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I think it should started a discussion about some excesses of the stock market. Rich people can look for battered companies and severely profit from their accel

I think it should started a discussion about some excesses of the stock market. Rich people can look for battered companies and severely profit from their accelerated demise which some people wanted to fight against for once. Out of their own motives for profit or just for fun to be able to at least once stick it to speculators looking for easy profit. That trading was halted and "corrected" proved they had an impact. I don't think the stock market serves a public function with these mechanisms in place and needs further regulation.

JumpCrisscross 5y ago
> Rich people can look for battered companies and severely profit from their accelerated demise which some people wanted to fight against for once You’re describing accelerating creative destruction. It’s painful but good. Prevent it entirely and you cause stagnation. We can make the human impact more compassionate. But trying to stop it is folly.
- raxxorrax 5y ago
  You propose certainty where there is none and I am not talking about preventing it outright. I also do believe that it a profitable endeavour with very little general advantages as it is right now. That is more parasitic than constructive, so in that regard it fails to justify itself and regulation is required. Little would stagnate if modern fintech would be scraped almost entirely. Human impact should be secondary here. Additionally creative destruction can also mean that I destroy the wealth of those that currently do profit from canceling companies prematurely. It is applicable to economies rebuilding after a war, not applicable to Gamestop. That is an excuse for exploitation.
  - gruez 5y ago
    >I also do believe that it a profitable endeavour with very little general advantages as it is right now. the "advantage" here is that the true value of the company is reflected in the market, so that capital is allocated to the best companies rather than the most hyped ones. >That is more parasitic than constructive Can you explain how it's "parasitic"? >Additionally creative destruction can also mean that I destroy the wealth of those that currently do profit from canceling companies prematurely Isn't that what happens if someone thinks a stock will go down, shorts it, and gets it wrong?
- netcan 5y ago
  Perhaps, but honestly, I think Schumpeterian creative destruction is... at this point, more of an idealistic take. It exists, but it isn't a permanent feature of the big fish economy that stock markets represent. There are processes like online travel retail overtaking travel agenting. That's a sort of creative destruction. Mostly though, travel agents were an SME sector. Like the proverbial (and literal) restaurant trade, they're subject to market forces in this way and the theory often plays out in practice. Heavy price competition. Creative destruction. Etc. Banking OTOH, doesn't really have a creative destruction dynamic to speak of. Most auto manufacturers are what and who they were 20 or 50 years ago. Big tech, also, doesn't compete like restaurants do. It's more about holding control via network effects, platforms or whatnot. Avoiding head to head competition and market price dynamics entirely. GME fell somewhere in the middle. They're kind of restaurant like, but also relatively big and publicly traded. In any case, the financial meta game can often be more relevant and determinant of reality than market dynamics as per Schumpeter, JS Mill and the like.
  - JumpCrisscross 5y ago
    > Schumpeterian creative destruction is... at this point, more of an idealistic take Schumpeterian creative destruction is an ideal. But the process of innovation it describes is well documented in the study of entrepreneurship, venture capital, new firm formation and the industrial dynamic of new entrance. > isn't a permanent feature of the big fish economy that stock markets represent Most of the stock market isn’t Goliaths. Formation and destruction still reigns in most of the economy. There, short sellers add value. (I’m more sceptical of private equity and its leverage tactics.) > Banking OTOH, doesn't really have a creative destruction dynamic to speak of. Most auto manufacturers are what and who they were 20 or 50 years ago Banking and auto manufacturers share a history in being bailed out. Big Tech looks like a classic market failure, though Facebook’s stumbling gives me pause on that conclusion.
    - netcan 5y ago
      >> Schumpeterian creative destruction is an ideal. But the process of innovation it describes is well documented in the study of entrepreneurship, venture capital, new firm formation and the industrial dynamic of new entrance I'm not sure we disagree, at least not much. What I meant is that descriptions/theories/models/takes^ such as these are an ideal, I agree. The extent to which this ideal describes what appears to be a dominant process in the part of the world we're describing varies. What I'm (halfheartedly) arguing is that the Schumpeterian description currently, isn't so dominant. At least, it's not dominant enough to be the basis for understanding short selling... I don't believe. In fact, the share price of a company isn't necessarily very important to the operation of the company... in theory. Short selling is, also in theory, not necessarily all that impactful on share prices. >>Banking and auto manufacturers share a history in being bailed out. True, but again, this is markets in practice. The long term, perfect free market ideals are not something that generally exist in reality for a lot of reasons... both good and bad depending on your perspectives. I don't think Schumpeter meant for his ideas to apply only in hypothetical markets. Creative destruction was as a powerful force, for example, in the early decades of auto manufacturing. Banking has always been somewhat perplexing to economists, who can't really agree on whether or not they should be considered "firms." We might disagree about short sellers vs leveraged buyouts. I'm more skeptical of short selling and derivatives value add, more willing to entertain the idea that leveraged buyouts have a useful role. At least leveraged buyouts relate directly to financing business activities. ^Economists, atm, seem to like the term "story."
- deleted 5y ago
  [deleted]
- ska 5y ago
  > You’re describing accelerating creative destruction. It’s painful but good. There is this aspect, true - and necessary. An equal folly is to believe this is the only thing, or even the only significant thing, going on.
WJW 5y ago
> people can look for battered companies and severely profit from their accelerated demise Gamestop is one of those companies where the demise has been severely delayed IMO; they could've seen the future years ago but chose to stay with their legacy business of selling games in physical stores. Online game stores do what they do but with much lower costs and a much better business model. There are two ways forward for Gamestop IMO but neither is very positive: - They try to compete with the giants in the online gaming market, like Steam. I can't see them bootstrap their way into that, Steam and the others have too much network effect going on and GME has not shown any real talent in the online/tech domain. - They try to revitalize their offline presence. I don't see this happening either. There has been a decades long trend of everything moving from off- to on-line and I don't see that changing anytime soon. For anyone who agrees with the above assessment, the conclusion would be that the future for Gamestop is not very bright. Depending on the timescale you think it is going to play out, being short is an entirely valid position to be in. Personally, I think the sentimental memories of the ~25-~45 years old generation will keep it alive for a decade or so more.
- FractalParadigm 5y ago
  GameStop has pivoted to some extent. It's incredibly rare that I go into one of their stores, but the last time I did it was less of a games store and more of a gaming merchandise store. Their acquisition of ThinkGeek and subsequent selling of those products in stores is satisfying a niche that nobody else (apart from maybe the mom & pop comic book store) seems interested in.
  - j2bax 5y ago
    I’m always surprised how much random gaming merch Target displays.
  - gruez 5y ago
    >it was less of a games store and more of a gaming merchandise store. Their acquisition of ThinkGeek and subsequent selling of those products in stores is satisfying a niche that nobody else (apart from maybe the mom & pop comic book store) seems interested in. Maybe it's just my personal preferences, but I can't imagine myself or anyone I know buying enough "gaming merchandise" in significant numbers. If I need a game, it's either digital, or physical through amazon with same day delivery. It's the same with other gaming-related merchandise. I go for whatever's cheaper/on sale, which is usually bestbuy or amazon.
this_user 5y ago
The purpose of stock markets is to find the "correct" price for a stock. To that end, it needs to be possible to express both bullish and bearish views. However, doing the latter is already more difficult because in order to short the stock, you need to borrow it first, and you need to pay for those borrowed shares for as long as you keep holding them. Furthermore, those borrows can be pulled at any time, forcing you to cover at the most inopportune of times. There are also things like Reg SHO Rule 201(b) ("Uptick rule") that further complicate shorting a stock. Regulators have even been known to ban short sales in certain names outright like they they did for financial stocks during the 2008 financial crisis. If anything, selling short needs to be made easier as it represents an essential corrective. And this ultimately serves the greater good too as it ensures that the price of a stock is correct and investors don't overpay, which will inevitably lead to losses for them. A good recent example of what happens otherwise is Wirecard. In 2019 the German BaFin enacted a ban on short sales in the stock of the company after reports had been published that were essentially accusing them of fraud. In the end, those reports turned out to be true, and the company collapsed less than 18 months later. The stock fell from over EUR 150 to virtually zero and investors lost pretty much everything. They should have listened to the short sellers rather than fight them. There are also no "easy profits" in short selling. They only make money if they are right. There are people who have been calling for the immediate collapse of Tesla for the last decade or so. Others have been trying to short Amazon, Google, Apple, Microsoft, because they think that these companies are completely overvalues. Most of these people are probably bankrupt by now. But GME isn't any of those companies. They are a failing brick and mortar retailer that is boxed in by Steam on one side and Amazon on the other. They have repeatedly attempted to transform the company over the last decade without success. The fact that their plan is to launch some NFT market place, a field in which they have no experience and that is already crowded by established players like OpenSea, demonstrates how much their management is completely out of ideas. And if the shorts make money from the GME stock, it just means they were right.
- netcan 5y ago
  >> The purpose of stock markets is to find the "correct" price for a stock. Is it? Who's purpose? The main purpose of an IPO is (was?) financing. IE, raising money for the company operations... like a bank loan, VC investment, etc. In practice, many of today's IPOs are companies that don't need to raise money (anymore). For those companies, their main purpose when doing an IPO is usually liquidity. IE, letting founders, investors and such cash their shares... or continue owning them with the added benefit of market prices to validate the value of their wealth. Your argument is quite mainstream, but I can't see how anyone would make it except to justify short selling. It seems to me there's a lot of "you sure about that?" in the whole thing. Are you sure "finding the correct price" is an actual need? Who needs this, and why? Are you sure short selling makes for better prices? Liquidity is a similar argument made in favour of derivative HFT and such. I also think its (probably/usually) quite bogus. Do stock markets even have liquidity problems? Stocks are insanely liquid. That's what they're for.
FabHK 5y ago
> I don't think the stock market serves a public function with these mechanisms in place The purpose is precisely to zoom in on the correct value of a stock (via crowdsourcing and putting your money where your mouth is), and thereby allow investment to flow to the most advantageous opportunities.
jcranberry 5y ago
Sufficient volatility will cause automatically triggered halts. It's required by regnms.

JumpCrisscross 5y ago

> Rich people can look for battered companies and severely profit from their accelerated demise which some people wanted to fight against for once You’re describing accelerating creative destruction. It’s painful but good. Prevent it entirely and you cause stagnation. We can make the human impact more compassionate. But trying to stop it is folly.

raxxorrax 5y ago
You propose certainty where there is none and I am not talking about preventing it outright. I also do believe that it a profitable endeavour with very little general advantages as it is right now. That is more parasitic than constructive, so in that regard it fails to justify itself and regulation is required. Little would stagnate if modern fintech would be scraped almost entirely. Human impact should be secondary here. Additionally creative destruction can also mean that I destroy the wealth of those that currently do profit from canceling companies prematurely. It is applicable to economies rebuilding after a war, not applicable to Gamestop. That is an excuse for exploitation.
- gruez 5y ago
  >I also do believe that it a profitable endeavour with very little general advantages as it is right now. the "advantage" here is that the true value of the company is reflected in the market, so that capital is allocated to the best companies rather than the most hyped ones. >That is more parasitic than constructive Can you explain how it's "parasitic"? >Additionally creative destruction can also mean that I destroy the wealth of those that currently do profit from canceling companies prematurely Isn't that what happens if someone thinks a stock will go down, shorts it, and gets it wrong?
netcan 5y ago
Perhaps, but honestly, I think Schumpeterian creative destruction is... at this point, more of an idealistic take. It exists, but it isn't a permanent feature of the big fish economy that stock markets represent. There are processes like online travel retail overtaking travel agenting. That's a sort of creative destruction. Mostly though, travel agents were an SME sector. Like the proverbial (and literal) restaurant trade, they're subject to market forces in this way and the theory often plays out in practice. Heavy price competition. Creative destruction. Etc. Banking OTOH, doesn't really have a creative destruction dynamic to speak of. Most auto manufacturers are what and who they were 20 or 50 years ago. Big tech, also, doesn't compete like restaurants do. It's more about holding control via network effects, platforms or whatnot. Avoiding head to head competition and market price dynamics entirely. GME fell somewhere in the middle. They're kind of restaurant like, but also relatively big and publicly traded. In any case, the financial meta game can often be more relevant and determinant of reality than market dynamics as per Schumpeter, JS Mill and the like.
- JumpCrisscross 5y ago
  > Schumpeterian creative destruction is... at this point, more of an idealistic take Schumpeterian creative destruction is an ideal. But the process of innovation it describes is well documented in the study of entrepreneurship, venture capital, new firm formation and the industrial dynamic of new entrance. > isn't a permanent feature of the big fish economy that stock markets represent Most of the stock market isn’t Goliaths. Formation and destruction still reigns in most of the economy. There, short sellers add value. (I’m more sceptical of private equity and its leverage tactics.) > Banking OTOH, doesn't really have a creative destruction dynamic to speak of. Most auto manufacturers are what and who they were 20 or 50 years ago Banking and auto manufacturers share a history in being bailed out. Big Tech looks like a classic market failure, though Facebook’s stumbling gives me pause on that conclusion.
  - netcan 5y ago
    >> Schumpeterian creative destruction is an ideal. But the process of innovation it describes is well documented in the study of entrepreneurship, venture capital, new firm formation and the industrial dynamic of new entrance I'm not sure we disagree, at least not much. What I meant is that descriptions/theories/models/takes^ such as these are an ideal, I agree. The extent to which this ideal describes what appears to be a dominant process in the part of the world we're describing varies. What I'm (halfheartedly) arguing is that the Schumpeterian description currently, isn't so dominant. At least, it's not dominant enough to be the basis for understanding short selling... I don't believe. In fact, the share price of a company isn't necessarily very important to the operation of the company... in theory. Short selling is, also in theory, not necessarily all that impactful on share prices. >>Banking and auto manufacturers share a history in being bailed out. True, but again, this is markets in practice. The long term, perfect free market ideals are not something that generally exist in reality for a lot of reasons... both good and bad depending on your perspectives. I don't think Schumpeter meant for his ideas to apply only in hypothetical markets. Creative destruction was as a powerful force, for example, in the early decades of auto manufacturing. Banking has always been somewhat perplexing to economists, who can't really agree on whether or not they should be considered "firms." We might disagree about short sellers vs leveraged buyouts. I'm more skeptical of short selling and derivatives value add, more willing to entertain the idea that leveraged buyouts have a useful role. At least leveraged buyouts relate directly to financing business activities. ^Economists, atm, seem to like the term "story."
deleted 5y ago
[deleted]
ska 5y ago
> You’re describing accelerating creative destruction. It’s painful but good. There is this aspect, true - and necessary. An equal folly is to believe this is the only thing, or even the only significant thing, going on.

WJW 5y ago

> people can look for battered companies and severely profit from their accelerated demise Gamestop is one of those companies where the demise has been severely delayed IMO; they could've seen the future years ago but chose to stay with their legacy business of selling games in physical stores. Online game stores do what they do but with much lower costs and a much better business model. There are two ways forward for Gamestop IMO but neither is very positive: - They try to compete with the giants in the online gaming market, like Steam. I can't see them bootstrap their way into that, Steam and the others have too much network effect going on and GME has not shown any real talent in the online/tech domain. - They try to revitalize their offline presence. I don't see this happening either. There has been a decades long trend of everything moving from off- to on-line and I don't see that changing anytime soon. For anyone who agrees with the above assessment, the conclusion would be that the future for Gamestop is not very bright. Depending on the timescale you think it is going to play out, being short is an entirely valid position to be in. Personally, I think the sentimental memories of the ~25-~45 years old generation will keep it alive for a decade or so more.

FractalParadigm 5y ago
GameStop has pivoted to some extent. It's incredibly rare that I go into one of their stores, but the last time I did it was less of a games store and more of a gaming merchandise store. Their acquisition of ThinkGeek and subsequent selling of those products in stores is satisfying a niche that nobody else (apart from maybe the mom & pop comic book store) seems interested in.
- j2bax 5y ago
  I’m always surprised how much random gaming merch Target displays.
- gruez 5y ago
  >it was less of a games store and more of a gaming merchandise store. Their acquisition of ThinkGeek and subsequent selling of those products in stores is satisfying a niche that nobody else (apart from maybe the mom & pop comic book store) seems interested in. Maybe it's just my personal preferences, but I can't imagine myself or anyone I know buying enough "gaming merchandise" in significant numbers. If I need a game, it's either digital, or physical through amazon with same day delivery. It's the same with other gaming-related merchandise. I go for whatever's cheaper/on sale, which is usually bestbuy or amazon.

this_user 5y ago

The purpose of stock markets is to find the "correct" price for a stock. To that end, it needs to be possible to express both bullish and bearish views. However, doing the latter is already more difficult because in order to short the stock, you need to borrow it first, and you need to pay for those borrowed shares for as long as you keep holding them. Furthermore, those borrows can be pulled at any time, forcing you to cover at the most inopportune of times. There are also things like Reg SHO Rule 201(b) ("Uptick rule") that further complicate shorting a stock. Regulators have even been known to ban short sales in certain names outright like they they did for financial stocks during the 2008 financial crisis. If anything, selling short needs to be made easier as it represents an essential corrective. And this ultimately serves the greater good too as it ensures that the price of a stock is correct and investors don't overpay, which will inevitably lead to losses for them. A good recent example of what happens otherwise is Wirecard. In 2019 the German BaFin enacted a ban on short sales in the stock of the company after reports had been published that were essentially accusing them of fraud. In the end, those reports turned out to be true, and the company collapsed less than 18 months later. The stock fell from over EUR 150 to virtually zero and investors lost pretty much everything. They should have listened to the short sellers rather than fight them. There are also no "easy profits" in short selling. They only make money if they are right. There are people who have been calling for the immediate collapse of Tesla for the last decade or so. Others have been trying to short Amazon, Google, Apple, Microsoft, because they think that these companies are completely overvalues. Most of these people are probably bankrupt by now. But GME isn't any of those companies. They are a failing brick and mortar retailer that is boxed in by Steam on one side and Amazon on the other. They have repeatedly attempted to transform the company over the last decade without success. The fact that their plan is to launch some NFT market place, a field in which they have no experience and that is already crowded by established players like OpenSea, demonstrates how much their management is completely out of ideas. And if the shorts make money from the GME stock, it just means they were right.

netcan 5y ago
>> The purpose of stock markets is to find the "correct" price for a stock. Is it? Who's purpose? The main purpose of an IPO is (was?) financing. IE, raising money for the company operations... like a bank loan, VC investment, etc. In practice, many of today's IPOs are companies that don't need to raise money (anymore). For those companies, their main purpose when doing an IPO is usually liquidity. IE, letting founders, investors and such cash their shares... or continue owning them with the added benefit of market prices to validate the value of their wealth. Your argument is quite mainstream, but I can't see how anyone would make it except to justify short selling. It seems to me there's a lot of "you sure about that?" in the whole thing. Are you sure "finding the correct price" is an actual need? Who needs this, and why? Are you sure short selling makes for better prices? Liquidity is a similar argument made in favour of derivative HFT and such. I also think its (probably/usually) quite bogus. Do stock markets even have liquidity problems? Stocks are insanely liquid. That's what they're for.

FabHK 5y ago

> I don't think the stock market serves a public function with these mechanisms in place The purpose is precisely to zoom in on the correct value of a stock (via crowdsourcing and putting your money where your mouth is), and thereby allow investment to flow to the most advantageous opportunities.

jcranberry 5y ago

Sufficient volatility will cause automatically triggered halts. It's required by regnms.