like the short sellers made a mistake though. Short interest for Gamestop was 140% 12/31. Institutions did that. It's just too much for institutions to get so arrogant and greedy that they think that's worth a return but on the other hand talk down to small retail investors.
slg 6y ago
>b) The "little guy" refers to the Reddit traders that are making a killing right now, with the expectation that eventually the stock price will crash again. The stock price is completely disconnected from the value of the company. Either this is a bubble that will eventually pop and every small player still holding it will be badly hurt or the bubble doesn't pop, it continually exposes an inherit flaw in our financial system, and who knows what type of drastic and wide-reaching ramifications there could be from that including marketwide collapses.
- GrumpyNl 6y ago
  "The stock price is completely disconnected from the value of the company", this goes for most of the stock prices.
  - slg 6y ago
    I'm not going to disagree with you on the semantics of that, but this simply is in a totally different league. There is almost always plausible deniability that the stock value and company value are related. Meanwhile Gamestop is up over 1600% in a couple weeks with no fundamental changes to the company. There is no argument that can be made for anything else beyond the stock price being manipulated by a coordinated effort.
cwkoss 6y ago
> As best I can figure, most of the /r/ guys are doing this as a form of trolling and aren't expecting to get rich off it or pour their live-savings into it. There are certainly a lot of people talking about "sell your house, put it all into Gamestop". I hope the majority of people reading it recognize it as a joke, but I'm sure some people are heavily overinvested in gamestop right now, to the extent that losses will hurt.
spoonjim 6y ago
The /r/ guys who are last to the party will lose more money than was made by all of the people before them. It won’t be all hedge fund guys covering.
AlexCoventry 6y ago
> Who is this hurting, exactly? I think the narrative around this trade is a bit simplistic, and a lot of people in it are likely to wind up disappointed by the details it ignores. For instance, with potential losses this big, counter-party risk is huge. Even if everything works as the trade intends, and the losers have to chase after an ever smaller pool of increasingly expensive GME shares, it may make more economic sense for some of those losers to declare bankruptcy instead.
- nrmitchi 6y ago
  > it may make more economic sense for some of those losers to declare bankruptcy instead. This is a thing that goes against the narrative here, where the narrative is "Melvin has $13B, we can take it all!". Even if you assume that is true, and you can somehow push this already $25B cap company high enough, there isn't enough money in that $13B to allow all shares of GME to sell at the current price. If the entire premise here is "Melvin is screwed, we have him by the balls, and he has $13B", then it seems that the max would be... $13B. Past that, you're no longer "taking from Melvin"; you're taking from the people who don't get out before you do. There is no bankrupcy judge in the world that will say "Okay Melvin, sorry, but you owe WSB a thousand trillion dollars".
didibus 6y ago
There's two way this can play out in the end from my understanding. 1. The Hedge funds loses their bets, and some retail investors make ton of money of it. This will happen if when the retail investors "cash out", all the money is coming from the shorters being forced to buy it back at the inflated prices. 2. The shorters will be done liquidating their loss, and now more "little guys" will buy the now inflated stock from the earlier retail investors at an inflated price wanting to "get in" on the action. This will result is something more akin to a pyramid scheme and get rich quick scheme. Edit: Well there's a 3rd way, though seems less likely to me, which is that the new surge in stock price allows GameStop leverage to somehow become a massively profitable company that actually meets and surpassed the now "apparently" inflated stock price. In which case, all of the "little guys" will win and only the shorters will lose. I guess this is the best case scenario.
onlyrealcuzzo 6y ago
WSB is mostly buying options - not stocks directly and cashing out now (or at some top that could be in the future). The people on WSB that sold their call options and made a killing are selling those options to other people on WSB who (likely) will lose everything. And the ones with diamond hands who haven't sold yet will (likely) lose everything. So - this is like penny stock sellers in the 90s. Some little guys made a killing. Lots of little guys lost most of their savings. It's not like all the little guys are going to win and Melvin Capital is the one paying the bill. It's like Melvin Capital went bankrupt, and some little guys on Reddit fooled a bunch of other Redditors into giving them a bunch of money.
- Aperocky 6y ago
  well, the short sellers contributed. WSB and other investors pocketed the 5 billion from those people. And I assume some diamond hands on WSB will end up losing everything. It's easy to understand why everyone is HODL in WSB, since that's the position you want others to hold whether you want to sell or hold. Won't surprise me if half already exited.
Aunche 6y ago
The people hurting are the ones who get addicted to gambling with stocks and options. One person becoming a millionaire doesn't make up for another losing their life savings.

chrisseaton 6y ago

Aren't almost all companies like this an integral part of almost everyone's pensions? Through your pension you're probably an investor in tens of thousands of companies and funds.

yellowapple 6y ago
Right, which means that a single company having a weird day probably won't have much of a noticeable impact on those pensions at all.
Apocryphon 6y ago
You’re not wrong, but are there pension funds that include revenue made from shorting stocks? Seems like a reckless practice if there are.
- gnicholas 6y ago
  I am far from the most knowledgeable HNer on this topic, but my understanding is that pension funds are more conservative than most, but that they do get involved in riskier asset classes as well. They probably allocate a portion of their assets to hedge funds or VCs because otherwise they miss out on lots of upside. Of course, there can be downside as well...
- maigret 6y ago
  Shorts are often (usually) a legit way to reduce risk - if the stock falls, you’re not losing everything. But that’s less entertaining to report about, so you rarely read about this in the non-technical news.
  - admax88q 6y ago
    And if it doesn't fall you lose money. You can't just reduce risk without also reducing gains.
    - bee_rider 6y ago
      But in the case of something like a pension, reducing risk is often the goal, right?
      - admax88q 6y ago
        The goal is to make enough money for pensioners to live off. If the goal was to reduce risk then pensions would be better off being held in cash. But pension funds dont have enough cash to meet needs so they have to grow.
        GordonS 6y ago
        Pension pots actually often do follow a path of minimising risk, with the percentage held in cash and government bonds increasing as pensionable age nears.
Nimitz14 6y ago
No.
xxpor 6y ago
Who the hell has a pension any more?
- iancmceachern 6y ago
  J&J employees do
- csa 6y ago
  Many/most federal, state, and local government employees (including teachers), among others.
- chrisseaton 6y ago
  I have a pension from my tech job. Almost all professional full-time jobs offer pensions. It might be in the form of a 401k in the US, but a 401k is just another kind of pension.
  - fragmede 6y ago
    They're both forms of retirements savings, but a 401k is a totally different form of retirements savings from a pension.
    - chrisseaton 6y ago
      I don't know why people get confused about this! It's a fund to give you income in retirement. That's a pension! You can have both defined-benefit and defined-contribution pensions. Not all pensions are defined-benefit: 401(k) is a defined-contribution pension. Wikipedia say it's a pension: > a 401(k) plan is an employer-sponsored defined-contribution pension https://en.wikipedia.org/wiki/401(k) https://en.wikipedia.org/wiki/401(k) The US Code also says it's a pension - 401 is 'Qualified pension, profit-sharing, and stock bonus plans' and 401(k) is covered under the 'qualified pension' clause ('qualified' meaning the same as 'defined contribution' in this case.) If it looks like a pension and quacks like a pension and is called a pension in law and is called a pension in non-technical resources like Wikipedia then... it's a pension!

alfl 6y ago

If there is a reversion to mean it will slaughter the retail investors.

TuringNYC 6y ago
It happens all the time, and retail investors dont get bailed out. Here is a lowly perspective from the retail investor: https://twitter.com/inactivist_/status/1354537152445521923/photo/1 https://twitter.com/inactivist_/status/1354537152445521923/p...
- ISL 6y ago
  The retail investor only wins if they realize their profits. If they don't, those profits are shifted to a third actor (or never removed from their tormentor's pocket).
  - imtringued 6y ago
    The real winners are those who bought GME at $10 or less and the WSB userbase is well aware of that fact.

krok 6y ago

> These points doubtless make me appear to be a complacent shill for the financial industry, talking down to the rubes For context, in 2008 John Authers was a (very senior) Financial Times reporter on Wall Street. He became aware that there were queues of financial workers outside retail branches of banks in South Manhattan. These people had cash in various US banks, more than the insured deposit limit, and were withdrawing it and/or shifting it between accounts to protect themselves against the bankruptcy of major banks. They has a better idea than the newspaper-reading public of what was about to go down. John decided that this wasn't worthy of being covered in the FT. He did however queue up himself to move his own money so it was protected. You can judge for yourself whether that makes him likely to be a complacent shill for the financial industry, talking down to the rubes.

scarmig 6y ago
For the interested: https://www.ft.com/content/1fcb4d60-b1df-11e8-99ca-68cf89602132 https://www.ft.com/content/1fcb4d60-b1df-11e8-99ca-68cf89602... "Was this the right call? I think so. All our competitors also shunned any photos of Manhattan bank branches. The right to free speech does not give us right to shout fire in a crowded cinema; there was the risk of a fire, and we might have lit the spark by shouting about it." Enraging. You're allowed to shout fire in a crowded theater if there is, you know, a fire. Tapping all the people in the box seats on the shoulder to give them a heads up about the fire so they can get to the exit before everyone stampedes for it is sociopathic, not social-minded. I guess it's to his credit that he admitted to this, in the same sense that I'd credit a murderer confessing his crime and bringing the police to the body.
- jerry1979 6y ago
  unwalled: https://www.businesstelegraph.co.uk/in-a-crisis-sometimes-you-dont-tell-the-whole-story/ https://www.businesstelegraph.co.uk/in-a-crisis-sometimes-yo...
- SimonPStevens 6y ago
  While I mostly agree, it is a touch more subtle than this metaphor. Shouting fire in a crowded theatre doesn't typically cause the fire to get worse. A major newspaper breaking news of an impending bank run, does have the likelihood of actually being the thing that triggers the bank run, or maybe making it much worse.

deleted 6y ago

[deleted]

biolurker1 6y ago

Reddit guys do expect to get rich from it and they are pouring their life savings on it. Come by wsb and take a look.

admax88q 6y ago

> The "little guy" refers to the Reddit traders that are making a killing right now, with the expectation that eventually the stock price will crash again. The reddit traders are only making a killing if they're selling these inflated positions. At some point somebody will be left holding the bag, odds are it will be a bunch of people from wallstreetbets and other retail investors that are late to the party. There's no chance game stop is worth the its current price.

fredophile 6y ago
It's a short squeeze. The guys left holding the bag are people that are covering their short positions in the company. The average retail investor is not shorting stocks.. There will probably also be some people that try to jump on the trend too late but that isn't who is being hurt right now.
- Traster 6y ago
  The second that the shorts have covered the price isn't going to drop to $90, it's going to drop back to $20 and most of the WSBers who were holding out for $2000 will lose their shirts. The shorts are going to lose, no doubt. But once they've lost, the stock price is probably $20. A lot of WSBers are going to be holding stock at that point, and possibly on margin. And that stock is going to be a crappy retail stock. At which point it'll be a slow drift as they cut their losses and move onto the next meme stock. The stock price today is irrelevant if you're not going to sell, and that's what WSB Thto be saying. The price is going to drop much faster than it rose.
  - Aloha 6y ago
    I dont feel bad for the guy who loses two grand at the casino, why should I feel bad for them?
    - coryfklein 6y ago
      You should feel bad for the human being who loses two grand at the casino!

teekert 6y ago

"Making a killing"... I got my first experience in trading with Crypto currencies, it always surprises me what stock traders call "crazy". Just an observation, I know the downsides of crypto etc, etc, it's just... another world.

polote 6y ago

> Reddit traders that are making a killing right now How can you know that ? Some of them are making a killing, but how can you be sure it is the majority of them ? It is easy to say that some hedge founds made bad bet, but I strongly think that some other hedge founds were winners. These people are professionals at making money from such events !

ric2b 6y ago
> Some of them are making a killing, but how can you be sure it is the majority of them ? Because they're mostly opening long positions (buying and holding the stock) and the price is way up?

TuringNYC 6y ago

This Reddit Post is very revealing: https://twitter.com/inactivist_/status/1354537152445521923/photo/1 https://twitter.com/inactivist_/status/1354537152445521923/p...

MisterBastahrd 6y ago
Not really. The people who are moving this money are largely not the people with a few hundred bucks to their names. The entire lot of those types don't even move the needle.
deleted 6y ago
[deleted]
pera 6y ago
this actually makes me want to buy a couple of gme stocks
anotherman554 6y ago
Being without a relationship has never made me want to go to Vegas and gamble my 401k on blackjack.
- TuringNYC 6y ago
  Being without a relationship was Galloway's take. This poster's take is that he's find going to zero because him and many others would rather stick it to the man, even if it means the stocks go to zero eventually.
hnuser847 6y ago
That's the lamest take I've seen yet. They identified a short squeeze opportunity and exploited it. No Freudian analysis needed.
- taigeair 6y ago
  if you check out the forums, most of them have wives

VectorLock 6y ago

>As best I can figure, most of the /r/ guys are doing this as a form of trolling and aren't expecting to get rich off it or pour their live-savings into it. I saw a lot of those "pour their life-savings" into it postings. A lot of "yacht or food stamps" type sentiments being shared.

city41 6y ago
On the flip side, if you watch the comments go by in the megathread, quite a few people are just buying 1 stock (often times just a fraction of a stock).
- VectorLock 6y ago
  The fact that there are many people who are only gambling a small amount doesn't mean there aren't great amounts of people who are putting themselves in financial peril. It just means you have to look harder for them.

deleted 6y ago

[deleted]

stephen_greet 6y ago

I think the author is arguing here that the solution to combating institutional gambling via trading is not to allow retail investors to also gamble. Should someone who has no idea what they're doing be able to leverage themselves up 100X to buy a call/sell option by pressing a few buttons in Robinhood because they read about YOLO stock on Wallstreetbets? As someone who has lost a lot of money by following the Reddit sentiment on an investment, I think the author's point here is fair. This is not to say I wasn't an idiot. I was. But at a hard time in my life I needed more money so I gambled big and lost big. I worry other people will fall into the same trap.

mancerayder 6y ago
It ruffles my feathers when I read that we should "combat institutional gambling via trading and not allow retail investors to gamble." Who died and made the author a moral decision-maker? Is the problem that gambling is a 'sin' or is the problem that we're TRULY worried about people losing all their money and we want to protect them from themselves? Do you want to put them in prison when they bet money on fantasy football or a poor person spends their paychecks on lottery tickets? How far do you want to take this? FYI: states are moving to legalize gambling.
- CrazyDave 6y ago
  Irresponsible gambling costs the government money because we have safety nets. This applies to both institutions and individuals. The government needs to bail out banks and provide social welfare. It's not a moral issue to me. Gambling through leveraged stocks should to be taxed more heavily to offset its cost. Something like the rate on lottery tickets.
  - mancerayder 6y ago
    That's a clear straw man argument, that there exists a sequence of events between people buying stocks on margin, going bankrupt, and living off of government assistance. And this occurrence is so commonplace as to warrant a proposed punitive tax on margin trade profit? What evidence do you have that this actually happens? I think you ARE making a moral argument, namely around 'risk taking' being something that society should punish and discourage via taxation. You left the second part, the societal cost (which may be real, who knows, you only offered a hypothetical government assistance scenario) completely in the realm of speculative fancy. Not to mention, if you really truly wanted to morally punish and discourage gambling, I seriously doubt a tax on profit would make a dent in it! Have you ever met a real gambler?

onetimeusename 6y ago

It looks like the short sellers made a mistake though. Short interest for Gamestop was 140% 12/31. Institutions did that. It's just too much for institutions to get so arrogant and greedy that they think that's worth a return but on the other hand talk down to small retail investors.

slg 6y ago

>b) The "little guy" refers to the Reddit traders that are making a killing right now, with the expectation that eventually the stock price will crash again. The stock price is completely disconnected from the value of the company. Either this is a bubble that will eventually pop and every small player still holding it will be badly hurt or the bubble doesn't pop, it continually exposes an inherit flaw in our financial system, and who knows what type of drastic and wide-reaching ramifications there could be from that including marketwide collapses.

GrumpyNl 6y ago
"The stock price is completely disconnected from the value of the company", this goes for most of the stock prices.
- slg 6y ago
  I'm not going to disagree with you on the semantics of that, but this simply is in a totally different league. There is almost always plausible deniability that the stock value and company value are related. Meanwhile Gamestop is up over 1600% in a couple weeks with no fundamental changes to the company. There is no argument that can be made for anything else beyond the stock price being manipulated by a coordinated effort.

cwkoss 6y ago

> As best I can figure, most of the /r/ guys are doing this as a form of trolling and aren't expecting to get rich off it or pour their live-savings into it. There are certainly a lot of people talking about "sell your house, put it all into Gamestop". I hope the majority of people reading it recognize it as a joke, but I'm sure some people are heavily overinvested in gamestop right now, to the extent that losses will hurt.

spoonjim 6y ago

The /r/ guys who are last to the party will lose more money than was made by all of the people before them. It won’t be all hedge fund guys covering.

AlexCoventry 6y ago

> Who is this hurting, exactly? I think the narrative around this trade is a bit simplistic, and a lot of people in it are likely to wind up disappointed by the details it ignores. For instance, with potential losses this big, counter-party risk is huge. Even if everything works as the trade intends, and the losers have to chase after an ever smaller pool of increasingly expensive GME shares, it may make more economic sense for some of those losers to declare bankruptcy instead.

nrmitchi 6y ago
> it may make more economic sense for some of those losers to declare bankruptcy instead. This is a thing that goes against the narrative here, where the narrative is "Melvin has $13B, we can take it all!". Even if you assume that is true, and you can somehow push this already $25B cap company high enough, there isn't enough money in that $13B to allow all shares of GME to sell at the current price. If the entire premise here is "Melvin is screwed, we have him by the balls, and he has $13B", then it seems that the max would be... $13B. Past that, you're no longer "taking from Melvin"; you're taking from the people who don't get out before you do. There is no bankrupcy judge in the world that will say "Okay Melvin, sorry, but you owe WSB a thousand trillion dollars".

didibus 6y ago

There's two way this can play out in the end from my understanding. 1. The Hedge funds loses their bets, and some retail investors make ton of money of it. This will happen if when the retail investors "cash out", all the money is coming from the shorters being forced to buy it back at the inflated prices. 2. The shorters will be done liquidating their loss, and now more "little guys" will buy the now inflated stock from the earlier retail investors at an inflated price wanting to "get in" on the action. This will result is something more akin to a pyramid scheme and get rich quick scheme. Edit: Well there's a 3rd way, though seems less likely to me, which is that the new surge in stock price allows GameStop leverage to somehow become a massively profitable company that actually meets and surpassed the now "apparently" inflated stock price. In which case, all of the "little guys" will win and only the shorters will lose. I guess this is the best case scenario.

onlyrealcuzzo 6y ago

WSB is mostly buying options - not stocks directly and cashing out now (or at some top that could be in the future). The people on WSB that sold their call options and made a killing are selling those options to other people on WSB who (likely) will lose everything. And the ones with diamond hands who haven't sold yet will (likely) lose everything. So - this is like penny stock sellers in the 90s. Some little guys made a killing. Lots of little guys lost most of their savings. It's not like all the little guys are going to win and Melvin Capital is the one paying the bill. It's like Melvin Capital went bankrupt, and some little guys on Reddit fooled a bunch of other Redditors into giving them a bunch of money.

Aperocky 6y ago
well, the short sellers contributed. WSB and other investors pocketed the 5 billion from those people. And I assume some diamond hands on WSB will end up losing everything. It's easy to understand why everyone is HODL in WSB, since that's the position you want others to hold whether you want to sell or hold. Won't surprise me if half already exited.

Aunche 6y ago

The people hurting are the ones who get addicted to gambling with stocks and options. One person becoming a millionaire doesn't make up for another losing their life savings.