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> But Melvin Capital announced that they closed out their short position. And bailing out Melvin Capital isn't the same thing as assuming their positions. Yeah

> But Melvin Capital announced that they closed out their short position. And bailing out Melvin Capital isn't the same thing as assuming their positions. Yeah, arm's length transactions are a means of providing truth to falsity, and perfectly crafted statements are in the same category. The only thing missing from these press releases is "to the best of my knowledge"

JumpCrisscross 6y ago
> arm's length transactions are a means of providing truth to falsity, and perfectly crafted statements are in the same category Bailouts aren't arms-length transactions. They're highly involved. Melvin Capital isn't just a GameStop short. It has billions of other assets. But not all of those are liquid. Margin calls require liquidity, and Melvin didn't have many options other than fire selling the rest of their portfolio and taking a private bailout at exorbitant terms (but less egregious than the losses they would have incurred in a fire sale). From Citadel's perspective, why on earth would they assume the short positions? They're in the red. That is Melvin's investors' problem. The second-order problem, that of avoiding a fire sale of remaining assets, is what the bailout prevented. With respect to Melvin, I'm blown away that these trades were executed as unhedged shorts.
- anonymouse008 6y ago
  > From Citadel's perspective, why on earth would they assume the short positions? They're in the red. That is Melvin's investors' problem. The second-order problem, that of avoiding a fire sale of remaining assets, is what the bailout prevented. Because: > With respect to Melvin, I'm blown away that these trades were executed as unhedged shorts. Because that ^ will take down a prime, and if it's your prime because you're buddies with your mentee... no sir. And to cap it off, dominos fall everywhere because of the Index Fund phenomenon if there's no longer 'liquidity' from these guys. Side note: You're smart as hell, I can tell from the few times we've interacted on this forum, and I appreciate the thoughtful responses. We need to figure out a way to trade info and get a beer. Edit: this could become a run on the banks, but instead it would be a run on equities... which is equity cost of capital worse than just withdrawing your dollars.

JumpCrisscross 6y ago

> arm's length transactions are a means of providing truth to falsity, and perfectly crafted statements are in the same category Bailouts aren't arms-length transactions. They're highly involved. Melvin Capital isn't just a GameStop short. It has billions of other assets. But not all of those are liquid. Margin calls require liquidity, and Melvin didn't have many options other than fire selling the rest of their portfolio and taking a private bailout at exorbitant terms (but less egregious than the losses they would have incurred in a fire sale). From Citadel's perspective, why on earth would they assume the short positions? They're in the red. That is Melvin's investors' problem. The second-order problem, that of avoiding a fire sale of remaining assets, is what the bailout prevented. With respect to Melvin, I'm blown away that these trades were executed as unhedged shorts.

anonymouse008 6y ago
> From Citadel's perspective, why on earth would they assume the short positions? They're in the red. That is Melvin's investors' problem. The second-order problem, that of avoiding a fire sale of remaining assets, is what the bailout prevented. Because: > With respect to Melvin, I'm blown away that these trades were executed as unhedged shorts. Because that ^ will take down a prime, and if it's your prime because you're buddies with your mentee... no sir. And to cap it off, dominos fall everywhere because of the Index Fund phenomenon if there's no longer 'liquidity' from these guys. Side note: You're smart as hell, I can tell from the few times we've interacted on this forum, and I appreciate the thoughtful responses. We need to figure out a way to trade info and get a beer. Edit: this could become a run on the banks, but instead it would be a run on equities... which is equity cost of capital worse than just withdrawing your dollars.