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There’s a long history of similar occurrences that follow along a common line: whatever appears to support individual investors will be the path taken by politi

by dkrich 6y ago

There’s a long history of similar occurrences that follow along a common line: whatever appears to support individual investors will be the path taken by politicians and regulatory bodies. Right now it appears that the public wants to be able to trade on their terms because there is this narrative that the little guy is finally sticking it to the big bad hedge funds. In reality there is probably very little truth to this. However, support for the individual investor plays extremely well which is why you see politicians from both sides joining forces on this issue. A rumor makes it halfway around the world while the truth is still putting its pants on. Nobody is interested in the subtleties around these issues where there almost certainly should be regulations in place or at least warnings from those who do actually know better. But late in bull markets when speculation is running wild those who try to be the voice of reason are run over by the masses until they shut up and go away. Galbraith wrote about this in the 1950’s and if you read his account of the 1929 crash the parallels are eerily similar. Nobody wants to be told they aren’t making money due to skill but because they’re caught up in a dangerous bubble. In the aftermath of a crash when tremendous sums are lost, nobody blames the speculators, they always find another scapegoat- the regulators, the brokerages, the hedge funds- whomever. It doesn’t matter so long as the speculator is held up as a victim. I expect this to end no differently.

dleslie 6y ago
The FOMO is palpable. There's a hurried rush of small investors hoping to turn their meagre savings into a big win, backed by the anxiety that if they don't try then they'll forever regret missing their one and only chance at a comfortable life. This sort of event would be less likely if America's wealth disparity weren't so grotesquely skewed.
- BoorishBears 6y ago
  It boggles the mind people think hedge funds can't profit off a mad rush like this...
  - dkrich 6y ago
    I mean do people really believe Robinhood traders are moving billions of dollars of stock a day? Most admit that they aren’t selling and buying at higher and higher levels. That translates to very little cash to buy more. There is absolutely no way that these moves can be attributed to retail traders or short squeezes. The narrative that these are retailers causing every significant move higher and with every move the shorts are losing more and more is actually causing this bubble.
    - kenneth 6y ago
      Let's say the average bet is 1-5k into this the average Robinhood user invests around 5k), it only takes 200k-1M buying in to move $1B into the stock. When you start with a $200M market cap on a heavily shorted stock, you easily end up where we are today
      - dkrich 6y ago
        And doing it every day? Even now that the stock is $350 a share? If they are able to do that I have to question the “little guy” tag.
      - BoorishBears 6y ago
        Average bet being 1-5k feels optimistic by an order of magnitude... The entire account value of normal RH users in the range of 1-5k Most people just joining don't have 1k to just throw at a lottery ticket, and remember that until today RH allowed fractional shares of GME - But you know, that's not even it... The other day GME did 20 Billion in volume in a single trading day. More than the S&P 500. I don't understand how people think retail can account for that.
    - rory 6y ago
      Matt Levine's email today estimates retail investors to be about 30% of total volume (with actual data from Citadel), but retail was net selling on Tuesday, Wednesday, and Thursday. So theoretically retail is enough to move the price if they were truly united, but that isn't actually the case. It's just not sexy to say "I bought in for a couple days and am taking my gains" in a public forum.
- Leader2light 6y ago
  It is so sad. The collapse will come within the next decade. Total financial collapse.
- ycombigator 6y ago
  Many just want to screw the hedge funds, finally it's their blood in the water.
  - markbnj 6y ago
    I don't get this. I can't imagine the professional investor class is still blindly following their shorts. They're all out by now, aren't they? If the "little guys" are making money I tend to think it's coming from other little guys.
    - NationalPark 6y ago
      The "short" (haha) answer is that we just don't know what the funds have done during the last week. They're incentivized to mislead the public about closing their positions. But the technical reasons the gamma squeeze happened and possible short squeeze today could happen still make sense: the equity has oversubscribed short interest and a skyrocketing price.
      - tayo42 6y ago
        I'm kind of amazed how little transparency there is in the stock market. Everyone seems to be guessing. The unequal amount of information for regular people is really unfair and seems like an easy situation for corruption to take place
    - disgrunt 6y ago
      No. Apparently other hedge funds got in line behind Melvin with even more aggressive shorts.
    - Anon1096 6y ago
      The truth of the matter is that hedge funds and institutions are quietly the ones actually pumping these stocks. Reddit likes to paint a narrative that they are in control, but when their messiah has 50MM max of securities and options, meanwhile single trades are going through worth over 700MM, the narrative just doesn't make sense. This is a battle of Wall Street vs Wall Street with some retailers playing along as pawns. Most likely, starry eyed retailers are going to be the ones holding the bag when it all comes down because they're playing a game without even knowing who they're up against. As for the shorts, Melvin and Citron are out but new shorters get in every day. The higher the price goes the more incentive there is to short. Most will probably lose money as the bubble inflates. But a few will make out like kings when it pops.
- sosuke 6y ago
  When hindsight points out the opportunities that you overlooked which would have giving you that comfortable life it infects all future decision making.
  - throwaway-571 6y ago
    Is there a spoiler tag on HN ? These ones still hurt: There is a lot of thing one could have done "for the LULz" but decided to browse HN, Imgur or Reddit instead. - Bitcoin. I heard about it when it was still possible to mint it on CPU, but chose to run SETI@Home instead. - Bitcoin when it was at merely $9000. - Ethereum when it was going under $1. - Dogecoin like anytime before yesterday (up 6x or something today). - #GME when options where pennies on the dollar, or even the stock at $20 in early January. - $Tesla in January, February, March of 2020 or anytime before the split. - $Tesla instead of putting down $1000 to reserve a slot to buy a model 3 at its announcement, put it in the stock, or even better, in long dated calls. - $Amazon or $Apple last march or anytime before that. - $SPCE after it crashed in March (a WSB hyped stock)
    - dleslie 6y ago
      Dogecoin is ... Just _why_? There's no limit on the number of coins. Mining is designed to be forever-easy. The coin is _designed_ for rapid deflation. Why are people treating it as anything other than the joke it was intended to be?
      - throwaway-571 6y ago
        You can still make money of a joke if you are quick enough! Just @-mention Elon and here you go.
      - whatshisface 6y ago
        I really have no idea, but your question suggests its own answer: fiat currencies are also designed for eternal inflation (I think you swapped inflation with deflation) and many people consider that a boon.
- agumonkey 6y ago
  I wonder what's the optimum sizing of FOMO. 1% ? 0.1 ? 2% ?
  - qznc 6y ago
    The Kelly criterion tells you how big your bet should be.
- oramit 6y ago
  My Facebook feed is filled with people talking about this. These are friends I have know for years who have never mentioned stocks before but now are talking about "holding the line". It is FOMO for sure, but the real emotions I get from talking with people are outrage and revenge. Everyone feels like the system (economic and political) is rigged against the public. The dopamine hit from sticking it to the man is palpable.
  - sanderjd 6y ago
    That would be useful if they were actually sticking it to the man. But that isn't what's happening here. What's happening is a big bubble where most of these regular people are gonna lose lots of money while the hedge funds end up closing out their position for a manageable loss and come out just fine.
    - oramit 6y ago
      For sure. This is a terrible way to "stick it to the man" and i've encouraged everyone i've talked to about this to stay far away. Unfortunately emotions have really taken hold. Greed is a hard one to talk people down from but doable. Anger and outrage pretty much impossible.
    - PaulDavisThe1st 6y ago
      ... not to mention the few smarter hedge funds and mutual funds that quickly jumped in an out of this and made substantial gains, leaving everyone who thinks they are "holding the line" even more "on the line".
      - ummonk 6y ago
        Ehh, the short ratio is still over 100%, and I guarantee you those aren't retail investors. So plenty of institutional investments to stick it to left.
        sanderjd 6y ago
        You don't know when those shorts got in. The price is clearly too high now, so it makes sense that sophisticated investors (probably other hedge funds) would be entering short positions at the recent prices. And those recent entrants will not be squeezed unless the price goes up by another ludicrous amount, which it is less likely to do now that the initial surge of enthusiasm is running its course. So lots of retail traders who got into the frenzy late with normal stock purchases at these absurd prices will get screwed during the inevitable crash, while the recent shorters will make a killing.
- NoOneNew 6y ago
  Everything on WSB states this is a bad investment plan and is more to bankrupt Melvin because they tried to bankrupt Gamestop. Short sellers have been using the down turned economy to collapse struggling companies that hire everyday people. What's funny is how the HN community tries to defend the firms they've whined about for years. Is what's going on irrational? Yup. But it pulls back the curtain of what the financial firms do to the economy and their own manipulation tactics.
  - sanderjd 6y ago
    Here's what oh-so-many people are missing: the gigantic volume in these stocks is no longer coming from the WSB YOLO bros who know they'll lose money but think that's worth it to stick it to hedge funds. That may well be who was getting into the stock on Monday and Tuesday. But now it is people who saw the story on Good Morning America, having never previously heard of WSB or Robinhood, who don't care about hedge funds or any of that, but just got the impression from the news that hey this stock is going way up and that must mean it is a way to make a quick buck. And those are the people who are actually going to get screwed, not the hedge fund managers, who will be just fine.
    - NoOneNew 6y ago
      So it's WSB fault that the news outlets spun the narrative to confuse people? Sorry, but hasn't the news spinning and generally misconstruing news stories to the benefit of their advertisers and financiers agendas been the issue the past few years?
      - chrisdhoover 6y ago
        The news has a long history of prevaricating. “Remember the Maine.” It is only recently that folks are waking up to what Chomsky spent a lifetime explaining. The awakening is accelerating. Assange and Snowden, the naked media lying in the 2020 election, and now Wall Street manipulation is being exposed. We never had a reckoning after 2008. If this becomes an infinite runaway squeeze. Who will get bailed out?
      - 6y ago
- xbmcuser 6y ago
  We are going to find out what will happen soon. As looking at the trade volumes people seem to have stopped selling or buying looking at the stock prices and the trades it looks like hf traders rather than retail
  - f430 6y ago
    The rally will continue as long as there are buyers given the price and the neural pathways have been fully mapped out. What I'm worried about is that there were more than one Melvin Capital with several banks now involved who do not own enough shares to cover the shorts. Which means we are literally witnessing a money printer go brrr situation where as long as there are people buying in due to FOMO or some us-vs-them politics, the prices will rally. The most shocking part is how exposed not only the brokers are but now the banks are also exposed. We are literally seeing a repeat of 1929. https://www.history.com/news/1929-stock-market-crash-warning-signs https://www.history.com/news/1929-stock-market-crash-warning...
  - deleted 6y ago
    [deleted]
- throwaway-571 6y ago
  It's kind of depressing when you look at these crazy success stories of lottery winners. You realize even a small bet at the right time could be life-changing. Let's say instead of buying a Latte every working days at starbucks over the last five years you had invested it in tesla stocks. Or maybe for every starbucks latte you drank, you invested the same amount in ETF and in Tesla (pay 3 latte, drink one). Where would your life be? Would you still be at your 9-to-5 or would you go work for that non-profit? Or would you just be lazing around on the sofa or at the beach sipping pina-coladas? Anyway, sometimes it takes a lot of energy to deal with the KIMO (Know I Missed Out).
  - triangleman 6y ago
    The best analysis is always against the company itself: - SBUX instead of buying Starbucks - MO instead of buying cigarettes (see The Millionaire Next Door for this analysis) - LVMH instead of buying LV, M, or H - NVDA instead of buying video cards and AAA games - CVS instead of shopping at convenience stores
    - fractionalhare 6y ago
      This doesn't seem to be saying anything about those companies though. It's just that you will do better financially if you invest money instead of spending it. Well...yeah.
  - slfnflctd 6y ago
    Totally know what you mean. What I do is just assume I'm going to have to work until I die, and keep angling toward work I tolerate better. I try to invest wisely, maintain a few months of cash savings, etcetera, but don't think about it otherwise. Money is imaginary and anything could happen to it at any moment. If once in a while I want to use some of my disposable income to spin a roulette wheel or buy GME, and can keep it under control, I see no problem. If I win, it's a nice surprise. But if I don't feel like playing, of course I won't win anything. Despite having watched it since Monday or before, I don't think about what I could've won on GME this week any more than what I could've won at some dog track. I decided not to play, and that's that. My life continues on as normal.
- thereddaikon 6y ago
  That's not the sense I'm getting at all. Oh im sure there are those involved who fit the description. But for most, it isn't about making money at all. Its about financial warfare with "the man". The overwhelming majority of examples I have seen so far are only concerned with causing hedges funds to collapse and to put brokers out of business, personal losses be damned. And I see little reason to doubt this. Everyone knows Gamestop is a company with an obsolete business model, a bad reputation and little chance of turning things around. Everyone knows that there is little to no chance of making any money on holding. But $500 isn't a lot of money. 3 million people each putting $500 in to GME is. Obviously there are some who are putting in far more. Current market cap is $24 billion. Its coming from somewhere. I suspect once this is all over we will find that some major players got involved as well and put a lot of money into GME to topple their rivals. But that isn't the main narrative and most of the people buying in are doing so to make a statement. This has started a discussion. A lot of people are getting a 101 education on how the stock market really works and they are learning just how little it actually has to do with real value and the economy. I predict there will be serious public pressure for regulatory reform. People are going to want to make shorting and high speed trading illegal.
  - AmericanChopper 6y ago
    > A lot of people are getting a 101 education on how the stock market really works and they are learning just how little it actually has to do with real value and the economy. I don’t see how you can draw this conclusion from these events. If this level of price volatility was commonly caused by market participants, then it would be such big news when it happens. They’re not common at all, they represent a small number of events where a small number of shares were traded overvalue for very short periods of time. Nobody is concerned that stocks are overvalued because short squeezes are just happening all the time. Squeezes are also short sellers getting punished for trying to profit off somebody else’s losses, which as far as I can tell most people think is very morally righteous. The only time they’re controversial is when intervention occurs to rescue the short seller.
- znpy 6y ago
  "That's just, like, your opinion man"
- kortilla 6y ago
  > This sort of event would be less likely if America's wealth disparity weren't so grotesquely skewed. Highly unlikely. It doesn’t matter how rich the rich are if you’re poor and want to gamble your way out. The problem is with poverty, which is completely unrelated to wealth disparity. One you can fix by making life worse for everyone, the other you can fix by making life better for the poor.
- throwaway-571 6y ago
  WSB is trying to create a short squeeze by buying call options to crush the shorters. RoaringKitty found the stock underpriced in 2019 and then managed to turn 50k into 13M in 1.5 years + and is still holding 22M in stock and calls.
- Unklejoe 6y ago
  > This sort of event would be less likely if America's wealth disparity weren't so grotesquely skewed. Maybe, but I'm pretty well off (at least compared to the rest of the country) and I still feel the same way. It's primal if you ask me.
FartyMcFarter 6y ago
> there is this narrative that the little guy is finally sticking it to the big bad hedge funds. In reality there is probably very little truth to this. Which part has little truth to it? The big hedge funds are apparently losing money (billions!) on Gamestop, unless that's being mis-reported. Some of the "little guys" (reddit people) definitely were a part of the reason for that.
- MattGaiser 6y ago
  Certain hedge funds are losing money. I am sure some others are having a great time with this.
- zaphod4prez 6y ago
  (Disclaimer I do NOT know what I'm talking about, just repeating what I saw on Twitter) It seems like they've all closed their shorts already, most of them did on like day 2 I believe. In addition, other hedge funds have been on the winning side of this trade. Some of the orders for GME last few days have been absolutely massive, not coming from retail.
  - hatsunearu 6y ago
    There was a CNBC post about Citron and Melvin closing shorts but it was retracted.
    - whimsicalism 6y ago
      No, it wasn't. Melvin has definitely closed, although Citron may still be in partially. Why are so many people repeating the same misleading talking points over and over?
      - kchr 6y ago
        > Melvin has definitely closed, although Citron may still be in partially. Source?
Dirlewanger 6y ago
>nobody blames the speculators The hedge funds are the speculators in this case. They're playing a dangerous game where you can short more stock than what actually exists. Why this is allowed? Who the fuck knows.
- kgwgk 6y ago
  Shorting more stock than what actually exists is not really that different from shorting less stock than what actually exist. Imagine you short 50% of the outstanding shares. Now there are 50% more long positions than outstanding shares. It's not substantially different from having 100% or 150% more long positions than outstanding shares.
  - deleted 6y ago
    [deleted]
  - FabHK 6y ago
    You could stipulate, though, that the outstanding short position mustn't exceed the net position, or equivalently that the total long positions can't exceed twice the net position. Why not? (This would require new regulation, but not be impossible, I think.) If the total long or short positions exceed the underlying economics by a lot, you create all sort of weird incentives for manipulation, as can be seen in the CDS market sometimes.
    - kgwgk 6y ago
      You could stipulate whatever you wanted, but there is nothing special about that threshold in particular. I fully agree that derivatives can create all sort of problems in many cases, including when the nominal amount of the positions is much higher than the actual amount of the underlying.
      - FabHK 6y ago
        Agreed fully. The 2x long, -1 short limit is just a neat, natural limit that one could discuss, and might be easier to enforce than other (similarly arbitrary) limits.
Miner49er 6y ago
> Right now it appears that the public wants to be able to trade on their terms because there is this narrative that the little guy is finally sticking it to the big bad hedge funds. In reality there is probably very little truth to this. The fact that buying was limited yesterday is evidence that the little guy is actually winning here. Trading was stopped to save the hedge funds, because if they go under or lose too much, the clearinghouse has to front that. If the clearinghouse goes under the whole market will crash.
- TameAntelope 6y ago
  I cannot stress this strongly enough -- the fact that buying was limited yesterday is not evidence that the little guy is actually winning. As has been explained in multiple other places, the limitations were as a result of Robinhood et. al. being unable to cover the risks involved in providing instant trading capabilities for a stock as volatile as the ones that got restricted. That has nothing to do with "the little guy is winning" whatsoever, and in fact may indicate that "the little guy" is about to lose his shirt, due to lack of predictability. Trading was not stopped "to save the hedge funds". This is an outright lie that needs to be squashed. Stop saying this. I don't mean to be rude, but the narrative you're spreading is actively dangerous and not supported by any of the facts we have available to us.
  - ForHackernews 6y ago
    Some variation of "If you owe a bank thousands, you have a problem, but if you owe a bank millions, the bank has a problem" probably applies here. If crazy retail investors can bankrupt Robinhood or other over-leveraged brokerage firms, that's also a win for the little guys. I don't think many HN posters with their stable, extremely well-paid technology careers can truly empathize with the strain of aggressive nihilism on display at WSB. "I'm only gambling with my future, so nothing to lose."
  - TeMPOraL 6y ago
    Here's the thing, though - and please correct me if I'm wrong: it's not just Robin Hood. Many other trading apps blocked GME buys yesterday and today, and some of them are blaming this on banks and brokerages upstream of the apps. That to me looks like the clearing houses themselves are worried, which means the whole thing poses a risk (even if easily mitigated) to the greater market.
dalbasal 6y ago
Re: Subtleties. I disagree. I think a big part of why this whole thing is fascinating is the depth. Yesterday morning, financial press were blathering generalities pinning WSB as market manipulators and calling for regulation to stop them. That is, stop retail investors trading at a scale that moves markets. IE, the stuff that insiders get away with regularly. Between yesterday afternoon and now, millions of people have been catching up on the detailed mechanics of stock trade execution. There's a mad dash from reporter to get interviews with brokers, clearing house operators & such. Note that the maneuver itself was analyzed in detail, and in public. That's what allowed big names like Cuban, Musk, various politicians and such to take a side and comment on it intelligibly. Ultimately, whoever is holding these meme stock shorts needs to buys stock to cover their positions. I acknowledge that brokers had legitimate/legal/normative reasons to stop retail buys. But, it's also true that they created a window where short sellers could buy without competition from retail investors. Maybe brokers are covered legally against market manipulation charges because clearing houses were genuinely short on liquidity. But, (1) that doesn't change what happened and (2) Isn't this the regulator's job? The reason people are cheerleading is because of these shenanigans. "Rigged" gets thrown around often, usually it's devoid of subtlety. This time, it's detailed. We can debate the details and construction of the rig. Truths fly around reddit for an afternoon, and are discarded the following day. Few people cheerleading because they want a no regulation, pre-depression stock market. They just aren't willing to accept a rigged system. In any case, who are the speculators here? Short sellers like Melvin or Redditors? Short sellers future-sold 140% of the stock... hoping for a crash and potentially creating one. Redditors recognized this by looking at publicly available information and discussing it in the open.
- dkrich 6y ago
  Yesterday premarket when Robinhood announced the cessation of trading in these ultra volatile stocks, was there a deep analysis of what led them to that decision? A measured consideration of why they might do that? Of course not. Immediately a false narrative was created that citadel forced them to do it under threat that they would stop their order flow. Had any politician or public figure merely suggested we let the CEO of Robinhood explain the decision, they would’ve been dragged by the Twitter mob. Just look at how Steve Cohen, Lee Cooperman and John Fortt were shamed for raising what I believed to be perfectly legitimate questions. But nobody is interested in legitimate questions when it’s hive mind mob rule which is what always takes hold in a bubble. In fact the vilification of naysayers is one of the tell tale signs of a speculative bubble. To answer the last question who are the speculators here, shorts or wsbers? Both. But what I’m talking about are the speculators who are simply buying this up with the expectation they will make huge gains like deep fucking value. They can say all they want about how they don’t care about potential losses and this is something bigger. Total nonsense. Let’s see who gets blamed and who plays the victim if we get a crash. It’s an interesting world when Mark Cuban and chamath palyhapitia can be portrayed as champions of the little guy when they have made billions of dollars at their expense. Chamath takes a SPAC public every Tuesday. Who do we think are buying these up? Warren Buffett? Didn’t Cuban make his fortune selling a worthless business to Yahoo? These guys are using this entire thing to build their own popularity.
robntheh00d 6y ago
End all speculative finance. That’s where we ended up after 1929, until the current billionaire class removed all the guard rails. Nobody deep on SV stocks and unicorn chasing wants to admit they’re in the bubble too. Why does society owe floating a coder bros data science project? Anything not science is a meme. That billionaires should exist is a meme. This is social philosophy, not truth. And it’s gamed. America is a bubble in time and it’s having a real (environmental) impact on the future. Billionaires are not experts. They’re rich and can pay the fines and schmooze. That is not expertise. It’s selling “free market” and manipulating it based on a meme that speculative finance expertise is real. All it is is social engineering of the masses to accept deflation of their economic position.
- remolacha 6y ago
  Bad take. We need capital markets to effectively value and fund different business efforts (unless you want to do things Soviet-style). And no matter how much fundamental analysis you do, some things remain unknown; all finance is in some way speculative. There are rough patches, but you need to take the bad to get the good.
  - robntheh00d 6y ago
    No, we don’t. We need to let people build their communities without tethering agency to outsiders who control the flow of imaginary capital. Pretending a value in a database is real ownership of something is insane and continues to lead humanity towards fascism to protect the oligopoly at the top of the meme pyramid. You’re selling an appeal to authority that is a complete mirage, only existing in your head because of years of reinforcement.
    - remolacha 6y ago
      People can seek capital from whomever they want. But it’s also true that outside capital is useful. If my community has lots of resources and no ideas about how to use them, then the world is better off if I take my resources and find an under-resourced entrepreneur in a less wealthy part of the world to invest in. That’s what capital represents.
tootie 6y ago
As much as there's a backlash of "it's ok when hedge funds do it" the GME situation is still an absolutely massive distortion. The company is still worth the same $11/share it was a few months ago. Maybe $20 if you think the new leadership will improve sales. It's not better because it's little guys doing it. It's still abusive.
ramraj07 6y ago
Many might be FOMOing, but few want to be told that they're too dumb to be given this power. Clearly the experts themselves don't know when they bite too much (as seen in 2008) lets spare the common adult some decency and allow them to bankrupt themselves if they wish to do so. America was a great place precisely because of this freedom
franklampard 6y ago
> In reality there is probably very little truth to this. The whole premise of your argument is based on ‘probably’
unicornmama 6y ago
The narrative that retail investors have stuck it to hedge funds is laughable. Who do they think is selling counter party is? All they’ve managed to do transfer wealth from one hedge fund to another. And eventually when this pops they have transferred wealth from themselves to other winning hedge funds.
- itronitron 6y ago
  the enemy of my enemy is my friend, my friend.
cardiffspaceman 6y ago
In 1929 a series of events took place, and some of it took a while to happen (like Ford shutting down for a few months) that pretty much (not completely) eliminated retail accounts from both the stock market and actually from banking. Much of the public swore off checking and savings accounts, never mind owning stocks. It seems like the big money is changing its clothes to pose as children in order to get priority on the life boats ("Women and children first!"). The social circle of firms closely connected to this ruin of Robinhood and which had been short GME are the speculators. Short for longer than intraday == speculative. Short as a market maker for an hour or two is good for efficient clearing. It's on the guys with the big money to gather their fortitude and ride this out in the most-trust-inducing ways they can. I think the big money is naive if they think it could be otherwise. One more thing, I am reminded that a lot of the time, a retail investor will buy something, a weak stock, and ride it down to zero out of misguided optimism. Conducting margin calls on zero notice is going to be toxic to such people and I don't think the finance world really wants that money to leave the market for good.
- kurthr 6y ago
  I take much of what you say a reasonable wisdom, but the idea of retail investors buying weak stocks on margin and riding them to zero seems far fetched. They shouldn't be buying on margin anyway and if it goes to zero, they're going to get the margin call no matter what.
  - cardiffspaceman 6y ago
    So they get the margin call partway down, they pay in to keep the stock because they have told all their friends they are long that mess, and out of pride continue to ride it down.
    - kurthr 6y ago
      ... so Citidel can make money up/down and sideways, front running like a real robbing hood.
tal8d 6y ago
Nope, the narrative has been building for the last two days that this was all perpetrated by fascist white supremacist deplorables... so it is no mystery which side Democrats will pick. Republicans will do the same for more classically stereotypical reasons.
eloff 6y ago
The very high and very speculative participation by retail investors is scaring me. I'm reminded of the story of the hedge fund manager who was getting a shoe shine, and the shoe shine boy was giving him stock tips. He closed out his positions and correctly called the top of the bubble[1]. I don't know if the story is true, and it is just an anecdote anyway. But historically this kind of activity does mark the end of bull markets. At the same time I keep hearing that the stock market is actually undervalued on average given current interest rates - and those aren't going to change anytime soon. Definitely things are frothy and there are bubbles in some stocks, but maybe this market still has legs - at least while the fed is buying 120 billion of debt each month. [1] I found it, it was Joe Kennedy in 1929: https://archive.fortune.com/magazines/fortune/fortune_archive/1996/04/15/211503/index.htm https://archive.fortune.com/magazines/fortune/fortune_archiv...
JohnJamesRambo 6y ago
What an excellent post.

by dkrich 6y ago

dleslie 6y ago

The FOMO is palpable. There's a hurried rush of small investors hoping to turn their meagre savings into a big win, backed by the anxiety that if they don't try then they'll forever regret missing their one and only chance at a comfortable life. This sort of event would be less likely if America's wealth disparity weren't so grotesquely skewed.

BoorishBears 6y ago
It boggles the mind people think hedge funds can't profit off a mad rush like this...
- dkrich 6y ago
  I mean do people really believe Robinhood traders are moving billions of dollars of stock a day? Most admit that they aren’t selling and buying at higher and higher levels. That translates to very little cash to buy more. There is absolutely no way that these moves can be attributed to retail traders or short squeezes. The narrative that these are retailers causing every significant move higher and with every move the shorts are losing more and more is actually causing this bubble.
  - kenneth 6y ago
    Let's say the average bet is 1-5k into this the average Robinhood user invests around 5k), it only takes 200k-1M buying in to move $1B into the stock. When you start with a $200M market cap on a heavily shorted stock, you easily end up where we are today
    - dkrich 6y ago
      And doing it every day? Even now that the stock is $350 a share? If they are able to do that I have to question the “little guy” tag.
    - BoorishBears 6y ago
      Average bet being 1-5k feels optimistic by an order of magnitude... The entire account value of normal RH users in the range of 1-5k Most people just joining don't have 1k to just throw at a lottery ticket, and remember that until today RH allowed fractional shares of GME - But you know, that's not even it... The other day GME did 20 Billion in volume in a single trading day. More than the S&P 500. I don't understand how people think retail can account for that.
  - rory 6y ago
    Matt Levine's email today estimates retail investors to be about 30% of total volume (with actual data from Citadel), but retail was net selling on Tuesday, Wednesday, and Thursday. So theoretically retail is enough to move the price if they were truly united, but that isn't actually the case. It's just not sexy to say "I bought in for a couple days and am taking my gains" in a public forum.
Leader2light 6y ago
It is so sad. The collapse will come within the next decade. Total financial collapse.
ycombigator 6y ago
Many just want to screw the hedge funds, finally it's their blood in the water.
- markbnj 6y ago
  I don't get this. I can't imagine the professional investor class is still blindly following their shorts. They're all out by now, aren't they? If the "little guys" are making money I tend to think it's coming from other little guys.
  - NationalPark 6y ago
    The "short" (haha) answer is that we just don't know what the funds have done during the last week. They're incentivized to mislead the public about closing their positions. But the technical reasons the gamma squeeze happened and possible short squeeze today could happen still make sense: the equity has oversubscribed short interest and a skyrocketing price.
    - tayo42 6y ago
      I'm kind of amazed how little transparency there is in the stock market. Everyone seems to be guessing. The unequal amount of information for regular people is really unfair and seems like an easy situation for corruption to take place
  - disgrunt 6y ago
    No. Apparently other hedge funds got in line behind Melvin with even more aggressive shorts.
  - Anon1096 6y ago
    The truth of the matter is that hedge funds and institutions are quietly the ones actually pumping these stocks. Reddit likes to paint a narrative that they are in control, but when their messiah has 50MM max of securities and options, meanwhile single trades are going through worth over 700MM, the narrative just doesn't make sense. This is a battle of Wall Street vs Wall Street with some retailers playing along as pawns. Most likely, starry eyed retailers are going to be the ones holding the bag when it all comes down because they're playing a game without even knowing who they're up against. As for the shorts, Melvin and Citron are out but new shorters get in every day. The higher the price goes the more incentive there is to short. Most will probably lose money as the bubble inflates. But a few will make out like kings when it pops.
sosuke 6y ago
When hindsight points out the opportunities that you overlooked which would have giving you that comfortable life it infects all future decision making.
- throwaway-571 6y ago
  Is there a spoiler tag on HN ? These ones still hurt: There is a lot of thing one could have done "for the LULz" but decided to browse HN, Imgur or Reddit instead. - Bitcoin. I heard about it when it was still possible to mint it on CPU, but chose to run SETI@Home instead. - Bitcoin when it was at merely $9000. - Ethereum when it was going under $1. - Dogecoin like anytime before yesterday (up 6x or something today). - #GME when options where pennies on the dollar, or even the stock at $20 in early January. - $Tesla in January, February, March of 2020 or anytime before the split. - $Tesla instead of putting down $1000 to reserve a slot to buy a model 3 at its announcement, put it in the stock, or even better, in long dated calls. - $Amazon or $Apple last march or anytime before that. - $SPCE after it crashed in March (a WSB hyped stock)
  - dleslie 6y ago
    Dogecoin is ... Just _why_? There's no limit on the number of coins. Mining is designed to be forever-easy. The coin is _designed_ for rapid deflation. Why are people treating it as anything other than the joke it was intended to be?
    - throwaway-571 6y ago
      You can still make money of a joke if you are quick enough! Just @-mention Elon and here you go.
    - whatshisface 6y ago
      I really have no idea, but your question suggests its own answer: fiat currencies are also designed for eternal inflation (I think you swapped inflation with deflation) and many people consider that a boon.
agumonkey 6y ago
I wonder what's the optimum sizing of FOMO. 1% ? 0.1 ? 2% ?
- qznc 6y ago
  The Kelly criterion tells you how big your bet should be.
oramit 6y ago
My Facebook feed is filled with people talking about this. These are friends I have know for years who have never mentioned stocks before but now are talking about "holding the line". It is FOMO for sure, but the real emotions I get from talking with people are outrage and revenge. Everyone feels like the system (economic and political) is rigged against the public. The dopamine hit from sticking it to the man is palpable.
- sanderjd 6y ago
  That would be useful if they were actually sticking it to the man. But that isn't what's happening here. What's happening is a big bubble where most of these regular people are gonna lose lots of money while the hedge funds end up closing out their position for a manageable loss and come out just fine.
  - oramit 6y ago
    For sure. This is a terrible way to "stick it to the man" and i've encouraged everyone i've talked to about this to stay far away. Unfortunately emotions have really taken hold. Greed is a hard one to talk people down from but doable. Anger and outrage pretty much impossible.
  - PaulDavisThe1st 6y ago
    ... not to mention the few smarter hedge funds and mutual funds that quickly jumped in an out of this and made substantial gains, leaving everyone who thinks they are "holding the line" even more "on the line".
    - ummonk 6y ago
      Ehh, the short ratio is still over 100%, and I guarantee you those aren't retail investors. So plenty of institutional investments to stick it to left.
      - sanderjd 6y ago
        You don't know when those shorts got in. The price is clearly too high now, so it makes sense that sophisticated investors (probably other hedge funds) would be entering short positions at the recent prices. And those recent entrants will not be squeezed unless the price goes up by another ludicrous amount, which it is less likely to do now that the initial surge of enthusiasm is running its course. So lots of retail traders who got into the frenzy late with normal stock purchases at these absurd prices will get screwed during the inevitable crash, while the recent shorters will make a killing.
NoOneNew 6y ago
Everything on WSB states this is a bad investment plan and is more to bankrupt Melvin because they tried to bankrupt Gamestop. Short sellers have been using the down turned economy to collapse struggling companies that hire everyday people. What's funny is how the HN community tries to defend the firms they've whined about for years. Is what's going on irrational? Yup. But it pulls back the curtain of what the financial firms do to the economy and their own manipulation tactics.
- sanderjd 6y ago
  Here's what oh-so-many people are missing: the gigantic volume in these stocks is no longer coming from the WSB YOLO bros who know they'll lose money but think that's worth it to stick it to hedge funds. That may well be who was getting into the stock on Monday and Tuesday. But now it is people who saw the story on Good Morning America, having never previously heard of WSB or Robinhood, who don't care about hedge funds or any of that, but just got the impression from the news that hey this stock is going way up and that must mean it is a way to make a quick buck. And those are the people who are actually going to get screwed, not the hedge fund managers, who will be just fine.
  - NoOneNew 6y ago
    So it's WSB fault that the news outlets spun the narrative to confuse people? Sorry, but hasn't the news spinning and generally misconstruing news stories to the benefit of their advertisers and financiers agendas been the issue the past few years?
    - chrisdhoover 6y ago
      The news has a long history of prevaricating. “Remember the Maine.” It is only recently that folks are waking up to what Chomsky spent a lifetime explaining. The awakening is accelerating. Assange and Snowden, the naked media lying in the 2020 election, and now Wall Street manipulation is being exposed. We never had a reckoning after 2008. If this becomes an infinite runaway squeeze. Who will get bailed out?
    - 6y ago
xbmcuser 6y ago
We are going to find out what will happen soon. As looking at the trade volumes people seem to have stopped selling or buying looking at the stock prices and the trades it looks like hf traders rather than retail
- f430 6y ago
  The rally will continue as long as there are buyers given the price and the neural pathways have been fully mapped out. What I'm worried about is that there were more than one Melvin Capital with several banks now involved who do not own enough shares to cover the shorts. Which means we are literally witnessing a money printer go brrr situation where as long as there are people buying in due to FOMO or some us-vs-them politics, the prices will rally. The most shocking part is how exposed not only the brokers are but now the banks are also exposed. We are literally seeing a repeat of 1929. https://www.history.com/news/1929-stock-market-crash-warning-signs https://www.history.com/news/1929-stock-market-crash-warning...
- deleted 6y ago
  [deleted]
throwaway-571 6y ago
It's kind of depressing when you look at these crazy success stories of lottery winners. You realize even a small bet at the right time could be life-changing. Let's say instead of buying a Latte every working days at starbucks over the last five years you had invested it in tesla stocks. Or maybe for every starbucks latte you drank, you invested the same amount in ETF and in Tesla (pay 3 latte, drink one). Where would your life be? Would you still be at your 9-to-5 or would you go work for that non-profit? Or would you just be lazing around on the sofa or at the beach sipping pina-coladas? Anyway, sometimes it takes a lot of energy to deal with the KIMO (Know I Missed Out).
- triangleman 6y ago
  The best analysis is always against the company itself: - SBUX instead of buying Starbucks - MO instead of buying cigarettes (see The Millionaire Next Door for this analysis) - LVMH instead of buying LV, M, or H - NVDA instead of buying video cards and AAA games - CVS instead of shopping at convenience stores
  - fractionalhare 6y ago
    This doesn't seem to be saying anything about those companies though. It's just that you will do better financially if you invest money instead of spending it. Well...yeah.
- slfnflctd 6y ago
  Totally know what you mean. What I do is just assume I'm going to have to work until I die, and keep angling toward work I tolerate better. I try to invest wisely, maintain a few months of cash savings, etcetera, but don't think about it otherwise. Money is imaginary and anything could happen to it at any moment. If once in a while I want to use some of my disposable income to spin a roulette wheel or buy GME, and can keep it under control, I see no problem. If I win, it's a nice surprise. But if I don't feel like playing, of course I won't win anything. Despite having watched it since Monday or before, I don't think about what I could've won on GME this week any more than what I could've won at some dog track. I decided not to play, and that's that. My life continues on as normal.
thereddaikon 6y ago
That's not the sense I'm getting at all. Oh im sure there are those involved who fit the description. But for most, it isn't about making money at all. Its about financial warfare with "the man". The overwhelming majority of examples I have seen so far are only concerned with causing hedges funds to collapse and to put brokers out of business, personal losses be damned. And I see little reason to doubt this. Everyone knows Gamestop is a company with an obsolete business model, a bad reputation and little chance of turning things around. Everyone knows that there is little to no chance of making any money on holding. But $500 isn't a lot of money. 3 million people each putting $500 in to GME is. Obviously there are some who are putting in far more. Current market cap is $24 billion. Its coming from somewhere. I suspect once this is all over we will find that some major players got involved as well and put a lot of money into GME to topple their rivals. But that isn't the main narrative and most of the people buying in are doing so to make a statement. This has started a discussion. A lot of people are getting a 101 education on how the stock market really works and they are learning just how little it actually has to do with real value and the economy. I predict there will be serious public pressure for regulatory reform. People are going to want to make shorting and high speed trading illegal.
- AmericanChopper 6y ago
  > A lot of people are getting a 101 education on how the stock market really works and they are learning just how little it actually has to do with real value and the economy. I don’t see how you can draw this conclusion from these events. If this level of price volatility was commonly caused by market participants, then it would be such big news when it happens. They’re not common at all, they represent a small number of events where a small number of shares were traded overvalue for very short periods of time. Nobody is concerned that stocks are overvalued because short squeezes are just happening all the time. Squeezes are also short sellers getting punished for trying to profit off somebody else’s losses, which as far as I can tell most people think is very morally righteous. The only time they’re controversial is when intervention occurs to rescue the short seller.
znpy 6y ago
"That's just, like, your opinion man"
kortilla 6y ago
> This sort of event would be less likely if America's wealth disparity weren't so grotesquely skewed. Highly unlikely. It doesn’t matter how rich the rich are if you’re poor and want to gamble your way out. The problem is with poverty, which is completely unrelated to wealth disparity. One you can fix by making life worse for everyone, the other you can fix by making life better for the poor.
throwaway-571 6y ago
WSB is trying to create a short squeeze by buying call options to crush the shorters. RoaringKitty found the stock underpriced in 2019 and then managed to turn 50k into 13M in 1.5 years + and is still holding 22M in stock and calls.
Unklejoe 6y ago
> This sort of event would be less likely if America's wealth disparity weren't so grotesquely skewed. Maybe, but I'm pretty well off (at least compared to the rest of the country) and I still feel the same way. It's primal if you ask me.

FartyMcFarter 6y ago

> there is this narrative that the little guy is finally sticking it to the big bad hedge funds. In reality there is probably very little truth to this. Which part has little truth to it? The big hedge funds are apparently losing money (billions!) on Gamestop, unless that's being mis-reported. Some of the "little guys" (reddit people) definitely were a part of the reason for that.

MattGaiser 6y ago
Certain hedge funds are losing money. I am sure some others are having a great time with this.
zaphod4prez 6y ago
(Disclaimer I do NOT know what I'm talking about, just repeating what I saw on Twitter) It seems like they've all closed their shorts already, most of them did on like day 2 I believe. In addition, other hedge funds have been on the winning side of this trade. Some of the orders for GME last few days have been absolutely massive, not coming from retail.
- hatsunearu 6y ago
  There was a CNBC post about Citron and Melvin closing shorts but it was retracted.
  - whimsicalism 6y ago
    No, it wasn't. Melvin has definitely closed, although Citron may still be in partially. Why are so many people repeating the same misleading talking points over and over?
    - kchr 6y ago
      > Melvin has definitely closed, although Citron may still be in partially. Source?

Dirlewanger 6y ago

>nobody blames the speculators The hedge funds are the speculators in this case. They're playing a dangerous game where you can short more stock than what actually exists. Why this is allowed? Who the fuck knows.

kgwgk 6y ago
Shorting more stock than what actually exists is not really that different from shorting less stock than what actually exist. Imagine you short 50% of the outstanding shares. Now there are 50% more long positions than outstanding shares. It's not substantially different from having 100% or 150% more long positions than outstanding shares.
- deleted 6y ago
  [deleted]
- FabHK 6y ago
  You could stipulate, though, that the outstanding short position mustn't exceed the net position, or equivalently that the total long positions can't exceed twice the net position. Why not? (This would require new regulation, but not be impossible, I think.) If the total long or short positions exceed the underlying economics by a lot, you create all sort of weird incentives for manipulation, as can be seen in the CDS market sometimes.
  - kgwgk 6y ago
    You could stipulate whatever you wanted, but there is nothing special about that threshold in particular. I fully agree that derivatives can create all sort of problems in many cases, including when the nominal amount of the positions is much higher than the actual amount of the underlying.
    - FabHK 6y ago
      Agreed fully. The 2x long, -1 short limit is just a neat, natural limit that one could discuss, and might be easier to enforce than other (similarly arbitrary) limits.

Miner49er 6y ago

> Right now it appears that the public wants to be able to trade on their terms because there is this narrative that the little guy is finally sticking it to the big bad hedge funds. In reality there is probably very little truth to this. The fact that buying was limited yesterday is evidence that the little guy is actually winning here. Trading was stopped to save the hedge funds, because if they go under or lose too much, the clearinghouse has to front that. If the clearinghouse goes under the whole market will crash.

TameAntelope 6y ago
I cannot stress this strongly enough -- the fact that buying was limited yesterday is not evidence that the little guy is actually winning. As has been explained in multiple other places, the limitations were as a result of Robinhood et. al. being unable to cover the risks involved in providing instant trading capabilities for a stock as volatile as the ones that got restricted. That has nothing to do with "the little guy is winning" whatsoever, and in fact may indicate that "the little guy" is about to lose his shirt, due to lack of predictability. Trading was not stopped "to save the hedge funds". This is an outright lie that needs to be squashed. Stop saying this. I don't mean to be rude, but the narrative you're spreading is actively dangerous and not supported by any of the facts we have available to us.
- ForHackernews 6y ago
  Some variation of "If you owe a bank thousands, you have a problem, but if you owe a bank millions, the bank has a problem" probably applies here. If crazy retail investors can bankrupt Robinhood or other over-leveraged brokerage firms, that's also a win for the little guys. I don't think many HN posters with their stable, extremely well-paid technology careers can truly empathize with the strain of aggressive nihilism on display at WSB. "I'm only gambling with my future, so nothing to lose."
- TeMPOraL 6y ago
  Here's the thing, though - and please correct me if I'm wrong: it's not just Robin Hood. Many other trading apps blocked GME buys yesterday and today, and some of them are blaming this on banks and brokerages upstream of the apps. That to me looks like the clearing houses themselves are worried, which means the whole thing poses a risk (even if easily mitigated) to the greater market.

dalbasal 6y ago

Re: Subtleties. I disagree. I think a big part of why this whole thing is fascinating is the depth. Yesterday morning, financial press were blathering generalities pinning WSB as market manipulators and calling for regulation to stop them. That is, stop retail investors trading at a scale that moves markets. IE, the stuff that insiders get away with regularly. Between yesterday afternoon and now, millions of people have been catching up on the detailed mechanics of stock trade execution. There's a mad dash from reporter to get interviews with brokers, clearing house operators & such. Note that the maneuver itself was analyzed in detail, and in public. That's what allowed big names like Cuban, Musk, various politicians and such to take a side and comment on it intelligibly. Ultimately, whoever is holding these meme stock shorts needs to buys stock to cover their positions. I acknowledge that brokers had legitimate/legal/normative reasons to stop retail buys. But, it's also true that they created a window where short sellers could buy without competition from retail investors. Maybe brokers are covered legally against market manipulation charges because clearing houses were genuinely short on liquidity. But, (1) that doesn't change what happened and (2) Isn't this the regulator's job? The reason people are cheerleading is because of these shenanigans. "Rigged" gets thrown around often, usually it's devoid of subtlety. This time, it's detailed. We can debate the details and construction of the rig. Truths fly around reddit for an afternoon, and are discarded the following day. Few people cheerleading because they want a no regulation, pre-depression stock market. They just aren't willing to accept a rigged system. In any case, who are the speculators here? Short sellers like Melvin or Redditors? Short sellers future-sold 140% of the stock... hoping for a crash and potentially creating one. Redditors recognized this by looking at publicly available information and discussing it in the open.

dkrich 6y ago
Yesterday premarket when Robinhood announced the cessation of trading in these ultra volatile stocks, was there a deep analysis of what led them to that decision? A measured consideration of why they might do that? Of course not. Immediately a false narrative was created that citadel forced them to do it under threat that they would stop their order flow. Had any politician or public figure merely suggested we let the CEO of Robinhood explain the decision, they would’ve been dragged by the Twitter mob. Just look at how Steve Cohen, Lee Cooperman and John Fortt were shamed for raising what I believed to be perfectly legitimate questions. But nobody is interested in legitimate questions when it’s hive mind mob rule which is what always takes hold in a bubble. In fact the vilification of naysayers is one of the tell tale signs of a speculative bubble. To answer the last question who are the speculators here, shorts or wsbers? Both. But what I’m talking about are the speculators who are simply buying this up with the expectation they will make huge gains like deep fucking value. They can say all they want about how they don’t care about potential losses and this is something bigger. Total nonsense. Let’s see who gets blamed and who plays the victim if we get a crash. It’s an interesting world when Mark Cuban and chamath palyhapitia can be portrayed as champions of the little guy when they have made billions of dollars at their expense. Chamath takes a SPAC public every Tuesday. Who do we think are buying these up? Warren Buffett? Didn’t Cuban make his fortune selling a worthless business to Yahoo? These guys are using this entire thing to build their own popularity.

robntheh00d 6y ago

End all speculative finance. That’s where we ended up after 1929, until the current billionaire class removed all the guard rails. Nobody deep on SV stocks and unicorn chasing wants to admit they’re in the bubble too. Why does society owe floating a coder bros data science project? Anything not science is a meme. That billionaires should exist is a meme. This is social philosophy, not truth. And it’s gamed. America is a bubble in time and it’s having a real (environmental) impact on the future. Billionaires are not experts. They’re rich and can pay the fines and schmooze. That is not expertise. It’s selling “free market” and manipulating it based on a meme that speculative finance expertise is real. All it is is social engineering of the masses to accept deflation of their economic position.

remolacha 6y ago
Bad take. We need capital markets to effectively value and fund different business efforts (unless you want to do things Soviet-style). And no matter how much fundamental analysis you do, some things remain unknown; all finance is in some way speculative. There are rough patches, but you need to take the bad to get the good.
- robntheh00d 6y ago
  No, we don’t. We need to let people build their communities without tethering agency to outsiders who control the flow of imaginary capital. Pretending a value in a database is real ownership of something is insane and continues to lead humanity towards fascism to protect the oligopoly at the top of the meme pyramid. You’re selling an appeal to authority that is a complete mirage, only existing in your head because of years of reinforcement.
  - remolacha 6y ago
    People can seek capital from whomever they want. But it’s also true that outside capital is useful. If my community has lots of resources and no ideas about how to use them, then the world is better off if I take my resources and find an under-resourced entrepreneur in a less wealthy part of the world to invest in. That’s what capital represents.

tootie 6y ago

As much as there's a backlash of "it's ok when hedge funds do it" the GME situation is still an absolutely massive distortion. The company is still worth the same $11/share it was a few months ago. Maybe $20 if you think the new leadership will improve sales. It's not better because it's little guys doing it. It's still abusive.

ramraj07 6y ago

Many might be FOMOing, but few want to be told that they're too dumb to be given this power. Clearly the experts themselves don't know when they bite too much (as seen in 2008) lets spare the common adult some decency and allow them to bankrupt themselves if they wish to do so. America was a great place precisely because of this freedom

franklampard 6y ago

> In reality there is probably very little truth to this. The whole premise of your argument is based on ‘probably’

unicornmama 6y ago

The narrative that retail investors have stuck it to hedge funds is laughable. Who do they think is selling counter party is? All they’ve managed to do transfer wealth from one hedge fund to another. And eventually when this pops they have transferred wealth from themselves to other winning hedge funds.

itronitron 6y ago
the enemy of my enemy is my friend, my friend.

cardiffspaceman 6y ago

In 1929 a series of events took place, and some of it took a while to happen (like Ford shutting down for a few months) that pretty much (not completely) eliminated retail accounts from both the stock market and actually from banking. Much of the public swore off checking and savings accounts, never mind owning stocks. It seems like the big money is changing its clothes to pose as children in order to get priority on the life boats ("Women and children first!"). The social circle of firms closely connected to this ruin of Robinhood and which had been short GME are the speculators. Short for longer than intraday == speculative. Short as a market maker for an hour or two is good for efficient clearing. It's on the guys with the big money to gather their fortitude and ride this out in the most-trust-inducing ways they can. I think the big money is naive if they think it could be otherwise. One more thing, I am reminded that a lot of the time, a retail investor will buy something, a weak stock, and ride it down to zero out of misguided optimism. Conducting margin calls on zero notice is going to be toxic to such people and I don't think the finance world really wants that money to leave the market for good.

kurthr 6y ago
I take much of what you say a reasonable wisdom, but the idea of retail investors buying weak stocks on margin and riding them to zero seems far fetched. They shouldn't be buying on margin anyway and if it goes to zero, they're going to get the margin call no matter what.
- cardiffspaceman 6y ago
  So they get the margin call partway down, they pay in to keep the stock because they have told all their friends they are long that mess, and out of pride continue to ride it down.
  - kurthr 6y ago
    ... so Citidel can make money up/down and sideways, front running like a real robbing hood.

tal8d 6y ago

Nope, the narrative has been building for the last two days that this was all perpetrated by fascist white supremacist deplorables... so it is no mystery which side Democrats will pick. Republicans will do the same for more classically stereotypical reasons.

eloff 6y ago

The very high and very speculative participation by retail investors is scaring me. I'm reminded of the story of the hedge fund manager who was getting a shoe shine, and the shoe shine boy was giving him stock tips. He closed out his positions and correctly called the top of the bubble[1]. I don't know if the story is true, and it is just an anecdote anyway. But historically this kind of activity does mark the end of bull markets. At the same time I keep hearing that the stock market is actually undervalued on average given current interest rates - and those aren't going to change anytime soon. Definitely things are frothy and there are bubbles in some stocks, but maybe this market still has legs - at least while the fed is buying 120 billion of debt each month. [1] I found it, it was Joe Kennedy in 1929: https://archive.fortune.com/magazines/fortune/fortune_archive/1996/04/15/211503/index.htm https://archive.fortune.com/magazines/fortune/fortune_archiv...

JohnJamesRambo 6y ago

What an excellent post.