3 ms·

“The markets can remain irrational longer than you can remain solvent.” Looking at WSB today, a lot of people and comments are clearly market-irrational, becau

“The markets can remain irrational longer than you can remain solvent.” Looking at WSB today, a lot of people and comments are clearly market-irrational, because they're smelling blood. They're not buying the stock based on the fundamentals, they're buying the stock in the hope of bankrupting any fund that is trying to short sell the stock. For revenge. For shits and giggles. A friend of mine posted some statistics from a Swedish broker who reported that over 15000 people had bought shares in GME in the past two days. That's just one broker in one small country. Suddenly, that 50 million share float doesn't look very big. It's definitely small enough that what is essentially a global flashmob of angry people can completely disrupt the share. I think if you're shorting the stock right now, thinking it "has to" crash back down, you're severely underestimating the size and irrationality of this mob.

Silhouette 6y ago
A pump and dump is like a pyramid scheme. Some people, mostly those who get in and out early, will make money. The other people involved will lose money. The circumstances at the moment are strange, for sure, but the end result seems all but certain to be the same: the patsies mostly end up giving their money to someone else. It just happens that this time, it's a different group of market manipulators, who may or may not be acting legally and so may or may not get to keep that money anyway. If nothing else, this incident has shown that maverick investment could be dangerous to our financial systems. These stocks do not exist in a vacuum and the people playing games with them are not operating independent of the rest of the markets. Their actions could hurt a lot of innocent people as well -- ordinary people who just have their savings and pensions invested in the market in normal, responsible ways -- at least in the short term. If the same strategy continues, it must be a matter of weeks, if not days or hours, before governments begin heavy-handed regulatory interventions and even new legal restrictions, assuming that hasn't already started behind the scenes and isn't responsible for the interventions in buying certain stocks that have already happened.
- henrikschroder 6y ago
  You're saying that the end result will certainly be the same, that "the patsies" will end up giving their money to someone else. But at the same time you say that this scenario has to become regulated. Why? If the end result is the same, what's the argument for regulating it? Also, there's a hilarious near-unanimous political backlash against the brokers that interfered or halted with their customers' ability to trade GME these past couple of days. > If nothing else, this incident has shown that maverick investment could be dangerous to our financial systems. In the 2008 financial crisis, the actors who caused it suffered absolutely zero consequences, while the losses were socialized, and regular people suffered consequences in the form of recession and unemployment. The hypocrisy is staggering, if anything, the large actors in the financial systems are dangerous to ordinary people! > Their actions could hurt a lot of innocent people as well "Won't somebody please think of the children!!!" Yeah, no. The explicit target of this action are the shorting hedge funds that were betting on Gamestop's slow demise. There are no innocents being hurt here.
  - Silhouette 6y ago
    If the end result is the same, what's the argument for regulating it? Mitigating the collateral damage that this sort of situation causes. The hypocrisy is staggering, if anything, the large actors in the financial systems are dangerous to ordinary people! I agree that some large actors have in the past been grossly irresponsible. I agree that they should be regulated and if necessary penalised accordingly. But two wrongs do not make a right. The explicit target of this action are the shorting hedge funds that were betting on Gamestop's slow demise. There are no innocents being hurt here. Tell that to everyone whose savings and pensions are invested rationally in places that are traded on the same markets but have nothing to do with the WSB pump and dump. Extreme volatility and irrational stock prices ultimately hurt everyone in the market who is trying to invest responsibly.
    - AnthonyMouse 6y ago
      > Mitigating the collateral damage that this sort of situation causes. The thing is, this isn't 2008. The risk then was that the entire financial industry was in a precarious position because even the ones not holding enough bad mortgages to bankrupt them were still holding some, and the double whammy of that and being exposed to defaults by what people expected to be stable institutional debtors could have had a domino effect. Right now the financial industry is already flush with stimulus money and interest rates are around zero. You don't get the same domino effect. So big firms that made risky bets can suffer the consequences. > But two wrongs do not make a right. Just the opportunity to not bail them out this time could be worth the consequences to act as a deterrent for this kind of careless risk taking. > Extreme volatility and irrational stock prices ultimately hurt everyone in the market who is trying to invest responsibly. Explain how this has any significant effect on everyone investing in major index funds. Most of them don't include GameStop at all and for the few that do it generally isn't a major component. And even if it was, they would have then owned the same number of shares before this started and after it ends, so if the price goes from $5 to the moon and then back to $5 again over the course of a short period of time, that effects them how exactly?
ashtonkem 6y ago
The nihilistic trend evident here is quite concerning. Traders not even interested in making money, but in just hurting someone they hate.

Silhouette 6y ago

A pump and dump is like a pyramid scheme. Some people, mostly those who get in and out early, will make money. The other people involved will lose money. The circumstances at the moment are strange, for sure, but the end result seems all but certain to be the same: the patsies mostly end up giving their money to someone else. It just happens that this time, it's a different group of market manipulators, who may or may not be acting legally and so may or may not get to keep that money anyway. If nothing else, this incident has shown that maverick investment could be dangerous to our financial systems. These stocks do not exist in a vacuum and the people playing games with them are not operating independent of the rest of the markets. Their actions could hurt a lot of innocent people as well -- ordinary people who just have their savings and pensions invested in the market in normal, responsible ways -- at least in the short term. If the same strategy continues, it must be a matter of weeks, if not days or hours, before governments begin heavy-handed regulatory interventions and even new legal restrictions, assuming that hasn't already started behind the scenes and isn't responsible for the interventions in buying certain stocks that have already happened.

henrikschroder 6y ago
You're saying that the end result will certainly be the same, that "the patsies" will end up giving their money to someone else. But at the same time you say that this scenario has to become regulated. Why? If the end result is the same, what's the argument for regulating it? Also, there's a hilarious near-unanimous political backlash against the brokers that interfered or halted with their customers' ability to trade GME these past couple of days. > If nothing else, this incident has shown that maverick investment could be dangerous to our financial systems. In the 2008 financial crisis, the actors who caused it suffered absolutely zero consequences, while the losses were socialized, and regular people suffered consequences in the form of recession and unemployment. The hypocrisy is staggering, if anything, the large actors in the financial systems are dangerous to ordinary people! > Their actions could hurt a lot of innocent people as well "Won't somebody please think of the children!!!" Yeah, no. The explicit target of this action are the shorting hedge funds that were betting on Gamestop's slow demise. There are no innocents being hurt here.
- Silhouette 6y ago
  If the end result is the same, what's the argument for regulating it? Mitigating the collateral damage that this sort of situation causes. The hypocrisy is staggering, if anything, the large actors in the financial systems are dangerous to ordinary people! I agree that some large actors have in the past been grossly irresponsible. I agree that they should be regulated and if necessary penalised accordingly. But two wrongs do not make a right. The explicit target of this action are the shorting hedge funds that were betting on Gamestop's slow demise. There are no innocents being hurt here. Tell that to everyone whose savings and pensions are invested rationally in places that are traded on the same markets but have nothing to do with the WSB pump and dump. Extreme volatility and irrational stock prices ultimately hurt everyone in the market who is trying to invest responsibly.
  - AnthonyMouse 6y ago
    > Mitigating the collateral damage that this sort of situation causes. The thing is, this isn't 2008. The risk then was that the entire financial industry was in a precarious position because even the ones not holding enough bad mortgages to bankrupt them were still holding some, and the double whammy of that and being exposed to defaults by what people expected to be stable institutional debtors could have had a domino effect. Right now the financial industry is already flush with stimulus money and interest rates are around zero. You don't get the same domino effect. So big firms that made risky bets can suffer the consequences. > But two wrongs do not make a right. Just the opportunity to not bail them out this time could be worth the consequences to act as a deterrent for this kind of careless risk taking. > Extreme volatility and irrational stock prices ultimately hurt everyone in the market who is trying to invest responsibly. Explain how this has any significant effect on everyone investing in major index funds. Most of them don't include GameStop at all and for the few that do it generally isn't a major component. And even if it was, they would have then owned the same number of shares before this started and after it ends, so if the price goes from $5 to the moon and then back to $5 again over the course of a short period of time, that effects them how exactly?

ashtonkem 6y ago

The nihilistic trend evident here is quite concerning. Traders not even interested in making money, but in just hurting someone they hate.