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Once again, this insistence on viewing 'Wall Street' as a monolothic entity. The largest asset management firm on Earth holds over 9 million Gamestop stock, non

Once again, this insistence on viewing 'Wall Street' as a monolothic entity. The largest asset management firm on Earth holds over 9 million Gamestop stock, none of the big banks that received bailouts in 08 are affected by this, 99.9% of hedge funds are not affected by this, high frequency traders are probably making a bundle. Institutional money was long Gamestop before this story entered the public consciousness. The idea of governments stepping in to bolster hedge funds is ludicrous, the whole point is that the government and SEC is hands off with them. Ultimately, a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson. It's great that retail investors got in on a high-level play like this and made money.

kev_da_dev 6y ago
How is disabling purchases and broker-wide outages not bolstering hedge funds? It's government intervention no matter how you look at it. Just because it's not a direct capital infusion does not make it any less bad
- afavour 6y ago
  Not sure if I missed something but did the government intervene here? I thought it was all private entities that stopped the trading?
  - dalbasal 6y ago
    The line is blurry. There was an immediate and emphatic appeal to the regulators, and the way the SEC works is often by encouraging self regulation. The CEO of the NASDAQ even went on air to ask for more SEC regulation. This isn't unusual, it's pretty much how "government intervention" via the SEC, and a lot of other regulatory bodies, actually works.
    - afavour 6y ago
      So, the SEC is hands off and encourages self regulation, so any instance of self regulation is considered government intervention?
      - emteycz 6y ago
        Yes, when SEC asks for something it's considered governmental intervention even though they technically don't force it.
        dalbasal 6y ago
        ...Exactly. This is by design. It's what regulators are designed to do. Medical/pharma is an exception. Usually regulators are designed to wield pressure. For long term goals, they usually steer towards more explicit "industry standards" that they can back... but they rarely author them. For shorter term and more operational issues, pressure is the main toolkit.
      - mandelbrotwurst 6y ago
        Probably not any, but my understanding is that the answer to that is mostly yes because much of the incentive for these entities to self-regulate comes from the threat of worse-for-them regulations from SEC if they fail to do so in a way that SEC feels good about, and they spend a fair bit of energy communicating back and forth what those ways are, even if it's not made explicit on paper.
      - dalbasal 6y ago
        Look at the language of SEC (and other regulators outside of technical fields like pharma). There are very occasional "landmark" regulations, often legislated, that are explicit. EG Sarbanes-Oxley. Day-2-day, the SEC works mostly by signalling. They might make a policy declaration, or send letters to CEOs. They'll note things in periodic firm reviews. Publicly raise an eyebrow. Take action against or investigate one firm and publish findings. Rarely are specifically worded edicts issued. Regulating bodies are designed to work largely through pressure instead of (ironically) through regulations. This is by design. Regulators are usually created in response to firms having won the loophole cat and mouse games, and the prohibitive complexity of actual regulations. If government wanted rules, they can just legislate directly instead of delegating to a regulator. "Compliance" is often about staying away from trouble by playing a sort of guessing game. It doesn't mean that it's "hands off."
- dagw 6y ago
  How is disabling purchases and broker-wide outages not bolstering hedge funds? There are hedge funds on both sides of this bet. So this intervention is both helping and harming "hedge funds" in equal measure depending on what side they have taken.
  - nightski 6y ago
    Buying vs. Selling Short do not carry equal amounts of risk. They are not balanced sides of the equation.
- deleted 6y ago
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- duxup 6y ago
  >It's government intervention no matter how you look at it. Is it? Do we have some information on that yet? Why does disabling purchases help?
  - mcguire 6y ago
    It prevents more people from piling onto the short squeeze? (It also prevents J. Naive Trader from buying into this train wreck and losing a bucket of money when the bottom falls out, which it will.)
- d33k4y 6y ago
  Trading through Royal Bank of Canada's platform has been down all morning. https://financialpost.com/news/fp-street/rbc-online-banking-trading-inaccessible-due-to-technical-issues https://financialpost.com/news/fp-street/rbc-online-banking-...
- fock 6y ago
  in the current situation, I don't think that private buyers trying the short squeeze (for which you have to hold) are really the driving force anymore. I think someone at robinhood had the (good) idea that at the current price, most people can realize a nice buck (by selling), while allowing them to buy a stock, which will probably go down a factor of 200 over the next year and currently fluctuates -50%/100% on a 20minute schedule required a casino license. The whole idea of the short squeeze is that the hedgefunds can't buy anything anymore and the lenders want their stuff back. And if they are still overshorted and the lenders don't like to bleed them first, before initiating the squeeze I don't think that this somehow hurts retail investors. Maybe it benefits the lenders who can nicely bleed both shortsellers and the WSB+muskalike-crowd, but at the current price, where the stock has actually gone up quite a bit but stabilized, it seems quite clear that this thing is decided by the lenders now. Do they want to play the crazy game for a near bankrupt company and demand their loans from Melvin or Co. (which would probably result in fast default and them not seeing a substantial amount of their shares again with the others reduced to a pennystock) or do they just sail along, taxing the narcissistic sociopaths on one side, while slowly selling off their actual stock to then be bought by those and returned to them. I guess they decided for option 2 and I think they are not as dumb and chaddy as they look to you ;).
dcolkitt 6y ago
> high frequency traders are probably making a bundle. I've heard from a former colleague at a major HFT firm, that they hit their entire revenue target for the year, just in the past week.
- totalZero 6y ago
  What kind of self-respecting HFT firm has revenue targets? Surely you're talking about P&L.
  - jimbob21 6y ago
    They're nearly the same thing in the hedge fund's case. Most of them take some variant of 2&20 still, so 20% of fund profits is their revenue.
    - hawk_ 6y ago
      HFTs are not hedgefunds and generally are marketmakers.
    - FabHK 6y ago
      HFT shops are not hedge funds. They don't need much capital, and I'd say that many have no outside investors. So, their trading PnL minus cost of running the operation is the net profit. On the other hand, the trading PnL will typically be a tiny part of their total trading volume (maybe a few bp).
  - deleted 6y ago
    [deleted]
  - dcolkitt 6y ago
    Trading revenue. As in “Goldman reported trading revenue of $X”
- lifeslogit 6y ago
  That is very interesting to hear! I imagined that this was the perfect storm for HFT. Lots of retail investors using default exchange routing settings via brokers like Robinhood and ETrade that sell their order flow. Meanwhile these retail investors are buying small amounts of very volatile equities! Lots of opportunity to rack up lots of pennies.
chaganated 6y ago
Unconvincing. We're all playing in the same pool. It only takes one upset stomach to set off a chain reaction.
koolba 6y ago
All those institutions are interconnected. A large hit to one player can cascade to the wider market as they're forced to sell off other positions to put up additional capital. That could cause additional sell-offs for more leveraged players. And so on... The phrase "too big to fail" exists for a reason and it's smaller than you think.
- bluecalm 6y ago
  Forcing big leveraged players to sell is fantastic for everyone else. There will be a lot of cheap stocks to pick up for everyone else.
  - duxup 6y ago
    Sell, what exactly? They won't buy after that?
    - meetups323 6y ago
      It's hard to know exactly what the repercussions were, but in my experience a lot of stocks were down yesterday, including some FAANG's and the like down 5-10%. Those numbers aren't likely to be permanent, so anyone who wanted to buy anyways got a 5-10% discount.
  - boringg 6y ago
    Assuming that you are in cash or another asset class that isn't being sold off.
    - bluecalm 6y ago
      No need for that assumption. Equities going down is not a problem for reasonable investors. You just buy more for cheaper prices according to your schedule and wait. You still own the % of your companies. It's not worth less just because you can't temporarily sell it. It would be like saying that price of your house is fluctuating from 0 to 500k depending if there is a potential buyer today or not. Stock market crash is only a big problem for leveraged over commited entities, very small inconvenience for people beyond accumulation phase (as they may need to sell very small % of assets in coming months) and huge opportunity for everyone else. Stocks crashing is fantastic for a little guy. It's the same with real estate prices and it's the reason entrenched players do everything to prevent it.
zouhair 6y ago
Ah the good old "it's just some bad apples", the system is great, trust it.
- bidirectional 6y ago
  I'm not talking about good vs. bad, but winner vs. loser. This is Wall St vs Wall St with retail investors taking some off the top on one side. This is not retail investors vs Wall St.
  - alisonkisk 6y ago
    Retail is getting fleeced also.
TheAlchemist 6y ago
Exactly. Just take a look at the shareholders and count how many shares those institutional have: https://money.cnn.com/quote/shareholders/shareholders.html?symb=GME&subView=institutional https://money.cnn.com/quote/shareholders/shareholders.html?s... It's Wall Street vs Wall Street - redditors were just the catalyst, and will be left holding the bag.
- ignoramous 6y ago
  What's surprising is all the concern for redditors here and elsewhere; whilst the overwhelming vibe from r/wsb is this meme resulting in squeeze is strictly personal and not at all business for most that are holding on. The rest (presumably greedy) are either making money or losing money because they're either riding up with the market or down. That's a feature of the zero-sum game that the financial system has been reduced to both the benefit and the detriment of the greed that's on all sides of the table.
  - hobs 6y ago
    Because the vibe you would want to make for a pump and dump scheme is an emotional hold it forever mindset. There's no distinction between the two, if you have that mindset you will be left holding the bag even if you think you won.
- deleted 6y ago
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minikites 6y ago
>the market has rightfully taught them a lesson Has it? What leads you to believe that THIS is the time investment firms will stop being reckless?
- bidirectional 6y ago
  Where did I say that? They've been taught a lesson via losing a lot of money, and now they know will be a lot of eyeballs on any future trades of a similar nature.
  - minikites 6y ago
    How is that a lesson? What consequences have they endured that will affect their future behavior? "Eyeballs" is not a lesson.
    - bidirectional 6y ago
      Losing billions of dollars in one of the biggest trading stories ever seems fairly consequential and will likely affect their future behaviour. That combined with the newfound knowledge that the type of trade they made can be picked up on and exploited is also likely to affect their future behaviour (i.e. don't do that again).
      - minikites 6y ago
        These are shame-based punishments, what happens if these people have no shame?
        alisonkisk 6y ago
        $3B is not shame.
        minikites 6y ago
        Sure it is, and most of us have enough capacity for shame that it works on us. Do you think Bernie Madoff feels ashamed about the money he lost? People who have no shame are very powerful, which is exactly why we need actual, meaningful punishment for people like this.
bluetwo 6y ago
I was wondering if this was really a pump and dump made to look like a short squeeze. Now I'm 100% convinced that this is what it is. All those people buying a couple hundred shares via Robinhood are going to lose their shirts.
totalZero 6y ago
Sure, but Gabe Plotkin is the uber-wallstreeter. All the rich-but-average Chosen Ones who get internships because of mommy and daddy look at what guys like him accomplish and think, "someday that too can be mine." This is like that scene in 300 where Leonidas makes Xerxes bleed. The point isn't that Wall Street has fallen. It's that, for once, Wall Street is fallible.
- deleted 6y ago
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- 52-6F-62 6y ago
  I can't see how that's the case. They aren't going to suffer for this, let alone personally. Even if the fund tanks, they can set up a new one, probably with sympathetic money or just cruise off into the sunset with their millions.
  - risyachka 6y ago
    Loosing billions still hurts a lot I would guess.
    - shin_lao 6y ago
      It's not their money, it's the money from LPs who invested in the fund.
      - yellowstuff 6y ago
        If you know the term LPs you should know the typically senior management at hedge funds have a significant portion of their net worth invested in their own funds.
    - 52-6F-62 6y ago
      The fund and it's investors may lose a lot. The people running the fund will not. But it's important to remember that it's a matter of scale here. Billions is a lot to a midwestern retail worker who put half his rent check into a volatile stock. It's not a lot to large groups of already-wealthy investors who have a portion of their portfolio invested with this one fund.
DougN7 6y ago
Some retail investors made money. The rest that are still jumping in will lose a lot as the stock returns to it’s correct price over time.
- clarkevans 6y ago
  As repeated Reddit, the shorts are still oversubscribed and the short squeeze has yet to start. Retail investors are around 15% -- there are many index funds that are invested, perhaps they might be the last ones holding? Even so, I'll be damned if I understand anything about this. I think it's interesting that "accredited investors" (e.g. 1MM in assets) can unionize to play in the stock market (e.g. hedge funds) but that the majority of Americans aren't permitted to unionize due to SEC rules. They are stuck with index funds. It's like we only allow top earners to be wolves and force everyone else to be sheep.
  - kgwgk 6y ago
    It can't go tits up!
  - fock 6y ago
    Looking at this, I guess it's safe to say that the WSB-crowd won't pull of the short squeeze: https://money.cnn.com/quote/shareholders/shareholders.html?symb=GME&subView=institutional https://money.cnn.com/quote/shareholders/shareholders.html?s...... it's institutional investors lending their stock out and buying it back...
- treeman79 6y ago
  So the smart money is to short it? Hehe.
TameAntelope 6y ago
Thank you, I appreciate this level headed response. The populist outrage fueled by anonymous Reddit users who are often either lying outright or wildly speculating is completely out of control. We really need to get those vaccines out, people are going insane...
dalbasal 6y ago
>> this insistence on viewing 'Wall Street' as a monolithic entity. That's not a fair statement. "Wall Street" isn't viewed as a monolithic entity. It's viewed as an entity, or industry. In fairness, Wall Street is even more insular than other industries that we happily refer to as a group: Petrogas, real estate developers, silicon valley, etc.
snowwrestler 6y ago
Right now it looks like retail investors stuck it to Wall Street and made some money because GME is still over $400/share this morning. Everyone holding GME can look at their app and feel great. But not everyone is going to be able to sell it at $400... or even $100 in some cases. It will be interesting to see how everyone feels after the sell off.
- Finnucane 6y ago
  Sure, once the squeeze is over they'll be holding expensive stock in a fundamentally near-worthless company. But then, they're probably Bitcoin believers too.
  - WorldMaker 6y ago
    I think the argument remains that GME is not fundamentally a near-worthless company and some of these investors are probably right that it was hugely undervalued by all the funds shorting it (maybe not to the tune of $400 a share, but many of those investors have seemed to have been whales, not average joes). Retail is down in the pandemic, but it is not out. My opinions that GME is the biggest pawn shop operation in the US makes me look down on the shops from a high horse that I don't currently feel a need in my personal life for pawn shops, but America as whole will always need pawn shops.
- mikestew 6y ago
  GME is still over $400/share this morning Guess what's changed in the 56 minutes since you posted this? GME: $265.00 Though I think it had dipped into around $380 by the time of parent post, and heading down. But someone bought at $430 this morning.
  - snowwrestler 6y ago
    Is this a surprise? Tons of people wanted to buy GME this morning and were mad that Robinhood was preventing them. We won’t know for days who makes money and who doesn’t. It certainly won’t be everyone.
bilekas 6y ago
What is worrying, is that a lot of people are going to be left holding the bag.. And I dont see this retail trading squeeze not hurting some regular retail investors..
bvirb 6y ago
https://www.powercycletrading.com/what-is-a-high-short-interest-ratio/#:~:text=A%20high%20NYSE%20short%20interest,that%20make%20investors%20more%20optimistic https://www.powercycletrading.com/what-is-a-high-short-inter.... > Short interest as a percentage of float above 20% is extremely high > A high NYSE short interest ratio means that the stock market as a whole is vulnerable to a “short-squeeze.” It could rise quickly if new economic data, political news, or other types of information are released that make investors more optimistic. GME was shorted 140%. No idea if 20% being risky is sage advice but it seems like you're totally right: some hedge funds took on a massive risk, the market saw the opportunity and played the other side.
- bilekas 6y ago
  I'm pretty stupid on this, but how does one short for +100% is that not naked shoring ?
  - w23j 6y ago
    From https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops#footnote-3 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...: There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.
  - bovine3dom 6y ago
    When you short a share, you borrow a share from someone who owns it and sell that share to someone else. If the person who bought the shorted share lends it to someone else to short, one share has been shorted twice.
  - FabHK 6y ago
philip1209 6y ago
A lens to look at this through is - "why is short selling allowed?" Advocates cite increased "liquidity." But, does society really benefit? Short-selling really just lets trading firms extract value from the failure of others. In that sense - professional trading firms that participate in short-selling could be grouped into a monolithic "Wall Street" in the sense that they are extracting value without a benefit for society.
- gizmondo 6y ago
  No, advocates cite improved "price discovery". You know, the only rational reason why stock markets exist in the first place.
  - alisonkisk 6y ago
    Markets also exist for capital allocation.
    - gizmondo 6y ago
      Yes, and in order to have efficient capital allocation, you need price discovery.
- rjtavares 6y ago
  If stocks prices being close to their true value is beneficial to society, then traditional short selling is also beneficial.
- mediaman 6y ago
  Most advocates argue that short-sellers help find the accurate price of a security, in service of the broader market goal of capital allocation. People who argue that markets should be long-only wind up advocating for frauds and failures to be mispriced in the market. Liquidity is not usually the primary benefit. That’s usually the argument for high frequency trading firms.
  - calyth2018 6y ago
partiallypro 6y ago
I agree with this mostly, but you can't deny that the swift action Wall Street firms/brokers have made to protect the interests of those effected hedge funds.
FabHK 6y ago
> a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson. Individually, what they were doing (shorting that stock) might have been perfectly sensible. That they collectively overshorted made them vulnerable. I'm not convinced yet that it was stupid.
ketamine__ 6y ago
> Ultimately, a few medium-sized hedge funds were caught doing something stupid Shorting a company that sells a physical product in malls during a pandemic is stupid? It seems their intuition is correct but there was a black swan event.
- mattkrause 6y ago
  Like everything, it’s a matter of degree. Would I start a company to sell physical video games, in malls, in a pandemic? Hell no. Would I short it to the extent that it the shares become ‘rare’ enough to induce a lot of demand? Also, hell no. Both extremes are....not clever.
- mcguire 6y ago
  Shorting a company to the extent that you have enough leverage to go bankrupt? Not the brightest move. Shorting it so that you may not be physically able to satisfy the sales? That's window-licking territory.
mcguire 6y ago
Yep, and this is a particularly silly article. One group of investors caught another group making a spectacularly poor decision. It just happens that the first group are retail traders (I'm not sure I would call them "investors").
boh 6y ago
This story is far less dramatic than the media is making it out to be. Short-sellers are a fringe group within the industry who often totally fail on trades (short selling is a pretty risky bet with an unlimited downside). This situation is definitely not monumental or new. Retail investors have been pumping stocks for the last 100 years. They contributed to the crash of 1929 and the dot com bubble, for instance. No they didn't have a subreddit to express themselves, they instead were driven by newspapers and pundits to direct their trades, but a similar premise nonetheless.
KKKKkkkk1 6y ago
Ultimately, a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson. It's great that retail investors got in on a high-level play like this and made money. Why is betting on the decline of an off-line video-game chain stupid? I'm surprised GameStop is even still in business.
ufmace 6y ago
I'm wondering about this. I was a little skeptical of the whole David-vs-Goliath bring-down-wall-st thing. But if it's really true that this is just one small and low-relevance hedge fund getting their ass handed to them for doing something dumb, then why does it feel like there's a whole machine trying so hard to tear down /r/wallstreetbets and distort the entire retail investing market to stop it? Why did Discord ban their server on a flimsy pretext right at the height of the attention? Why is there a sudden flood of articles about how this is all so very concerning in the mainstream financial press? Why are they mobilizing the universal weapon of calling everything they don't like Nazis?
- ryandrake 6y ago
  Nobody cares about these two hedge funds in particular, but they are concerned in general about retail investors having some way to band together to move a (very small) market. If it can happen to one fund it can happen to any random fund on Wall Street and that kind of risk and uncertainty can’t be allowed. Same mentality when companies that try to fight unions forming, even those forming at their competitors. A few Amazon employees want to form a union? The entire retail industry will suddenly show their support for Amazon. Can’t set the president of allowing the little guy anywhere to get used to being able to band together and take collective action.
- alisonkisk 6y ago
  Because like anything that gets suddenly popular, r/wsb and discord wsb got flooded with spammers.
ffggvv 6y ago
don’t forget the pensioners whose money is in the hedge fund

kev_da_dev 6y ago

How is disabling purchases and broker-wide outages not bolstering hedge funds? It's government intervention no matter how you look at it. Just because it's not a direct capital infusion does not make it any less bad

afavour 6y ago
Not sure if I missed something but did the government intervene here? I thought it was all private entities that stopped the trading?
- dalbasal 6y ago
  The line is blurry. There was an immediate and emphatic appeal to the regulators, and the way the SEC works is often by encouraging self regulation. The CEO of the NASDAQ even went on air to ask for more SEC regulation. This isn't unusual, it's pretty much how "government intervention" via the SEC, and a lot of other regulatory bodies, actually works.
  - afavour 6y ago
    So, the SEC is hands off and encourages self regulation, so any instance of self regulation is considered government intervention?
    - emteycz 6y ago
      Yes, when SEC asks for something it's considered governmental intervention even though they technically don't force it.
      - dalbasal 6y ago
        ...Exactly. This is by design. It's what regulators are designed to do. Medical/pharma is an exception. Usually regulators are designed to wield pressure. For long term goals, they usually steer towards more explicit "industry standards" that they can back... but they rarely author them. For shorter term and more operational issues, pressure is the main toolkit.
    - mandelbrotwurst 6y ago
      Probably not any, but my understanding is that the answer to that is mostly yes because much of the incentive for these entities to self-regulate comes from the threat of worse-for-them regulations from SEC if they fail to do so in a way that SEC feels good about, and they spend a fair bit of energy communicating back and forth what those ways are, even if it's not made explicit on paper.
    - dalbasal 6y ago
      Look at the language of SEC (and other regulators outside of technical fields like pharma). There are very occasional "landmark" regulations, often legislated, that are explicit. EG Sarbanes-Oxley. Day-2-day, the SEC works mostly by signalling. They might make a policy declaration, or send letters to CEOs. They'll note things in periodic firm reviews. Publicly raise an eyebrow. Take action against or investigate one firm and publish findings. Rarely are specifically worded edicts issued. Regulating bodies are designed to work largely through pressure instead of (ironically) through regulations. This is by design. Regulators are usually created in response to firms having won the loophole cat and mouse games, and the prohibitive complexity of actual regulations. If government wanted rules, they can just legislate directly instead of delegating to a regulator. "Compliance" is often about staying away from trouble by playing a sort of guessing game. It doesn't mean that it's "hands off."
dagw 6y ago
How is disabling purchases and broker-wide outages not bolstering hedge funds? There are hedge funds on both sides of this bet. So this intervention is both helping and harming "hedge funds" in equal measure depending on what side they have taken.
- nightski 6y ago
  Buying vs. Selling Short do not carry equal amounts of risk. They are not balanced sides of the equation.
deleted 6y ago
[deleted]
duxup 6y ago
>It's government intervention no matter how you look at it. Is it? Do we have some information on that yet? Why does disabling purchases help?
- mcguire 6y ago
  It prevents more people from piling onto the short squeeze? (It also prevents J. Naive Trader from buying into this train wreck and losing a bucket of money when the bottom falls out, which it will.)
d33k4y 6y ago
Trading through Royal Bank of Canada's platform has been down all morning. https://financialpost.com/news/fp-street/rbc-online-banking-trading-inaccessible-due-to-technical-issues https://financialpost.com/news/fp-street/rbc-online-banking-...
fock 6y ago
in the current situation, I don't think that private buyers trying the short squeeze (for which you have to hold) are really the driving force anymore. I think someone at robinhood had the (good) idea that at the current price, most people can realize a nice buck (by selling), while allowing them to buy a stock, which will probably go down a factor of 200 over the next year and currently fluctuates -50%/100% on a 20minute schedule required a casino license. The whole idea of the short squeeze is that the hedgefunds can't buy anything anymore and the lenders want their stuff back. And if they are still overshorted and the lenders don't like to bleed them first, before initiating the squeeze I don't think that this somehow hurts retail investors. Maybe it benefits the lenders who can nicely bleed both shortsellers and the WSB+muskalike-crowd, but at the current price, where the stock has actually gone up quite a bit but stabilized, it seems quite clear that this thing is decided by the lenders now. Do they want to play the crazy game for a near bankrupt company and demand their loans from Melvin or Co. (which would probably result in fast default and them not seeing a substantial amount of their shares again with the others reduced to a pennystock) or do they just sail along, taxing the narcissistic sociopaths on one side, while slowly selling off their actual stock to then be bought by those and returned to them. I guess they decided for option 2 and I think they are not as dumb and chaddy as they look to you ;).

dcolkitt 6y ago

> high frequency traders are probably making a bundle. I've heard from a former colleague at a major HFT firm, that they hit their entire revenue target for the year, just in the past week.

totalZero 6y ago
What kind of self-respecting HFT firm has revenue targets? Surely you're talking about P&L.
- jimbob21 6y ago
  They're nearly the same thing in the hedge fund's case. Most of them take some variant of 2&20 still, so 20% of fund profits is their revenue.
  - hawk_ 6y ago
    HFTs are not hedgefunds and generally are marketmakers.
  - FabHK 6y ago
    HFT shops are not hedge funds. They don't need much capital, and I'd say that many have no outside investors. So, their trading PnL minus cost of running the operation is the net profit. On the other hand, the trading PnL will typically be a tiny part of their total trading volume (maybe a few bp).
- deleted 6y ago
  [deleted]
- dcolkitt 6y ago
  Trading revenue. As in “Goldman reported trading revenue of $X”
lifeslogit 6y ago
That is very interesting to hear! I imagined that this was the perfect storm for HFT. Lots of retail investors using default exchange routing settings via brokers like Robinhood and ETrade that sell their order flow. Meanwhile these retail investors are buying small amounts of very volatile equities! Lots of opportunity to rack up lots of pennies.

chaganated 6y ago

Unconvincing. We're all playing in the same pool. It only takes one upset stomach to set off a chain reaction.

koolba 6y ago

All those institutions are interconnected. A large hit to one player can cascade to the wider market as they're forced to sell off other positions to put up additional capital. That could cause additional sell-offs for more leveraged players. And so on... The phrase "too big to fail" exists for a reason and it's smaller than you think.

bluecalm 6y ago
Forcing big leveraged players to sell is fantastic for everyone else. There will be a lot of cheap stocks to pick up for everyone else.
- duxup 6y ago
  Sell, what exactly? They won't buy after that?
  - meetups323 6y ago
    It's hard to know exactly what the repercussions were, but in my experience a lot of stocks were down yesterday, including some FAANG's and the like down 5-10%. Those numbers aren't likely to be permanent, so anyone who wanted to buy anyways got a 5-10% discount.
- boringg 6y ago
  Assuming that you are in cash or another asset class that isn't being sold off.
  - bluecalm 6y ago
    No need for that assumption. Equities going down is not a problem for reasonable investors. You just buy more for cheaper prices according to your schedule and wait. You still own the % of your companies. It's not worth less just because you can't temporarily sell it. It would be like saying that price of your house is fluctuating from 0 to 500k depending if there is a potential buyer today or not. Stock market crash is only a big problem for leveraged over commited entities, very small inconvenience for people beyond accumulation phase (as they may need to sell very small % of assets in coming months) and huge opportunity for everyone else. Stocks crashing is fantastic for a little guy. It's the same with real estate prices and it's the reason entrenched players do everything to prevent it.

zouhair 6y ago

Ah the good old "it's just some bad apples", the system is great, trust it.

bidirectional 6y ago
I'm not talking about good vs. bad, but winner vs. loser. This is Wall St vs Wall St with retail investors taking some off the top on one side. This is not retail investors vs Wall St.
- alisonkisk 6y ago
  Retail is getting fleeced also.

TheAlchemist 6y ago

Exactly. Just take a look at the shareholders and count how many shares those institutional have: https://money.cnn.com/quote/shareholders/shareholders.html?symb=GME&subView=institutional https://money.cnn.com/quote/shareholders/shareholders.html?s... It's Wall Street vs Wall Street - redditors were just the catalyst, and will be left holding the bag.

ignoramous 6y ago
What's surprising is all the concern for redditors here and elsewhere; whilst the overwhelming vibe from r/wsb is this meme resulting in squeeze is strictly personal and not at all business for most that are holding on. The rest (presumably greedy) are either making money or losing money because they're either riding up with the market or down. That's a feature of the zero-sum game that the financial system has been reduced to both the benefit and the detriment of the greed that's on all sides of the table.
- hobs 6y ago
  Because the vibe you would want to make for a pump and dump scheme is an emotional hold it forever mindset. There's no distinction between the two, if you have that mindset you will be left holding the bag even if you think you won.
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minikites 6y ago

>the market has rightfully taught them a lesson Has it? What leads you to believe that THIS is the time investment firms will stop being reckless?

bidirectional 6y ago
Where did I say that? They've been taught a lesson via losing a lot of money, and now they know will be a lot of eyeballs on any future trades of a similar nature.
- minikites 6y ago
  How is that a lesson? What consequences have they endured that will affect their future behavior? "Eyeballs" is not a lesson.
  - bidirectional 6y ago
    Losing billions of dollars in one of the biggest trading stories ever seems fairly consequential and will likely affect their future behaviour. That combined with the newfound knowledge that the type of trade they made can be picked up on and exploited is also likely to affect their future behaviour (i.e. don't do that again).
    - minikites 6y ago
      These are shame-based punishments, what happens if these people have no shame?
      - alisonkisk 6y ago
        $3B is not shame.
        minikites 6y ago
        Sure it is, and most of us have enough capacity for shame that it works on us. Do you think Bernie Madoff feels ashamed about the money he lost? People who have no shame are very powerful, which is exactly why we need actual, meaningful punishment for people like this.

bluetwo 6y ago

I was wondering if this was really a pump and dump made to look like a short squeeze. Now I'm 100% convinced that this is what it is. All those people buying a couple hundred shares via Robinhood are going to lose their shirts.

totalZero 6y ago

Sure, but Gabe Plotkin is the uber-wallstreeter. All the rich-but-average Chosen Ones who get internships because of mommy and daddy look at what guys like him accomplish and think, "someday that too can be mine." This is like that scene in 300 where Leonidas makes Xerxes bleed. The point isn't that Wall Street has fallen. It's that, for once, Wall Street is fallible.

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52-6F-62 6y ago
I can't see how that's the case. They aren't going to suffer for this, let alone personally. Even if the fund tanks, they can set up a new one, probably with sympathetic money or just cruise off into the sunset with their millions.
- risyachka 6y ago
  Loosing billions still hurts a lot I would guess.
  - shin_lao 6y ago
    It's not their money, it's the money from LPs who invested in the fund.
    - yellowstuff 6y ago
      If you know the term LPs you should know the typically senior management at hedge funds have a significant portion of their net worth invested in their own funds.
  - 52-6F-62 6y ago
    The fund and it's investors may lose a lot. The people running the fund will not. But it's important to remember that it's a matter of scale here. Billions is a lot to a midwestern retail worker who put half his rent check into a volatile stock. It's not a lot to large groups of already-wealthy investors who have a portion of their portfolio invested with this one fund.

DougN7 6y ago

Some retail investors made money. The rest that are still jumping in will lose a lot as the stock returns to it’s correct price over time.

clarkevans 6y ago
As repeated Reddit, the shorts are still oversubscribed and the short squeeze has yet to start. Retail investors are around 15% -- there are many index funds that are invested, perhaps they might be the last ones holding? Even so, I'll be damned if I understand anything about this. I think it's interesting that "accredited investors" (e.g. 1MM in assets) can unionize to play in the stock market (e.g. hedge funds) but that the majority of Americans aren't permitted to unionize due to SEC rules. They are stuck with index funds. It's like we only allow top earners to be wolves and force everyone else to be sheep.
- kgwgk 6y ago
  It can't go tits up!
- fock 6y ago
  Looking at this, I guess it's safe to say that the WSB-crowd won't pull of the short squeeze: https://money.cnn.com/quote/shareholders/shareholders.html?symb=GME&subView=institutional https://money.cnn.com/quote/shareholders/shareholders.html?s...... it's institutional investors lending their stock out and buying it back...
treeman79 6y ago
So the smart money is to short it? Hehe.

TameAntelope 6y ago

Thank you, I appreciate this level headed response. The populist outrage fueled by anonymous Reddit users who are often either lying outright or wildly speculating is completely out of control. We really need to get those vaccines out, people are going insane...

dalbasal 6y ago

>> this insistence on viewing 'Wall Street' as a monolithic entity. That's not a fair statement. "Wall Street" isn't viewed as a monolithic entity. It's viewed as an entity, or industry. In fairness, Wall Street is even more insular than other industries that we happily refer to as a group: Petrogas, real estate developers, silicon valley, etc.

snowwrestler 6y ago

Right now it looks like retail investors stuck it to Wall Street and made some money because GME is still over $400/share this morning. Everyone holding GME can look at their app and feel great. But not everyone is going to be able to sell it at $400... or even $100 in some cases. It will be interesting to see how everyone feels after the sell off.

Finnucane 6y ago
Sure, once the squeeze is over they'll be holding expensive stock in a fundamentally near-worthless company. But then, they're probably Bitcoin believers too.
- WorldMaker 6y ago
  I think the argument remains that GME is not fundamentally a near-worthless company and some of these investors are probably right that it was hugely undervalued by all the funds shorting it (maybe not to the tune of $400 a share, but many of those investors have seemed to have been whales, not average joes). Retail is down in the pandemic, but it is not out. My opinions that GME is the biggest pawn shop operation in the US makes me look down on the shops from a high horse that I don't currently feel a need in my personal life for pawn shops, but America as whole will always need pawn shops.
mikestew 6y ago
GME is still over $400/share this morning Guess what's changed in the 56 minutes since you posted this? GME: $265.00 Though I think it had dipped into around $380 by the time of parent post, and heading down. But someone bought at $430 this morning.
- snowwrestler 6y ago
  Is this a surprise? Tons of people wanted to buy GME this morning and were mad that Robinhood was preventing them. We won’t know for days who makes money and who doesn’t. It certainly won’t be everyone.

bilekas 6y ago

What is worrying, is that a lot of people are going to be left holding the bag.. And I dont see this retail trading squeeze not hurting some regular retail investors..

bvirb 6y ago

https://www.powercycletrading.com/what-is-a-high-short-interest-ratio/#:~:text=A%20high%20NYSE%20short%20interest,that%20make%20investors%20more%20optimistic https://www.powercycletrading.com/what-is-a-high-short-inter.... > Short interest as a percentage of float above 20% is extremely high > A high NYSE short interest ratio means that the stock market as a whole is vulnerable to a “short-squeeze.” It could rise quickly if new economic data, political news, or other types of information are released that make investors more optimistic. GME was shorted 140%. No idea if 20% being risky is sage advice but it seems like you're totally right: some hedge funds took on a massive risk, the market saw the opportunity and played the other side.

bilekas 6y ago
I'm pretty stupid on this, but how does one short for +100% is that not naked shoring ?
- w23j 6y ago
  From https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops#footnote-3 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...: There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.
- bovine3dom 6y ago
  When you short a share, you borrow a share from someone who owns it and sell that share to someone else. If the person who bought the shorted share lends it to someone else to short, one share has been shorted twice.
- FabHK 6y ago

philip1209 6y ago

A lens to look at this through is - "why is short selling allowed?" Advocates cite increased "liquidity." But, does society really benefit? Short-selling really just lets trading firms extract value from the failure of others. In that sense - professional trading firms that participate in short-selling could be grouped into a monolithic "Wall Street" in the sense that they are extracting value without a benefit for society.

gizmondo 6y ago
No, advocates cite improved "price discovery". You know, the only rational reason why stock markets exist in the first place.
- alisonkisk 6y ago
  Markets also exist for capital allocation.
  - gizmondo 6y ago
    Yes, and in order to have efficient capital allocation, you need price discovery.
rjtavares 6y ago
If stocks prices being close to their true value is beneficial to society, then traditional short selling is also beneficial.
mediaman 6y ago
Most advocates argue that short-sellers help find the accurate price of a security, in service of the broader market goal of capital allocation. People who argue that markets should be long-only wind up advocating for frauds and failures to be mispriced in the market. Liquidity is not usually the primary benefit. That’s usually the argument for high frequency trading firms.
- calyth2018 6y ago

partiallypro 6y ago

I agree with this mostly, but you can't deny that the swift action Wall Street firms/brokers have made to protect the interests of those effected hedge funds.

FabHK 6y ago

> a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson. Individually, what they were doing (shorting that stock) might have been perfectly sensible. That they collectively overshorted made them vulnerable. I'm not convinced yet that it was stupid.

ketamine__ 6y ago

> Ultimately, a few medium-sized hedge funds were caught doing something stupid Shorting a company that sells a physical product in malls during a pandemic is stupid? It seems their intuition is correct but there was a black swan event.

mattkrause 6y ago
Like everything, it’s a matter of degree. Would I start a company to sell physical video games, in malls, in a pandemic? Hell no. Would I short it to the extent that it the shares become ‘rare’ enough to induce a lot of demand? Also, hell no. Both extremes are....not clever.
mcguire 6y ago
Shorting a company to the extent that you have enough leverage to go bankrupt? Not the brightest move. Shorting it so that you may not be physically able to satisfy the sales? That's window-licking territory.

mcguire 6y ago

Yep, and this is a particularly silly article. One group of investors caught another group making a spectacularly poor decision. It just happens that the first group are retail traders (I'm not sure I would call them "investors").

boh 6y ago

This story is far less dramatic than the media is making it out to be. Short-sellers are a fringe group within the industry who often totally fail on trades (short selling is a pretty risky bet with an unlimited downside). This situation is definitely not monumental or new. Retail investors have been pumping stocks for the last 100 years. They contributed to the crash of 1929 and the dot com bubble, for instance. No they didn't have a subreddit to express themselves, they instead were driven by newspapers and pundits to direct their trades, but a similar premise nonetheless.

KKKKkkkk1 6y ago

Ultimately, a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson. It's great that retail investors got in on a high-level play like this and made money. Why is betting on the decline of an off-line video-game chain stupid? I'm surprised GameStop is even still in business.

ufmace 6y ago

I'm wondering about this. I was a little skeptical of the whole David-vs-Goliath bring-down-wall-st thing. But if it's really true that this is just one small and low-relevance hedge fund getting their ass handed to them for doing something dumb, then why does it feel like there's a whole machine trying so hard to tear down /r/wallstreetbets and distort the entire retail investing market to stop it? Why did Discord ban their server on a flimsy pretext right at the height of the attention? Why is there a sudden flood of articles about how this is all so very concerning in the mainstream financial press? Why are they mobilizing the universal weapon of calling everything they don't like Nazis?

ryandrake 6y ago
Nobody cares about these two hedge funds in particular, but they are concerned in general about retail investors having some way to band together to move a (very small) market. If it can happen to one fund it can happen to any random fund on Wall Street and that kind of risk and uncertainty can’t be allowed. Same mentality when companies that try to fight unions forming, even those forming at their competitors. A few Amazon employees want to form a union? The entire retail industry will suddenly show their support for Amazon. Can’t set the president of allowing the little guy anywhere to get used to being able to band together and take collective action.
alisonkisk 6y ago
Because like anything that gets suddenly popular, r/wsb and discord wsb got flooded with spammers.

ffggvv 6y ago

don’t forget the pensioners whose money is in the hedge fund