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Re #3: I held off investing significant money into Bitcoin because I was convinced that the forces of the market would pull it back down to $10 where it belonge
by e79 6y ago
Re #3: I held off investing significant money into Bitcoin because I was convinced that the forces of the market would pull it back down to $10 where it belonged soon enough. I’ve been asking myself ever since why I felt so sure at the time.
As for GME, there’s fundamental analysis and financial experts telling us it is only a matter of time before the price free falls. But there’s a serious behavioral dissymmetry here. The market is rich with GME stock buyers who don’t care to listen to any of these traditional buy/sell signals. I’m not sure you’re wrong, but I’m personally a little bit less certain that the price will drop — at least soon — due to this reason alone. As this article points out, feedback loops can be extremely powerful. And I suspect they can play out over longer periods than we expect.
- cccc4all 6y agoThe GME situation is huge mess created by billionaire vulture short sellers shorting more than 100% of stocks. Thereby, when you buy current GME stock, the stock also has an attached buyer that has to buy that stock back, at ANY price. All you have to do is simply buy and hold the stock, and the price will go up. Traditional buy/sell signals are irrelevant, because of the short seller shenanigans. The short sellers created this perfect trap for themselves, now they are scrambling to get out of using every dirty tricks. The more WSB crowd is aware of this scenario, the more they jump in to the diamond hands philosophy.
- FabHK 6y ago> Thereby, when you buy current GME stock, the stock also has an attached buyer that has to buy that stock back, at ANY price. Yeah, but as I've explained elsewhere: Suppose long interest is 240% and short interest 140% (leaving net supply of 100% shares). Then, even if redditor HODLers hold 99% of actual shares, and won't sell them, it's enough if there is 1% free float, and the 141% remaining longs (who have lent out their shares to the shorts) are happy to sell at the current inflated price. The shorts can then close out their position with 140 of those 141 longs, and then you're left with 99% shares held by redditors, and 1% held by someone else who might want to sell at this point. To squeeze the shorts, you need to control 100% or more of the long interest. I doubt that's the case here.
- cccc4all 6y agoThis post can explain why you only need smaller percentage to squeeze short sellers. https://wallstreetplayboys.com/amc-gamestop-and-nokia-why-it-is-a-huge-deal/ https://wallstreetplayboys.com/amc-gamestop-and-nokia-why-it... The bottom line, everyone knows they can sell to short sellers at ANY price, because the short sellers have to buy at ANY price. Why would anyone sell to short sellers at less than ANY price?
- chii 6y ago> because the short sellers have to buy at ANY price. no they don't. They can bankrupt, and default on their contractual obligations. And if they are smart, what they will do today is setup a structure that protects their existing assets from seizure, and then short GME, and then default if it doesn't turn out well (or gain massive profit if it does fall).
- onedognight 6y agoFrom what I read on WSB (caveat emptor), the broker (JP Morgan) is on the hook if the shorts go bankrupt. JPM needs to prepare for that possibility.
- cccc4all 6y agoThat's the funny thing, that's not what's happening. It would make sense for those companies to declare bankruptcy in these scenarios. Instead, these short seller companies are being propped up by even bigger companies and the entire financial press is pushing FUD propaganda to convince normal people to sell. This has never happened before. Why is this happening the way it has for past week?
- devoutsalsa 6y agoIf the short position’s larger than the float, the squeeze will get sqouze.
- FabHK 6y ago
- deleted 6y ago[deleted]
- FabHK 6y agoYour investment thesis would then be that GME becomes a token of value independent of the underlying business, dividends, and so on. More of a collector's item. Intriguing, and (lamentably) not entirely impossible. But, you know: bubbles do have the habit of bursting.
- throwaway-571 6y agoAren't we in a bubble since march 2020, if not sometime in 2018?
- hahajk 6y agoI guess you have to ask what gives stocks value in the first place... especially tech stocks that don’t issue dividends.
- chii 6y agodividends are irrelevant when valuing a stock - it's the company's earnings (and margins etc), and the future expected earnings that matter.
- shanusmagnus 6y agoUnless there are dividends, all the factors you mentioned are purely symbolic. The fact that this symbolic -> monetary imputation is now the dominant determinant of stock price was the parent's point.
- chii 6y agoit's not symbolic - the value of a company (i.e., their share price, if public) can be exchanged with money by selling the share. This is true regardless of the actual dividend payouts. Irrelevancy of dividends is not the same as not _being able_ to pay dividends. Paying dividends is just one way a company returns profits - but there are plenty of other ways, such as share buy backs, or reinvestments in the company (thus making future returns higher).
- deleted 6y ago[deleted]
- nostrademons 6y agoBitcoin did end up dropping about 80% from its late-2017 high. It took about 10 months, but it bottomed out in the 3000s, down from $17K in Dec 2017. Wouldn't surprise me if GME does the same thing - just the sheer number of shorts will blunt the price declines a bit, as they cover.
- Judgmentality 6y agoYah, but dropping 80% when you've inexplicably climbed 10,000,000% (depending on the timeline) sorta shows that you're anchoring the reality to something that is already incredibly, ridiculously distorted.
- newacct583 6y ago> The market is rich with GME stock buyers who don’t care to listen to any of these traditional buy/sell signals. It is this week. But let's be honest: (1) wallstreetbets isn't a very large community compared with the whole market, or even the capitalization of GME or AMC and (2) these are investors engaged in a fun revolution. This won't stay fun for months. These folks want to trade in those portfolios. And if this doesn't go up any farther (it's been flat at ~$300 since Thursday), how many of those will get bored and sell so they can trade whatever the next meme stock is? Not that many, sure. But enough to push the value down lower, to a threshold where more Robinhood traders decide to get out. And we have exactly the kind of feedback loop described in the linked article. GME is going to fall because there's no reason for GME to stay high. Once the short squeeze is over and the lols play out, it's just another failing company. (And I continue to believe that this is going to turn out to be a big astroturfed scam when this is all said and done and I'm betting a bunch of the early players will turn out to have been executing a pump and dump.)
- AmericanChopper 6y agoGME stock will undoubtedly be carried for some period of time after the squeeze is over (is it already over? I don’t know...) by momentum and hype. But the inevitable outcome is that it crashes, because GameStop fundamentals are simply bad. Bitcoin is a completely different proposition however, because so much of the demand is driven by black market commerce, and other equally inscrutable factors. Both the supply of and demand for Bitcoin are completely volatile. There’s basically no hope of performing a reasonable analysis of where it’s value might be heading.
- dreamcompiler 6y agoBitcoin is not a stock and has no fundamentals; GME does. There's no objective value metric for Bitcoin so it can float freely. But because GME is at least loosely tethered to the value of a real company, I'm confident that will bring the price back to reality.
- anonisko 6y agoOne caveat is that the insane valuation could let the company raise enormous amounts of cash and attract talent. Perhaps enough to revitalize the company into something with a legit growth story. I'd say this is very unlikely, but it's not beyond the realm of possibility that GME becomes like a TSLA or AMZN that is constantly trying to catch up to the absurdly high expectations of investors.
- thaumasiotes 6y agoI don't follow the logic. Bitcoin has no fundamentals, so it can go as high or low as it wants. GameStop has fundamentals. But you're free to ignore them; they're not hurting anything. GameStop has everything Bitcoin has, plus some extra things; it is therefore worth even more than Bitcoin is. Said another way, it is nonsensical to claim that Bitcoin has no fundamentals. If you believe that (1) Bitcoin has "no fundamentals"; and (2) GameStop has fundamentals tethering it to a market capitalization of a few million dollars, what you're actually saying is that Bitcoin has fundamentals tethering it to a market capitalization of zero dollars.
- T-A 6y ago> GameStop has everything Bitcoin has, plus some extra things Including the ability to keep making losses in perpetuity, which would make it worth negative infinity.
- thaumasiotes 6y agoNo, it wouldn't. As a stock owner, fiscal losses by the company named on the certificate don't impact you at all.