24 ms·

It Feels Like the Game Is Rigged

161 points by aloukissas 6y ago

xeeeeeeeeeeenu 6y ago
>Everyone from Ted Cruz to AOC to Aaron Rodgers sided with Main Street against Wall Street. Apart from the media, of course. For example, Newsweek is calling GME investors "far-right extremists"[1] while The Washington Post is comparing the situation to the Capitol riots[2]. [1] - https://www.newsweek.com/far-right-extremists-use-gamestop-chaos-radicalize-recruit-telegram-1565355 https://www.newsweek.com/far-right-extremists-use-gamestop-c... [2] - https://www.washingtonpost.com/opinions/2021/01/30/good-guys-gamestop-story-its-hedge-funds-short-sellers/ https://www.washingtonpost.com/opinions/2021/01/30/good-guys...
- freefal 6y ago
  The Post article is an op-ed, not something written by the editorial board. I’d prefer that newspapers feel free to publish a wide range of views without readers ascribing those views to the paper (I.e., the newsroom or editorial board).
  - harry8 6y ago
    >free to publish a wide range of views... Sure. But it's under their banner. They edit the op ed and can demand unsubstantiated claims be substantiated or removed. Otherwise it really is no better than done racist blog. A case that can't be made without facts that can't be stood up shouldn't be made in any newspaper that values it's reputation.
- ignoranceprior 6y ago
  Your summary of the Newsweek article is pretty misleading. They're not accusing r/WSB or GME investors as a whole of being far-right extremists (which would be false), they're referring to actual alt-righters talking about GME.
  - mixedCase 6y ago
    Correct, they're opting for a guilt by association approach, if you can even call it that. Nefarious "journalism" nonetheless.
- sn41 6y ago
  Why "sticking to the man" resonates with me, and why I took pleasure in this incident is because students from the mid-2000s realize that hedge fund managers for the most part are not as smart as they think they are. Their bungling significantly set back the dreams of several students of my generation. I am not far right by any means, just was far gone and sad for 2010-2015. I suspect that the truth is closer to "Wall Street" than we care to admit. Insider information is still the key, not stochastic differential equations, Ito's formula and portfolio balance theories. Melvin putting all their leveraged eggs in one basket is considered above board, and is not being questioned.
  - Tarq0n 6y ago
    If insider information really is key you should able to easily provide evidence for that claim. The market moving before news is announced is something that the SEC monitors and has consequences when it happens.
    - hi5eyes 6y ago
      Everyone’s seen the “consequences” like the ones Elon Musk faced after tweeting “funding secured”
    - sn41 6y ago
      "Easily" is a subjective claim. You can read the congressional testimony of Harry Markopolos from the Madoff scandal, where he explicitly says that SEC is hobbled because regulators do not have the werewithal to attend these hob-nobbing conferences. I am not in the finance industry, so my sources can only be public documents. https://www.fraud-magazine.com/article.aspx?id=313 https://www.fraud-magazine.com/article.aspx?id=313
    - deleted 6y ago
      [deleted]
  - smabie 6y ago
    Yeah I think a lot of hedge funds are run by idiots. Market making firms however, they are the true stars. There are also some really good hedge funds: RenTec, Millennium, 2 Sigma, etc. A lot of hedge funds are dinosaurs and are slowly going extinct. Even in the last 5 years there has been a big shift: investors really prefer systematic firms and raising money for a discretionary fund gets harder and harder every day. I do not believe insider information is key. If it was, hedge fund risk adjusted returns would probably be less abysmal. It's not that straightforward to evaluate hf performance, but trust me when I say, there a lot of funds out there providing very dubious value to investors.
- solipsism 6y ago
  People really don't seem to understand the concept of the op-ed. Maybe publications need to do a better job of making the distinction clear. For reference, this is from an article from the newsroom: But of course, what the Reddit cabal did to inflate the stock of bygone-era companies like GameStop, AMC Entertainment and Bed Bath & Beyond simply mirrored what the hedge fund sharpies had done in conspiring to “short” those same stocks and drive down the prices https://www.washingtonpost.com/business/2021/01/30/financial-regulations-wall-street-sec-gamestop/ https://www.washingtonpost.com/business/2021/01/30/financial...
  - goatinaboat 6y ago
    People really don't seem to understand the concept of the op-ed. Maybe publications need to do a better job of making the distinction clear. The concept is for the editor or owner to be able publish something with plausible deniability.
- hintymad 6y ago
  The media’s behavior is why I became cynical about the system: moralize everything for no particular facts. You don’t like someone, label that person far-right. This is how transparency is lost. With transparency gone, so is trust. And we stopped the trade for your own good. Yeah, right.
- Benjammer 6y ago
  Jimmy Kimmel said "and maybe even some Russian Disruptors," for no apparent reason in his opening monologue talking about the people buying $GME last week.
  - flycaliguy 6y ago
    I think unfortunately the reason is apparent, filling out a monologue.
  - prepend 6y ago
    I think the problem is that anyone who likes money is now in on GME. Probably some Russian Disrupters too, but not sure why that would be joke worthy unless there’s some other detail (eg, disrupters are realizing 90% of gains or something). Personally, I think this is a smokescreen for a pretty smart invested group. I hope we eventually learn who did it just to satisfy my curiosity. If they are dumb, we will. If they are successful, we never will as the technique is too useful to use again.
- fourstar 6y ago
  All the focus on racism and divisiveness within the media (all the woke sjw BS) really started around after occupy Wall Street. Now why would they want that to happen? So maybe we fight with each other instead of with them and their profits?
- mikeyouse 6y ago
  Ted Cruz is literally married to a Managing Director at Goldman Sachs - if people think his sanctimonious Tweets were a principled stance “against Wall St” then we’re in worse shape than I thought.
  - deleted 6y ago
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- Aunche 6y ago
  Of course politicians will rally behind the populist narrative. They don't care that regular people are throwing away their money buying into conspiracy theories.
- hn_throwaway_99 6y ago
  One of the things I really appreciate about HN is its ability to get beyond "sound-bite arguments" to really get to a deeper understanding of what can be complicated arguments. Which is why I really disliked your comment, because your primary sentence includes two lies where you take some words out of context, but hey it must be true because you provided links. 1. Going to your own link, Newsweek did not call "GME investors "far-right extremists"". The article clearly states that far-right extremists were instead using the "stick-it-to-the-man" ethos driving a lot of the GME investor chatter to recruit. There is a huge difference. 2. As other's have pointed out, WaPo published an Op Ed, this was not something under their Editorial Board or a news article. Saying "The Washington Post is comparing the situation to the Capitol riots" is deliberately misleading.
  - clarifier123 6y ago
    >1. Going to your own link, Newsweek did not call "GME investors "far-right extremists"". The article clearly states that far-right extremists were instead using the "stick-it-to-the-man" ethos driving a lot of the GME investor chatter to recruit. There is a huge difference. The point of the article is to associate WSB with far-right extremists. It's a common manipulation tactic, they're making them seem guilty by association. >As other's have pointed out, WaPo published an Op Ed, this was not something under their Editorial Board or a news article. Saying "The Washington Post is comparing the situation to the Capitol riots" is deliberately misleading. People often say that "op-eds don't represent the official opinion of the paper", but it's provably false. There's no shortage of people who are willing to write pro-Trump op-eds, after all, almost half of the country voted for him. How come they aren't getting published in NYT, WaPo etc.? Because publishing an op-ed is a soft endorsement. It doesn't necessarily mean that they 100% agree with it, but it definitely means that they consider the opinion "acceptable".
  - prepend 6y ago
    > 1. Going to your own link, Newsweek did not call "GME investors "far-right extremists"". The article clearly states that far-right extremists were instead using the "stick-it-to-the-man" ethos driving a lot of the GME investor chatter to recruit. There is a huge difference. Yes, but no. It’s called throwing shade and while it is very different from actually showing evidence on a subject and making a claim, it is intended to link the ideas in the readers mind. In middle school it would go like “I’m not saying hn_throwaway is a slut, but I did see her watching Harry Potter and also saw three other boys who say they like her at the theater that weekend.” Both statements are true, but without some other fact they don’t matter so the only reason to mention them is to make a claim without evidence. Especially since I explicitly said I’m not calling you a slut. The article linked does not act responsibly by mentioning these facts in the same article without some link. I think it’s mostly last journalism coupled with trying to click-bait get eyeballs for ads. I too like HN for our attempted critical thinking, and I like that people keep busting through different theories and trying to get to the source of truth.
timoth3y 6y ago
Thanks for that. It's nice to see a calm perspective on GME. Of course, he doesn't try to get to the bottom of a lot of the questions that really do need to be answered, but a good perspective on what it means for "the rest of us."
DethNinja 6y ago
Did people had faith in financial institutions after 2008 crash anyway, if so who are those people? I feel like huge majority of the people already know that system is rigged but what can they do? Most of them got very limited options against the system.
- iterator5 6y ago
  I feel like the overwhelming majority of people believe that the system is fair and their shot at being a billionaire is just over the next hill.
  - deleted 6y ago
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kenneth 6y ago
Institutional traders (hedge fund, i-banks, prop traders, hft) have the advantage of deep pockets and the financial literacy to be able to execute strategies which create easy returns. Many of these strategies are easily scalable to turn a small edge into a big one, using leverage. Oftentimes these strategies have an asymmetric risk profile, with low probability of losing a lot of money (sometimes with unlimited downside potential), for example: - writing out of the money options for the premiums - shorting stocks with leverage - '08s frenzy of selling credit default swaps - forex trading with spreads so low that they take 100x+ leverage Usually, when these strategies work, it's easy money and they get addicted to the easy returns. They scale the strategies up to a level of risk they can't handle. Like having 140% short interest relative to GME's float. When these strategies blow up in their faces, it wipes them out completely, to the level of requiring bailouts. Main street (retail investors, taxpayers) have had enough of this, and a lot of anger is directed at institutional investors for always getting the easy money and the bailouts at their expense. They want to see the game applied fairly, such that when the bets go sour, they go bankrupt and don't get bailed out like in 2008. In the 2015 CHF forex crisis, many brokers went bankrupt overnight. That's what should happen to Melvin, and to anyone who takes the stupid risky bets that don't work out.
- Tarq0n 6y ago
  Bailouts go to banks because the government is on the hook for insuring cash deposits anyway. Do you have any examples of hedge funds being bailed out?
  - tonfa 6y ago
    I think Bear Stearns might count for some people. (tho was more about buying the good assets to avoid adding even more fire to the crisis, I think investors were mostly wiped out)
  - deleted 6y ago
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  - hn_throwaway_99 6y ago
    The 98 bailout of Long Term Capital Management was pretty legendary - there were books about it: https://en.wikipedia.org/wiki/Long-Term_Capital_Management#1998_bailout https://en.wikipedia.org/wiki/Long-Term_Capital_Management#1... Now, granted, public funds weren't used for the bailout, in this case it was more the Fed organizing private banks for the bailout. Also, the investors in LTCM still lost a ton of money. But LTCM is still a great prototypical example of "vacuuming up nickels in front of a steamroller", i.e. these traders can take these positions (LTCM was focused on merger arbitrage IIRC) that seem like a license to print money, except they invariably can lead to some giant risk blowup. And when they fail, they have a knack for taking down the whole financial system with them so the government has to get involved (even if it is just cajoling other bankers in a room) to bail them out.
noisy_boy 6y ago
> And the fact that Janet Yellen, the new Treasury Secretary, got paid hundreds of thousands of dollars in speaking fees from Citadel doesn’t help either. I think there is an opportunity for a service that allows the logistics of ordering/distributing large quantities of books written by such people that can be used by banks/funds for distribution to their employees and such to avoid the bad-light of direct speaking fees. Order the books, target gets paid (the cut the publisher takes can be considered an acceptable collateral cost of avoiding the exposure) and everyone looks nice - "we were just sharing knowledge - books are good!". Best part is, some people might actually read the books.
smabie 6y ago
The quote from that caller is pretty amazing. There are just so many things wrong his statement that it's hard to even know where to start. 1. A 7% weekly loss isn't really anything that a buy and hold investor should be worried out. Yes losing money sucks, but are you really so afraid of volatility you would rather earn practically nothing from 3 month T-bills? 2. It's super easy to call shorting GME risky after the fact.It's incredible what people call "obvious" and "risky" once a particular situation has blown up. Captain Hindsight strikes again. 3. He claims he is worried about "market manipulation", but I doubt he would be complaining or have his faith shaken in the markets if he just realized a 7% gain this week. This guy is looking to blame someone and hedge funds are a convenient populist target. On an aside, it seems the market can't ever get a break. If it crashes and unemployment skyrockets, it was due to some fat cats gambling. If the market skyrockets and unemployment is high, now the fat cats are making money off the backs of everyone else. If the market skyrockets and unemployment is low, well, everyone isn't sharing in the gains equally. Give me a break.
- fortran77 6y ago
  Also if someone "came into money" and the market is at an all-time-high (during a pandemic, no less!) why not roll it into the stock market over a one- or two-year period? Same dollar amount each month for two years.
  - squeaky-clean 6y ago
    Research generally shows that if you have a lump sum of cash, it's better to invest it all at once rather than average it out. https://investor.vanguard.com/investing/online-trading/invest-lump-sum https://investor.vanguard.com/investing/online-trading/inves... Time in the market > Timing the market, and all that jazz.
    - dnautics 6y ago
      yeah but cost averaging is often a psychological technique. It's easier to commit yourself to cost average than it is to commit yourself to a lump sum investment.
danfang 6y ago
All these traders are playing in a casino. Yes, the casino favors the house. Yes, people have figured out how to make big bucks by counting cards. The rules will probably change so the house keeps on winning. To me, all this indicates that the only way to win is to not play. Passively investing in the market as a whole is the only way to win long term. Disclosure: I work at a robo-advisor specializing in long term passive investing. My views are my own, and in no way associated with the views of my employer. This is not investment advice.
- smabie 6y ago
  Which market? What country? What assets? Are you allocating money to Pokémon cards? Why or why not? PS: all investing is active management. full stop.
  - curtis3389 6y ago
    Funny enough, I overheard a comic shop owner today saying he has $180k in 9 pokemon cards he had rated, and some of them are only rated 5/10. The return on investment there leaves me at a loss for words.
  - danfang 6y ago
    I'm thinking of a globally diversified portfolio of index funds based on modern portfolio theory. You can read about the investment strategy, but basically it comes down to risk adjusted returns over long periods of time. It will become abundantly clear why Pokemon cards are not part of that strategy. We probably have different definitions of active investing. I take my definition from Wikipedia: https://en.wikipedia.org/wiki/Active_management https://en.wikipedia.org/wiki/Active_management In my mind, another way to divide the two is about assumptions about efficiency. Passive investors assume that the market is generally efficient, and do not try to exploit inefficiencies to generate returns. Active investors generate returns from perceived inefficiencies (information asymmetry, etc).
    - salawat 6y ago
      That's exactly the opposite of not playing. Your money is still in and propping up the misbehavior in the system. You must take responsibility for what and who gets empowered by your hard earned wealth. There is no other way around it.and a single datapoint leaving the system won't fix it. It needs to be a collective action. Sadly, (and I hope I am proven wrong) we aren't so great at that.
consider_the 6y ago
bitcoin
AI_WAIFU 6y ago
This is one of those cases where the game was definitely rigged, even though no one intentionally rigged it. Every actor in the chain was following their own self interest, but at the end of the day, the guys who got cutoff at the knees during the 11th hour were the retail investors and r/wsb. I don't think this was a coincidence, but rather a special case of more general rich-get-richer dynamics that we see everywhere in society.
MisterBastahrd 6y ago
Know what bugged me the entire time through all of this? The big money guys on the big money shows kept referring to themselves as "the investor class." As if by the very nature of their jobs, they were set aside above and apart from those of us who have to earn our livings by doing useful things. I'd love to know how much of the brainpower in the US is set aside for the purpose of doing nothing more than extracting wealth from the markets. Additionally, I've long held the opinion that if your primary method of earning a living is by extracting wealth from the market, then your "capital gains" are just a fancy way of earning a living and you should be taxed at the exact same rate that everyone else is. You don't deserve to pay half the taxes just because your earnings are derived from stocks.
- Animats 6y ago
  And maybe it's time to have a tax on financial transactions. The EU is looking at that again. It's called a "Tobin tax". Not much, a fraction of a percent, but on every trade.
  - smabie 6y ago
    A fraction of a percent is yuuuge. Entire categories of liquidity providers can be wiped out with taxes on trades as "low" as 0.05% Not sure what people have against trading or why I should be taxed on buying or selling shares, but the government likes to capture money and spend it on weapons, so I suppose it isn't surprising the idea is being floated.
    - Bakary 6y ago
      The possibility of getting wealthy this way is only available because there is a stable society to skim off of, and that is in turn the result of the collective work of millions. Trading does not create wealth but shifts it around, so why shouldn't it be taxed?
  - goatinaboat 6y ago
    And maybe it's time to have a tax on financial transactions. The EU is looking at that again. It's called a "Tobin tax" I don’t mean to sound harsh but you are financially illiterate if you don’t know this already exists. Have a read of https://www.gov.uk/tax-buy-shares https://www.gov.uk/tax-buy-shares By the way Tobin no longer advocates for a Tobin tax.
darkerside 6y ago
If you are scared out of the market by a little ripple like this, investing in equities may not be a good fit, behaviorially. If you are thinking about taking it out now, are you really sure you'll be able to stay in when the market drops 40%? If not, better to cut your losses now, reduce your equity holdings, and probably find someone to manage your money for you. I self manage for the most part, but I also have at least some discipline and an awareness that the market could drop at any given time. It's only over the 5 year plus time horizon that I actually expect to make money.
Animats 6y ago
Hedge funds, as a class, underperform the Dow. Hedge fund managers, as a class, do very, very well. "Except Japan", the author puts in a footnote. The stock market in Japan peaked in 1990 and never came back. The Nikkei peaked at 19590 and is now at 1740. Could that happen to the US?
- smabie 6y ago
  1. dow is irrelevant, you should ignore it 2. it's not so easy to determine whether a fund is providing value, you can't just look at returns. The math is more complex than that.
- noisy_boy 6y ago
  This is what I too fear when I hear the ever-lasting optimism of long term investing. Could this become a common reality sometime in future? If yes, maybe the other advise about diversifying (real-estate/precious metals etc) isn't so bad.
  - Animats 6y ago
    In Japan, real estate tanked, too. Once the population starts to decline, real estate drops.
    - Clewza313 6y ago
      Fortunately Biden's liberal immigration policy and plan to do another $2T of "money printer go brrrr" should prop up both real estate and stocks nicely.
    - noisy_boy 6y ago
      Seems to me that that's a typical Japanese/Singaporean/Scandinavian problem - if it manifests in other places due to rising quality of living and high societal costs associated with offspring, I'll probably have a different set of worries.
      - piva00 6y ago
yongjik 6y ago
From the letter quoted in the article: > Seeing my wife lose money as a result of the hedge funds foolish shorts and inability to adapt to a new wave of social media – as well as the frightening thought the trading can be halted at any time as the brokerages see fit – has caused me to become extremely disheartened toward investing in the future. Just checked, and after all these shenanigans, S&P 500 was set back to... where it was one month ago. This actually sounds like a strong evidence in favor of index funds plus long-term investing.
- hn_throwaway_99 6y ago
  Exactly - if you're concerned about long term investing because of the relatively small recent drawdown in the S&P, you really need to re-educate yourself about what long term investing means.
deleted 6y ago
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benlivengood 6y ago
The advice just falls flat for me. Honestly, if the only winning move is to invest for the long term then why even bother with capital markets at all? Sounds like a waste of time when what we really want is for people to own the means of production. Dump 100% of federal tax revenue into index funds and let it grow faster than the interest on T-bills issued for expenditures. Churn for ~50 years and start paying UBI from the massive profits. Would the government even need to pay interest on the T-bills in USD? Why not just issue more T-bills as interest because after all the long term pretty much guarantees the government would be swimming in cash in 50 years and have no trouble repaying it all. Incidentally the federal government would also become the majority shareholder of every company in the world. If the market can magically let everyone with enough money invested in their youth retire happily then it follows that letting the government own all the stocks and issue UBI would result in roughly the same outcome.
- sombremesa 6y ago
  > Dump 100% of federal tax revenue into index funds and let it grow faster than the interest on T-bills issued for expenditures. I don't come to HN for comic relief, but there it is.
- teraku 6y ago
  Few things to unpack here. >Honestly, if the only winning move is to invest for the long term then why even bother with capital markets at all Because they are gamblers, that's why. Most (reasonable) people only invest long-term. >Sounds like a waste of time when what we really want is for people to own the means of production. Yup. >Dump 100% of federal tax revenue into index funds and let it grow faster than the interest on T-bills issued for expenditures. Churn for ~50 years and start paying UBI from the massive profits. Tax revenue is not 'profit' by the state. That's not how tax nor money issuing works. But to the topic at hand: There are countries that put money into investment funds that will invest into infrastructure and safe long-term assets. But usually not for UBI, but for retirements (e.g. Denmark). >If the market can magically let everyone with enough money invested in their youth retire happily then it follows that letting the government own all the stocks and issue UBI would result in roughly the same outcome. Generally the idea of not having to work at all is still heavily controversial within science. Some believe in UBI, some in job-guarantees and others just in relatively high minimum wage and very strong retirement plans.
Gatsky 6y ago
On the most basic level we don't actually know who is buying and selling Gamestop stock. The narrative that the little people have taken down the elites may in fact be mostly false. Matt Levine talks about this in his latest column [1]. The restrictions imposed by RH didn't necessarily stop the buying. [1] https://www.bloomberg.com/opinion/articles/2021-01-29/reddit-traders-on-robinhood-are-on-both-sides-of-gamestop https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...
gorgoiler 6y ago
Where is the evidence that “nontraditional investors beat the crap out of hedge fund speculators at their own game” or that “hedge funds pressured the brokerages to disallow new stock purchases of GameStop”? This is the narrative, for sure, but how is this anything more than conjecture? Have the hedge funds publicly said “you got us!”, and even then why should we believe them? The story is fuelled by a subreddit and celebrity hot takes on Twitter. The news coverage I might actually trust also happens to be extremely weak — it’s all on the periphery rather than at the center of the story and I’m deeply skeptical anyone knows what’s actually going on. Why should they? Without a leak from an institution that’s how it should be when private entities trade on a public market. I have seen the mansplaining of what a short position is or what a short squeeze is or how someone can be 150% over shorted — originally 138%, then inflated to 140% for impact, then inflated again. The explanations aren’t wrong but knowing the mechanics of a theory doesn’t differentiate between an internet fantasy and the real world. That kind of self-fulfilling logic is one step away from the world of conspiracy theories. As I’ve said before, on the face of it this just looks a lot like some folks pumping a cheap stock. Potentially the first round of these had good reason to — the actual squeeze — but now the second, third, fourth and upcoming fifth daily cycles are pumping it for the sole reason because the last one did and we need an exit. It could well by pyramid shaped — I’d put money on it if I were you.
- MattGaiser 6y ago
  They are deep into conspiracy theories over on /r/wsb
- hbosch 6y ago
  > It could well by pyramid shaped — I’d put money on it. A 01/21 300P on GME is roughly 25,000 right now, for a single contract. If you’ve got the cash, it’s almost certainly free money. Right?
  - gorgoiler 6y ago
    Hah. My original already quite ironic final words were “I’d put money on it”. I have edited to further emphasise my point.
jb775 6y ago
If the SEC or any government agency steps in to help Wall St hedge funds at the expense of $GME shareholders, I wouldn't be the least bit surprised to see the entire millennial generation revolt against the current financial system. They could easily trigger it by a crowdsourced agreement to liquidate 401k's and all stock holdings. If we see any govt agency step in, I'd imagine them trying to pity sell us on lost teacher pensions, etc being managed by the hedge funds...but they'll leave out the part that says those teacher pensions have been financially weaponized against average investors for years.
- SpicyLemonZest 6y ago
  The vast majority of GME shares are held by large financial institutions and mutual funds, so theories about government favoritism toward big money just don’t make a ton of sense here. Whatever the SEC ends up doing here, we can be virtually certain they did not strike a corrupt deal with Melvin Capital against Fidelity and Blackrock.
- OscarCunningham 6y ago
  The hedge funds involved here aren't structurally important. They're not going to get a bailout.
anonu 6y ago
I've said it many many times on HN and elsewhere. It wont be popular to say this again now - but I dont care: Trading stocks on RH is gambling - it is no better than trading in a casino. The SEC should step in and regulate them like a casino, in the name of investor protection (aka NOT day-trader protection) RH is the social media of trading. Its all about the quick hit of dopamine via a mobile-first experience. Any conceptual inkling of educating their customers around long term investing is out the window. Why? Because thats not their business model. They profit when you trade a lot because they get paid by HFT. So investing is not in their mantra. Only ridiculous day trading as we have now. This isn't a story about market stability, price formation, RegNMS, margins, collateral. Thats all a distraction. This story is about the "autists" at r/wsb sticking it to wall street. Which is fine, its all good and entertaining. But random punting isn't going to create wealth.
loosetypes 6y ago
I recently learned the term OPM (other peoples’ money). As in, it’s preferable to invest OPM. Could that be the definition of a hedge fund? And in that regard, it’s basically the opposite of the ideals many of us are intimately familiar with - such as having “skin in the game”. To share in winnings yet be insulated from losses must change one’s incentives and potentially reframe what “risky” means in practice.
tempsy 6y ago
isn’t the “rigging” mostly a function of the Federal Reserve’s money printer? seems odd to argue it isn’t rigged by showing stocks always go up.
gher-shyu3i 6y ago
The game is not just rigged, it's fundamentally broken. Parasitic practices such as lending money with interest and shorting are the basis of the modern economic system. Practices that we've known for literally over 1400 years to be bad, yet we continue to engage in them, then cry when things go south. If we want a proper economic system, we should have proper fundamentals. Ban shorting, ban interest, ban packaging debt and selling it in packages, etc. encourage proper investments (not casino gamblings) and things will improve drastically.
syntaxing 6y ago
I'm not going to lie, the idea of the 401K kinda scares me now. We were always told to keep it safe, invest in index fund, let compound interests do its thing with your pretax money. But during the financial crisis, most "commoners" took a heavy hit that took a very long time to recover and it felt like we were the last on the priority list to recover and the WSB saga really shows how unfair it is. But my big question is what is the alternative? Real estate?
ineptech 6y ago
> I understand that it feels like the odds are stacked against you. But I’m asking you to please reconsider... [ followed by table of great S&P outcomes ] I think the author misunderstands the threat here, and it's much graver than they think. Remember the U2 album Apple pushed to everybody's iphones? Same thing here. What happened last week is the cracks showing, people being forcibly reminded that they are not in control. In Apple's case it was iphone owners being jolted out of the pleasant fantasy that their phone is a little piece of territory they alone control. In GME's case, it's people thinking of the stock market as something that exists for them to use, like a supermarket. And the jolting reality is that the stock market has become a vast and incomprehensible playground for billionaires to gamble with derivatives, in which the retail investor is incidentally allowed to participate only insofar as their money is helping to push up prices. So the threat to the market is not what the author seems to be speaking to (a hypothetical investor who will buy in late, lose money, and get sore about it). The threat is people getting the general feeling that the stock market is shady, and deciding to buy a rental property, start a small business, etc.
- salawat 6y ago
  Ding ding ding. That this isn't the top comment probably has J.P. Morgan spinning in his grave. >A man I do not trust could not get money from me on all the bonds in Christendom. http://memory.loc.gov/service/gdc/scd0001/2006/20060517001te/20060517001te.pdf http://memory.loc.gov/service/gdc/scd0001/2006/20060517001te... The fact is, it all runs on public trust. Just like governance, just like civil liberties, just like policing, just like everything else that provides a giant's shoulder to start from. It is why honor, integrity, honesty, and transparency are considered virtues in good business. It is also why deception, secrecy, obfuscation, and equivocation are such powerful tools fpr shaping the business landscape. In a world of honest people, the liar unchecked is King (or at least one hell of a catalyst). If you start getting widespread loss of faith in the system, or merely the operators thereof, there will be a destruucturing and re-evolution of a system people can feel more implicit trust in. What that process looks like I don't know, but I'm certain it will be slow and stymied in it's coming, but sweeping in it's non-resemblance to what we have now. At least one can only hope.
chmod600 6y ago
During the 2008 crisis, there was a lot of criticism of HFTs. Their primary defense was that they provide liquidity, which is valuable. Does HFT help with this issue at all?
SecurityMinded 6y ago
The game is actually rigged. This guy, who authored this article is most probably commissioned by Citadel or Robinhood or whomever else to soften the blow by promoting "it is not their fault" rhetoric. It is their fault. If it is not, whose fault is it for god's sake?
b0rsuk 6y ago
I can't help but notice a parallel with horse races and mafia. They say some mobsters love to bet in horse races. They end up betting on the best horses. Where mafia rules, it becomes an open secret you're not supposed to bet on "their" horses. They don't fancy sharing money with you.
antonzabirko 6y ago
So because Citadel made 100m executing the stocks they were happy to lose 3b+? Am i missing something or is this what the author is saying?
mrslave 6y ago
The irony of educating the average Joe about the long term investment mindset when the hedge funds people despise for getting rich while Main St suffers are anything but long term thinkers. > Hedge funds have idea dinners in private behind closed doors. I appreciate however the slightly obtuse admission that there's lots of behind the scenes private conversations. Interesting more so in this environment when everyone is a market manipulator depending on who you ask.
deleted 6y ago
[deleted]
itsatrashcan 6y ago
A post to consider as to why buy (and not sell) orders were cancelled. This does not address however the face that SEC fined Robinhood for not providing best execution to customers. https://stu2b50.dev/posts/why-robinhood-d3580b https://stu2b50.dev/posts/why-robinhood-d3580b

161 points by aloukissas 6y ago

>Everyone from Ted Cruz to AOC to Aaron Rodgers sided with Main Street against Wall Street. Apart from the media, of course. For example, Newsweek is calling GME investors "far-right extremists"[1] while The Washington Post is comparing the situation to the Capitol riots[2]. [1] - https://www.newsweek.com/far-right-extremists-use-gamestop-chaos-radicalize-recruit-telegram-1565355 https://www.newsweek.com/far-right-extremists-use-gamestop-c... [2] - https://www.washingtonpost.com/opinions/2021/01/30/good-guys-gamestop-story-its-hedge-funds-short-sellers/ https://www.washingtonpost.com/opinions/2021/01/30/good-guys...

freefal 6y ago
The Post article is an op-ed, not something written by the editorial board. I’d prefer that newspapers feel free to publish a wide range of views without readers ascribing those views to the paper (I.e., the newsroom or editorial board).
- harry8 6y ago
  >free to publish a wide range of views... Sure. But it's under their banner. They edit the op ed and can demand unsubstantiated claims be substantiated or removed. Otherwise it really is no better than done racist blog. A case that can't be made without facts that can't be stood up shouldn't be made in any newspaper that values it's reputation.
ignoranceprior 6y ago
Your summary of the Newsweek article is pretty misleading. They're not accusing r/WSB or GME investors as a whole of being far-right extremists (which would be false), they're referring to actual alt-righters talking about GME.
- mixedCase 6y ago
  Correct, they're opting for a guilt by association approach, if you can even call it that. Nefarious "journalism" nonetheless.
sn41 6y ago
Why "sticking to the man" resonates with me, and why I took pleasure in this incident is because students from the mid-2000s realize that hedge fund managers for the most part are not as smart as they think they are. Their bungling significantly set back the dreams of several students of my generation. I am not far right by any means, just was far gone and sad for 2010-2015. I suspect that the truth is closer to "Wall Street" than we care to admit. Insider information is still the key, not stochastic differential equations, Ito's formula and portfolio balance theories. Melvin putting all their leveraged eggs in one basket is considered above board, and is not being questioned.
- Tarq0n 6y ago
  If insider information really is key you should able to easily provide evidence for that claim. The market moving before news is announced is something that the SEC monitors and has consequences when it happens.
  - hi5eyes 6y ago
    Everyone’s seen the “consequences” like the ones Elon Musk faced after tweeting “funding secured”
  - sn41 6y ago
    "Easily" is a subjective claim. You can read the congressional testimony of Harry Markopolos from the Madoff scandal, where he explicitly says that SEC is hobbled because regulators do not have the werewithal to attend these hob-nobbing conferences. I am not in the finance industry, so my sources can only be public documents. https://www.fraud-magazine.com/article.aspx?id=313 https://www.fraud-magazine.com/article.aspx?id=313
  - deleted 6y ago
    [deleted]
- smabie 6y ago
  Yeah I think a lot of hedge funds are run by idiots. Market making firms however, they are the true stars. There are also some really good hedge funds: RenTec, Millennium, 2 Sigma, etc. A lot of hedge funds are dinosaurs and are slowly going extinct. Even in the last 5 years there has been a big shift: investors really prefer systematic firms and raising money for a discretionary fund gets harder and harder every day. I do not believe insider information is key. If it was, hedge fund risk adjusted returns would probably be less abysmal. It's not that straightforward to evaluate hf performance, but trust me when I say, there a lot of funds out there providing very dubious value to investors.
solipsism 6y ago
People really don't seem to understand the concept of the op-ed. Maybe publications need to do a better job of making the distinction clear. For reference, this is from an article from the newsroom: But of course, what the Reddit cabal did to inflate the stock of bygone-era companies like GameStop, AMC Entertainment and Bed Bath & Beyond simply mirrored what the hedge fund sharpies had done in conspiring to “short” those same stocks and drive down the prices https://www.washingtonpost.com/business/2021/01/30/financial-regulations-wall-street-sec-gamestop/ https://www.washingtonpost.com/business/2021/01/30/financial...
- goatinaboat 6y ago
  People really don't seem to understand the concept of the op-ed. Maybe publications need to do a better job of making the distinction clear. The concept is for the editor or owner to be able publish something with plausible deniability.
hintymad 6y ago
The media’s behavior is why I became cynical about the system: moralize everything for no particular facts. You don’t like someone, label that person far-right. This is how transparency is lost. With transparency gone, so is trust. And we stopped the trade for your own good. Yeah, right.
Benjammer 6y ago
Jimmy Kimmel said "and maybe even some Russian Disruptors," for no apparent reason in his opening monologue talking about the people buying $GME last week.
- flycaliguy 6y ago
  I think unfortunately the reason is apparent, filling out a monologue.
- prepend 6y ago
  I think the problem is that anyone who likes money is now in on GME. Probably some Russian Disrupters too, but not sure why that would be joke worthy unless there’s some other detail (eg, disrupters are realizing 90% of gains or something). Personally, I think this is a smokescreen for a pretty smart invested group. I hope we eventually learn who did it just to satisfy my curiosity. If they are dumb, we will. If they are successful, we never will as the technique is too useful to use again.
fourstar 6y ago
All the focus on racism and divisiveness within the media (all the woke sjw BS) really started around after occupy Wall Street. Now why would they want that to happen? So maybe we fight with each other instead of with them and their profits?
mikeyouse 6y ago
Ted Cruz is literally married to a Managing Director at Goldman Sachs - if people think his sanctimonious Tweets were a principled stance “against Wall St” then we’re in worse shape than I thought.
- deleted 6y ago
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Aunche 6y ago
Of course politicians will rally behind the populist narrative. They don't care that regular people are throwing away their money buying into conspiracy theories.
hn_throwaway_99 6y ago
One of the things I really appreciate about HN is its ability to get beyond "sound-bite arguments" to really get to a deeper understanding of what can be complicated arguments. Which is why I really disliked your comment, because your primary sentence includes two lies where you take some words out of context, but hey it must be true because you provided links. 1. Going to your own link, Newsweek did not call "GME investors "far-right extremists"". The article clearly states that far-right extremists were instead using the "stick-it-to-the-man" ethos driving a lot of the GME investor chatter to recruit. There is a huge difference. 2. As other's have pointed out, WaPo published an Op Ed, this was not something under their Editorial Board or a news article. Saying "The Washington Post is comparing the situation to the Capitol riots" is deliberately misleading.
- clarifier123 6y ago
  >1. Going to your own link, Newsweek did not call "GME investors "far-right extremists"". The article clearly states that far-right extremists were instead using the "stick-it-to-the-man" ethos driving a lot of the GME investor chatter to recruit. There is a huge difference. The point of the article is to associate WSB with far-right extremists. It's a common manipulation tactic, they're making them seem guilty by association. >As other's have pointed out, WaPo published an Op Ed, this was not something under their Editorial Board or a news article. Saying "The Washington Post is comparing the situation to the Capitol riots" is deliberately misleading. People often say that "op-eds don't represent the official opinion of the paper", but it's provably false. There's no shortage of people who are willing to write pro-Trump op-eds, after all, almost half of the country voted for him. How come they aren't getting published in NYT, WaPo etc.? Because publishing an op-ed is a soft endorsement. It doesn't necessarily mean that they 100% agree with it, but it definitely means that they consider the opinion "acceptable".
- prepend 6y ago
  > 1. Going to your own link, Newsweek did not call "GME investors "far-right extremists"". The article clearly states that far-right extremists were instead using the "stick-it-to-the-man" ethos driving a lot of the GME investor chatter to recruit. There is a huge difference. Yes, but no. It’s called throwing shade and while it is very different from actually showing evidence on a subject and making a claim, it is intended to link the ideas in the readers mind. In middle school it would go like “I’m not saying hn_throwaway is a slut, but I did see her watching Harry Potter and also saw three other boys who say they like her at the theater that weekend.” Both statements are true, but without some other fact they don’t matter so the only reason to mention them is to make a claim without evidence. Especially since I explicitly said I’m not calling you a slut. The article linked does not act responsibly by mentioning these facts in the same article without some link. I think it’s mostly last journalism coupled with trying to click-bait get eyeballs for ads. I too like HN for our attempted critical thinking, and I like that people keep busting through different theories and trying to get to the source of truth.

timoth3y 6y ago

Thanks for that. It's nice to see a calm perspective on GME. Of course, he doesn't try to get to the bottom of a lot of the questions that really do need to be answered, but a good perspective on what it means for "the rest of us."

DethNinja 6y ago

Did people had faith in financial institutions after 2008 crash anyway, if so who are those people? I feel like huge majority of the people already know that system is rigged but what can they do? Most of them got very limited options against the system.

iterator5 6y ago
I feel like the overwhelming majority of people believe that the system is fair and their shot at being a billionaire is just over the next hill.
- deleted 6y ago
  [deleted]

kenneth 6y ago

Institutional traders (hedge fund, i-banks, prop traders, hft) have the advantage of deep pockets and the financial literacy to be able to execute strategies which create easy returns. Many of these strategies are easily scalable to turn a small edge into a big one, using leverage. Oftentimes these strategies have an asymmetric risk profile, with low probability of losing a lot of money (sometimes with unlimited downside potential), for example: - writing out of the money options for the premiums - shorting stocks with leverage - '08s frenzy of selling credit default swaps - forex trading with spreads so low that they take 100x+ leverage Usually, when these strategies work, it's easy money and they get addicted to the easy returns. They scale the strategies up to a level of risk they can't handle. Like having 140% short interest relative to GME's float. When these strategies blow up in their faces, it wipes them out completely, to the level of requiring bailouts. Main street (retail investors, taxpayers) have had enough of this, and a lot of anger is directed at institutional investors for always getting the easy money and the bailouts at their expense. They want to see the game applied fairly, such that when the bets go sour, they go bankrupt and don't get bailed out like in 2008. In the 2015 CHF forex crisis, many brokers went bankrupt overnight. That's what should happen to Melvin, and to anyone who takes the stupid risky bets that don't work out.

Tarq0n 6y ago
Bailouts go to banks because the government is on the hook for insuring cash deposits anyway. Do you have any examples of hedge funds being bailed out?
- tonfa 6y ago
  I think Bear Stearns might count for some people. (tho was more about buying the good assets to avoid adding even more fire to the crisis, I think investors were mostly wiped out)
- deleted 6y ago
  [deleted]
- hn_throwaway_99 6y ago
  The 98 bailout of Long Term Capital Management was pretty legendary - there were books about it: https://en.wikipedia.org/wiki/Long-Term_Capital_Management#1998_bailout https://en.wikipedia.org/wiki/Long-Term_Capital_Management#1... Now, granted, public funds weren't used for the bailout, in this case it was more the Fed organizing private banks for the bailout. Also, the investors in LTCM still lost a ton of money. But LTCM is still a great prototypical example of "vacuuming up nickels in front of a steamroller", i.e. these traders can take these positions (LTCM was focused on merger arbitrage IIRC) that seem like a license to print money, except they invariably can lead to some giant risk blowup. And when they fail, they have a knack for taking down the whole financial system with them so the government has to get involved (even if it is just cajoling other bankers in a room) to bail them out.

noisy_boy 6y ago

> And the fact that Janet Yellen, the new Treasury Secretary, got paid hundreds of thousands of dollars in speaking fees from Citadel doesn’t help either. I think there is an opportunity for a service that allows the logistics of ordering/distributing large quantities of books written by such people that can be used by banks/funds for distribution to their employees and such to avoid the bad-light of direct speaking fees. Order the books, target gets paid (the cut the publisher takes can be considered an acceptable collateral cost of avoiding the exposure) and everyone looks nice - "we were just sharing knowledge - books are good!". Best part is, some people might actually read the books.

smabie 6y ago

The quote from that caller is pretty amazing. There are just so many things wrong his statement that it's hard to even know where to start. 1. A 7% weekly loss isn't really anything that a buy and hold investor should be worried out. Yes losing money sucks, but are you really so afraid of volatility you would rather earn practically nothing from 3 month T-bills? 2. It's super easy to call shorting GME risky after the fact.It's incredible what people call "obvious" and "risky" once a particular situation has blown up. Captain Hindsight strikes again. 3. He claims he is worried about "market manipulation", but I doubt he would be complaining or have his faith shaken in the markets if he just realized a 7% gain this week. This guy is looking to blame someone and hedge funds are a convenient populist target. On an aside, it seems the market can't ever get a break. If it crashes and unemployment skyrockets, it was due to some fat cats gambling. If the market skyrockets and unemployment is high, now the fat cats are making money off the backs of everyone else. If the market skyrockets and unemployment is low, well, everyone isn't sharing in the gains equally. Give me a break.

fortran77 6y ago
Also if someone "came into money" and the market is at an all-time-high (during a pandemic, no less!) why not roll it into the stock market over a one- or two-year period? Same dollar amount each month for two years.
- squeaky-clean 6y ago
  Research generally shows that if you have a lump sum of cash, it's better to invest it all at once rather than average it out. https://investor.vanguard.com/investing/online-trading/invest-lump-sum https://investor.vanguard.com/investing/online-trading/inves... Time in the market > Timing the market, and all that jazz.
  - dnautics 6y ago
    yeah but cost averaging is often a psychological technique. It's easier to commit yourself to cost average than it is to commit yourself to a lump sum investment.

danfang 6y ago

All these traders are playing in a casino. Yes, the casino favors the house. Yes, people have figured out how to make big bucks by counting cards. The rules will probably change so the house keeps on winning. To me, all this indicates that the only way to win is to not play. Passively investing in the market as a whole is the only way to win long term. Disclosure: I work at a robo-advisor specializing in long term passive investing. My views are my own, and in no way associated with the views of my employer. This is not investment advice.

smabie 6y ago
Which market? What country? What assets? Are you allocating money to Pokémon cards? Why or why not? PS: all investing is active management. full stop.
- curtis3389 6y ago
  Funny enough, I overheard a comic shop owner today saying he has $180k in 9 pokemon cards he had rated, and some of them are only rated 5/10. The return on investment there leaves me at a loss for words.
- danfang 6y ago
  I'm thinking of a globally diversified portfolio of index funds based on modern portfolio theory. You can read about the investment strategy, but basically it comes down to risk adjusted returns over long periods of time. It will become abundantly clear why Pokemon cards are not part of that strategy. We probably have different definitions of active investing. I take my definition from Wikipedia: https://en.wikipedia.org/wiki/Active_management https://en.wikipedia.org/wiki/Active_management In my mind, another way to divide the two is about assumptions about efficiency. Passive investors assume that the market is generally efficient, and do not try to exploit inefficiencies to generate returns. Active investors generate returns from perceived inefficiencies (information asymmetry, etc).
  - salawat 6y ago
    That's exactly the opposite of not playing. Your money is still in and propping up the misbehavior in the system. You must take responsibility for what and who gets empowered by your hard earned wealth. There is no other way around it.and a single datapoint leaving the system won't fix it. It needs to be a collective action. Sadly, (and I hope I am proven wrong) we aren't so great at that.

consider_the 6y ago

bitcoin

AI_WAIFU 6y ago

This is one of those cases where the game was definitely rigged, even though no one intentionally rigged it. Every actor in the chain was following their own self interest, but at the end of the day, the guys who got cutoff at the knees during the 11th hour were the retail investors and r/wsb. I don't think this was a coincidence, but rather a special case of more general rich-get-richer dynamics that we see everywhere in society.

MisterBastahrd 6y ago

Know what bugged me the entire time through all of this? The big money guys on the big money shows kept referring to themselves as "the investor class." As if by the very nature of their jobs, they were set aside above and apart from those of us who have to earn our livings by doing useful things. I'd love to know how much of the brainpower in the US is set aside for the purpose of doing nothing more than extracting wealth from the markets. Additionally, I've long held the opinion that if your primary method of earning a living is by extracting wealth from the market, then your "capital gains" are just a fancy way of earning a living and you should be taxed at the exact same rate that everyone else is. You don't deserve to pay half the taxes just because your earnings are derived from stocks.

Animats 6y ago
And maybe it's time to have a tax on financial transactions. The EU is looking at that again. It's called a "Tobin tax". Not much, a fraction of a percent, but on every trade.
- smabie 6y ago
  A fraction of a percent is yuuuge. Entire categories of liquidity providers can be wiped out with taxes on trades as "low" as 0.05% Not sure what people have against trading or why I should be taxed on buying or selling shares, but the government likes to capture money and spend it on weapons, so I suppose it isn't surprising the idea is being floated.
  - Bakary 6y ago
    The possibility of getting wealthy this way is only available because there is a stable society to skim off of, and that is in turn the result of the collective work of millions. Trading does not create wealth but shifts it around, so why shouldn't it be taxed?
- goatinaboat 6y ago
  And maybe it's time to have a tax on financial transactions. The EU is looking at that again. It's called a "Tobin tax" I don’t mean to sound harsh but you are financially illiterate if you don’t know this already exists. Have a read of https://www.gov.uk/tax-buy-shares https://www.gov.uk/tax-buy-shares By the way Tobin no longer advocates for a Tobin tax.

darkerside 6y ago

If you are scared out of the market by a little ripple like this, investing in equities may not be a good fit, behaviorially. If you are thinking about taking it out now, are you really sure you'll be able to stay in when the market drops 40%? If not, better to cut your losses now, reduce your equity holdings, and probably find someone to manage your money for you. I self manage for the most part, but I also have at least some discipline and an awareness that the market could drop at any given time. It's only over the 5 year plus time horizon that I actually expect to make money.

Animats 6y ago

Hedge funds, as a class, underperform the Dow. Hedge fund managers, as a class, do very, very well. "Except Japan", the author puts in a footnote. The stock market in Japan peaked in 1990 and never came back. The Nikkei peaked at 19590 and is now at 1740. Could that happen to the US?

smabie 6y ago
1. dow is irrelevant, you should ignore it 2. it's not so easy to determine whether a fund is providing value, you can't just look at returns. The math is more complex than that.
noisy_boy 6y ago
This is what I too fear when I hear the ever-lasting optimism of long term investing. Could this become a common reality sometime in future? If yes, maybe the other advise about diversifying (real-estate/precious metals etc) isn't so bad.
- Animats 6y ago
  In Japan, real estate tanked, too. Once the population starts to decline, real estate drops.
  - Clewza313 6y ago
    Fortunately Biden's liberal immigration policy and plan to do another $2T of "money printer go brrrr" should prop up both real estate and stocks nicely.
  - noisy_boy 6y ago
    Seems to me that that's a typical Japanese/Singaporean/Scandinavian problem - if it manifests in other places due to rising quality of living and high societal costs associated with offspring, I'll probably have a different set of worries.
    - piva00 6y ago

yongjik 6y ago

From the letter quoted in the article: > Seeing my wife lose money as a result of the hedge funds foolish shorts and inability to adapt to a new wave of social media – as well as the frightening thought the trading can be halted at any time as the brokerages see fit – has caused me to become extremely disheartened toward investing in the future. Just checked, and after all these shenanigans, S&P 500 was set back to... where it was one month ago. This actually sounds like a strong evidence in favor of index funds plus long-term investing.

hn_throwaway_99 6y ago
Exactly - if you're concerned about long term investing because of the relatively small recent drawdown in the S&P, you really need to re-educate yourself about what long term investing means.

deleted 6y ago

[deleted]

benlivengood 6y ago

The advice just falls flat for me. Honestly, if the only winning move is to invest for the long term then why even bother with capital markets at all? Sounds like a waste of time when what we really want is for people to own the means of production. Dump 100% of federal tax revenue into index funds and let it grow faster than the interest on T-bills issued for expenditures. Churn for ~50 years and start paying UBI from the massive profits. Would the government even need to pay interest on the T-bills in USD? Why not just issue more T-bills as interest because after all the long term pretty much guarantees the government would be swimming in cash in 50 years and have no trouble repaying it all. Incidentally the federal government would also become the majority shareholder of every company in the world. If the market can magically let everyone with enough money invested in their youth retire happily then it follows that letting the government own all the stocks and issue UBI would result in roughly the same outcome.

sombremesa 6y ago
> Dump 100% of federal tax revenue into index funds and let it grow faster than the interest on T-bills issued for expenditures. I don't come to HN for comic relief, but there it is.
teraku 6y ago
Few things to unpack here. >Honestly, if the only winning move is to invest for the long term then why even bother with capital markets at all Because they are gamblers, that's why. Most (reasonable) people only invest long-term. >Sounds like a waste of time when what we really want is for people to own the means of production. Yup. >Dump 100% of federal tax revenue into index funds and let it grow faster than the interest on T-bills issued for expenditures. Churn for ~50 years and start paying UBI from the massive profits. Tax revenue is not 'profit' by the state. That's not how tax nor money issuing works. But to the topic at hand: There are countries that put money into investment funds that will invest into infrastructure and safe long-term assets. But usually not for UBI, but for retirements (e.g. Denmark). >If the market can magically let everyone with enough money invested in their youth retire happily then it follows that letting the government own all the stocks and issue UBI would result in roughly the same outcome. Generally the idea of not having to work at all is still heavily controversial within science. Some believe in UBI, some in job-guarantees and others just in relatively high minimum wage and very strong retirement plans.

Gatsky 6y ago

On the most basic level we don't actually know who is buying and selling Gamestop stock. The narrative that the little people have taken down the elites may in fact be mostly false. Matt Levine talks about this in his latest column [1]. The restrictions imposed by RH didn't necessarily stop the buying. [1] https://www.bloomberg.com/opinion/articles/2021-01-29/reddit-traders-on-robinhood-are-on-both-sides-of-gamestop https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...

gorgoiler 6y ago

Where is the evidence that “nontraditional investors beat the crap out of hedge fund speculators at their own game” or that “hedge funds pressured the brokerages to disallow new stock purchases of GameStop”? This is the narrative, for sure, but how is this anything more than conjecture? Have the hedge funds publicly said “you got us!”, and even then why should we believe them? The story is fuelled by a subreddit and celebrity hot takes on Twitter. The news coverage I might actually trust also happens to be extremely weak — it’s all on the periphery rather than at the center of the story and I’m deeply skeptical anyone knows what’s actually going on. Why should they? Without a leak from an institution that’s how it should be when private entities trade on a public market. I have seen the mansplaining of what a short position is or what a short squeeze is or how someone can be 150% over shorted — originally 138%, then inflated to 140% for impact, then inflated again. The explanations aren’t wrong but knowing the mechanics of a theory doesn’t differentiate between an internet fantasy and the real world. That kind of self-fulfilling logic is one step away from the world of conspiracy theories. As I’ve said before, on the face of it this just looks a lot like some folks pumping a cheap stock. Potentially the first round of these had good reason to — the actual squeeze — but now the second, third, fourth and upcoming fifth daily cycles are pumping it for the sole reason because the last one did and we need an exit. It could well by pyramid shaped — I’d put money on it if I were you.

MattGaiser 6y ago
They are deep into conspiracy theories over on /r/wsb
hbosch 6y ago
> It could well by pyramid shaped — I’d put money on it. A 01/21 300P on GME is roughly 25,000 right now, for a single contract. If you’ve got the cash, it’s almost certainly free money. Right?
- gorgoiler 6y ago
  Hah. My original already quite ironic final words were “I’d put money on it”. I have edited to further emphasise my point.

jb775 6y ago

If the SEC or any government agency steps in to help Wall St hedge funds at the expense of $GME shareholders, I wouldn't be the least bit surprised to see the entire millennial generation revolt against the current financial system. They could easily trigger it by a crowdsourced agreement to liquidate 401k's and all stock holdings. If we see any govt agency step in, I'd imagine them trying to pity sell us on lost teacher pensions, etc being managed by the hedge funds...but they'll leave out the part that says those teacher pensions have been financially weaponized against average investors for years.

SpicyLemonZest 6y ago
The vast majority of GME shares are held by large financial institutions and mutual funds, so theories about government favoritism toward big money just don’t make a ton of sense here. Whatever the SEC ends up doing here, we can be virtually certain they did not strike a corrupt deal with Melvin Capital against Fidelity and Blackrock.
OscarCunningham 6y ago
The hedge funds involved here aren't structurally important. They're not going to get a bailout.

anonu 6y ago

I've said it many many times on HN and elsewhere. It wont be popular to say this again now - but I dont care: Trading stocks on RH is gambling - it is no better than trading in a casino. The SEC should step in and regulate them like a casino, in the name of investor protection (aka NOT day-trader protection) RH is the social media of trading. Its all about the quick hit of dopamine via a mobile-first experience. Any conceptual inkling of educating their customers around long term investing is out the window. Why? Because thats not their business model. They profit when you trade a lot because they get paid by HFT. So investing is not in their mantra. Only ridiculous day trading as we have now. This isn't a story about market stability, price formation, RegNMS, margins, collateral. Thats all a distraction. This story is about the "autists" at r/wsb sticking it to wall street. Which is fine, its all good and entertaining. But random punting isn't going to create wealth.

loosetypes 6y ago

I recently learned the term OPM (other peoples’ money). As in, it’s preferable to invest OPM. Could that be the definition of a hedge fund? And in that regard, it’s basically the opposite of the ideals many of us are intimately familiar with - such as having “skin in the game”. To share in winnings yet be insulated from losses must change one’s incentives and potentially reframe what “risky” means in practice.

tempsy 6y ago

isn’t the “rigging” mostly a function of the Federal Reserve’s money printer? seems odd to argue it isn’t rigged by showing stocks always go up.

gher-shyu3i 6y ago

The game is not just rigged, it's fundamentally broken. Parasitic practices such as lending money with interest and shorting are the basis of the modern economic system. Practices that we've known for literally over 1400 years to be bad, yet we continue to engage in them, then cry when things go south. If we want a proper economic system, we should have proper fundamentals. Ban shorting, ban interest, ban packaging debt and selling it in packages, etc. encourage proper investments (not casino gamblings) and things will improve drastically.

syntaxing 6y ago

I'm not going to lie, the idea of the 401K kinda scares me now. We were always told to keep it safe, invest in index fund, let compound interests do its thing with your pretax money. But during the financial crisis, most "commoners" took a heavy hit that took a very long time to recover and it felt like we were the last on the priority list to recover and the WSB saga really shows how unfair it is. But my big question is what is the alternative? Real estate?

ineptech 6y ago

> I understand that it feels like the odds are stacked against you. But I’m asking you to please reconsider... [ followed by table of great S&P outcomes ] I think the author misunderstands the threat here, and it's much graver than they think. Remember the U2 album Apple pushed to everybody's iphones? Same thing here. What happened last week is the cracks showing, people being forcibly reminded that they are not in control. In Apple's case it was iphone owners being jolted out of the pleasant fantasy that their phone is a little piece of territory they alone control. In GME's case, it's people thinking of the stock market as something that exists for them to use, like a supermarket. And the jolting reality is that the stock market has become a vast and incomprehensible playground for billionaires to gamble with derivatives, in which the retail investor is incidentally allowed to participate only insofar as their money is helping to push up prices. So the threat to the market is not what the author seems to be speaking to (a hypothetical investor who will buy in late, lose money, and get sore about it). The threat is people getting the general feeling that the stock market is shady, and deciding to buy a rental property, start a small business, etc.

salawat 6y ago
Ding ding ding. That this isn't the top comment probably has J.P. Morgan spinning in his grave. >A man I do not trust could not get money from me on all the bonds in Christendom. http://memory.loc.gov/service/gdc/scd0001/2006/20060517001te/20060517001te.pdf http://memory.loc.gov/service/gdc/scd0001/2006/20060517001te... The fact is, it all runs on public trust. Just like governance, just like civil liberties, just like policing, just like everything else that provides a giant's shoulder to start from. It is why honor, integrity, honesty, and transparency are considered virtues in good business. It is also why deception, secrecy, obfuscation, and equivocation are such powerful tools fpr shaping the business landscape. In a world of honest people, the liar unchecked is King (or at least one hell of a catalyst). If you start getting widespread loss of faith in the system, or merely the operators thereof, there will be a destruucturing and re-evolution of a system people can feel more implicit trust in. What that process looks like I don't know, but I'm certain it will be slow and stymied in it's coming, but sweeping in it's non-resemblance to what we have now. At least one can only hope.

chmod600 6y ago

During the 2008 crisis, there was a lot of criticism of HFTs. Their primary defense was that they provide liquidity, which is valuable. Does HFT help with this issue at all?

SecurityMinded 6y ago

The game is actually rigged. This guy, who authored this article is most probably commissioned by Citadel or Robinhood or whomever else to soften the blow by promoting "it is not their fault" rhetoric. It is their fault. If it is not, whose fault is it for god's sake?

b0rsuk 6y ago

I can't help but notice a parallel with horse races and mafia. They say some mobsters love to bet in horse races. They end up betting on the best horses. Where mafia rules, it becomes an open secret you're not supposed to bet on "their" horses. They don't fancy sharing money with you.

antonzabirko 6y ago

So because Citadel made 100m executing the stocks they were happy to lose 3b+? Am i missing something or is this what the author is saying?

mrslave 6y ago

The irony of educating the average Joe about the long term investment mindset when the hedge funds people despise for getting rich while Main St suffers are anything but long term thinkers. > Hedge funds have idea dinners in private behind closed doors. I appreciate however the slightly obtuse admission that there's lots of behind the scenes private conversations. Interesting more so in this environment when everyone is a market manipulator depending on who you ask.

deleted 6y ago

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itsatrashcan 6y ago

A post to consider as to why buy (and not sell) orders were cancelled. This does not address however the face that SEC fined Robinhood for not providing best execution to customers. https://stu2b50.dev/posts/why-robinhood-d3580b https://stu2b50.dev/posts/why-robinhood-d3580b