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> While everyone is celebrating retail traders winning over a large hedge fund in this case, it rarely ever plays out this way. Most commonly, retail ends up lo

> While everyone is celebrating retail traders winning over a large hedge fund in this case, it rarely ever plays out this way. Most commonly, retail ends up losing money when there is excessive speculation. This is the only passage anyone with too much at stake (than they can afford) in this short needs to read. Other than that, I believe industry insiders / traders are missing the mark in that the current dynamic is also fueled in part by a million-strong (if not more?) rejecting the fundamentals and pumping cash in to businesses that Wall Street's hive mind has decided has no job being in existence. AMC made a billion dollars during the rally [0] (and it is not lost on me that this capital would be dumped into parachute payments and bonuses to c-suite and nothing's going to trickle-down). In the off-chance AMC makes the capital work, then, that'd have vindicated retail, but it kind of seems too optimistic but that's the whole point. [0] https://movieweb.com/amc-theatres-raises-one-billion-dollars-avoids-bankruptcy/ https://movieweb.com/amc-theatres-raises-one-billion-dollars...

WJW 6y ago
Eventually, either the Wall Street "hive mind" (really though, WS contains thousands of funds and many would be overjoyed to see some competitors fall) or the retail buyers of these companies will be proven wrong. What happens next is way more interesting than the current situation. Even if it turns out that GME can be short squeezed until there is not a single share shorted anymore, the retail investors will then collectively be HODLing a ton of stock in a company losing hundreds of millions per year. Buying pressure for such stocks is typically low. There is no way everyone can get out at the top, so a lot of people will have to sell at very low prices. This is even true if the original thesis of "we can pump this stock to $1000" is true.
- PeterisP 6y ago
  "There is no way everyone can get out at the top" - this is the big issue here - as far as I understand, the position of WallStreetBets is that there are (were?) so many shorts of GME compared to the shares on market that they would be required to buy all that stock and everyone can get out at the top. I don't feel certain about this (especially since if any of the funds actually go bankrupt, they would default on their obligations, not actually buy the shorted stock at all and just owe some not-fully-collectable money), but that seems to be the whole reason for this situation.
  - ZephyrBlu 6y ago
    I'm pretty sure a mass buying of the stock would drive the price right into the floor. So the first few people will get an extremely high price because like you said, the shorts are forced to buy, but as the sell off begins the price will plummet.
    - tikej 6y ago
      But aren’t the shorts for like 140% of the GME stock? That means if everyone holds with prices, sooner or later the shorters will have to buy ALL that stock anyway at nearly any price to cover for the losses and give back shorted stock.
      - WJW 6y ago
        There is a more likely alternative than paying "nearly any price", which is that the funds in question go bankrupt and default on any obligations remaining. At that point, anyone who hasn't sold yet will be left holding (call options on) stock worth maybe a tenth of its current price.
        pbronez 6y ago
        If the structurally possible outcomes are: 1) Shorts all come due and hedge funds pay all the retail investors big gains 2) hedge fund dies and defaults so retail get screwed I’m pretty sure WSB would collectively declare victory. It’s a suicide mission for them.
      - lepton 6y ago
        140% of stock /issuance/, not outstanding. Shorting stock creates new stock. Once all shorts are closed, the 100% of issuance is still outstanding and someone's holding it. Not everyone can get out!
        bluGill 6y ago
        That doesn't mean the same people. Gamestop does have a long term plan. If it works out the company can be worth money. Buying Gamestop for $2 at the bottom in a few months might be a reasonable risk for the final person holding the bag.
- ZephyrBlu 6y ago
  > There is no way everyone can get out at the top, so a lot of people will have to sell at very low prices. This is even true if the original thesis of "we can pump this stock to $1000" is true This is what I've been thinking about the whole time. They can definitely pump the stock if they keep HODLing, since sellers effectively set the price when the short positions have to be closed. Someone still has to be the bagholder and end up holding near worthless stock at the end of this though. $GME will come crashing down once the short squeeze is over, and there's only going to be a small minority of retail traders who get out at the top. People who have bought in later at hundreds of dollars are likely to lose a lot of money IMO. Possibly to the tune of over half their initial investment.
  - CaptArmchair 6y ago
    Well, I opened up Reddit an hour ago. It's not just WSB, there's posts all over the place with tens of thousands of upvotes. The thing that boggled my mind was plenty of people openly asking "Hey, I don't know anything about trading, but I want to join this and buy stock." and other people straight up telling them "Get the app from a broker (not RH!), open an account and buy $GME" (followed by a flurry of rocket and diamond hand emojis) It is one thing to be told that markets can be irrational and emotional. It's a completely different thing to see it that playing out in real time on social media.
  - R0b0t1 6y ago
    >Someone still has to be the bagholder and end up holding near worthless stock at the end of this though. The hedgefunds are filling this niche. Trading slowed yesterday because brokers were afraid of going bankrupt.
    - ZephyrBlu 6y ago
      That was because of liquidity issues. There's no guarantee hedge funds will be the ones who end up holding stock at the end of this.
lovich 6y ago
>rejecting the fundamentals I think what is missing in many people's analysis is that there is a new fundamental value in this situation. Buying GME shares is now linked to destroying a hedge fund and ruining some billionaire's days. For many people, and I include myself in this group, that has a real tangible value that outweighs the actual dollar amount it costs to buy a few GME shares. When the leaders of these brokerages and hedge funds ponder as to why people are throwing money at something that is likely to crash and burn when it will likely not make money and is just hurting the billionaires, they are staring the answer in the face
- WJW 6y ago
  While some billionaires are having a terrible week, market makers and prop trading desks have been making an absolute fortune. I'm sure the billionaires owning the market makers are more than happy to sell "financial uprising points" to WSB readers if they so desperately wish to purchase them. It's a mistake to see "the billionaires" or "Wall Street" as a single homogenous group. 99% of them don't mind Melvin capital going under at all.
  - HexDecOctBin 6y ago
    In the modern world, most people live in a state of learned helplessness, because they have been told that the societal systems around them are very complex and they don't have a hope of comprehending them. An event like this, while not being a be-all-and-end-all, can give commoners a taste of blood -- that maybe they are just as smart as those elites, that maybe they can use the systems for their own benefit too, that maybe they don't HAVE to live under the boot. It's the hope that matters, because there are always more opportunities.
  - leprechaun1066 6y ago
    99% of them are doing more than just not minding Melvin's issues, they're actively feeding off Melvin. Melvin is going to be (or is already) selling off what they have in stuff like FB, MSFT, AAPL, etc, and it's not the retail traders who are benefiting from this, it's the other parts of the investment banking system. Even the sales traders are going to be on the phone with Melvin going "Sell 200k AAPL? No bother."
dmingod666 6y ago
lol, when did the stock market reflect the fundamentals? Its post 2020, the whole economy had come to a standstill and the market was rallying like nothing happened. All this 'fundamentals' talk just sounds hollow.
- fock 6y ago
  it is. the whole market is overvalued. But while some parts of the market have some actual things, people want (highly educated workforce, machinery, land, supply chains...) Gamestop has nothing of this and yet is pushed to an even higher value.
- xadhominemx 6y ago
  The market rallied because it accurately predicted there would be a strong economic recovery in 2021/2022.
  - dwater 6y ago
    That is not true, it hasn't accurately predicted anything. 96% of 2021 and 2022 haven't happened yet.
    - chii 6y ago
      That's why it's called a prediction, and not a record. The market prediction doesn't mean it's going to happen - but it's likely. If the market prediction turns out to be wrong, then there'd be a correction in price (aka, another crash).
      - dwater 6y ago
        Sure, and in order to determine if a prediction is correct or incorrect, you have to wait for the event to occur. To make the above statement true you would have to either remove the word "accurately" or wait until the end of 2022.
- Enginerrrd 6y ago
ece 6y ago
A good hedge fund knows how to hedge the risky investments they make, and if they're just betting, they should know someone else might get the other side. It could be another fund/investor, but it's WSB this time. I think there's a lesson here for people making massive short bets, and for hedge funds and anybody making a bet instead of an investment: that someone else might take the other side and have more power than you might think. This is all just betting at this point, with WSB still betting they can trigger even more of a short squeeze. If this has somehow crossed the line from "bet" to "investment" that starts affecting the rest of the economy, then the consequences should be interesting to watch. Trading on exchanges shouldn't be able to be restricted by someone like Robinhood, though they have other problems too.

WJW 6y ago

Eventually, either the Wall Street "hive mind" (really though, WS contains thousands of funds and many would be overjoyed to see some competitors fall) or the retail buyers of these companies will be proven wrong. What happens next is way more interesting than the current situation. Even if it turns out that GME can be short squeezed until there is not a single share shorted anymore, the retail investors will then collectively be HODLing a ton of stock in a company losing hundreds of millions per year. Buying pressure for such stocks is typically low. There is no way everyone can get out at the top, so a lot of people will have to sell at very low prices. This is even true if the original thesis of "we can pump this stock to $1000" is true.

PeterisP 6y ago
"There is no way everyone can get out at the top" - this is the big issue here - as far as I understand, the position of WallStreetBets is that there are (were?) so many shorts of GME compared to the shares on market that they would be required to buy all that stock and everyone can get out at the top. I don't feel certain about this (especially since if any of the funds actually go bankrupt, they would default on their obligations, not actually buy the shorted stock at all and just owe some not-fully-collectable money), but that seems to be the whole reason for this situation.
- ZephyrBlu 6y ago
  I'm pretty sure a mass buying of the stock would drive the price right into the floor. So the first few people will get an extremely high price because like you said, the shorts are forced to buy, but as the sell off begins the price will plummet.
  - tikej 6y ago
    But aren’t the shorts for like 140% of the GME stock? That means if everyone holds with prices, sooner or later the shorters will have to buy ALL that stock anyway at nearly any price to cover for the losses and give back shorted stock.
    - WJW 6y ago
      There is a more likely alternative than paying "nearly any price", which is that the funds in question go bankrupt and default on any obligations remaining. At that point, anyone who hasn't sold yet will be left holding (call options on) stock worth maybe a tenth of its current price.
      - pbronez 6y ago
        If the structurally possible outcomes are: 1) Shorts all come due and hedge funds pay all the retail investors big gains 2) hedge fund dies and defaults so retail get screwed I’m pretty sure WSB would collectively declare victory. It’s a suicide mission for them.
    - lepton 6y ago
      140% of stock /issuance/, not outstanding. Shorting stock creates new stock. Once all shorts are closed, the 100% of issuance is still outstanding and someone's holding it. Not everyone can get out!
      - bluGill 6y ago
        That doesn't mean the same people. Gamestop does have a long term plan. If it works out the company can be worth money. Buying Gamestop for $2 at the bottom in a few months might be a reasonable risk for the final person holding the bag.
ZephyrBlu 6y ago
> There is no way everyone can get out at the top, so a lot of people will have to sell at very low prices. This is even true if the original thesis of "we can pump this stock to $1000" is true This is what I've been thinking about the whole time. They can definitely pump the stock if they keep HODLing, since sellers effectively set the price when the short positions have to be closed. Someone still has to be the bagholder and end up holding near worthless stock at the end of this though. $GME will come crashing down once the short squeeze is over, and there's only going to be a small minority of retail traders who get out at the top. People who have bought in later at hundreds of dollars are likely to lose a lot of money IMO. Possibly to the tune of over half their initial investment.
- CaptArmchair 6y ago
  Well, I opened up Reddit an hour ago. It's not just WSB, there's posts all over the place with tens of thousands of upvotes. The thing that boggled my mind was plenty of people openly asking "Hey, I don't know anything about trading, but I want to join this and buy stock." and other people straight up telling them "Get the app from a broker (not RH!), open an account and buy $GME" (followed by a flurry of rocket and diamond hand emojis) It is one thing to be told that markets can be irrational and emotional. It's a completely different thing to see it that playing out in real time on social media.
- R0b0t1 6y ago
  >Someone still has to be the bagholder and end up holding near worthless stock at the end of this though. The hedgefunds are filling this niche. Trading slowed yesterday because brokers were afraid of going bankrupt.
  - ZephyrBlu 6y ago
    That was because of liquidity issues. There's no guarantee hedge funds will be the ones who end up holding stock at the end of this.

lovich 6y ago

>rejecting the fundamentals I think what is missing in many people's analysis is that there is a new fundamental value in this situation. Buying GME shares is now linked to destroying a hedge fund and ruining some billionaire's days. For many people, and I include myself in this group, that has a real tangible value that outweighs the actual dollar amount it costs to buy a few GME shares. When the leaders of these brokerages and hedge funds ponder as to why people are throwing money at something that is likely to crash and burn when it will likely not make money and is just hurting the billionaires, they are staring the answer in the face

WJW 6y ago
While some billionaires are having a terrible week, market makers and prop trading desks have been making an absolute fortune. I'm sure the billionaires owning the market makers are more than happy to sell "financial uprising points" to WSB readers if they so desperately wish to purchase them. It's a mistake to see "the billionaires" or "Wall Street" as a single homogenous group. 99% of them don't mind Melvin capital going under at all.
- HexDecOctBin 6y ago
  In the modern world, most people live in a state of learned helplessness, because they have been told that the societal systems around them are very complex and they don't have a hope of comprehending them. An event like this, while not being a be-all-and-end-all, can give commoners a taste of blood -- that maybe they are just as smart as those elites, that maybe they can use the systems for their own benefit too, that maybe they don't HAVE to live under the boot. It's the hope that matters, because there are always more opportunities.
- leprechaun1066 6y ago
  99% of them are doing more than just not minding Melvin's issues, they're actively feeding off Melvin. Melvin is going to be (or is already) selling off what they have in stuff like FB, MSFT, AAPL, etc, and it's not the retail traders who are benefiting from this, it's the other parts of the investment banking system. Even the sales traders are going to be on the phone with Melvin going "Sell 200k AAPL? No bother."

dmingod666 6y ago

lol, when did the stock market reflect the fundamentals? Its post 2020, the whole economy had come to a standstill and the market was rallying like nothing happened. All this 'fundamentals' talk just sounds hollow.

fock 6y ago
it is. the whole market is overvalued. But while some parts of the market have some actual things, people want (highly educated workforce, machinery, land, supply chains...) Gamestop has nothing of this and yet is pushed to an even higher value.
xadhominemx 6y ago
The market rallied because it accurately predicted there would be a strong economic recovery in 2021/2022.
- dwater 6y ago
  That is not true, it hasn't accurately predicted anything. 96% of 2021 and 2022 haven't happened yet.
  - chii 6y ago
    That's why it's called a prediction, and not a record. The market prediction doesn't mean it's going to happen - but it's likely. If the market prediction turns out to be wrong, then there'd be a correction in price (aka, another crash).
    - dwater 6y ago
      Sure, and in order to determine if a prediction is correct or incorrect, you have to wait for the event to occur. To make the above statement true you would have to either remove the word "accurately" or wait until the end of 2022.
Enginerrrd 6y ago

ece 6y ago

A good hedge fund knows how to hedge the risky investments they make, and if they're just betting, they should know someone else might get the other side. It could be another fund/investor, but it's WSB this time. I think there's a lesson here for people making massive short bets, and for hedge funds and anybody making a bet instead of an investment: that someone else might take the other side and have more power than you might think. This is all just betting at this point, with WSB still betting they can trigger even more of a short squeeze. If this has somehow crossed the line from "bet" to "investment" that starts affecting the rest of the economy, then the consequences should be interesting to watch. Trading on exchanges shouldn't be able to be restricted by someone like Robinhood, though they have other problems too.