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%53, so far. The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite. It's literally ev

%53, so far. The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite. It's literally everything those funds can sell, borrow, and get bailed out to cover their position. My prediction last week was this has system wide implications, and I'm thinking 1. the Fed will intervene, leverage Robinhood's EULA, and buy out everyone's shares at a price that will be profitable but still piss everyone off. 2. the new U.S. administration will use this as leverage for some backburner, discredited radical regulations for things like a financial transaction tax or a tax on assets in custody, but only for retail investors and not their donors, 3. the admin will direct the IRS to prioritize making public examples of new traders who screw up their filings. And that's the optimistic view. The alternative is contagion that takes down Citadel, and causes a lot of institutions to sell otherwise valuable stocks to cover knock-on effect positions, risking things like indexes and pension solvency. Imo, this is a macro level liquidity crisis, and there are some other players who might use the moment as well. E.g. China could dump some of its massive U.S. treasury holdings, ostensibly to hedge dollar devaluation risk, but really it's seizing its moment to cause enough chaos to tip the U.S. into actual domestic chaos while it consolidates its position in Taiwan and Hong Kong. Viewed this way, the Treasury and the administration doesn't really have a choice, assuming they can a) use Robinhood's EULA to sell everyone's shares to the Fed, and b) convince the Fed to provide that liquidity vehicle to unwind this execrably stupid trade. Fanfic? Maybe, but I think the system level risk means the stakes are about opportunities to make moves that upset the global balance of power, and not just a domestic populist issue.

cj 6y ago
> The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite There’s a significant amount of disinformation regarding the 140% figure and what it means in practical terms. I’m curious, do you see a difference between a stock with 99% short interest vs. 101% short interest? If so, what is the difference? (In my mind, there’s no difference - curious if you see it differently)
- imtringued 6y ago
  In the former you can just buy your shares on the open market. In the latter case you need an agreement with the lenders of the shares to remove the doubly lent shares.
mathattack 6y ago
This isn’t that big a deal. LTCM was levered up 100 to 1 when it got bailed out on its 3 billion notional. Bear and Lehman were levered up 30 to 1 on their billions of assets. I don’t see that kind of leverage or counterparts risk here. A hedge fund or two blows up. Maybe they take a small investment bank with them. The system can survive that shock.
- 015a 6y ago
  I agree; its important to keep in mind that GME's total market cap, even after all of this, is only ~$22B. A 140% short position is bad (even if that's the real number, which I doubt), but in the scope of all things, not world-ending. Some hedge funds will die from this, and we'll probably have a few weeks of overall market downturn similar to last year, but we're not talking about "the entire US real estate market" here. The US government could buy the entirety of GameStop at 3x its current price and it would barely quality for a line on the annual budget report.
  - motohagiography 6y ago
    Indeed, I'm saying it's not the cost of if they do a bailout, it's the cost if they don't. Maybe I've overestimated the impact of a ~13bn fund evaporating and breaking a clearing house and the liquidity crunch from all their leverage and the linked derivatives. Not sure what hedge fund leverage is these days. Surely it can't be at 2008 levels. We know about Melvin, not sure about others in there. As I interpret it, it's not clear what institutions have exposure to these at-risk funds and their leverage who are still short GME, and this is what causes liquidity problems. Not 2008 level, but could be Fed intervention level. The admin can bail out those funds for a trivial line item by taking on the RH user shares. If they don't intervene, I'm suggesting this is the domino for a crunch.
    - mathattack 6y ago
      The Fed won’t step in if it’s 15 billion of one way bets. They care when the bets are leveraged and there’s a trillion dollar counterparty problem.
RivieraKid 6y ago
"True" short interest is much lower - 55% - if you take into account that shorting creates new virtual shares. It's like fractional reserve banking. https://twitter.com/ihors3/status/1355969693841051650?s=19 https://twitter.com/ihors3/status/1355969693841051650?s=19
tpmx 6y ago
> %53 What's with that weird way of writing a percentage numeric? Some weird "i'm an insider, trust me" signalling?
- gambiting 6y ago
  In some languages you put the percentage sign at the front - like, in Turkish for instance[0]. I mean, it's not that weird. It's how currency symbols move to either front or behind of a number. Why is it $300 but 300zł? [0] https://forum.wordreference.com/threads/percent-sign-position.2321266/ https://forum.wordreference.com/threads/percent-sign-positio...
  - PurpleFoxy 6y ago
    It’s generally said that the dollar sign is in front to stop people adding extra numbers to written cheques. Since the end of the number is finished with .00 and the start is $ there is no room to add anything extra.
    - Izkata 6y ago
      All the checks I've seen have a box for the number and the $ printed outside the box. There wouldn't be room even if there was no $. Also that's why the amount is written in words below it, a double-entry to prevent one of the two locations from being modified.
  - kps 6y ago
    Does Turkish say “out of ten, four” rather than “four out of ten”?
- aerovistae 6y ago
  Wow.
  - tpmx 6y ago
    Wow what? Yes, I wrote that people here tend to speak English rather than Turkish in this forum. Horrible me.
deleted 6y ago
[deleted]
Uehreka 6y ago
I’m far from an expert in this, but this seems wrong. My understanding is that even though shorts can in theory have “infinite downside”, in practice the short-sellers have to bail if they can’t post enough collateral to buy back the stock. And the 140% isn’t some “impossible fraction” thing, it just means that if there were 10 million shares before, well then now there are technically 24 million, and the short-sellers will need to buy back the “extra” 14 million in order to exit all their positions (not 100% sure if I got that right). I get that the Redditors are doing something funky and unusual here, but whenever I see people talking about this being some sort of “buffer overflow! Game over, Man!” scenario, I get pretty skeptical. If markets survived April’s negative oil prices and the weirdness that entailed, I’m pretty sure they can survive a brief increase in the price of a small mall retailer’s stock.
- addandsubtract 6y ago
  Aren't 140% of 10 million shares 14 million?
  - Uehreka 6y ago
    So, my layman’s understanding is that if there are 10 million shares, and you borrow 1 million of them (a 10% short position) from their owners, then sell them to new owners, both the old owners and new owners count as owning stock, and so 11 million shares “are owned”. My understanding is that then when the end of the quarter comes around, the owners of all 11 million shares are owed dividends. 10 million of those receive a dividend from the company, and the short seller has to pay a dividend to the people they borrowed from. So in a very real sense, it is as if 11 million shares are owned. To expand: if there were 10 million shares, you borrowed all of them, and sold all of them, you would have a 100% short position and 20 million shares would be “owned” by various people. If you then went to the owners of 4 million of the freshly sold shares and borrowed from them and re-sold the shares... now you have a 140% short position and 24 million shares “exist”. 10 million of them are “real shares” and 14 million are “obligations” that you’ll have to fulfill at the end of each quarter. My understanding (again, almost entirely from reading Matt Levine columns) is that this is a thing you can do if you’re really cheeky, you’d just need a mountain of collateral and balls of steel.
PragmaticPulp 6y ago
> The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite. No, this is misinformation. When someone shorts a stock, they create a synthetic long. 113% short interest translates to about 53% short when you include the synthetic longs. S3 Partners includes this info: https://twitter.com/ihors3/status/1355249817048522755 https://twitter.com/ihors3/status/1355249817048522755 WSB is all about pumping stock, so they've been perpetuating this myth that anything over 100% short interest results in an impossible position to cover, which isn't true at all. The number of Redditors buying into this trade with the belief that the stock must go to infinity if they all have "diamond hands" is terrifying at this point.

cj 6y ago

> The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite There’s a significant amount of disinformation regarding the 140% figure and what it means in practical terms. I’m curious, do you see a difference between a stock with 99% short interest vs. 101% short interest? If so, what is the difference? (In my mind, there’s no difference - curious if you see it differently)

imtringued 6y ago
In the former you can just buy your shares on the open market. In the latter case you need an agreement with the lenders of the shares to remove the doubly lent shares.

mathattack 6y ago

This isn’t that big a deal. LTCM was levered up 100 to 1 when it got bailed out on its 3 billion notional. Bear and Lehman were levered up 30 to 1 on their billions of assets. I don’t see that kind of leverage or counterparts risk here. A hedge fund or two blows up. Maybe they take a small investment bank with them. The system can survive that shock.

015a 6y ago
I agree; its important to keep in mind that GME's total market cap, even after all of this, is only ~$22B. A 140% short position is bad (even if that's the real number, which I doubt), but in the scope of all things, not world-ending. Some hedge funds will die from this, and we'll probably have a few weeks of overall market downturn similar to last year, but we're not talking about "the entire US real estate market" here. The US government could buy the entirety of GameStop at 3x its current price and it would barely quality for a line on the annual budget report.
- motohagiography 6y ago
  Indeed, I'm saying it's not the cost of if they do a bailout, it's the cost if they don't. Maybe I've overestimated the impact of a ~13bn fund evaporating and breaking a clearing house and the liquidity crunch from all their leverage and the linked derivatives. Not sure what hedge fund leverage is these days. Surely it can't be at 2008 levels. We know about Melvin, not sure about others in there. As I interpret it, it's not clear what institutions have exposure to these at-risk funds and their leverage who are still short GME, and this is what causes liquidity problems. Not 2008 level, but could be Fed intervention level. The admin can bail out those funds for a trivial line item by taking on the RH user shares. If they don't intervene, I'm suggesting this is the domino for a crunch.
  - mathattack 6y ago
    The Fed won’t step in if it’s 15 billion of one way bets. They care when the bets are leveraged and there’s a trillion dollar counterparty problem.

RivieraKid 6y ago

"True" short interest is much lower - 55% - if you take into account that shorting creates new virtual shares. It's like fractional reserve banking. https://twitter.com/ihors3/status/1355969693841051650?s=19 https://twitter.com/ihors3/status/1355969693841051650?s=19

tpmx 6y ago

> %53 What's with that weird way of writing a percentage numeric? Some weird "i'm an insider, trust me" signalling?

gambiting 6y ago
In some languages you put the percentage sign at the front - like, in Turkish for instance[0]. I mean, it's not that weird. It's how currency symbols move to either front or behind of a number. Why is it $300 but 300zł? [0] https://forum.wordreference.com/threads/percent-sign-position.2321266/ https://forum.wordreference.com/threads/percent-sign-positio...
- PurpleFoxy 6y ago
  It’s generally said that the dollar sign is in front to stop people adding extra numbers to written cheques. Since the end of the number is finished with .00 and the start is $ there is no room to add anything extra.
  - Izkata 6y ago
    All the checks I've seen have a box for the number and the $ printed outside the box. There wouldn't be room even if there was no $. Also that's why the amount is written in words below it, a double-entry to prevent one of the two locations from being modified.
- kps 6y ago
  Does Turkish say “out of ten, four” rather than “four out of ten”?
aerovistae 6y ago
Wow.
- tpmx 6y ago
  Wow what? Yes, I wrote that people here tend to speak English rather than Turkish in this forum. Horrible me.

deleted 6y ago

[deleted]

Uehreka 6y ago

I’m far from an expert in this, but this seems wrong. My understanding is that even though shorts can in theory have “infinite downside”, in practice the short-sellers have to bail if they can’t post enough collateral to buy back the stock. And the 140% isn’t some “impossible fraction” thing, it just means that if there were 10 million shares before, well then now there are technically 24 million, and the short-sellers will need to buy back the “extra” 14 million in order to exit all their positions (not 100% sure if I got that right). I get that the Redditors are doing something funky and unusual here, but whenever I see people talking about this being some sort of “buffer overflow! Game over, Man!” scenario, I get pretty skeptical. If markets survived April’s negative oil prices and the weirdness that entailed, I’m pretty sure they can survive a brief increase in the price of a small mall retailer’s stock.

addandsubtract 6y ago
Aren't 140% of 10 million shares 14 million?
- Uehreka 6y ago
  So, my layman’s understanding is that if there are 10 million shares, and you borrow 1 million of them (a 10% short position) from their owners, then sell them to new owners, both the old owners and new owners count as owning stock, and so 11 million shares “are owned”. My understanding is that then when the end of the quarter comes around, the owners of all 11 million shares are owed dividends. 10 million of those receive a dividend from the company, and the short seller has to pay a dividend to the people they borrowed from. So in a very real sense, it is as if 11 million shares are owned. To expand: if there were 10 million shares, you borrowed all of them, and sold all of them, you would have a 100% short position and 20 million shares would be “owned” by various people. If you then went to the owners of 4 million of the freshly sold shares and borrowed from them and re-sold the shares... now you have a 140% short position and 24 million shares “exist”. 10 million of them are “real shares” and 14 million are “obligations” that you’ll have to fulfill at the end of each quarter. My understanding (again, almost entirely from reading Matt Levine columns) is that this is a thing you can do if you’re really cheeky, you’d just need a mountain of collateral and balls of steel.

PragmaticPulp 6y ago

> The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite. No, this is misinformation. When someone shorts a stock, they create a synthetic long. 113% short interest translates to about 53% short when you include the synthetic longs. S3 Partners includes this info: https://twitter.com/ihors3/status/1355249817048522755 https://twitter.com/ihors3/status/1355249817048522755 WSB is all about pumping stock, so they've been perpetuating this myth that anything over 100% short interest results in an impossible position to cover, which isn't true at all. The number of Redditors buying into this trade with the belief that the stock must go to infinity if they all have "diamond hands" is terrifying at this point.