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It turns out an online community can stay irrational longer than a hedge can solvent.
by thrwn_frthr_awy 6y ago
It turns out an online community can stay irrational longer than a hedge can solvent.
- PragmaticPulp 6y agoThese situations tend to blow Up both sides, more or less. A few lucky Redditors will get out with profits. Most of the late entries are going to take steep losses. Those losing Redditors will be paying the winning Redditors. The narrative that this is hedge funds losing to Redditors isn’t fully accurate.
- cbozeman 6y agoHedge funds are down $70 billion over this, so I'm pretty sure there's some accuracy. And no, its not all GameStop, but $GME is a driver. https://www.reuters.com/article/us-retail-trading-shortbets-idUSKBN29X1SW https://www.reuters.com/article/us-retail-trading-shortbets-...
- pjc50 6y agoThis is very much reminding me of 2008. If you keep blowing up financial institutions, eventually you're going to hit a Lehman and the counterparty risk spreads to the rest of the system.
- germinalphrase 6y agoThe zeitgeist seems to be “screw ‘em; they’re jackals”.
- pjc50 6y agoYes, I'm aware of that. Do we actually want to rerun 2008 again, though? Are people expecting it to have a different, better outcome and not a different, worse outcome or just the bailout again? The hedge funds aren't structurally important. Brokerages start to be. Retail banks definitely are.
- germinalphrase 6y agoThey probably don’t understand. If they do understand, they don’t seem to care. There are a lot of people under the age of forty who don’t feel like they are benefiting from our current system. When the Boomers hit age 35, they owned approx. 21 percent of the nation’s wealth. Gen X plummeted down to 9 percent. Millennials are on track to own about 3-4 percent. This is according to the Fed. They make less, own less, don’t see themselves or their interests represented at the highest levels of our government, and are fed up. So, yes, the young would suffer more than the wealthy, the elderly, and the connected in an economic collapse, but they don’t seem to care.
- splistud 6y agoWell said. And these people under forty (to reduce everything to simple terms) divide themselves into roughly equal camps. Some see the problems as fatcats/gov not doing enough to help the poor. The other side sees the fatcats/gov not doing enough to help citizens as opposed to certain elites and all here because of illegal entry. Both are right to a large extent, and both are slandered as evil/racist/etc. by the other side.
- chewz 6y ago> When you got nothing, you got nothing to lose!
- ENGNR 6y agoIf there is a systematic risk.. surely better to catch it earlier than let it keep inflating
- tonfa 6y agoIsn't that fairly misleading? > Ortex said the figures are based on the change in trading prices between the start of January to Wednesday’s close, and the number of short positions. The shorts might be down 70 billions, but won't most hedge funds hedge their position with something more complex than just a short?
- PragmaticPulp 6y agoIf you only add up the estimated short positions, and you assume they didn't hold any winning long positions, and you assume short positions are only held by hedge funds, and you assume the hedge funds didn't hedge with other contracts, that estimate might come close. That's a lot of assumptions, though. Some hedge funds are going to make bank on this.
- jgtrosh 6y agoThe motive I've seen most prominently displayed is “buy to hurt hedges, expect 100% loss”. Of course, many individuals will be upset at the results, but this wasn't touted as anything other than a risky bubble, even by those who believe in gme.
- Mauricebranagh 6y agoAs some one else said the WSB concert party has all the signs of a boiler room scam. I bet there are some much more experienced reditors behind this and a lot of the useful idiots will lose $$
- splistud 6y agoIt's far simpler than that. There was no scam, just a long steady accretion around those that pointed out the fundamental mispricing of gme, and the explosive nature of any expected correction given it's extremely high short ratio. The rest is just piling on, and even less understandable than most reddit piling-on given the volume and technical nature of the issue.
- deathgrips 6y agoYou're assuming that people on r/wallstreetbets are exactly the same as people on wall street who literally only care about money. The redditors buying don't want to make money, they just want to kill the hedge fund. By wasting a few hundred dollars they are making a larger dent in wall street than congress has made for the last few decades.
- mitfahrener 6y agoLol. What are idiotic statement.
- deathgrips 6y agoWhat an idiotic statement.
- lexapro 6y agoThere might even be some overlap, wall street using wallstreetbets to manipulate.
- gerikson 6y agoThat's the future defense against this kind of short squeeze. Funds will engage these subs (or hire people) and deflect interest from the stocks they're shorting and maybe steer it towards competitor's.
- splistud 6y agoI doubt any defense will be needed. Capital for this kind of risk will never be available again.
- lexapro 6y agoI'm sure there are some hedge funds that are killing it right now.
- cbozeman 6y agoThis was one scenario were the shorts really did have it wrong. GameStop's financials were and are pretty solid. There was no reason to short the stock so heavily, which is why they're in the trouble that they're in right now. You should watch Roaring Kitty's video from June 2019 I believe (maybe its 2020?) on YouTube about this. He goes into great detail, with something like an hour of analysis on why $GME is a reasonable investment. Remember also, Dr. Michael Burry was buying into $GME (it was 5% of his fund in fact). Other big institutional investors like BlackRock, etc. had major positions as well.
- kace91 6y ago>This was one scenario were the shorts really did have it wrong. GameStop's financials were and are pretty solid. Honest question: do you really think that rational analysis of the viability of a stock is relevant at this point? It seems to me that gme just happened to end up being the battlefield in which the wsb people acted
- kzrdude 6y agoThe rational analysis was the basis. What's happening the last weeks is just the noise of WSB once it came through. Now it's a lot of noise and a lot of money that's going to be lost by people wanting to get in on this -- far too late. A rational forum would be everyone marvelling at what was already pulled off, not this free-for-all where everyone's pretending there's a big battle going on right now and pretending there is anything to gain left.
- dan-robertson 6y agoBlackRock own a large position in basically every US equity. The reason is that their funds generally want to be exposed to the entire market or some large subsets of it. They aren’t stating some opinion about the value of GameStop by owning 10% of it as they own about 10% of the entire stock market. If you see regularly someone’s name on the front page of the New York Times you might infer something about them. If you see someone’s name in the phonebook that is less interesting as (ok, not actually true but hopefully you get the point) everyone is in the phonebook. BlackRock is the phonebook.
- andi999 6y agoSo currently some hedge Fonds are bleeding money, true? So who is the counter party who currently gets this money (can't be the community since they hold)
- edgyquant 6y agoThey’re bleeding because others are holding, no? There are premiums at play.
- andi999 6y agoThat would be virtual bleeding (which could be the case though), but if you bleed real money then somebody else has to receive it. If you hold a stock money doesn't come to you (except as annual profit distribution but that is a different issue). I read the fees for borrowing a stock for shorting are coupled to the market price (not sure). So if you fund lost a few billion real money (so they have to sell other assets to pay that) then somebody else has to get these billions now.
- robinei 6y agoThe stocks they are borrowing for their shorts have really high interest now. They are bleeding money just paying interest. And now that goes for a couple of hundred percent of the stock float.
- 6y ago
- teekert 6y agoDoes that make them rational again?
- blackrock 6y agoGood one. They also call themselves Autists and Retards. I read a suggestion that it’s not the price of the stock that scared the hedge fund. But the borrowing costs, where the interest rates might have gone as high as 80%! That’s quite an expensive credit card there to be shorting stocks with.
- nervousvarun 6y agoThis is why r/wallstreetbets uses "hold" as a rallying cry. The interest continues to accrue with each day they hold out. An obviously that's only to a point. If you get into this late you are definitely more likely to get burned. But it's clear some of these people genuinely seem to care about "wrecking hedge funds" as much as anything else.
- IG_Semmelweiss 6y agoIts important to note for the sake of comparison, that average borrowing costs in a stock , to understand how out of whack 80% really is. I believe in normal circunstances it tends to be less than 1%
- splistud 6y agoI've received upwards of 30 for short periods in hard to borrow issues (we're talking american certificates of canadian mining stocks, etc). I've never heard of 80.