5 ms·

There’s not just “1 stock.” Let’s say: A loans a share to be B who sells to C who loans to D and so on. You end up with a multiplier on nominal stock, always,

by ghayes 6y ago

There’s not just “1 stock.” Let’s say: A loans a share to be B who sells to C who loans to D and so on. You end up with a multiplier on nominal stock, always, and that’s perfectly normal. I really don’t understand the moralistic argument here, esp. without regard to the underlying value of the original asset. Up is not strictly good.

Daho0n 6y ago
No matter how many times it gets repeated in the thread it is still nonsense made up by the stock market. Exchange "Share" with "Burger" and see how many Burgers you can create from thin air. If you end up with more than one you should start a McDonald's competitor! If you can't it is because you are making mental gymnastics as soon as the word is some magical word Wall Street made up. Sure it is correct that you can but it shouldn't be and can't be fixed fast enough. But thank you to everyone who gave me GME money with their mental gymnastics <3
- krok 6y ago
  Ok, I've done it. I told my children that I'm going to take them to McDonald's tomorrow evening. They see this promise as 100% good, as real as if they were actually holding the burger. The only difference from their point of view, is that if they were holding a physical burger now, by tomorrow evening it would be cold and bad to eat. The ones I have promised them are real burgers which are deliverable tomorrow evening, at the time we're going to want to eat them. So I've created two additional burgers owned by my children, in addition to all the physical burgers that currently exist, which are owned by either McDonald's, if they haven't been sold yet, or by customers if they have. Does this mean that I've found an infinite supply of free burgers and should go into competition with McDonald's? No. Because I'm going to have to buy the burgers from McDonald's to supply to my children. They own two new paper burgers, but I'm short two burgers. So the net total world supply of burgers is unchanged.
  - bal4591 6y ago
    Well you're still flawed if you scale your argument. What if you take your argument, and scaled it up. What if you promised each kid 1 trillion burgers. Will you have access to 1 trillion burgers tomorrow? What if they take their future 1 trillion burgers and sell half. What if you walk into McDonalds to claim the 1 trillion burgers. Does McDonalds have 1 trillion burgers? No. So you're saying it's okay to promise burgers as long as it's an amount that actually exists and McDonald's can fulfil it. So what you're saying is that you shouldn't sell things you can't possibly fulfil? Hence the argument against this kind of trading.
    - Chris2048 6y ago
      Most financial institutions need some kind of basis for a promise - something that "secures" the contract e.g. like a loan secured by an asset. A regulated entity might have capital requirements which would limit the no of burgers promised to money held. Another might be a contract with mcdonalds for N burgers, or a warehouse full of burgers - shorted stocks require the lender to actually sell a stock, and the shorter to actually sell it (and buy it back later) but there will need to be security/"deposit" on the returning of the stock - there exist a risk that the lender will not get their stock back, which is part of the reason for the premium. Since you/I are not regulated financial institutions, not may would trust us to deliver 1 trillion burgers on paper; so the flaw exists in "What if they take their future 1 trillion burgers and sell half" - sell to whom? They'd have to find someone willing to buy. "What if you walk into McDonalds to claim the 1 trillion burgers" - the "paper burger" is an agreement between you and some third-party, not mcdonalds. You couldn't pre-order items from one shop, and go to another store with you invoice and demand they fulfil it - your contract is not some general/official currency, there is no obligation to accept it. > So you're saying it's okay to promise burgers as long as it's an amount that actually exists and McDonald's can fulfil it. It's a promise that you will supply N burgers, so the criteria for ok-ness is that you can supply N burgers, that McDs can provide that many is necessary-but-not-sufficient alongside: - you can pay for N burgers - you can transport N burgers (on time) but when I say "ok", I mean from a "morality of making personal promises" perspective, not "financial promises/obligations made by a regulated financial institution" perspective. Individuals are not financial institutions, and financial institutions are regulated as such.
- codyb 6y ago
  Person A has burger. Person B borrows A’s burger and sells it to Person C. Person D borrows Person C’s burger and sells it to Person E. Still seems to work? Then, tomorrow Person B and Person D owe burgers to Person A and Person C. If there is only one burger in existence, this will create demand pulling prices up I’d think.
  - bveb33 6y ago
    This is where the burger analogy breaks down in my opinion because it's a lot harder to deliver a fraudulent burger than a digital signature. What can happen in real life is Person A and Person C are given a digital receipt confirming delivery of the burgers they were owed and that is the end of the transaction. To shield themselves from revealing potential fraud, the brokerage will charge a $500 fee if either of them ask for proof of their burger. Now, while there may only be one burger in existence, it appears as though there are two, keeping demand artificially flat.
- nemo44x 6y ago
  What you’re forgetting is you still have to deliver. If you created burgers out of thin air and sold them (you’re actually creating a promise of a burger, not a real burger) then you’d have to deliver these burgers when whoever bought them calls for them. Or you’d go to jail. So how could you do this? Well you could create a burger delivery service that sells other peoples burgers. But you sell them for a bit more than what you pay for them and you can begin you’re offering “all the burgers” and connecting the sellers with the buyers. Now you’re creating burgers out of thin air to people buying them from you and you’re delivering the burger they ordered even though you don’t even own a grill. Congrats, you just created a burger exchange that sells promises of future burgers on margin out of thin air. If you’re even smarter you’d use other people’s money (which is key) to capitalize this venture instead of your own and keep an outsized share of the profits. This is what investment banks and hedge funds do. Other people’s money is key to winning and not really losing.

by ghayes 6y ago

Daho0n 6y ago

No matter how many times it gets repeated in the thread it is still nonsense made up by the stock market. Exchange "Share" with "Burger" and see how many Burgers you can create from thin air. If you end up with more than one you should start a McDonald's competitor! If you can't it is because you are making mental gymnastics as soon as the word is some magical word Wall Street made up. Sure it is correct that you can but it shouldn't be and can't be fixed fast enough. But thank you to everyone who gave me GME money with their mental gymnastics <3

krok 6y ago
Ok, I've done it. I told my children that I'm going to take them to McDonald's tomorrow evening. They see this promise as 100% good, as real as if they were actually holding the burger. The only difference from their point of view, is that if they were holding a physical burger now, by tomorrow evening it would be cold and bad to eat. The ones I have promised them are real burgers which are deliverable tomorrow evening, at the time we're going to want to eat them. So I've created two additional burgers owned by my children, in addition to all the physical burgers that currently exist, which are owned by either McDonald's, if they haven't been sold yet, or by customers if they have. Does this mean that I've found an infinite supply of free burgers and should go into competition with McDonald's? No. Because I'm going to have to buy the burgers from McDonald's to supply to my children. They own two new paper burgers, but I'm short two burgers. So the net total world supply of burgers is unchanged.
- bal4591 6y ago
  Well you're still flawed if you scale your argument. What if you take your argument, and scaled it up. What if you promised each kid 1 trillion burgers. Will you have access to 1 trillion burgers tomorrow? What if they take their future 1 trillion burgers and sell half. What if you walk into McDonalds to claim the 1 trillion burgers. Does McDonalds have 1 trillion burgers? No. So you're saying it's okay to promise burgers as long as it's an amount that actually exists and McDonald's can fulfil it. So what you're saying is that you shouldn't sell things you can't possibly fulfil? Hence the argument against this kind of trading.
  - Chris2048 6y ago
    Most financial institutions need some kind of basis for a promise - something that "secures" the contract e.g. like a loan secured by an asset. A regulated entity might have capital requirements which would limit the no of burgers promised to money held. Another might be a contract with mcdonalds for N burgers, or a warehouse full of burgers - shorted stocks require the lender to actually sell a stock, and the shorter to actually sell it (and buy it back later) but there will need to be security/"deposit" on the returning of the stock - there exist a risk that the lender will not get their stock back, which is part of the reason for the premium. Since you/I are not regulated financial institutions, not may would trust us to deliver 1 trillion burgers on paper; so the flaw exists in "What if they take their future 1 trillion burgers and sell half" - sell to whom? They'd have to find someone willing to buy. "What if you walk into McDonalds to claim the 1 trillion burgers" - the "paper burger" is an agreement between you and some third-party, not mcdonalds. You couldn't pre-order items from one shop, and go to another store with you invoice and demand they fulfil it - your contract is not some general/official currency, there is no obligation to accept it. > So you're saying it's okay to promise burgers as long as it's an amount that actually exists and McDonald's can fulfil it. It's a promise that you will supply N burgers, so the criteria for ok-ness is that you can supply N burgers, that McDs can provide that many is necessary-but-not-sufficient alongside: - you can pay for N burgers - you can transport N burgers (on time) but when I say "ok", I mean from a "morality of making personal promises" perspective, not "financial promises/obligations made by a regulated financial institution" perspective. Individuals are not financial institutions, and financial institutions are regulated as such.
codyb 6y ago
Person A has burger. Person B borrows A’s burger and sells it to Person C. Person D borrows Person C’s burger and sells it to Person E. Still seems to work? Then, tomorrow Person B and Person D owe burgers to Person A and Person C. If there is only one burger in existence, this will create demand pulling prices up I’d think.
- bveb33 6y ago
  This is where the burger analogy breaks down in my opinion because it's a lot harder to deliver a fraudulent burger than a digital signature. What can happen in real life is Person A and Person C are given a digital receipt confirming delivery of the burgers they were owed and that is the end of the transaction. To shield themselves from revealing potential fraud, the brokerage will charge a $500 fee if either of them ask for proof of their burger. Now, while there may only be one burger in existence, it appears as though there are two, keeping demand artificially flat.
nemo44x 6y ago
What you’re forgetting is you still have to deliver. If you created burgers out of thin air and sold them (you’re actually creating a promise of a burger, not a real burger) then you’d have to deliver these burgers when whoever bought them calls for them. Or you’d go to jail. So how could you do this? Well you could create a burger delivery service that sells other peoples burgers. But you sell them for a bit more than what you pay for them and you can begin you’re offering “all the burgers” and connecting the sellers with the buyers. Now you’re creating burgers out of thin air to people buying them from you and you’re delivering the burger they ordered even though you don’t even own a grill. Congrats, you just created a burger exchange that sells promises of future burgers on margin out of thin air. If you’re even smarter you’d use other people’s money (which is key) to capitalize this venture instead of your own and keep an outsized share of the profits. This is what investment banks and hedge funds do. Other people’s money is key to winning and not really losing.