4 ms·

How is it a scam? You buy stock. You own a share in a company, or in a company that owns more companies. The company makes money. It pays that out by dividends

How is it a scam? You buy stock. You own a share in a company, or in a company that owns more companies. The company makes money. It pays that out by dividends or share buybacks. You sell it decades later, hopefully for a profit. That's the deal. That's what's for sale. You want to blame HFTs or whatever? Bah. Worst case you're losing a fraction of a percent of your initial purchase. You've got absolutely nothing on the old-school commissions you'd pay twenty years ago. Oh, wait. I know how it's a "scam". "Double your money", you say. It's a "scam" because people went in thinking "buy sell buy sell momentum trade profit profit profit DOUBLE MY MONEY THEN AGAIN AND AGAIN FREE MONEY FREE MONEY" and it turns out there wasn't free money, that the money was in fact very expensive, that you had to assume Risk, that people who make money on it do a ton of Research to mitigate the risk, that you were competing with billion-dollar systems for doing research and managing risk and getting that money. Maybe you even went in thinking "TO THE MOON" and were surprised when your GME stopped trading because your broker was impaired by pre-existing contracts and couldn't make it happen and elected to use the options which they put in the fine-print they asked you to read and you didn't. Well, boo hoo. Don't play games with your money, don't play games with your food, buy the product that's for sale like a normal responsible investor, and you'll be fine. Or play games, treat it like a casino, but then don't be surprised when you get the casino experience.

rapsey 5y ago
>How is it a scam? You buy stock. You own a share in a company, or in a company that owns more companies. Because the stock you buy may not have been actually bought by your broker. Which is the entire point of the GME saga which you completely misunderstand. A stock has no business being shorted over 100% in a market that is not a scam. Major firms can get away with crimes like naked shorting and no one can do anything about it except the regulators and they turn a blind eye or impose hilariously low fines.
- ericmay 5y ago
  It's more complicated than that. The GameStop saga notably didn't occur with other brokers, such as Vanguard, where shares were "in-stock" if you'll pardon the pun and available for purchase or sale. The volatility of $GME caused issues with the settlement system. That doesn't make "the stock market" a scam. > A stock has no business being shorted over 100% in a market that is not a scam. I'm not sure this is a strong argument for a scam, but is a strong intuitive argument for correcting a problem with how the stock market functions.
- fennecfoxen 5y ago
  Meh. GME didn't stop trading because some fund had shorted the shares. They stopped trading because people couldn't be sure firms like Robin Hood would be good for the money. No one was prepared to go to bat and procure millions of dollars in meme-stocks for them, then be on the hook when those millions in dollars didn't show up. And everyone whined and whined and whined about "different rules for hedge funds!!!" Of course the big players pay the big fees to put their millions of dollars on the exchange directly, and have to do many things to limit the exchange's risk, like comply with rules and get audited and post collateral — oh, hey, that's what Robinhood didn't have enough of to execute your trade; maybe we're playing by the same rules after all...
  - rapsey 5y ago
    > Meh. GME didn't stop trading because some fund had shorted the shares The entire issue is a fund was allowed to short shares they did not have. An illegal act unless you are powerful enough. That is the origin and cause of the entire story. No one disagrees that Robin Hood is garbage. But them being that is not the main issue at all. RH having collateral is something entirely different from the shares you have suppose to have been owning being nothing but an IOU
    - UncleMeat 5y ago
      > The entire issue is a fund was allowed to short shares they did not have. Has this ever been demonstrated?
      - rapsey 5y ago
        The float was shorted 120%. This is not disputed.
        gruez 5y ago
        and that's not evidence of naked shorting, because of synthetic longs. see: footnote 3 of this article https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops#footnote-3 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...
- Aunche 5y ago
  >Because the stock you buy may not have been actually bought by your broker The stock did get bought by your broker. That's why gme's stock skyrocketed and brokers didn't want to trade it. A short interest over 100% doesn't imply naked shorting. If you're borrowing a stock, you can lend it out to someone else. It's like a sublease. There are two leases for a single apartment.
  - tartoran 5y ago
    And lots of naked shorts, inexistent shares sold by private market makers such as Citadel were deployed to suppress the price. Also don’t forget about dark pools and other tricks done to suppress the price action that are done shamelessly behind the scenes. Perhaps cryptos have become so successful over time because this type of manipulation is harder to pull off but that doesn’t make cryptos safer either. If it wasn’t for the high inflation rate I would not touch the market even with a 10 foot pole.
    - gruez 5y ago
      >Also don’t forget about dark pools and other tricks done to suppress the price action that are done shamelessly behind the scenes. can you elaborate on this? What tactics were used, and how did they "suppress the price action"? Moreover, how do they compare with "let's screw over hedge funds by driving up the price of a stock!"? AFAIK buying up stocks in a shorted company isn't illegal, but intentionally doing so to cause a short squeeze is, eg. >In 2012, the U.S. Securities and Exchange Commission charged Philip Falcone with market manipulation in relation to a short squeeze on a series of high-yield bonds issued by MAAX Holdings. After hearing that a firm was shorting the bonds, Falcone purchased the entire issue of bonds. He also lent the bonds to the short-sellers, and then bought them back when the traders sold them. As a result, his total exposure exceeded the entire issue of the MAAX bonds. Falcone then stopped lending the bonds, so that short-sellers could not liquidate their positions anymore. The price of the bonds rose dramatically.[16][17] The short-sellers could only liquidate their positions by contacting Falcone directly.[17]
- chollida1 5y ago
  > A stock has no business being shorted over 100% in a market that is not a scam. This also implies that those pesky, cheating buyer were long over 200% of hte stock. A stock has no business being bought over 200% in a market that is not a scam. Why is no one looking at that pesky wall street bets crowd for market manipulation:)
cudgy 5y ago
Sounds like you agree, except you don’t use the word “scam”.
- fennecfoxen 5y ago
  Not really? I mean if I went to the farmer's market and decided that instead of buying vegetables, I wanted to make a bunch of money buying and selling vegetables, and I ended up losing all my money, I'd be hard-pressed to call the market a scam either, even if some of the farmers do have inside information on the upcoming radish harvest.
  - garyfirestorm 5y ago
    I’d say that is fraud.
    - gruez 5y ago
      How's that fraud? did the farmers deceive you?
jrm4 5y ago
The measure of "is it a scam" is simple - How well does reality match up with your description, with regard to the people buying and selling things? Just watch the question of: when the little guy buys something (e.g. a stock or some other security) is the story that is told around "what it is" reasonably close to the truth? Pro-tip, if you're framing this as a hard binary, you're probably either the scammer or the sucker.

rapsey 5y ago

>How is it a scam? You buy stock. You own a share in a company, or in a company that owns more companies. Because the stock you buy may not have been actually bought by your broker. Which is the entire point of the GME saga which you completely misunderstand. A stock has no business being shorted over 100% in a market that is not a scam. Major firms can get away with crimes like naked shorting and no one can do anything about it except the regulators and they turn a blind eye or impose hilariously low fines.

ericmay 5y ago
It's more complicated than that. The GameStop saga notably didn't occur with other brokers, such as Vanguard, where shares were "in-stock" if you'll pardon the pun and available for purchase or sale. The volatility of $GME caused issues with the settlement system. That doesn't make "the stock market" a scam. > A stock has no business being shorted over 100% in a market that is not a scam. I'm not sure this is a strong argument for a scam, but is a strong intuitive argument for correcting a problem with how the stock market functions.
fennecfoxen 5y ago
Meh. GME didn't stop trading because some fund had shorted the shares. They stopped trading because people couldn't be sure firms like Robin Hood would be good for the money. No one was prepared to go to bat and procure millions of dollars in meme-stocks for them, then be on the hook when those millions in dollars didn't show up. And everyone whined and whined and whined about "different rules for hedge funds!!!" Of course the big players pay the big fees to put their millions of dollars on the exchange directly, and have to do many things to limit the exchange's risk, like comply with rules and get audited and post collateral — oh, hey, that's what Robinhood didn't have enough of to execute your trade; maybe we're playing by the same rules after all...
- rapsey 5y ago
  > Meh. GME didn't stop trading because some fund had shorted the shares The entire issue is a fund was allowed to short shares they did not have. An illegal act unless you are powerful enough. That is the origin and cause of the entire story. No one disagrees that Robin Hood is garbage. But them being that is not the main issue at all. RH having collateral is something entirely different from the shares you have suppose to have been owning being nothing but an IOU
  - UncleMeat 5y ago
    > The entire issue is a fund was allowed to short shares they did not have. Has this ever been demonstrated?
    - rapsey 5y ago
      The float was shorted 120%. This is not disputed.
      - gruez 5y ago
        and that's not evidence of naked shorting, because of synthetic longs. see: footnote 3 of this article https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops#footnote-3 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...
Aunche 5y ago
>Because the stock you buy may not have been actually bought by your broker The stock did get bought by your broker. That's why gme's stock skyrocketed and brokers didn't want to trade it. A short interest over 100% doesn't imply naked shorting. If you're borrowing a stock, you can lend it out to someone else. It's like a sublease. There are two leases for a single apartment.
- tartoran 5y ago
  And lots of naked shorts, inexistent shares sold by private market makers such as Citadel were deployed to suppress the price. Also don’t forget about dark pools and other tricks done to suppress the price action that are done shamelessly behind the scenes. Perhaps cryptos have become so successful over time because this type of manipulation is harder to pull off but that doesn’t make cryptos safer either. If it wasn’t for the high inflation rate I would not touch the market even with a 10 foot pole.
  - gruez 5y ago
    >Also don’t forget about dark pools and other tricks done to suppress the price action that are done shamelessly behind the scenes. can you elaborate on this? What tactics were used, and how did they "suppress the price action"? Moreover, how do they compare with "let's screw over hedge funds by driving up the price of a stock!"? AFAIK buying up stocks in a shorted company isn't illegal, but intentionally doing so to cause a short squeeze is, eg. >In 2012, the U.S. Securities and Exchange Commission charged Philip Falcone with market manipulation in relation to a short squeeze on a series of high-yield bonds issued by MAAX Holdings. After hearing that a firm was shorting the bonds, Falcone purchased the entire issue of bonds. He also lent the bonds to the short-sellers, and then bought them back when the traders sold them. As a result, his total exposure exceeded the entire issue of the MAAX bonds. Falcone then stopped lending the bonds, so that short-sellers could not liquidate their positions anymore. The price of the bonds rose dramatically.[16][17] The short-sellers could only liquidate their positions by contacting Falcone directly.[17]
chollida1 5y ago
> A stock has no business being shorted over 100% in a market that is not a scam. This also implies that those pesky, cheating buyer were long over 200% of hte stock. A stock has no business being bought over 200% in a market that is not a scam. Why is no one looking at that pesky wall street bets crowd for market manipulation:)

cudgy 5y ago

Sounds like you agree, except you don’t use the word “scam”.

fennecfoxen 5y ago
Not really? I mean if I went to the farmer's market and decided that instead of buying vegetables, I wanted to make a bunch of money buying and selling vegetables, and I ended up losing all my money, I'd be hard-pressed to call the market a scam either, even if some of the farmers do have inside information on the upcoming radish harvest.
- garyfirestorm 5y ago
  I’d say that is fraud.
  - gruez 5y ago
    How's that fraud? did the farmers deceive you?

jrm4 5y ago

The measure of "is it a scam" is simple - How well does reality match up with your description, with regard to the people buying and selling things? Just watch the question of: when the little guy buys something (e.g. a stock or some other security) is the story that is told around "what it is" reasonably close to the truth? Pro-tip, if you're framing this as a hard binary, you're probably either the scammer or the sucker.