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GME is absolutely going to crash and everyone knows it. There was a mod post just today reminding everyone to be ready. The stock is worth $10-20 on it's merits

by tootie 6y ago

GME is absolutely going to crash and everyone knows it. There was a mod post just today reminding everyone to be ready. The stock is worth $10-20 on it's merits and that's where it will land. We just don't know when. The chance of this as a contagion that brings down indexes seems very unlikely.

hntrader 6y ago
I think this whole episode might cause the next market sell-off: (1) fund degrossing as the initial driver - already happening (2) everyone is being reminded of 99/00 mania (3) uncertain regulatory environment surrounding trading (4) worries of systemic risks created by bubble GME going higher is likely to trigger it more than it dropping off right now
- Blammar 6y ago
  All we need to wait for now is the shoeshine boy's tip and it'll be time to get out! See https://seekingalpha.com/instablog/661124-brijwanth/73895-hidenburg-shoe-shine-boy https://seekingalpha.com/instablog/661124-brijwanth/73895-hi... for a humorous variation on that classic theme.
- cauthon 6y ago
  What is fund degrossing?
  - hntrader 6y ago
    Long short funds having to sell longs to cover losses on their shorts
    - cauthon 6y ago
      Thanks!
- jaycroft 6y ago
  I think there's also evidence that the "short bubble" might be more widespread than we think. I'm not entirely convinced that Melvin was able to unwind their 50mln short position and drive the short interest down on Ortex (they're the best thing we've got in terms of guessing how much true short interest there is, because exchanges only report once or twice a month on a week or more delay) by covering. Equally likely in my mind is that Citadel bought Melvin's book thinking that it had a better plan than unwinding the short just yet. Instead, "hide" the short someplace that Ortex isn't looking and that the exchanges won't report on for another 3 weeks. That would be their order flow with a company they are in a unique position with - Robinhood - where lots of the buy orders are coming from. If you were Citadel and a little unscrupulous, you could immediately route every sell order on RH to the market but keep the buy orders for yourself. This positions you as short to Robinhood users, and you get to send those sold shares back to the book you bought from Melvin to unwind that short. So, the short does still exist, but now it's not visible to outside brokers. Outside brokers, when Ortex calls them up, will say, no no, Melvin covered a bunch today and short interest actually went down! So Ortex publishes a lower SI number. But, that short didn't actually just disappear. Either Citadel, or Robinhood, now are short to their customers. Are there other companies that have "hidden" short interest in this way? Are some of the big unexplained market moves in companies without short interest some of these "hidden" shorts unwinding before everyone finds out?
  - scythe 6y ago
    >Equally likely in my mind is that Citadel bought Melvin's book thinking that it had a better plan than unwinding the short just yet. Instead, "hide" the short someplace that Ortex isn't looking and that the exchanges won't report on for another 3 weeks. That would be their order flow with a company they are in a unique position with - Robinhood - where lots of the buy orders are coming from. If you were Citadel and a little unscrupulous, you could immediately route every sell order on RH to the market but keep the buy orders for yourself. This positions you as short to Robinhood users, and you get to send those sold shares back to the book you bought from Melvin to unwind that short. So, the short does still exist, but now it's not visible to outside brokers. Outside brokers, when Ortex calls them up, will say, no no, Melvin covered a bunch today and short interest actually went down! Is that legal? Manipulating report agencies to manipulate the value of a stock? There are multiple Congressmembers interested in this situation. That could be a very dangerous game.
- scruple 6y ago
  > (1) fund degrossing as the initial driver - already happening I saw a tweet that I cannot find right now, unfortunately. It showed that de-grossing M-W of this week was nearly at the same level as March of 2020.
paulpauper 6y ago
When everyone is convinced X is going to happen, it tends to not happen, or at least not in the way it is expected by the consensus. People said Tesla would crash when Tesla doubled a year ago from $200 to $400, and then to $900, etc., and then it did a 5-1 split, etc. Yes it did crash 20% in August, but from a price that was so high that it was still considerably higher than it was last year when the pundits were warning of a bubble. Few foresaw the S&P 500 would surge 70% off the lows from Covid and make new highs later that year. The pundit consensus what that that it would be a bad, deep, long bear market. Same for the post-Covid tech boom, which few foresaw too. GME is not crashing as everyone is expected it to, even with Robinhood restricting buys. It is up huge today. I think this has a lot more to run, IMHO. More shorts will get squeezed out next week. Like Tesla, GME may not really end badly at all and just keep going up and up. I own some GME and not worried. Yeah, it is not that much of my total net worth, but I have found that heeding warnings of bubbles usually just means selling too soon. If GME does crash, there will be no systemic risk or anything like that. It will be an isolated event.
- tootie 6y ago
  Completely different. Tesla soared on its positive outlook. They have strong sales and have managed to maintain an insurmountable lead in the EV market. Their surge is due to enthusiasm for their business. Gamestop was clinging to life a few months. The rally from $4 to $15 was optimism about their leadership. The rally from $15 to $350 was 100% due to the short squeeze. And the squeeze will most definitely play out and be over pretty soon.
  - smabie 6y ago
    Is your money where your mouth is? Opinions are cheap and if I've learned something in my career as a trader, it's that anything can happen
r00fus 6y ago
GME is worth what a few dozen billion at its current valuation? How would that impact SPX, DJIA, etc.
- tootie 6y ago
  It's at like $25B last I looked. The market cap of the S&P is $36T. The NYSE manages about $25T. So this is like 0.1%.
- yreg 6y ago
  If short squeeze happens[0], the shorts will have to buy the shares back at whatever the price will be. If they go bankrupt the responsibility passes to the brokers and further upstream. Of course it might not happen. [0] https://news.ycombinator.com/item?id=25945253 https://news.ycombinator.com/item?id=25945253
cwhiz 6y ago
“Merits” The stock is worth what people think it’s worth. If people keep buying and holding, then it is worth what it is worth.
- troupe 6y ago
  That might be true in the short term, but can you point to the stock of a company has continued to lose money over decades still maintained a very high stock price?

by tootie 6y ago

hntrader 6y ago

I think this whole episode might cause the next market sell-off: (1) fund degrossing as the initial driver - already happening (2) everyone is being reminded of 99/00 mania (3) uncertain regulatory environment surrounding trading (4) worries of systemic risks created by bubble GME going higher is likely to trigger it more than it dropping off right now

Blammar 6y ago
All we need to wait for now is the shoeshine boy's tip and it'll be time to get out! See https://seekingalpha.com/instablog/661124-brijwanth/73895-hidenburg-shoe-shine-boy https://seekingalpha.com/instablog/661124-brijwanth/73895-hi... for a humorous variation on that classic theme.
cauthon 6y ago
What is fund degrossing?
- hntrader 6y ago
  Long short funds having to sell longs to cover losses on their shorts
  - cauthon 6y ago
    Thanks!
jaycroft 6y ago
I think there's also evidence that the "short bubble" might be more widespread than we think. I'm not entirely convinced that Melvin was able to unwind their 50mln short position and drive the short interest down on Ortex (they're the best thing we've got in terms of guessing how much true short interest there is, because exchanges only report once or twice a month on a week or more delay) by covering. Equally likely in my mind is that Citadel bought Melvin's book thinking that it had a better plan than unwinding the short just yet. Instead, "hide" the short someplace that Ortex isn't looking and that the exchanges won't report on for another 3 weeks. That would be their order flow with a company they are in a unique position with - Robinhood - where lots of the buy orders are coming from. If you were Citadel and a little unscrupulous, you could immediately route every sell order on RH to the market but keep the buy orders for yourself. This positions you as short to Robinhood users, and you get to send those sold shares back to the book you bought from Melvin to unwind that short. So, the short does still exist, but now it's not visible to outside brokers. Outside brokers, when Ortex calls them up, will say, no no, Melvin covered a bunch today and short interest actually went down! So Ortex publishes a lower SI number. But, that short didn't actually just disappear. Either Citadel, or Robinhood, now are short to their customers. Are there other companies that have "hidden" short interest in this way? Are some of the big unexplained market moves in companies without short interest some of these "hidden" shorts unwinding before everyone finds out?
- scythe 6y ago
  >Equally likely in my mind is that Citadel bought Melvin's book thinking that it had a better plan than unwinding the short just yet. Instead, "hide" the short someplace that Ortex isn't looking and that the exchanges won't report on for another 3 weeks. That would be their order flow with a company they are in a unique position with - Robinhood - where lots of the buy orders are coming from. If you were Citadel and a little unscrupulous, you could immediately route every sell order on RH to the market but keep the buy orders for yourself. This positions you as short to Robinhood users, and you get to send those sold shares back to the book you bought from Melvin to unwind that short. So, the short does still exist, but now it's not visible to outside brokers. Outside brokers, when Ortex calls them up, will say, no no, Melvin covered a bunch today and short interest actually went down! Is that legal? Manipulating report agencies to manipulate the value of a stock? There are multiple Congressmembers interested in this situation. That could be a very dangerous game.
scruple 6y ago
> (1) fund degrossing as the initial driver - already happening I saw a tweet that I cannot find right now, unfortunately. It showed that de-grossing M-W of this week was nearly at the same level as March of 2020.

paulpauper 6y ago

When everyone is convinced X is going to happen, it tends to not happen, or at least not in the way it is expected by the consensus. People said Tesla would crash when Tesla doubled a year ago from $200 to $400, and then to $900, etc., and then it did a 5-1 split, etc. Yes it did crash 20% in August, but from a price that was so high that it was still considerably higher than it was last year when the pundits were warning of a bubble. Few foresaw the S&P 500 would surge 70% off the lows from Covid and make new highs later that year. The pundit consensus what that that it would be a bad, deep, long bear market. Same for the post-Covid tech boom, which few foresaw too. GME is not crashing as everyone is expected it to, even with Robinhood restricting buys. It is up huge today. I think this has a lot more to run, IMHO. More shorts will get squeezed out next week. Like Tesla, GME may not really end badly at all and just keep going up and up. I own some GME and not worried. Yeah, it is not that much of my total net worth, but I have found that heeding warnings of bubbles usually just means selling too soon. If GME does crash, there will be no systemic risk or anything like that. It will be an isolated event.

tootie 6y ago
Completely different. Tesla soared on its positive outlook. They have strong sales and have managed to maintain an insurmountable lead in the EV market. Their surge is due to enthusiasm for their business. Gamestop was clinging to life a few months. The rally from $4 to $15 was optimism about their leadership. The rally from $15 to $350 was 100% due to the short squeeze. And the squeeze will most definitely play out and be over pretty soon.
- smabie 6y ago
  Is your money where your mouth is? Opinions are cheap and if I've learned something in my career as a trader, it's that anything can happen

r00fus 6y ago

GME is worth what a few dozen billion at its current valuation? How would that impact SPX, DJIA, etc.

tootie 6y ago
It's at like $25B last I looked. The market cap of the S&P is $36T. The NYSE manages about $25T. So this is like 0.1%.
yreg 6y ago
If short squeeze happens[0], the shorts will have to buy the shares back at whatever the price will be. If they go bankrupt the responsibility passes to the brokers and further upstream. Of course it might not happen. [0] https://news.ycombinator.com/item?id=25945253 https://news.ycombinator.com/item?id=25945253

cwhiz 6y ago

“Merits” The stock is worth what people think it’s worth. If people keep buying and holding, then it is worth what it is worth.

troupe 6y ago
That might be true in the short term, but can you point to the stock of a company has continued to lose money over decades still maintained a very high stock price?