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I'll repost my comment on this from 15 days ago. Not well received at the time (in the middle of the frenzy). Not sure why...I always assumed that HN has an a

I'll repost my comment on this from 15 days ago. Not well received at the time (in the middle of the frenzy). Not sure why...I always assumed that HN has an audience that is decent at math and analytical thinking. Here it is: What nobody is talking about yet are the thousands (tens of thousands? hundreds of thousands? millions?) of people who got hurt and will get hurt by this event. Sure, it's neat to see stories of people making from tens of thousands to millions of dollars due to the short squeeze. And yet it is easy to forget that those who played the game were buying GME all the way up to $500 one day, $420 the next day and $300-something the next. People also bought puts at different levels. All of this will come crashing down on top of them. It's a Ponzi scheme (or whatever the appropriate analogy might be). The people who, through hubris and ignorance, bought these stocks chasing them up the price scale to "Help our brothers who bought at $350 get positive" and other encouragement found on r/wallstreetbets are going to get shafted (if they haven't already). In other words, the institutional short sellers are not the only ones who lost money. The difference is, they KNOW they can win. Why? Because there is no way GME is worth $200, $300, $400, $500 or $1,000. At some point in the future gravity will do its thing and this stock will suffer a violent crash. And you can bet there will be short sellers there to profit from it. And you can bet a large number of people who are hoping to get rich quickly are going to lose unimaginable amounts of money. Today's addition to this 15-day old comment: We already know at least one fund made $700 million on this fiasco. For some strange reason the stock is holding around $50 these days. Here's a company that lost four billion dollars in the past four or five quarters with a stock that might not even be worth 1/10 of current levels. And people are still playing the game (or being played). As I said two weeks ago: Gravity will eventually do what gravity does. I don't know why people think they can magically violate the laws of physics.

havelhovel 6y ago
I think your comment was not well received because it compares the stock market to laws of physics and gravity, limits GME investor psychology to a) hubris or b) ignorance, describes a market exchange as a Ponzi scheme, proposes that millions of people may have been hurt by this event without defining what hurt means, and (now) expresses the view that anyone who is decent at mathematical or analytical thinking would automatically agree with you.
- robomartin 6y ago
  If what happened with GME does not prove all of my points I am not sure what will convince those who don't see it. Surely you understand that my use of terms like "gravity" and "Ponzi scheme" is in the mode of imagery, illustrations. If I must clarify: Gravity: What goes up comes down. What goes up very high without a basis in reality WILL come crashing down. It is an inescapable force. Ponzi scheme: A large base of people (many layers of them) are defrauded into jumping into an investment that is doomed to fail (refer to "gravity"). Only a few at the top of the pyramid make money. Everyone else loses big. Hubris: OK, stupidity, ignorance, innocence, misguidedness, etc. Pick one. Hubris happens to be the most benign. Perhaps people were too excited to engage their brains. It doesn't change the reality that they did not engage their brains. So, I am calling it "hubris" to be nice. The correct term would be far harsher than that. Ignorance: Nobody who understood what was going on would have taken that side of the trade. I knew exactly what was going on. I watched it go into the 400's and bough a bunch of puts. Laughed all the way down. Even if it kept going and reached $1K, I would have made money (refer to "gravity"). Those who pumped it up that high were not displaying great intellectual capacity, and they paid for it. Hurt: Lost money. Lost their savings. Committed suicide. Had heart attacks. Got divorced. Lost money they could not lose. Mathematical and analytical thinking: Yeah. I stand by that 100%. When the second derivative of the stock price with respect to time is, well, ridiculous, without an equally impressive reason to support it there is one thing we know without a shadow of a doubt: It will come down just as fast and hard (refer to "gravity") and you better be waiting for the other side to buy put options and not a part of the front side of that spike. Like it or not stocks have to mean-revert to a reasonable mathematical calculation related to actual valuation. Sure, there are corner cases here and there, but they are few when compared to the average market P/E ratio of about 25:1. A one billion to 1 change in the P/E ratio (whatever GME was, it was ridiculous) in a few days doesn't pass physics or math. And, yes, anyone who doesn't agree with me based on these facts should refrain from throwing money at the stock market. EDIT: Anyone who lost money with GME was not being intelligent when making those decisions. They can't even claim they were victims. Pick any adjective that pleases you, "intelligent" isn't one of them. The folks who understood what was going on (see "gravity") and acted accordingly are the intelligent ones. This might not be a nice thing to be told. And yet the best lessons are sometimes learned harshly. I hope everyone who got hurt in this event is able to eventually recover and then come back to the market as thinking investors and not as part of an unthinking mob.

havelhovel 6y ago

I think your comment was not well received because it compares the stock market to laws of physics and gravity, limits GME investor psychology to a) hubris or b) ignorance, describes a market exchange as a Ponzi scheme, proposes that millions of people may have been hurt by this event without defining what hurt means, and (now) expresses the view that anyone who is decent at mathematical or analytical thinking would automatically agree with you.

robomartin 6y ago
If what happened with GME does not prove all of my points I am not sure what will convince those who don't see it. Surely you understand that my use of terms like "gravity" and "Ponzi scheme" is in the mode of imagery, illustrations. If I must clarify: Gravity: What goes up comes down. What goes up very high without a basis in reality WILL come crashing down. It is an inescapable force. Ponzi scheme: A large base of people (many layers of them) are defrauded into jumping into an investment that is doomed to fail (refer to "gravity"). Only a few at the top of the pyramid make money. Everyone else loses big. Hubris: OK, stupidity, ignorance, innocence, misguidedness, etc. Pick one. Hubris happens to be the most benign. Perhaps people were too excited to engage their brains. It doesn't change the reality that they did not engage their brains. So, I am calling it "hubris" to be nice. The correct term would be far harsher than that. Ignorance: Nobody who understood what was going on would have taken that side of the trade. I knew exactly what was going on. I watched it go into the 400's and bough a bunch of puts. Laughed all the way down. Even if it kept going and reached $1K, I would have made money (refer to "gravity"). Those who pumped it up that high were not displaying great intellectual capacity, and they paid for it. Hurt: Lost money. Lost their savings. Committed suicide. Had heart attacks. Got divorced. Lost money they could not lose. Mathematical and analytical thinking: Yeah. I stand by that 100%. When the second derivative of the stock price with respect to time is, well, ridiculous, without an equally impressive reason to support it there is one thing we know without a shadow of a doubt: It will come down just as fast and hard (refer to "gravity") and you better be waiting for the other side to buy put options and not a part of the front side of that spike. Like it or not stocks have to mean-revert to a reasonable mathematical calculation related to actual valuation. Sure, there are corner cases here and there, but they are few when compared to the average market P/E ratio of about 25:1. A one billion to 1 change in the P/E ratio (whatever GME was, it was ridiculous) in a few days doesn't pass physics or math. And, yes, anyone who doesn't agree with me based on these facts should refrain from throwing money at the stock market. EDIT: Anyone who lost money with GME was not being intelligent when making those decisions. They can't even claim they were victims. Pick any adjective that pleases you, "intelligent" isn't one of them. The folks who understood what was going on (see "gravity") and acted accordingly are the intelligent ones. This might not be a nice thing to be told. And yet the best lessons are sometimes learned harshly. I hope everyone who got hurt in this event is able to eventually recover and then come back to the market as thinking investors and not as part of an unthinking mob.