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AMC, GameStop Give Hedge Fund Mudrick Capital $200M in Gains

141 points by prostoalex 6y ago

PragmaticPulp 6y ago
I expect a lot of Redditors will be very disappointed when they realize just how much money hedge funds made, on average, out of this episode. The WSB moderators really did everyone a disservice by letting obvious misinformation flood the subreddit. It’s hard to view the later stages of the GameStop phenomenon as anything other than a Reddit-fueled pump and dump scheme.
- allie1 6y ago
  Or a big Prisoner’s Dilemma experiment.
- mattnewton 6y ago
  I mean, that’s one take. Another take is a hedge fund who bailed out AMC with debt for shares was richly rewarded, and some of the public short selling hedge funds like Melvin still lost their shirts.
- NoOneNew 6y ago
  Not at all. The past few days they've shared not only the largest long holders of these stocks, but also the pension funds that were boosted as well. A few teacher pension funds got a good uptick and they were sharing that around. The cats at wsb might be self proclaimed retards, but they're not that stupid. They know lots of other folks are going to make money off of them. You know, if you actually visit the sub, you'd know that.
  - 3327 6y ago
    Hi Autist from WSB here. Diamond hands, and deepfuckingvalue we trust. DD is gold. not selling is Diamond. Stick to your guns. Don't let the Algos shake u out. See you techies in Valhalla.
  - EugeneG 6y ago
    Any uptick a pension fund would have had was lost once GME reverted back. Pension funds are buy and hold, so they could care less about short term fluctuations in 0.05% of their portfolio.
    - sudosysgen 6y ago
      GME didn't fully revert back yet, and I'm sure a lot of them realized their gains around the peak and sold. Pensions dont make short term investments, they already had GME shares since a long time ago. They do sell when extraordinary circumstances happen and buy other stocks to hold long term again.
    - paulgb 6y ago
      Just because a fund’s normal MO is to buy and hold doesn’t mean they’re asleep at the wheel and won’t react if their value hypothesis is (more than) realized overnight. (Ontario Teacher’s Pension Fund sold almost 25M shares, for example https://www.bloomberg.com/news/articles/2021-01-29/reddit-fever-ignites-mall-stock-and-fund-cashes-out-500-million https://www.bloomberg.com/news/articles/2021-01-29/reddit-fe...)
      - TheTrotters 6y ago
        NB: They sold 25M shares at ~$20/share. That's probably much more than what they paid for these shares but it's nowhere near where GME was over the past few days.
        cj 6y ago
        GME's 52 week low is $2.57. Without knowing when they entered their position. It was hovering around $4 for a long time last year. Even if they bought in at $5, selling at $20 is absolutely a win. Yes, they could have gambled and HODL'd, but there's no reason to gamble after seeing a 4x increase on a stock very few people expected would ever break $10.
        dashundchen 6y ago
        Just to clarify from the article - the Ontario Pension Fund was invested and cashed out stock in a commercial real estate company called Macerich that was getting associated with Gamestop on /r/wsb, not Gamestop itself.
  - colejohnson66 6y ago
    Exactly this. Wasn’t the whole point to spite short sellers even if it meant losing some?
  - randomdata 6y ago
    > A few teacher pension funds got a good uptick and they were sharing that around. The Ontario Teachers Pension Plan, who was holding GME, is one of the largest hedge funds in existence, worth over 200 billion dollars. For comparison, Maverick Capital is worth only $15 billion. That is not a case of some little guy teachers making out well, it is the rich (if not the richest) hedge funds getting richer.
    - freeone3000 6y ago
      Right, but, it actually is the Ontario Teacher's Pension Plan. It's not simply the name, it actually is the pension fund for Ontario's teachers.
      - randomdata 6y ago
        A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction and risk management techniques to improve performance, such as short selling, leverage, and derivatives. That is what the OTPP does. That the hedge fund exists to fund pensions is irrelevant. If you dig into the investors behind other funds, you are likely to find that they are also investing to help fund their own retirement.
    - JumpCrisscross 6y ago
      > The Ontario Teachers Pension Plan, who was holding GME, is one of the largest hedge funds in existence, worth over 200 billion dollars OTPP is a pension fund. Hedge funds are a different beast.
      - donarb 6y ago
        They may be a pension fund, but they do use hedge funds to balance their portfolio. https://www.otpp.com/investments/performance/investment-strategy/asset-mix https://www.otpp.com/investments/performance/investment-stra... "Additionally, we complement our efforts by using external hedge fund managers, which gives us access to unique approaches that both add performance and diversify risk."
  - gvhst 6y ago
    13Fs (reports that show what certain funds are holding) are filed quarterly. While you can see who owned GME as of 12/31/2020 the flows of the past few weeks is not public knowledge yet.
  - ehsankia 6y ago
    There are plenty of "Average people" that entered near the top, and since not everyone can sell simultaneously, that means a ton of people are losing the life savings they dumped into this out of excitement as it crashed back down. I think the point being made here is that the whole narrative of "average people beating wall street" is pretty naive and quite bullshit. All in on, maybe a few handful of people got 10x or even 100x their money, but most of the gains were most likely made by hedge funds and with the exception of one or two hedge funds who were squeezed, the majority of losses will probably be by average people.
    - JakeTheAndroid 6y ago
      Well in fairness to WSB, it was really built around loss porn, not sticking it to the hedge funds. So even those people losing their life savings are contributing the to the WSB cause so long as they show off all the red.
    - simias 6y ago
      Lurking the wsb threads now it's clear that none of these people have exit strategies, or even strategies at all. Even if that fabled squeeze was to take place I'm sure many of them would still be left holding the bags because they wouldn't know when to sell. And again, at this point I'm really not sold on that squeeze theory at all, it seems very plausible that it ended last week and now we're just seeing a good old pump-and-dump taking place. In the end some people are going to be very lucky and some others are going to learn a very expensive lesson about the dangers of gambling.
    - jb775 6y ago
      This explains what's actually happening right now: https://www.youtube.com/watch?v=gMShFx5rThI&feature=youtu.be https://www.youtube.com/watch?v=gMShFx5rThI&feature=youtu.be
    - deleted 6y ago
      [deleted]
    - SignalNotSecure 6y ago
      I think there is a name for people positioning themselves in the market on the advice of self-proclaimed "retards and autists"
  - simias 6y ago
    >The cats at wsb might be self proclaimed retards, but they're not that stupid. They know lots of other folks are going to make money off of them. You know, if you actually visit the sub, you'd know that. The sub you seem to like so much died last week. Whatever is left of it has been diluted when literally millions of people flooded it. "Eternal September" hit them hard. Right now it's filled with Q-level conspiracy theories, they parrot each other's talking point without understanding any of it ("short ladder" being the most funny and telling example of this). I can assure you that the vast majority of these people are wildly clueless about what's happening right now, they just keep telling each other that they're going to be rich. Look at this nonsense for instance: https://www.reddit.com/r/wallstreetbets/comments/lboqwm/yet_another_short_ladder_attack_to_start_the_day/ https://www.reddit.com/r/wallstreetbets/comments/lboqwm/yet_... Admittedly there are a few voices of reason being upvoted in this thread, but they're still hidden underneath the baseless "hype" claims.
    - cashewchoo 6y ago
      So much this. /r/wallstreetbets is going to struggle to recover. It's absolutely Eternal September. I've been subbed to WSB for about 5 years, ever since someone at work (prop trading) mentioned it as basically being a bunch of 25-30 yo finance people hanging out and doing dumb shit in their personal accounts for fun. I'll admit, I did some dumb stuff myself, trying to time UVXY/TVIX plays. (Basically netted 0 of course). But it was fun to shitpost about it. This is astrology for finance bros. And it'd been going a bit down-hill already, but most people were still that same description: young blood, day job in finance, knows what they're doing at both a mechanical and risk level, etc. And the content reflected it. Then somehow, one of those internet things happened. WSB became a hit, people flooded in, the mod team was overwhelmed, media attention flooded in making everything worse, etc. I feel like this is what a lot of /r/the_donald people ended up now that they're looking for a new cause. So much of the rhetoric I saw once the WSB Old Guard had been overwhelmed mirrored the kind of stuff you saw out of the_donald back in 2016.
      - decafninja 6y ago
        Seems the daily thread grows so big so fast that it becomes dog slow to even browse. But yeah, a lot of the comments are just one liner garbage memes: HODL! TO THE MOOOOOON! FISTS ON CHEST NO FEAR! TO VALHALLA! DIAMOND HANDS! As well as echo chamber "encouragement" to HODL! until $1000/$9000/the moon because Mark Cuban is on our side!
  - notyourwork 6y ago
    > You know, if you actually visit the sub, you'd know that. I'm not sure this part is needed for you to convey your point.
  - UncleMeat 6y ago
    > The cats at wsb might be self proclaimed retards, but they're not that stupid. The sub count increased 8-fold. Any prior culture it had has been overwhelmed.
  - ookblah 6y ago
    uh yeah there are also a ton of people losing a lot bc they got convinced to buy in at 300+. the OGs maybe, but the sub has basically quadrupled in size and brought a lot of new people who don't know anything + people looking to capitalize on that.
- marcinzm 6y ago
  >did everyone a disservice I suspect they didn't do a disservice to their own bank accounts. Random internet strangers care as much about you as do politicians and hedge fund owners.
  - SpicyLemonZest 6y ago
    I suspect they did. I had multiple friends buy GME and all of them are now in the red on that investment.
    - JohnJamesRambo 6y ago
      This is my experience as well. Many put their whole stimulus in it, and I can’t escape the idea that Wall Street knew all this would happen and they just found a way to get a large chunk of that other stimulus money that went to the people and not to corporations. An artificial movement that they may have created themselves that had an ethos of “bankrupting Wall Street”. Lol. A taxpayer funded pump and dump of epic proportions enabled by new tech sockpuppeting abilities and control. Before Cambridge Analytica I would say take your tinfoil hat off, but now I don’t know anymore. I consider nothing real online and go from there.
      - betterunix2 6y ago
        "Wall Street knew all this would happen" As if "Wall St." is one giant conspiracy. What happened to criticizing "Wall St." for treating the economy like a casino and driving the stock market into a giant bubble? Where are all those complaints about how "Wall St." is recklessly risking our retirement accounts? The contradictory conspiracy theories are astonishing.
- umvi 6y ago
  > The WSB moderators really did everyone a disservice by letting obvious misinformation flood the subreddit. Well, on the flip side a lot of redditors learned from the school of hard knocks, which is the best teacher in a lot of ways. Moderators suppressing posts won't teach a lesson you can only learn by losing money.
  - Aunche 6y ago
    Half of them may learn a lesson, but the other half will just blame hedge funds against for their own mistake.
    - PragmaticPulp 6y ago
      It’s already turning into a conspiracy theory. The popular narrative is that GME would have continued going up, but RobinHood colluded with hedge funds to stop it. It doesn’t make any sense and ignores the incentives that RobinHood had to continue allowing people to buy. However, when to they’ve become completely invested (some times literally) in the narrative that GME was going to make them all rich while the hedge funds went bankrupt, it’s difficult to admit that they were wrong.
  - PragmaticPulp 6y ago
    WSB moderators were (and still are) actively suppressing posts that don’t toe the line. I had a seasoned Reddit account that had been in WSB for a long time. As soon as I started commenting about how the short squeeze wasn’t a sure thing, my posts stopped showing up. They’ve been dismissing any comments that aren’t about GME going to the moon as hedge fund shills or bots. It’s extremely difficult to find any posts or comments critical of GameStop in the sub right now. If you sort by new, the critical comments are quickly removed. Moderators aren’t just letting Redditors figure it out. They’re shaping the conversation into the illusion of a consensus.
    - mywittyname 6y ago
      I had to unsub (having been a member for years) because my homepage was full of, "WE ARE HOLDING:diamond: :hands:!!!!I :diamond: LOVE :hands: THIS :diamond: STOCK :rocket::rocket::rocket::rocket::rocket::rocket:" posts with 50k upvotes and a list of gold a mile long. Edit: looks like emojis are stripped
- stefanmichael 6y ago
  HFTs were printing money throughout this entire ordeal due to volatility and inefficient trades
- blantonl 6y ago
  Volatility earns hedge funds huge returns. There are a very select few retail investors that really made a lot of money from this hype. There were a TON of professional traders that probably thought this was like shooting fish in a barrel.
- technofiend 6y ago
  Game theory inevitably takes over; I better sell before the next guy does and lowers the price even further. The only people with diamond anything are the ones who bailed and took their profits early.
  - betterunix2 6y ago
    The people with "diamond hands" are the ones who opened short positions when the stock was trading in the $300+ range. They are probably to busy looking up which sports cars to buy with all the money they made to bother looking at WSB right now.
- spelunker 6y ago
  I've been visiting WSB for couple of years now, and generally the mods have been really hands off, so them letting misinformation flood the subreddit is par for the course. Good or bad, that's how it is. Honestly lots of investing communities are like this - do your own due diligence, etc. It is surprising how _much_ misinformation is being spread in WSB as of late, and feels like a weird cult more than ever, but WSB was never about heavy moderation.
- Thaxll 6y ago
  The goal was to screw the original shorters.
- scarmig 6y ago
  I wouldn't be surprised if hedge funds overall made a profit and retail investors overall made a loss in the GME fiasco. More likely than not, even. My pet conspiracy theory is that WSB is just a cat's paw for another hedge fund that saw an opportunity to make money and wanted to try out a new approach.
  - betterunix2 6y ago
    It is a near certainty that hedge funds fleeced retail investors who bought GME above $100/share. The real problem with WSB is not the people who post there, it is the large crowd of unsophisticated lurkers who overestimate their own knowledge and abilities. The media did not help by hyping this story and making it sound like "Wall St." was terrified by a mob of Redditors. Two hedge funds lost some money, but as many have pointed out, those funds will probably still turn a profit on the year. Meanwhile, a bunch of hedge funds, algos, and prop traders are raking in cash from the spike in volatility, and a bunch of HFTs took advantage of the spike in volume. I expect a small bump in sports car and yacht sales in the NYC region as a bunch of "Wall St. bros" spend the giant bonuses they are taking home from this whole episode. As to the scam aspect, I give it a 50/50 chance that someone saw an opportunity to pump-and-dump some symbols with very high short interest. I doubt it was a hedge fund, it was probably an individual, probably someone living outside the reach of US law enforcement. The alternative is that a bunch of idiots actually came up with the idea that they could take on "Wall St." and managed to trigger a short squeeze, many of whom have yet to realize that the party's over.
- 015a 6y ago
  Its funny how people don't see the $100,000+ portfolio losses (and much less often, gains) all over that subreddit and don't immediately realize that a ton of the people who visit it are Wall Street finance people. That's seriously the meme among the people only secondarily connected with WSB; its not "autists" or "the vox populi", its wall street bros (WSB?) who have to spend all day being super serious at their job, and WSB is their way of letting off steam. And if you think that these firms weren't already feeding every single post and comment on reddit into their HFT algorithms, you better at least believe that after this whole thing, they're gonna be doing that, and adding some extra weight to `if subreddit === "wallstreetbets"`. From that point of view, WSB is rather icky; its people who know what they're doing (most of the time) subtly and anonymously impersonating an idiot to influence the actual idiots.
  - dclusin 6y ago
    Whereas Hacker News is just a bunch of people who don't know what they're doing pretending to be experts to influence the actual idiots. You can find charlatans pretty much anywhere money or people with money congregate.
    - dcolkitt 6y ago
      The difference is the HN hype train might cause you some headaches from picking an immature tech stack. Whereas the WSB echo chamber has literally ruined thousands of people's lives and retirements.
      - sokoloff 6y ago
        If someone is going to ruin their life or retirement based proximately to posts in a Reddit forum, it’s very hard for me to assign root cause to the Reddit forum. At most that’s the first or second “Why?” but there is surely a deeper issue.
        quxpar 6y ago
        Many people were prudent blue-chip investors whose retirement was ruined by the housing crisis. There doesn't seem to be any 'smart money', just 'big money'.
- duxup 6y ago
  The populist atmosphere surrounding it all was very attractive, to me included. But I worry that like a lot of heated populist rhetoric it is misguided, or even entirely dishonest. We just went through a presidency with someone who loved populist rhetoric, but whose actions were anything but. It happens a lot sadly.
- dgs_sgd 6y ago
  The subreddit surged from 1 to 8 mil redditors in less than two weeks. I think the mods couldn't have stopped the disinformation even if they tried, just due to sheer increase in volume of posts.
- razster 6y ago
  https://reddit.com/r/dataisbeautiful/comments/lbdfbp/oc_failstodeliver_data_on_gamestop_gme/ https://reddit.com/r/dataisbeautiful/comments/lbdfbp/oc_fail... Might be worth a read. Comments are interesting as well.
- cccc4all 6y ago
  Most large holdings are public record. Anyone can see which institutions held what positions. Everyone knew who stood to gain and who stood to lose in the short squeeze. WSB crows was going after the short squeeze, anyone that got gains just rode the wave and knew when to step off or not.
- strathmeyer 6y ago
  Pump and dump? Were they the ones who removed the ability to sell stocks? I guess it's important to spread that misinformation around.
  - FabHK 6y ago
    Nobody removed the ability to sell stocks. Some brokers removed the ability to buy stocks (because they were near broke and couldn't afford it), which probably saved some potential buyers some money and brought this train wreck to a halt a bit earlier.
- FabHK 6y ago
  On the bright side, though, at least it was a zero sum game (well, it will have been by the time the stock is back to where it started). Money was transferred from the early shorts and late longs to the early longs and late shorts; with the market makers taking a bit of a cut. Many other scams (or, for example, theft and robbery) destroy value (as, for example, a stolen wallet is a much bigger loss to the owner than it is a gain for the thief). Or, say, the 2008 GFC made a few people extremely rich (unscrupulous mortgage peddlers, investment bankers creating "complex, highly leveraged, exotic trades [...] without necessarily understanding all of the implications of those monstrosities", etc.), while wreaking havoc orders of magnitude greater on the entire world.
- dheera 6y ago
  > pump and dump scheme I don't see why everyone is against pump and dump schemes yet the system is literally designed for them to happen. It's an inevitable fact that they will happen when you set up a free market and a bunch of (stupid) humans from the general public, as also clearly demonstrated in the crypto scene. If people don't want them to occur, the short-term incentives, market, and exchanges themselves need to be re-structured in a way such that takes into account what a group of humans with free communication would do.
  - betterunix2 6y ago
    First of all, there is no such thing as a free market, certainly not in the capital markets. There are mountains of regulations covering stock, options, futures, and debt trades. Trading is routinely halted on various securities in extreme circumstances. Insider trading is restricted, and the restrictions become more significant for higher level management. Companies are required to report certain information to the public. Markets exist to solve problems of valuation and capital allocation. Pump-and-dump schemes distort valuations in very extreme ways and work against the purpose of equity markets. That is a basic reason why they should be banned. Another reason is that scams introduce unnecessary risk to someone making an investment decision; ideally investors should only focus on risks related to a company's business, not the risk that the information they were given about that company is false. The extra risk will drive away investors and the result will be less capital available to otherwise promising ventures, which again works against the goals of capital markets. It is not really possible to restructure markets in a way that would avoid pump-and-dump schemes, because the problem with a pump-and-dump scheme is not actually related to the rules governing the market. The problem is that the pump-and-dump scheme involves deliberately spreading false information; yet it is equally possible that investors hear true information and rush to buy, and the market should allow for that situation.
    - dheera 6y ago
      I guess my main question is, why does the stock price go up if mountains of people suddenly buy a stock? It's because we base pricing based on a simple free market order book algorithm. If the markets enforced a pricing algorithm that included certain time-based functions instead of basing it purely out of the order book, and mandate that all transactions happen at the algorithm's determined price (instead of the free market price), a lot of problems including pump-and-dump schemes and insider trading could be theoretically eliminated. We could completely legalize insider trading, for example, if we technologically mandated that large orders took weeks to execute while single shares traded in milliseconds. (I'm an engineer, not a financial expert; I view this problem as very similar to e.g. API limits and firewalls that implement rules to prevent abuse.)
- lasftew 6y ago
  Money was made by fools at the expense of greater fools. Short-term trading is a zero-sum game, always has been, always will be. Except for the HFT firms and market makers, who basically own the Robinhood flow and who thrive in foolish volatility. Guess who's paying so that r/WSB bros pay zero commisions? It's not the Red Cross.
kccqzy 6y ago
Title should be "Mudrick Capital Gains $200 Million on AMC, GameStop Bets" which is more accurate and less clickbaity than the current.
- texasbigdata 6y ago
  Mudricks position in AMC substantially predated any "hype" or "meme" economy impacts.
  - matwood 6y ago
    Yeah, prior to this meme, AMC was considered an acquisition target.
    - WSB_Mod 6y ago
      And for good reason, the exhibition business was consolidating, with Cineworld almost acquiring Cineplex, ultimately thwarted by COVID.
thefounder 6y ago
"Nobody" thought some hedge funds or bond holders would win along the ride, right? Regardless if they were tipped off about the restrictions in advance or not I think they were good citizens taking risks and helping two companies found in distress due covid.
- garmaine 6y ago
  The restrictions were at the brokerage level and only affected retail investors.
  - thefounder 6y ago
    The restrictions affected the price and the price affected everyone involved. I wouldn't be surprised if the big boys received a call before a decision was made to make sure they dump everything they have before they unleash the restrictions panic.
  - compiler-guy 6y ago
    This is because the big kids use big kid's brokerages. Which is to say, well capitalized brokerages that communicate well with their clients on possible capitalization needs. It is no shock at all that a cheap broker with a million new clients wasn't sufficiently well capitalized for a big kids play.
WanderPanda 6y ago
The people who adhered to the original plan (to overcome the million person prisoners dilemma) of setting a limit sell order at 420.69 should still have made a ton of money.
- afterburner 6y ago
  There were plenty of people calling for $1000 or even $10,000 sell orders. Definitely more than were calling for $420.69
mattnewton 6y ago
For people not reading the article and thinking this hedge fund was short these stocks: > In December, AMC signed a commitment letter with Mudrick Capital that called for the hedge fund to buy $100 million of new secured bonds that pay 15% cash or 17% deferred interest. In exchange, Mudrick received a commitment fee equal to about 8 million AMC shares. ie, this firm indirectly bet on an AMC recovery, investing in them as “distressed debt”, but the recovery in their stock came true suddenly.
- johntb86 6y ago
  They also sold out-of-the-money calls in Gamestop, meaning they made money if the price didn't increase.
  - mattnewton 6y ago
    And on AMC covered by their shares too it looks like. But the article title and comments here made it sound like they were the same short selling hedge funds targeted for squeezing by wsb, when the truth is more complicated.
ojnabieoot 6y ago
The important thing being lost in all the chatter: Elon Musk didn't have a creepy grudge against this hedge fund, therefore it is a good hedge fund.
- zionic 6y ago
  Nothing about Elons valid and, in my opinion, morally correct statements disparaging short sellers was creepy.
  - ojnabieoot 6y ago
    "Long buyers, who have an incentive to push positive propaganda about a company they are invested in (regardless of whether or not it is true), are good." "Short sellers, who have an incentive to push negative propaganda about a company they are invested in (regardless of whether or not it is true), are bad." This is self-evidently incoherent and is actually being too generous to Musk, who in real life is even stupider than my strawman[1]. And Elon Musk obviously has a creepy grudge against short sellers, as evidenced by his disgraceful comments in a 2018 analyst call[2]. The only thing approaching a principle that Musk has bothered to offer is that short sellers can hurt companies by artificially pushing the stock price down. But long buyers can hurt competitors by artificially pushing a stock price up! There's no "moral" difference. Musk just has absolutely no leg to stand on here - which is why he's myopically focused on Reddit and Twitter instead of people who are actually competent about finance. The only reason Elon Musk is "morally" opposed to short sellers is that they are hurting his personal bank account, and he's not satisfied with being merely the richest person in the world. And the only reason you share his opinion is that you are caught up in his cult of personality. Looking at your comment history: read more news and less Reddit. [1] https://twitter.com/elonmusk/status/1354890601649610753 https://twitter.com/elonmusk/status/1354890601649610753 [2] https://financialpost.com/investing/musk-takes-aim-at-analysts-for-pushing-tesla-short-thesis-1 https://financialpost.com/investing/musk-takes-aim-at-analys...
camjohnson26 6y ago
There’s a lot of anger against the financial system but unfortunately not much financial education to understand why it is working so poorly for average investors. That anger makes people lash out to try to change the status quo, which in this case caused Redditors to buy GME in spite of its ridiculously high valuation. But because they don’t actually understand the mechanics of the market the hedge funds will easily out maneuver them. Melvin Capital was a big loser with their fund down 50%, but the funds that held GameStop made out fine. A lot more of the volatility was probably driven by hedge funds than people think, and a lot less driven by Redditors. A billion dollars is an insane amount of money and even 6 million wallstreetsbets members working together can barely make a dent in these prices. At the end of the day hedge funds will be fine and retail investors will be left holding the bag. Their very real anger is valid, but should be turned toward the actual causes of financial injustice and not playing into the hand of hedge funds. Ironically, the shorts who have been blamed for much of this mess are the only ones screaming about the broken regulatory system, including the toothless SEC, and warning about asset bubbles driven by low interest rates that are making it very difficult to responsibly invest. If average investors would listen to these contrary voices instead of breathless longs on CNBC they would have a more complete view of what’s happening in markets today.
- JumpCrisscross 6y ago
  > That anger makes people lash out to try to change the status quo, which in this case caused Redditors to buy GME in spite of its ridiculously high valuation Is it anger motivating people to buy? I get mixing anger in with the greed and hysteria. Were I to play blackjack with the house being, I don't know, the Sackler family, I'd certainly get a high out of it and I'd certainly bet more. But I wouldn't be at the table because of the anger. The anger would just amplify the other motivations.
  - WJW 6y ago
    > Were I to play blackjack with the house being ... the Sackler family, I'd certainly get a high out of it and I'd certainly bet more. You playing at a gambling game with negative expected value against people you hate and you want to give them MORE money? I'm sure they'd love that. Any casino prefers irrational customers over the ones that can do math. (The ones that can do math are still welcome, just not as appreciated)
hooande 6y ago
"we did it, reddit!"
Gunax 6y ago
To the surprise of no one--the established, well-prepared and well-funded players out-compete Joe and Jane retailer investor. Everyone loves the David defeating Goliath at his own game narrative. I only worry that we are going to forget all of the times that David gets slain.
- deleted 6y ago
  [deleted]
- dcolkitt 6y ago
  There's a simple lesson. Buy and hold a low-fee index fund. Stop trying to pick stocks. And for God's sake stop trying to day trade stocks. Deviating from buy-and-hold indexing is mathematically a zero-sum game. Winning this game is also one of the most monetarily rewarding games on Earth. It's extremely unlikely that you're anywhere near good enough to win this game. If you don't know who the fool at the table is, it's probably you.
  - Gunax 6y ago
    I think you're absolutely correct. Stock picking is roughly a winner-take all game where you are facing off against incredibly smart and prepared people. Unfortunately, I have heard of several people[1] that have switched from passive funds to research and stock picking. One week of market silliness may have un-did decades of teaching the public to not pick individual stocks. While it's nice that more people are going to start reading 10-Qs and learning what a put is, it's almost certainly going to be a net-negative. [1]https://twitter.com/TrumpSC/status/1354197824494325764 https://twitter.com/TrumpSC/status/1354197824494325764
  - WA 6y ago
    Not as simple. With buy and hold of index funds, you limit your upside. There is close to zero chance to make 1,000% within a year. Stock picking has potentially a bigger downside, but also more upside. This being a zero-sum game doesn’t matter, if you have either an edge or are simply lucky. So instead of saying it’s all bullshit, it probably makes more sense to put 90% in index funds but expose yourself to a bigger upside with stock picking.
whereTheShares 6y ago
Can anyone explain the Fails-To-Deliver data for GME? Especially since its orders of magnitude greater than other companies. I feel like only half the story is being told! https://wherearetheshares.com/ https://wherearetheshares.com/
- ufotothemoon 6y ago
  Everyone should see this! Spread the information as far and wide as possible. Something very odd going on with failure to deliver data on GameStop. Hold your shares!
- JumpCrisscross 6y ago
  It was and is a heavily shorted and volatile stock. It's anomalous relative to the rest of the market at this point in time. But there is almost always someone out on the long tail of settlement shitshows.
meibo 6y ago
People have been saying that(HFs having made more money out of this than they lost/will recover in a short time) for a while now, but I doubt that a lot of the cult-like newbie flood on WSB/other investment or crypto subreddits that has been getting "we rekd the billionairs" drilled into their head for the past 3 weeks in every crevice of the internet will acknowledge this. You can still see people "just pumping their life savings" into GME on there. I sincerely hope that they know what they're doing.
- mattnewton 6y ago
  I think you missed the position this fund took, which I think was to bail out amc with a "distressed debt agreement" for shares, which they then used to make a killing. So, to me it sounds like it's really that long hedge funds profited from shorts and reddit investors were taken along for the ride if they had good timing. Shorts still "got rekt" and the people who helped bail out AMC were rewarded.
noncoml 6y ago
I thought the goal was to punish the HFs that were shorting GME, which was pretty much achieved. I don’t think anyone(reasonable) was expecting the rest of the financial market to sit back and watch and miss the opportunity to join the party.
- ehsankia 6y ago
  They may have punished a few HFs, but now a lot of retail investors will be paying the price as the price drops. Obviously it's clear to most of us that jumping in the hype at $300 was probably not wise, but that's what happens when the hype train pushes through.
- paxys 6y ago
  A LOT of people bought GME at $350 thinking they would get rich. Propoganda on WSB basically convinced you that it would go to $1000 next week. At some point it stopped being about hedge funds and became a standard pump and dump.
  - noncoml 6y ago
    To be honest, although everyone know that the spike will not last, none of us knew how high it would go. Even $350 was out of this world. In hindsight it's easy to give numbers like $300 or $350. But I agree, for a lot it turned into pump and dump.
- SpicyLemonZest 6y ago
  Perhaps at first. But if you browse through WSB right now, the prevailing narrative is that it wasn't achieved; the hedge funds are lying, they haven't stopped shorting, and you'd better keep buying and holding or the hedge funds will win.
- WJW 6y ago
  > punish the HFs This became the goal for some people. The original goal (way back when nobody knew who /u/deepfuckingvalue was) was to get rich on a short squeeze, because the counterparty on that trade had made a dumb gamble. If it had been some pension fund or even just retail investors on the other side that would have been fine too.
Aunche 6y ago
When, the media, brokers, clearing houses, or hedge funds disagree with you, that means they're obviously conspiring. When the media, celebrity-billionaires, politicians, other hedge funds, and early investors support you, that's confirmation that you were right. There's no way they could be motivated by other incentives like money or free publicity.
dougmwne 6y ago
Watching HN get caught up in this Gamestop bubble over the past week has been eye-opening to me about the community. The kind of information being spread around WSB was fully ridiculous. Wild conspiracy theories, financial advice with no basis in reality, astroturfing, and mob behavior. There has been an incredible amount of bleed-over between the garbage I've seen posted on WSB and the things posted in these HN threads and far too much reverence for a cesspool. I think HN likes to believe it is evidence based and rational instead of emotional and greedy. A more enlightened and civilized corner of the internet. I have not been seeing much of that lately. It turns out the promise of riches is enough to make any community lose it's collective mind. Here is a truism for you all: In any casino the players may win or lose, but the house always wins. If you think any bet is a guaranteed win, you have lost your rationality.
- yaitsyaboi 6y ago
  All the speculative mania in here was like 1/1000th of the stuff on WSB.
  - wizzwizz4 6y ago
    Yes: it was ~1‰ of WallStreetBets. That's ridiculous for a community the size of Hacker News.
- umanwizard 6y ago
  There is a similar phenomenon when Bitcoin is discussed on HN.
  - dougmwne 6y ago
    I really enjoy bitcoin speculation because it is so purely about human psychology with no inconvenient external realities or objective value to get in the way.
- clairity 6y ago
  wait til you really think about the covid bubble for more than 2 minutes. at a population level, you'll see a broad range of misperceptions everywhere. you'll see people missing the forest for the trees (private gatherings vs masks), focusing on trivialities (restaurants, fomites, masks again) and simply ignoring how much low-level emotion (fear, impotence) and instinct (othering strangers) drive our beliefs (have to protect ourselves from those selfish others, rather than the friends and family who present the highest risk).
realolokunmama 6y ago
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bobobob420 6y ago
Wow there are a lot of boomers in here. The point of the Reddit push was to screw the short sellers who did get screwed. And obviously it’s a pump and dump. And even more obviously everyone knows they are risking their money, no one is risking their life savings as someone else commented. And even if they did that’s their choice
smabie 6y ago
Hedge funds weren't the real winners, but rather prop shops/market making firms. January was the best month in the history of the universe for all the major prop shops: Citadel, Jane St, IMC, etc. The two "vols": volume and volatility are the corner stones of all market making performance. Bonuses are mighty fine this year, that is for sure.
pjfin123 6y ago
Buying and holding low fee index funds would probably be a more sustainable way to stick it to Wall Street.
H8crilA 6y ago
Imagine the balls of the person that pitched/approved selling uncovered calls on something that can 2x per day for a few days. "Let's collect $200M in options premium, but if the trend continues we'll lose $1B or even 10x more". Madness. Congrats on the trade tho.
andred14 6y ago
https://isthesqueezesquoze.com/ https://isthesqueezesquoze.com/

141 points by prostoalex 6y ago

I expect a lot of Redditors will be very disappointed when they realize just how much money hedge funds made, on average, out of this episode. The WSB moderators really did everyone a disservice by letting obvious misinformation flood the subreddit. It’s hard to view the later stages of the GameStop phenomenon as anything other than a Reddit-fueled pump and dump scheme.

allie1 6y ago
Or a big Prisoner’s Dilemma experiment.
mattnewton 6y ago
I mean, that’s one take. Another take is a hedge fund who bailed out AMC with debt for shares was richly rewarded, and some of the public short selling hedge funds like Melvin still lost their shirts.
NoOneNew 6y ago
Not at all. The past few days they've shared not only the largest long holders of these stocks, but also the pension funds that were boosted as well. A few teacher pension funds got a good uptick and they were sharing that around. The cats at wsb might be self proclaimed retards, but they're not that stupid. They know lots of other folks are going to make money off of them. You know, if you actually visit the sub, you'd know that.
- 3327 6y ago
  Hi Autist from WSB here. Diamond hands, and deepfuckingvalue we trust. DD is gold. not selling is Diamond. Stick to your guns. Don't let the Algos shake u out. See you techies in Valhalla.
- EugeneG 6y ago
  Any uptick a pension fund would have had was lost once GME reverted back. Pension funds are buy and hold, so they could care less about short term fluctuations in 0.05% of their portfolio.
  - sudosysgen 6y ago
    GME didn't fully revert back yet, and I'm sure a lot of them realized their gains around the peak and sold. Pensions dont make short term investments, they already had GME shares since a long time ago. They do sell when extraordinary circumstances happen and buy other stocks to hold long term again.
  - paulgb 6y ago
    Just because a fund’s normal MO is to buy and hold doesn’t mean they’re asleep at the wheel and won’t react if their value hypothesis is (more than) realized overnight. (Ontario Teacher’s Pension Fund sold almost 25M shares, for example https://www.bloomberg.com/news/articles/2021-01-29/reddit-fever-ignites-mall-stock-and-fund-cashes-out-500-million https://www.bloomberg.com/news/articles/2021-01-29/reddit-fe...)
    - TheTrotters 6y ago
      NB: They sold 25M shares at ~$20/share. That's probably much more than what they paid for these shares but it's nowhere near where GME was over the past few days.
      - cj 6y ago
        GME's 52 week low is $2.57. Without knowing when they entered their position. It was hovering around $4 for a long time last year. Even if they bought in at $5, selling at $20 is absolutely a win. Yes, they could have gambled and HODL'd, but there's no reason to gamble after seeing a 4x increase on a stock very few people expected would ever break $10.
      - dashundchen 6y ago
        Just to clarify from the article - the Ontario Pension Fund was invested and cashed out stock in a commercial real estate company called Macerich that was getting associated with Gamestop on /r/wsb, not Gamestop itself.
- colejohnson66 6y ago
  Exactly this. Wasn’t the whole point to spite short sellers even if it meant losing some?
- randomdata 6y ago
  > A few teacher pension funds got a good uptick and they were sharing that around. The Ontario Teachers Pension Plan, who was holding GME, is one of the largest hedge funds in existence, worth over 200 billion dollars. For comparison, Maverick Capital is worth only $15 billion. That is not a case of some little guy teachers making out well, it is the rich (if not the richest) hedge funds getting richer.
  - freeone3000 6y ago
    Right, but, it actually is the Ontario Teacher's Pension Plan. It's not simply the name, it actually is the pension fund for Ontario's teachers.
    - randomdata 6y ago
      A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction and risk management techniques to improve performance, such as short selling, leverage, and derivatives. That is what the OTPP does. That the hedge fund exists to fund pensions is irrelevant. If you dig into the investors behind other funds, you are likely to find that they are also investing to help fund their own retirement.
  - JumpCrisscross 6y ago
    > The Ontario Teachers Pension Plan, who was holding GME, is one of the largest hedge funds in existence, worth over 200 billion dollars OTPP is a pension fund. Hedge funds are a different beast.
    - donarb 6y ago
      They may be a pension fund, but they do use hedge funds to balance their portfolio. https://www.otpp.com/investments/performance/investment-strategy/asset-mix https://www.otpp.com/investments/performance/investment-stra... "Additionally, we complement our efforts by using external hedge fund managers, which gives us access to unique approaches that both add performance and diversify risk."
- gvhst 6y ago
  13Fs (reports that show what certain funds are holding) are filed quarterly. While you can see who owned GME as of 12/31/2020 the flows of the past few weeks is not public knowledge yet.
- ehsankia 6y ago
  There are plenty of "Average people" that entered near the top, and since not everyone can sell simultaneously, that means a ton of people are losing the life savings they dumped into this out of excitement as it crashed back down. I think the point being made here is that the whole narrative of "average people beating wall street" is pretty naive and quite bullshit. All in on, maybe a few handful of people got 10x or even 100x their money, but most of the gains were most likely made by hedge funds and with the exception of one or two hedge funds who were squeezed, the majority of losses will probably be by average people.
  - JakeTheAndroid 6y ago
    Well in fairness to WSB, it was really built around loss porn, not sticking it to the hedge funds. So even those people losing their life savings are contributing the to the WSB cause so long as they show off all the red.
  - simias 6y ago
    Lurking the wsb threads now it's clear that none of these people have exit strategies, or even strategies at all. Even if that fabled squeeze was to take place I'm sure many of them would still be left holding the bags because they wouldn't know when to sell. And again, at this point I'm really not sold on that squeeze theory at all, it seems very plausible that it ended last week and now we're just seeing a good old pump-and-dump taking place. In the end some people are going to be very lucky and some others are going to learn a very expensive lesson about the dangers of gambling.
  - jb775 6y ago
    This explains what's actually happening right now: https://www.youtube.com/watch?v=gMShFx5rThI&feature=youtu.be https://www.youtube.com/watch?v=gMShFx5rThI&feature=youtu.be
  - deleted 6y ago
    [deleted]
  - SignalNotSecure 6y ago
    I think there is a name for people positioning themselves in the market on the advice of self-proclaimed "retards and autists"
- simias 6y ago
  >The cats at wsb might be self proclaimed retards, but they're not that stupid. They know lots of other folks are going to make money off of them. You know, if you actually visit the sub, you'd know that. The sub you seem to like so much died last week. Whatever is left of it has been diluted when literally millions of people flooded it. "Eternal September" hit them hard. Right now it's filled with Q-level conspiracy theories, they parrot each other's talking point without understanding any of it ("short ladder" being the most funny and telling example of this). I can assure you that the vast majority of these people are wildly clueless about what's happening right now, they just keep telling each other that they're going to be rich. Look at this nonsense for instance: https://www.reddit.com/r/wallstreetbets/comments/lboqwm/yet_another_short_ladder_attack_to_start_the_day/ https://www.reddit.com/r/wallstreetbets/comments/lboqwm/yet_... Admittedly there are a few voices of reason being upvoted in this thread, but they're still hidden underneath the baseless "hype" claims.
  - cashewchoo 6y ago
    So much this. /r/wallstreetbets is going to struggle to recover. It's absolutely Eternal September. I've been subbed to WSB for about 5 years, ever since someone at work (prop trading) mentioned it as basically being a bunch of 25-30 yo finance people hanging out and doing dumb shit in their personal accounts for fun. I'll admit, I did some dumb stuff myself, trying to time UVXY/TVIX plays. (Basically netted 0 of course). But it was fun to shitpost about it. This is astrology for finance bros. And it'd been going a bit down-hill already, but most people were still that same description: young blood, day job in finance, knows what they're doing at both a mechanical and risk level, etc. And the content reflected it. Then somehow, one of those internet things happened. WSB became a hit, people flooded in, the mod team was overwhelmed, media attention flooded in making everything worse, etc. I feel like this is what a lot of /r/the_donald people ended up now that they're looking for a new cause. So much of the rhetoric I saw once the WSB Old Guard had been overwhelmed mirrored the kind of stuff you saw out of the_donald back in 2016.
    - decafninja 6y ago
      Seems the daily thread grows so big so fast that it becomes dog slow to even browse. But yeah, a lot of the comments are just one liner garbage memes: HODL! TO THE MOOOOOON! FISTS ON CHEST NO FEAR! TO VALHALLA! DIAMOND HANDS! As well as echo chamber "encouragement" to HODL! until $1000/$9000/the moon because Mark Cuban is on our side!
- notyourwork 6y ago
  > You know, if you actually visit the sub, you'd know that. I'm not sure this part is needed for you to convey your point.
- UncleMeat 6y ago
  > The cats at wsb might be self proclaimed retards, but they're not that stupid. The sub count increased 8-fold. Any prior culture it had has been overwhelmed.
- ookblah 6y ago
  uh yeah there are also a ton of people losing a lot bc they got convinced to buy in at 300+. the OGs maybe, but the sub has basically quadrupled in size and brought a lot of new people who don't know anything + people looking to capitalize on that.
marcinzm 6y ago
>did everyone a disservice I suspect they didn't do a disservice to their own bank accounts. Random internet strangers care as much about you as do politicians and hedge fund owners.
- SpicyLemonZest 6y ago
  I suspect they did. I had multiple friends buy GME and all of them are now in the red on that investment.
  - JohnJamesRambo 6y ago
    This is my experience as well. Many put their whole stimulus in it, and I can’t escape the idea that Wall Street knew all this would happen and they just found a way to get a large chunk of that other stimulus money that went to the people and not to corporations. An artificial movement that they may have created themselves that had an ethos of “bankrupting Wall Street”. Lol. A taxpayer funded pump and dump of epic proportions enabled by new tech sockpuppeting abilities and control. Before Cambridge Analytica I would say take your tinfoil hat off, but now I don’t know anymore. I consider nothing real online and go from there.
    - betterunix2 6y ago
      "Wall Street knew all this would happen" As if "Wall St." is one giant conspiracy. What happened to criticizing "Wall St." for treating the economy like a casino and driving the stock market into a giant bubble? Where are all those complaints about how "Wall St." is recklessly risking our retirement accounts? The contradictory conspiracy theories are astonishing.
umvi 6y ago
> The WSB moderators really did everyone a disservice by letting obvious misinformation flood the subreddit. Well, on the flip side a lot of redditors learned from the school of hard knocks, which is the best teacher in a lot of ways. Moderators suppressing posts won't teach a lesson you can only learn by losing money.
- Aunche 6y ago
  Half of them may learn a lesson, but the other half will just blame hedge funds against for their own mistake.
  - PragmaticPulp 6y ago
    It’s already turning into a conspiracy theory. The popular narrative is that GME would have continued going up, but RobinHood colluded with hedge funds to stop it. It doesn’t make any sense and ignores the incentives that RobinHood had to continue allowing people to buy. However, when to they’ve become completely invested (some times literally) in the narrative that GME was going to make them all rich while the hedge funds went bankrupt, it’s difficult to admit that they were wrong.
- PragmaticPulp 6y ago
  WSB moderators were (and still are) actively suppressing posts that don’t toe the line. I had a seasoned Reddit account that had been in WSB for a long time. As soon as I started commenting about how the short squeeze wasn’t a sure thing, my posts stopped showing up. They’ve been dismissing any comments that aren’t about GME going to the moon as hedge fund shills or bots. It’s extremely difficult to find any posts or comments critical of GameStop in the sub right now. If you sort by new, the critical comments are quickly removed. Moderators aren’t just letting Redditors figure it out. They’re shaping the conversation into the illusion of a consensus.
  - mywittyname 6y ago
    I had to unsub (having been a member for years) because my homepage was full of, "WE ARE HOLDING:diamond: :hands:!!!!I :diamond: LOVE :hands: THIS :diamond: STOCK :rocket::rocket::rocket::rocket::rocket::rocket:" posts with 50k upvotes and a list of gold a mile long. Edit: looks like emojis are stripped
stefanmichael 6y ago
HFTs were printing money throughout this entire ordeal due to volatility and inefficient trades
blantonl 6y ago
Volatility earns hedge funds huge returns. There are a very select few retail investors that really made a lot of money from this hype. There were a TON of professional traders that probably thought this was like shooting fish in a barrel.
technofiend 6y ago
Game theory inevitably takes over; I better sell before the next guy does and lowers the price even further. The only people with diamond anything are the ones who bailed and took their profits early.
- betterunix2 6y ago
  The people with "diamond hands" are the ones who opened short positions when the stock was trading in the $300+ range. They are probably to busy looking up which sports cars to buy with all the money they made to bother looking at WSB right now.
spelunker 6y ago
I've been visiting WSB for couple of years now, and generally the mods have been really hands off, so them letting misinformation flood the subreddit is par for the course. Good or bad, that's how it is. Honestly lots of investing communities are like this - do your own due diligence, etc. It is surprising how _much_ misinformation is being spread in WSB as of late, and feels like a weird cult more than ever, but WSB was never about heavy moderation.
Thaxll 6y ago
The goal was to screw the original shorters.
scarmig 6y ago
I wouldn't be surprised if hedge funds overall made a profit and retail investors overall made a loss in the GME fiasco. More likely than not, even. My pet conspiracy theory is that WSB is just a cat's paw for another hedge fund that saw an opportunity to make money and wanted to try out a new approach.
- betterunix2 6y ago
  It is a near certainty that hedge funds fleeced retail investors who bought GME above $100/share. The real problem with WSB is not the people who post there, it is the large crowd of unsophisticated lurkers who overestimate their own knowledge and abilities. The media did not help by hyping this story and making it sound like "Wall St." was terrified by a mob of Redditors. Two hedge funds lost some money, but as many have pointed out, those funds will probably still turn a profit on the year. Meanwhile, a bunch of hedge funds, algos, and prop traders are raking in cash from the spike in volatility, and a bunch of HFTs took advantage of the spike in volume. I expect a small bump in sports car and yacht sales in the NYC region as a bunch of "Wall St. bros" spend the giant bonuses they are taking home from this whole episode. As to the scam aspect, I give it a 50/50 chance that someone saw an opportunity to pump-and-dump some symbols with very high short interest. I doubt it was a hedge fund, it was probably an individual, probably someone living outside the reach of US law enforcement. The alternative is that a bunch of idiots actually came up with the idea that they could take on "Wall St." and managed to trigger a short squeeze, many of whom have yet to realize that the party's over.
015a 6y ago
Its funny how people don't see the $100,000+ portfolio losses (and much less often, gains) all over that subreddit and don't immediately realize that a ton of the people who visit it are Wall Street finance people. That's seriously the meme among the people only secondarily connected with WSB; its not "autists" or "the vox populi", its wall street bros (WSB?) who have to spend all day being super serious at their job, and WSB is their way of letting off steam. And if you think that these firms weren't already feeding every single post and comment on reddit into their HFT algorithms, you better at least believe that after this whole thing, they're gonna be doing that, and adding some extra weight to `if subreddit === "wallstreetbets"`. From that point of view, WSB is rather icky; its people who know what they're doing (most of the time) subtly and anonymously impersonating an idiot to influence the actual idiots.
- dclusin 6y ago
  Whereas Hacker News is just a bunch of people who don't know what they're doing pretending to be experts to influence the actual idiots. You can find charlatans pretty much anywhere money or people with money congregate.
  - dcolkitt 6y ago
    The difference is the HN hype train might cause you some headaches from picking an immature tech stack. Whereas the WSB echo chamber has literally ruined thousands of people's lives and retirements.
    - sokoloff 6y ago
      If someone is going to ruin their life or retirement based proximately to posts in a Reddit forum, it’s very hard for me to assign root cause to the Reddit forum. At most that’s the first or second “Why?” but there is surely a deeper issue.
      - quxpar 6y ago
        Many people were prudent blue-chip investors whose retirement was ruined by the housing crisis. There doesn't seem to be any 'smart money', just 'big money'.
duxup 6y ago
The populist atmosphere surrounding it all was very attractive, to me included. But I worry that like a lot of heated populist rhetoric it is misguided, or even entirely dishonest. We just went through a presidency with someone who loved populist rhetoric, but whose actions were anything but. It happens a lot sadly.
dgs_sgd 6y ago
The subreddit surged from 1 to 8 mil redditors in less than two weeks. I think the mods couldn't have stopped the disinformation even if they tried, just due to sheer increase in volume of posts.
razster 6y ago
https://reddit.com/r/dataisbeautiful/comments/lbdfbp/oc_failstodeliver_data_on_gamestop_gme/ https://reddit.com/r/dataisbeautiful/comments/lbdfbp/oc_fail... Might be worth a read. Comments are interesting as well.
cccc4all 6y ago
Most large holdings are public record. Anyone can see which institutions held what positions. Everyone knew who stood to gain and who stood to lose in the short squeeze. WSB crows was going after the short squeeze, anyone that got gains just rode the wave and knew when to step off or not.
strathmeyer 6y ago
Pump and dump? Were they the ones who removed the ability to sell stocks? I guess it's important to spread that misinformation around.
- FabHK 6y ago
  Nobody removed the ability to sell stocks. Some brokers removed the ability to buy stocks (because they were near broke and couldn't afford it), which probably saved some potential buyers some money and brought this train wreck to a halt a bit earlier.
FabHK 6y ago
On the bright side, though, at least it was a zero sum game (well, it will have been by the time the stock is back to where it started). Money was transferred from the early shorts and late longs to the early longs and late shorts; with the market makers taking a bit of a cut. Many other scams (or, for example, theft and robbery) destroy value (as, for example, a stolen wallet is a much bigger loss to the owner than it is a gain for the thief). Or, say, the 2008 GFC made a few people extremely rich (unscrupulous mortgage peddlers, investment bankers creating "complex, highly leveraged, exotic trades [...] without necessarily understanding all of the implications of those monstrosities", etc.), while wreaking havoc orders of magnitude greater on the entire world.
dheera 6y ago
> pump and dump scheme I don't see why everyone is against pump and dump schemes yet the system is literally designed for them to happen. It's an inevitable fact that they will happen when you set up a free market and a bunch of (stupid) humans from the general public, as also clearly demonstrated in the crypto scene. If people don't want them to occur, the short-term incentives, market, and exchanges themselves need to be re-structured in a way such that takes into account what a group of humans with free communication would do.
- betterunix2 6y ago
  First of all, there is no such thing as a free market, certainly not in the capital markets. There are mountains of regulations covering stock, options, futures, and debt trades. Trading is routinely halted on various securities in extreme circumstances. Insider trading is restricted, and the restrictions become more significant for higher level management. Companies are required to report certain information to the public. Markets exist to solve problems of valuation and capital allocation. Pump-and-dump schemes distort valuations in very extreme ways and work against the purpose of equity markets. That is a basic reason why they should be banned. Another reason is that scams introduce unnecessary risk to someone making an investment decision; ideally investors should only focus on risks related to a company's business, not the risk that the information they were given about that company is false. The extra risk will drive away investors and the result will be less capital available to otherwise promising ventures, which again works against the goals of capital markets. It is not really possible to restructure markets in a way that would avoid pump-and-dump schemes, because the problem with a pump-and-dump scheme is not actually related to the rules governing the market. The problem is that the pump-and-dump scheme involves deliberately spreading false information; yet it is equally possible that investors hear true information and rush to buy, and the market should allow for that situation.
  - dheera 6y ago
    I guess my main question is, why does the stock price go up if mountains of people suddenly buy a stock? It's because we base pricing based on a simple free market order book algorithm. If the markets enforced a pricing algorithm that included certain time-based functions instead of basing it purely out of the order book, and mandate that all transactions happen at the algorithm's determined price (instead of the free market price), a lot of problems including pump-and-dump schemes and insider trading could be theoretically eliminated. We could completely legalize insider trading, for example, if we technologically mandated that large orders took weeks to execute while single shares traded in milliseconds. (I'm an engineer, not a financial expert; I view this problem as very similar to e.g. API limits and firewalls that implement rules to prevent abuse.)
lasftew 6y ago
Money was made by fools at the expense of greater fools. Short-term trading is a zero-sum game, always has been, always will be. Except for the HFT firms and market makers, who basically own the Robinhood flow and who thrive in foolish volatility. Guess who's paying so that r/WSB bros pay zero commisions? It's not the Red Cross.

kccqzy 6y ago

Title should be "Mudrick Capital Gains $200 Million on AMC, GameStop Bets" which is more accurate and less clickbaity than the current.

texasbigdata 6y ago
Mudricks position in AMC substantially predated any "hype" or "meme" economy impacts.
- matwood 6y ago
  Yeah, prior to this meme, AMC was considered an acquisition target.
  - WSB_Mod 6y ago
    And for good reason, the exhibition business was consolidating, with Cineworld almost acquiring Cineplex, ultimately thwarted by COVID.

thefounder 6y ago

"Nobody" thought some hedge funds or bond holders would win along the ride, right? Regardless if they were tipped off about the restrictions in advance or not I think they were good citizens taking risks and helping two companies found in distress due covid.

garmaine 6y ago
The restrictions were at the brokerage level and only affected retail investors.
- thefounder 6y ago
  The restrictions affected the price and the price affected everyone involved. I wouldn't be surprised if the big boys received a call before a decision was made to make sure they dump everything they have before they unleash the restrictions panic.
- compiler-guy 6y ago
  This is because the big kids use big kid's brokerages. Which is to say, well capitalized brokerages that communicate well with their clients on possible capitalization needs. It is no shock at all that a cheap broker with a million new clients wasn't sufficiently well capitalized for a big kids play.

WanderPanda 6y ago

The people who adhered to the original plan (to overcome the million person prisoners dilemma) of setting a limit sell order at 420.69 should still have made a ton of money.

afterburner 6y ago
There were plenty of people calling for $1000 or even $10,000 sell orders. Definitely more than were calling for $420.69

mattnewton 6y ago

For people not reading the article and thinking this hedge fund was short these stocks: > In December, AMC signed a commitment letter with Mudrick Capital that called for the hedge fund to buy $100 million of new secured bonds that pay 15% cash or 17% deferred interest. In exchange, Mudrick received a commitment fee equal to about 8 million AMC shares. ie, this firm indirectly bet on an AMC recovery, investing in them as “distressed debt”, but the recovery in their stock came true suddenly.

johntb86 6y ago
They also sold out-of-the-money calls in Gamestop, meaning they made money if the price didn't increase.
- mattnewton 6y ago
  And on AMC covered by their shares too it looks like. But the article title and comments here made it sound like they were the same short selling hedge funds targeted for squeezing by wsb, when the truth is more complicated.

ojnabieoot 6y ago

The important thing being lost in all the chatter: Elon Musk didn't have a creepy grudge against this hedge fund, therefore it is a good hedge fund.

zionic 6y ago
Nothing about Elons valid and, in my opinion, morally correct statements disparaging short sellers was creepy.
- ojnabieoot 6y ago
  "Long buyers, who have an incentive to push positive propaganda about a company they are invested in (regardless of whether or not it is true), are good." "Short sellers, who have an incentive to push negative propaganda about a company they are invested in (regardless of whether or not it is true), are bad." This is self-evidently incoherent and is actually being too generous to Musk, who in real life is even stupider than my strawman[1]. And Elon Musk obviously has a creepy grudge against short sellers, as evidenced by his disgraceful comments in a 2018 analyst call[2]. The only thing approaching a principle that Musk has bothered to offer is that short sellers can hurt companies by artificially pushing the stock price down. But long buyers can hurt competitors by artificially pushing a stock price up! There's no "moral" difference. Musk just has absolutely no leg to stand on here - which is why he's myopically focused on Reddit and Twitter instead of people who are actually competent about finance. The only reason Elon Musk is "morally" opposed to short sellers is that they are hurting his personal bank account, and he's not satisfied with being merely the richest person in the world. And the only reason you share his opinion is that you are caught up in his cult of personality. Looking at your comment history: read more news and less Reddit. [1] https://twitter.com/elonmusk/status/1354890601649610753 https://twitter.com/elonmusk/status/1354890601649610753 [2] https://financialpost.com/investing/musk-takes-aim-at-analysts-for-pushing-tesla-short-thesis-1 https://financialpost.com/investing/musk-takes-aim-at-analys...

camjohnson26 6y ago

There’s a lot of anger against the financial system but unfortunately not much financial education to understand why it is working so poorly for average investors. That anger makes people lash out to try to change the status quo, which in this case caused Redditors to buy GME in spite of its ridiculously high valuation. But because they don’t actually understand the mechanics of the market the hedge funds will easily out maneuver them. Melvin Capital was a big loser with their fund down 50%, but the funds that held GameStop made out fine. A lot more of the volatility was probably driven by hedge funds than people think, and a lot less driven by Redditors. A billion dollars is an insane amount of money and even 6 million wallstreetsbets members working together can barely make a dent in these prices. At the end of the day hedge funds will be fine and retail investors will be left holding the bag. Their very real anger is valid, but should be turned toward the actual causes of financial injustice and not playing into the hand of hedge funds. Ironically, the shorts who have been blamed for much of this mess are the only ones screaming about the broken regulatory system, including the toothless SEC, and warning about asset bubbles driven by low interest rates that are making it very difficult to responsibly invest. If average investors would listen to these contrary voices instead of breathless longs on CNBC they would have a more complete view of what’s happening in markets today.

JumpCrisscross 6y ago
> That anger makes people lash out to try to change the status quo, which in this case caused Redditors to buy GME in spite of its ridiculously high valuation Is it anger motivating people to buy? I get mixing anger in with the greed and hysteria. Were I to play blackjack with the house being, I don't know, the Sackler family, I'd certainly get a high out of it and I'd certainly bet more. But I wouldn't be at the table because of the anger. The anger would just amplify the other motivations.
- WJW 6y ago
  > Were I to play blackjack with the house being ... the Sackler family, I'd certainly get a high out of it and I'd certainly bet more. You playing at a gambling game with negative expected value against people you hate and you want to give them MORE money? I'm sure they'd love that. Any casino prefers irrational customers over the ones that can do math. (The ones that can do math are still welcome, just not as appreciated)

hooande 6y ago

"we did it, reddit!"

Gunax 6y ago

To the surprise of no one--the established, well-prepared and well-funded players out-compete Joe and Jane retailer investor. Everyone loves the David defeating Goliath at his own game narrative. I only worry that we are going to forget all of the times that David gets slain.

deleted 6y ago
[deleted]
dcolkitt 6y ago
There's a simple lesson. Buy and hold a low-fee index fund. Stop trying to pick stocks. And for God's sake stop trying to day trade stocks. Deviating from buy-and-hold indexing is mathematically a zero-sum game. Winning this game is also one of the most monetarily rewarding games on Earth. It's extremely unlikely that you're anywhere near good enough to win this game. If you don't know who the fool at the table is, it's probably you.
- Gunax 6y ago
  I think you're absolutely correct. Stock picking is roughly a winner-take all game where you are facing off against incredibly smart and prepared people. Unfortunately, I have heard of several people[1] that have switched from passive funds to research and stock picking. One week of market silliness may have un-did decades of teaching the public to not pick individual stocks. While it's nice that more people are going to start reading 10-Qs and learning what a put is, it's almost certainly going to be a net-negative. [1]https://twitter.com/TrumpSC/status/1354197824494325764 https://twitter.com/TrumpSC/status/1354197824494325764
- WA 6y ago
  Not as simple. With buy and hold of index funds, you limit your upside. There is close to zero chance to make 1,000% within a year. Stock picking has potentially a bigger downside, but also more upside. This being a zero-sum game doesn’t matter, if you have either an edge or are simply lucky. So instead of saying it’s all bullshit, it probably makes more sense to put 90% in index funds but expose yourself to a bigger upside with stock picking.

whereTheShares 6y ago

Can anyone explain the Fails-To-Deliver data for GME? Especially since its orders of magnitude greater than other companies. I feel like only half the story is being told! https://wherearetheshares.com/ https://wherearetheshares.com/

ufotothemoon 6y ago
Everyone should see this! Spread the information as far and wide as possible. Something very odd going on with failure to deliver data on GameStop. Hold your shares!
JumpCrisscross 6y ago
It was and is a heavily shorted and volatile stock. It's anomalous relative to the rest of the market at this point in time. But there is almost always someone out on the long tail of settlement shitshows.

meibo 6y ago

People have been saying that(HFs having made more money out of this than they lost/will recover in a short time) for a while now, but I doubt that a lot of the cult-like newbie flood on WSB/other investment or crypto subreddits that has been getting "we rekd the billionairs" drilled into their head for the past 3 weeks in every crevice of the internet will acknowledge this. You can still see people "just pumping their life savings" into GME on there. I sincerely hope that they know what they're doing.

mattnewton 6y ago
I think you missed the position this fund took, which I think was to bail out amc with a "distressed debt agreement" for shares, which they then used to make a killing. So, to me it sounds like it's really that long hedge funds profited from shorts and reddit investors were taken along for the ride if they had good timing. Shorts still "got rekt" and the people who helped bail out AMC were rewarded.

noncoml 6y ago

I thought the goal was to punish the HFs that were shorting GME, which was pretty much achieved. I don’t think anyone(reasonable) was expecting the rest of the financial market to sit back and watch and miss the opportunity to join the party.

ehsankia 6y ago
They may have punished a few HFs, but now a lot of retail investors will be paying the price as the price drops. Obviously it's clear to most of us that jumping in the hype at $300 was probably not wise, but that's what happens when the hype train pushes through.
paxys 6y ago
A LOT of people bought GME at $350 thinking they would get rich. Propoganda on WSB basically convinced you that it would go to $1000 next week. At some point it stopped being about hedge funds and became a standard pump and dump.
- noncoml 6y ago
  To be honest, although everyone know that the spike will not last, none of us knew how high it would go. Even $350 was out of this world. In hindsight it's easy to give numbers like $300 or $350. But I agree, for a lot it turned into pump and dump.
SpicyLemonZest 6y ago
Perhaps at first. But if you browse through WSB right now, the prevailing narrative is that it wasn't achieved; the hedge funds are lying, they haven't stopped shorting, and you'd better keep buying and holding or the hedge funds will win.
WJW 6y ago
> punish the HFs This became the goal for some people. The original goal (way back when nobody knew who /u/deepfuckingvalue was) was to get rich on a short squeeze, because the counterparty on that trade had made a dumb gamble. If it had been some pension fund or even just retail investors on the other side that would have been fine too.

Aunche 6y ago

When, the media, brokers, clearing houses, or hedge funds disagree with you, that means they're obviously conspiring. When the media, celebrity-billionaires, politicians, other hedge funds, and early investors support you, that's confirmation that you were right. There's no way they could be motivated by other incentives like money or free publicity.

dougmwne 6y ago

Watching HN get caught up in this Gamestop bubble over the past week has been eye-opening to me about the community. The kind of information being spread around WSB was fully ridiculous. Wild conspiracy theories, financial advice with no basis in reality, astroturfing, and mob behavior. There has been an incredible amount of bleed-over between the garbage I've seen posted on WSB and the things posted in these HN threads and far too much reverence for a cesspool. I think HN likes to believe it is evidence based and rational instead of emotional and greedy. A more enlightened and civilized corner of the internet. I have not been seeing much of that lately. It turns out the promise of riches is enough to make any community lose it's collective mind. Here is a truism for you all: In any casino the players may win or lose, but the house always wins. If you think any bet is a guaranteed win, you have lost your rationality.

yaitsyaboi 6y ago
All the speculative mania in here was like 1/1000th of the stuff on WSB.
- wizzwizz4 6y ago
  Yes: it was ~1‰ of WallStreetBets. That's ridiculous for a community the size of Hacker News.
umanwizard 6y ago
There is a similar phenomenon when Bitcoin is discussed on HN.
- dougmwne 6y ago
  I really enjoy bitcoin speculation because it is so purely about human psychology with no inconvenient external realities or objective value to get in the way.
clairity 6y ago
wait til you really think about the covid bubble for more than 2 minutes. at a population level, you'll see a broad range of misperceptions everywhere. you'll see people missing the forest for the trees (private gatherings vs masks), focusing on trivialities (restaurants, fomites, masks again) and simply ignoring how much low-level emotion (fear, impotence) and instinct (othering strangers) drive our beliefs (have to protect ourselves from those selfish others, rather than the friends and family who present the highest risk).

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bobobob420 6y ago

Wow there are a lot of boomers in here. The point of the Reddit push was to screw the short sellers who did get screwed. And obviously it’s a pump and dump. And even more obviously everyone knows they are risking their money, no one is risking their life savings as someone else commented. And even if they did that’s their choice

smabie 6y ago

Hedge funds weren't the real winners, but rather prop shops/market making firms. January was the best month in the history of the universe for all the major prop shops: Citadel, Jane St, IMC, etc. The two "vols": volume and volatility are the corner stones of all market making performance. Bonuses are mighty fine this year, that is for sure.

pjfin123 6y ago

Buying and holding low fee index funds would probably be a more sustainable way to stick it to Wall Street.

H8crilA 6y ago

Imagine the balls of the person that pitched/approved selling uncovered calls on something that can 2x per day for a few days. "Let's collect $200M in options premium, but if the trend continues we'll lose $1B or even 10x more". Madness. Congrats on the trade tho.

andred14 6y ago

https://isthesqueezesquoze.com/ https://isthesqueezesquoze.com/