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This is a fascinating game to watch. I watched The Big Short yesterday for the first time, as it's trending on Netflix and was suggested, and this moment feels

by loceng 6y ago

This is a fascinating game to watch. I watched The Big Short yesterday for the first time, as it's trending on Netflix and was suggested, and this moment feels similar to exposing a weakness in the system that needs to be addressed - and hopefully not to strengthen the wrong position; I didn't realize the incredible actors cast for it, obviously they took on the roles as it's an incredibly important story for the general public to be educated about, to understand. Feels like a good day to watch The Wolf of Wall Sreet.

Accujack 6y ago
Yes. If you read what the ultimate intent of the /r/wallstreetbets crowd is, they're not just trying to exercise the same right to make money off of the financial system that billionaires have. A year ago, the person that started this detected a situation where GME was a company that didn't have long term prospects, wasn't losing money, but was still shorted to 140% of it's value. It's not supposed to be possible to go over 100% any more since 2008, by the way. Because of the shorting, he deduced that hedge funds and other influential people in the financial system were planning to encourage GME to go bankrupt, thus getting their short shares forgiven, because a bankrupt company is written off as a loss by the actual share owner. So the hedge funds' plan was to short shares at some price as much as they could get away with, then make the shares worthless by encouraging bankruptcy. Since the shares would then be written off, they would pocket all the money they took from selling the shares they borrowed to short. Nice racket. What WSB did is make the price go in the opposite direction, which is important for a lot of reasons, but one huge one is that the risk of shorting is proportional to the reward. If the price of a shorted stock goes up, then the borrower (person doing the short) still has to return it to the owner. No matter how high the price goes. So they realized if they drive the price WAY up, then the people who were doing the 140% shorts on a company they planned to drive out of business would get screwed by their own system. Some of the folks on WSB are making money and lots of it, but many of them just want to see the whole unfair system burn. By exploiting this weakness, they're trying to force the government to reform the whole finance industry.
- djbebs 6y ago
  Thats not true at all. Its perfectly possible and legal to short beyond 100%
  - Accujack 6y ago
    The practice I'm referring to is "naked shorting" which has been illegal since 2008 in the US.
    - ZephyrBlu 6y ago
      See this comment for why you can have >100% short interest without naked shorting: https://news.ycombinator.com/item?id=25991013 https://news.ycombinator.com/item?id=25991013
    - kcg 6y ago
      Except you're completely conflating terms and numbers here. A stock can have over 100% short interest with no naked shorting occurring. >100% short interest DOES NOT imply that there is naked shorting.
      - Accujack 6y ago
        It doesn't guarantee that it's occurring, but it's strong indicator that something sketchy is happening. In this case, the important point is that a hedge fund with a 140% short position is more vulnerable to loss than a hedge fund with a 100% short position.
        ac29 6y ago
        > In this case, the important point is that a hedge fund with a 140% short position is more vulnerable to loss than a hedge fund with a 100% short position. Sure, but only in the sense that a fund is also more vulnerable to loss at 80% short than 40% short. Nothing magic happens between 99% and 101% short.
  - tedunangst 6y ago
vishnugupta 6y ago
It’s a fabulous movie. It perfectly balances the nuances of the 2008 crash with the human side of the story. I watch it once a few month and discover a new aspect. I recommend “Margin Call”. Though I felt it overbalanced on the human drama it nicely complemented The Big Short.
paulie_a 6y ago
The boiler room is a better version of the wild of wallstreet

by loceng 6y ago

Accujack 6y ago

Yes. If you read what the ultimate intent of the /r/wallstreetbets crowd is, they're not just trying to exercise the same right to make money off of the financial system that billionaires have. A year ago, the person that started this detected a situation where GME was a company that didn't have long term prospects, wasn't losing money, but was still shorted to 140% of it's value. It's not supposed to be possible to go over 100% any more since 2008, by the way. Because of the shorting, he deduced that hedge funds and other influential people in the financial system were planning to encourage GME to go bankrupt, thus getting their short shares forgiven, because a bankrupt company is written off as a loss by the actual share owner. So the hedge funds' plan was to short shares at some price as much as they could get away with, then make the shares worthless by encouraging bankruptcy. Since the shares would then be written off, they would pocket all the money they took from selling the shares they borrowed to short. Nice racket. What WSB did is make the price go in the opposite direction, which is important for a lot of reasons, but one huge one is that the risk of shorting is proportional to the reward. If the price of a shorted stock goes up, then the borrower (person doing the short) still has to return it to the owner. No matter how high the price goes. So they realized if they drive the price WAY up, then the people who were doing the 140% shorts on a company they planned to drive out of business would get screwed by their own system. Some of the folks on WSB are making money and lots of it, but many of them just want to see the whole unfair system burn. By exploiting this weakness, they're trying to force the government to reform the whole finance industry.

djbebs 6y ago
Thats not true at all. Its perfectly possible and legal to short beyond 100%
- Accujack 6y ago
  The practice I'm referring to is "naked shorting" which has been illegal since 2008 in the US.
  - ZephyrBlu 6y ago
    See this comment for why you can have >100% short interest without naked shorting: https://news.ycombinator.com/item?id=25991013 https://news.ycombinator.com/item?id=25991013
  - kcg 6y ago
    Except you're completely conflating terms and numbers here. A stock can have over 100% short interest with no naked shorting occurring. >100% short interest DOES NOT imply that there is naked shorting.
    - Accujack 6y ago
      It doesn't guarantee that it's occurring, but it's strong indicator that something sketchy is happening. In this case, the important point is that a hedge fund with a 140% short position is more vulnerable to loss than a hedge fund with a 100% short position.
      - ac29 6y ago
        > In this case, the important point is that a hedge fund with a 140% short position is more vulnerable to loss than a hedge fund with a 100% short position. Sure, but only in the sense that a fund is also more vulnerable to loss at 80% short than 40% short. Nothing magic happens between 99% and 101% short.
- tedunangst 6y ago

vishnugupta 6y ago

It’s a fabulous movie. It perfectly balances the nuances of the 2008 crash with the human side of the story. I watch it once a few month and discover a new aspect. I recommend “Margin Call”. Though I felt it overbalanced on the human drama it nicely complemented The Big Short.

paulie_a 6y ago

The boiler room is a better version of the wild of wallstreet