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We're in a bubble that's being used instrumentally in a game of chicken between average joe with RH account and hedge funds on their short positions. There's m

We're in a bubble that's being used instrumentally in a game of chicken between average joe with RH account and hedge funds on their short positions. There's more to gain from this because of the social aspect (social change and reform), but also more to lose (bubble bursting on the average citizen that has more to lose personally than a fund). I'm obviously not cheering for the funds here, but I do worry for people like my dad who can just buy a stock more easily than order dinner. The social movement is honorable, but at what cost? This has the shape and character of a Joker move, when does the bubble burst?

2bitencryption 6y ago
I can't help but facepalm that people are genuinely encouraging one another to buy a stock that is so obviously overvalued, and then hold it at that price as long as possible... there are not many guarantees in trading, but that is a guarantee to lose money. and because it's under the guise of "sticking it to the man" people have become even less rational about their money. so when the stock eventually corrects to where it belongs for a dying retailer selling physical media in the digital age... I can only imagine the millions "surprised pikachu face" that will ensue
- simonbarker87 6y ago
  The vast majority know what they are doing here, I took a tiny fraction of my money and bought in - less than I would spend on a family meal out. I assume I lost it but it’s fun to have some skin in the game for the ride. Some people are putting silly amounts in but they know they’re not investing based on market fundamentals, they want in on the ride and they know they can loose it all. The issue here is the clear protections/options in place for hedge funds that they can use when they feel a squeeze but absolutely no protection for average joe investor when these guys try to short an otherwise viable business going through a rough patch. GameStop and Blackberry are in the middle of a turn around, shorting them and then telling the market they are failing is unethical and if they feel a bit of pain at the moment then good.
  - Cd00d 6y ago
    I know GameStop brought in new leadership, but a turn around is a reach, in my opinion. To me, GameStop is the mall store (problem), that required me to pre-pay for product expected to be wildly popular (problem), offers me $2 for physical media (problem^2) so that when I go in they can offer me used for $58 instead of new for $60 (problem). The future of gaming is downloads and streaming. GameStop may be able to generate revenue for a while selling used last gen systems while the current new consoles launch, but there's nothing about their position or business model that has a strong future. Plus, I'd say their long history of horrible customer satisfaction mean they don't have the brand loyalty for a pivot/reboot. I don't think it's unethical to short that.
- cactus2093 6y ago
  > there are not many guarantees in trading, but that is a guarantee to lose money. What? This is not at all a guarantee. Even if there were a guarantee that it will come back down eventually (which seems highly likely but that's still not a guarantee), that doesn't mean it will go down today or tomorrow or next week. For all we know there is still lots of time for new investors to get in, make money, and then get out before the price crashes. The particular absurdity of your claim here is that if it were true, we could not possibly have ended up in this place. That's exactly how we got here, people who "knew better" knew that of course this stock was going down and shorted it. Then it went up a little and people shorted it even more and it went up even more, and on and on as this played out over the past few weeks.
  - 2bitencryption 6y ago
    the "guarantee" I'm referring to comes from these two assumptions: - the price is overvalued and will correct - the prevailing sentiment on the wsb subreddit is "HOLD NO MATTER HOW HIGH IT GOES" (seriously, that's what they are saying) So, sure, maybe gamestop will magically become a company as valuable as its stock implies it is. But realistically no one would bet on this. So given that it is overvalued by everyone's definition of the term, and given that the hivemind has decided to "HOLD NO MATTER WHAT", it becomes obvious what will eventually happen - the hivemind will keep holding, since that's the meme, and memes drive stocks now - and Gamestop will correct. And that will be that.
  - reducesuffering 6y ago
    > For all we know there is still lots of time for new investors to get in, make money, and then get out before the price crashes. Yes, that means an equivalent amount of people will be holding the huge loss, because they bought in when the previous person got out...
    - mrgreenfur 6y ago
      The short squeeze is to force the hedge funds to buy at a high price when they have to cover their short. This is the whole plan.
platz 6y ago
Only invest what you can afford to loose
- gmaster1440 6y ago
  Seems like common sense, but I am willing to bet average joe RH investor does not have the financial hygiene to appreciate that fact enough.
  - tartoran 6y ago
    A simple disclaimer "We're not responsible if you get wiped out!" with another popup "Are you really sure you want to proceed?" after pressing ok twice would suffice before placing a bet. Who are we fooling? This damage control operation was to benefit their friends.
- miguelrochefort 6y ago
  - Does this advice apply to stocks? - Does this advice apply to foreign currencies? - Does this advice apply to local currencies? See the contradiction? You're always invested.
  - platz 6y ago
    If I'm always invested why aren't I living under a bridge because Pier 1 Imports went bankrupt in 2020? Also, I'm concerned that the earth could get hit with a rogue planet.
dcolkitt 6y ago
> The social movement is honorable I’m gonna disagree. The entire “social movement” seems to be little more than the same tired old cliches and hysterics about “speculators”. The main grievance is basically that short selling is bad. Despite academic finance, finding again and again that short selling meaningfully improves price efficiency and protects ordinary investors from bubbles and mania.[1][2] Again and again corporate executives use the scapegoat of short sellers and speculators to shift the blame from their own mismanagement. GameStop is no different, and it’s certainly not the short sellers that caused it to have a dying business model that’s hemorrhaging money. [1]https://www.sciencedirect.com/science/article/abs/pii/S0378426613003920 https://www.sciencedirect.com/science/article/abs/pii/S03784... [2] https://academic.oup.com/rfs/article-abstract/24/3/821/1590469 https://academic.oup.com/rfs/article-abstract/24/3/821/15904...
- gmaster1440 6y ago
  The part that is "honorable" about the social movement, for me at least, is that the sheer exposure of the shenanigans that wall street carries out, coupled with the challenging of status quo power structures (institutional vs. retail, special accredited status vs. joe on RH), has the potential to lead to general reform and positive changes. I think you're too quick to defend short selling as purely good, just as everyone else is too quick to decry it as pure evil. There's a middle ground here that's better for everyone, and a public dialectic on the scale we're seeing now is honorable and potentially effective, in my opinion.
  - dcolkitt 6y ago
    Can anyone in this social movement articulate what exactly those “shenanigans” are and provide evidence that they’re occurring. Not that there aren’t well founded criticisms of the financial industry. But as far as I see WSB appears to have zero overlap with any of them. All I see are gross inaccuracies (“short interest over 100% means they were naked short”) and zero-evidence QAnon like conspiracy theories about hedge funds colluding to shit down Robinhood.
    - 6y ago
cactus2093 6y ago
> but I do worry for people like my dad who can just buy a stock more easily than order dinner. I can't wrap my head around this argument at all. Why can't you trust your dad about his stock purchases? Yes, someone like your dad can buy a stock easily. They can also lose all their money at a casino or buy a lottery ticket easily. They can spend all their money on gadgets or fancy clothes. They can drink too much alcohol, or gain too much weight. Life comes with risks. To the extent that a behavior will harm innocent bystanders, then I am fine with making various things illegal, I'm not an anarchist or hard core libertarian or anything. But I don't see how letting someone buy shares of a stock falls into that category of things that could harm innocent bystanders.
- gmaster1440 6y ago
  > Why can't you trust your dad about his stock purchases? It's not the stock purchases in themselves. It's the degree to which certain stocks are hyped, largely by misinformation and traditional bubble mechanics, that's particularly insidious here. There's a reason why pump-and-dump schemes are traditionally regulated by securities laws.
  - cactus2093 6y ago
    From what I understand, pump-and-dumps are illegal if you make untrue promises about future behavior or otherwise are shown to deceive or lie about it. Or if you are coordinating to have a certain group all sell at an exact same time to leave others holding the bag. I suppose it's a fine line, but to me this seems much more loosely coordinated. I don't think there's been any particular time to sell that has been agreed on, and all the communication is out in a public forum. And the demand for the stock is all based around public knowledge that it was shorted 140% of its market cap. It seems like the difference between insider trading vs if information leaks to the public about a company's plans in which case it's completely legal to trade based on.

2bitencryption 6y ago

I can't help but facepalm that people are genuinely encouraging one another to buy a stock that is so obviously overvalued, and then hold it at that price as long as possible... there are not many guarantees in trading, but that is a guarantee to lose money. and because it's under the guise of "sticking it to the man" people have become even less rational about their money. so when the stock eventually corrects to where it belongs for a dying retailer selling physical media in the digital age... I can only imagine the millions "surprised pikachu face" that will ensue

simonbarker87 6y ago
The vast majority know what they are doing here, I took a tiny fraction of my money and bought in - less than I would spend on a family meal out. I assume I lost it but it’s fun to have some skin in the game for the ride. Some people are putting silly amounts in but they know they’re not investing based on market fundamentals, they want in on the ride and they know they can loose it all. The issue here is the clear protections/options in place for hedge funds that they can use when they feel a squeeze but absolutely no protection for average joe investor when these guys try to short an otherwise viable business going through a rough patch. GameStop and Blackberry are in the middle of a turn around, shorting them and then telling the market they are failing is unethical and if they feel a bit of pain at the moment then good.
- Cd00d 6y ago
  I know GameStop brought in new leadership, but a turn around is a reach, in my opinion. To me, GameStop is the mall store (problem), that required me to pre-pay for product expected to be wildly popular (problem), offers me $2 for physical media (problem^2) so that when I go in they can offer me used for $58 instead of new for $60 (problem). The future of gaming is downloads and streaming. GameStop may be able to generate revenue for a while selling used last gen systems while the current new consoles launch, but there's nothing about their position or business model that has a strong future. Plus, I'd say their long history of horrible customer satisfaction mean they don't have the brand loyalty for a pivot/reboot. I don't think it's unethical to short that.
cactus2093 6y ago
> there are not many guarantees in trading, but that is a guarantee to lose money. What? This is not at all a guarantee. Even if there were a guarantee that it will come back down eventually (which seems highly likely but that's still not a guarantee), that doesn't mean it will go down today or tomorrow or next week. For all we know there is still lots of time for new investors to get in, make money, and then get out before the price crashes. The particular absurdity of your claim here is that if it were true, we could not possibly have ended up in this place. That's exactly how we got here, people who "knew better" knew that of course this stock was going down and shorted it. Then it went up a little and people shorted it even more and it went up even more, and on and on as this played out over the past few weeks.
- 2bitencryption 6y ago
  the "guarantee" I'm referring to comes from these two assumptions: - the price is overvalued and will correct - the prevailing sentiment on the wsb subreddit is "HOLD NO MATTER HOW HIGH IT GOES" (seriously, that's what they are saying) So, sure, maybe gamestop will magically become a company as valuable as its stock implies it is. But realistically no one would bet on this. So given that it is overvalued by everyone's definition of the term, and given that the hivemind has decided to "HOLD NO MATTER WHAT", it becomes obvious what will eventually happen - the hivemind will keep holding, since that's the meme, and memes drive stocks now - and Gamestop will correct. And that will be that.
- reducesuffering 6y ago
  > For all we know there is still lots of time for new investors to get in, make money, and then get out before the price crashes. Yes, that means an equivalent amount of people will be holding the huge loss, because they bought in when the previous person got out...
  - mrgreenfur 6y ago
    The short squeeze is to force the hedge funds to buy at a high price when they have to cover their short. This is the whole plan.

platz 6y ago

Only invest what you can afford to loose

gmaster1440 6y ago
Seems like common sense, but I am willing to bet average joe RH investor does not have the financial hygiene to appreciate that fact enough.
- tartoran 6y ago
  A simple disclaimer "We're not responsible if you get wiped out!" with another popup "Are you really sure you want to proceed?" after pressing ok twice would suffice before placing a bet. Who are we fooling? This damage control operation was to benefit their friends.
miguelrochefort 6y ago
- Does this advice apply to stocks? - Does this advice apply to foreign currencies? - Does this advice apply to local currencies? See the contradiction? You're always invested.
- platz 6y ago
  If I'm always invested why aren't I living under a bridge because Pier 1 Imports went bankrupt in 2020? Also, I'm concerned that the earth could get hit with a rogue planet.

dcolkitt 6y ago

> The social movement is honorable I’m gonna disagree. The entire “social movement” seems to be little more than the same tired old cliches and hysterics about “speculators”. The main grievance is basically that short selling is bad. Despite academic finance, finding again and again that short selling meaningfully improves price efficiency and protects ordinary investors from bubbles and mania.[1][2] Again and again corporate executives use the scapegoat of short sellers and speculators to shift the blame from their own mismanagement. GameStop is no different, and it’s certainly not the short sellers that caused it to have a dying business model that’s hemorrhaging money. [1]https://www.sciencedirect.com/science/article/abs/pii/S0378426613003920 https://www.sciencedirect.com/science/article/abs/pii/S03784... [2] https://academic.oup.com/rfs/article-abstract/24/3/821/1590469 https://academic.oup.com/rfs/article-abstract/24/3/821/15904...

gmaster1440 6y ago
The part that is "honorable" about the social movement, for me at least, is that the sheer exposure of the shenanigans that wall street carries out, coupled with the challenging of status quo power structures (institutional vs. retail, special accredited status vs. joe on RH), has the potential to lead to general reform and positive changes. I think you're too quick to defend short selling as purely good, just as everyone else is too quick to decry it as pure evil. There's a middle ground here that's better for everyone, and a public dialectic on the scale we're seeing now is honorable and potentially effective, in my opinion.
- dcolkitt 6y ago
  Can anyone in this social movement articulate what exactly those “shenanigans” are and provide evidence that they’re occurring. Not that there aren’t well founded criticisms of the financial industry. But as far as I see WSB appears to have zero overlap with any of them. All I see are gross inaccuracies (“short interest over 100% means they were naked short”) and zero-evidence QAnon like conspiracy theories about hedge funds colluding to shit down Robinhood.
  - 6y ago

cactus2093 6y ago

> but I do worry for people like my dad who can just buy a stock more easily than order dinner. I can't wrap my head around this argument at all. Why can't you trust your dad about his stock purchases? Yes, someone like your dad can buy a stock easily. They can also lose all their money at a casino or buy a lottery ticket easily. They can spend all their money on gadgets or fancy clothes. They can drink too much alcohol, or gain too much weight. Life comes with risks. To the extent that a behavior will harm innocent bystanders, then I am fine with making various things illegal, I'm not an anarchist or hard core libertarian or anything. But I don't see how letting someone buy shares of a stock falls into that category of things that could harm innocent bystanders.

gmaster1440 6y ago
> Why can't you trust your dad about his stock purchases? It's not the stock purchases in themselves. It's the degree to which certain stocks are hyped, largely by misinformation and traditional bubble mechanics, that's particularly insidious here. There's a reason why pump-and-dump schemes are traditionally regulated by securities laws.
- cactus2093 6y ago
  From what I understand, pump-and-dumps are illegal if you make untrue promises about future behavior or otherwise are shown to deceive or lie about it. Or if you are coordinating to have a certain group all sell at an exact same time to leave others holding the bag. I suppose it's a fine line, but to me this seems much more loosely coordinated. I don't think there's been any particular time to sell that has been agreed on, and all the communication is out in a public forum. And the demand for the stock is all based around public knowledge that it was shorted 140% of its market cap. It seems like the difference between insider trading vs if information leaks to the public about a company's plans in which case it's completely legal to trade based on.