7 ms·

Last Sane Man on Wall Street

116 points by kamaal 4y ago

ckardat123 4y ago
If anyone is interested, here's a chart of Nikola insider stock trades graphed alongside the price of $NKLA: https://www.quiverquant.com/insiders/NKLA https://www.quiverquant.com/insiders/NKLA Here's a chart of Riot insider stock trades graphed alongside the price of $RIOT: https://www.quiverquant.com/insiders/RIOT https://www.quiverquant.com/insiders/RIOT
- lend000 4y ago
  Nice demonstration of how insiders don't know shit about longer term price movements of their own stock, especially when driven by the macro environment. The only way insiders could theoretically make money using an unfair edge is trading intraday earnings releases with leverage (which only a few people are in a position to know about, and which the SEC is very good at detecting nowadays).
  - shapefrog 4y ago
    > Nice demonstration of how insiders don't know shit about longer term price movements of their own stock if insiders done know shit about their own stock - what chance does twitter investing newsletter writter have > especially when driven by the macro environment The headwind / tailwind of the macro environment is really the biggest factor - this should be the #1 lesson for anyone investing anything.
  - paulpauper 4y ago
    Insiders will buy a little stock to make a much larger position go up in value (paper wealth) due to positive press and as a gesture of confidence. And then sell the inflated stock or borrow against it later. Or hedge it
    - chollida1 4y ago
      How are you assuming insiders hedge their stock?
tristor 4y ago
Fascinating article, and it sounds like this guy isn't just making money doing this but is actively working to expose bad actors in the marketplace. I applaud his work, and I hope to see more of this in the future. There's a lot of just crazy fraudulent stuff happening in the market over the last decade, and I'm hoping with the music slowing down, that we'll see a lot of the frauds fall over.
- gsatic 4y ago
  And that leads to - why not let the govt make money exposing bad actors? Why should the tax payer fund the cops?
  - filoleg 4y ago
    > why not let the govt make money exposing bad actors?Why should the tax payer fund the cops? Do you mind elaborating? Just trying to figure out what you meant there. Are you talking literally about police funding and how it could have been better used for funding SEC? Or are you talking about it in a more metaphorical sense, and questioning why random tax payers are doing the job of catching instances of malicious insider trading instead of SEC doing that? If it is the latter, then there is one solid incentive - whistleblowers get a reward between 10-30% of the monetary sanctions recovered on that case by SEC, as long as the case was successful and led to over $1mil recovered[0]. 0. https://www.sec.gov/whistleblower/frequently-asked-questions https://www.sec.gov/whistleblower/frequently-asked-questions
  - luckylion 4y ago
    They're not making money "exposing bad actors", they're making money by betting that exposing the bad actors will move investors to sell and stay away from those bad actors within some period of time. But that's not a given outcome, and the government shouldn't speculate with taxes.
  - ajb 4y ago
    We've tried profit making cops, it leads to corruption: https://en.m.wikipedia.org/wiki/Jonathan_Wild https://en.m.wikipedia.org/wiki/Jonathan_Wild https://www.bbc.co.uk/news/blogs-echochambers-29228851 https://www.bbc.co.uk/news/blogs-echochambers-29228851
joki777 4y ago
[dead]
polio 4y ago
I love short sellers. They serve a vital moral purpose in financial markets, as the article describes. Here's hoping the new rate regime will serve them better.
- draw_down 4y ago
  [dead]
- MuffinFlavored 4y ago
  i feel like i’ve read (in comment sections on reddit) the opposite? that short sellers are predatory and “bad”
  - quintushoratius 4y ago
    It all depends on which side of the sale you're on. The interesting thing about short sellers is, we only focus on the short sellers, not the people or companies that are loaning the stocks to them. When the short seller loses, they stand to make a bundle.
- chii 4y ago
  > moral purpose in financial markets i wouldn't really describe it as moral, but more a corrective force to ensure efficiency in the markets. It's neutral (or amoral), rather than moral.
wakahiu 4y ago
https://archive.ph/2022.01.24-140647/https://nymag.com/intelligencer/2022/01/nathan-anderson-hindenburg-research-short-selling.html https://archive.ph/2022.01.24-140647/https://nymag.com/intel...
berkle4455 4y ago
I’m confused how/why activist short-selling is legal but pump-and-dump scams are illegal. Isn’t it basically the same? Short sellers often get it wrong or blatantly distribute FUD. Hindenburg has proven to be well-researched and legit though.
- deleted 4y ago
  [deleted]
- ProjectArcturis 4y ago
  If you libel a company, that's illegal. If you publish unflattering but true things, that's perfectly fine.
- kgwgk 4y ago
  Short-selling is not "basically" market manipulation - but it can be: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3198384A https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3198384A
- pkkm 4y ago
  > Short sellers often (...) blatantly distribute FUD. I'm going to call a [citation needed] on that. It's already very illegal to spread false information in order to profit from short-selling. In fact, I'd say that shorts are overly scrutinized in comparison to longs. Both are important for price discovery and both have the potential to cause a misallocation of capital if they spread false information in favor of their position, yet people seem to have a positivity bias that makes them more willing to forgive someone who spoke positively of an overhyped stock than someone who spoke negatively of a good stock. Given short-sellers' importance in exposing "creative accounting" and excessive hype, I worry that the current popular sentiment against them will discourage further shorting even more than the financial incentives already do (a long has an unbounded upside with the downside capped at 100%, while a short has an unbounded downside with the upside capped at 100%).
  - cokecramer 4y ago
    [dead]
paulpauper 4y ago
Then, on June 9, 2020, Anderson came across a tweet from Milton. His truck company, Nikola, had gone public on NASDAQ five days before: “I’ve wanted to say this my whole adult life; $NKLA is now worth more than Ford and [Fiat Chrysler]. Nipping on the heels of GM …” Given that Ford and GM trade at very low multiple and have not done much in a long time, even decades, this is not that undoable. I think the survivorship bias with shorting is huge. So many people and firms try and fail. The risks seem to be glossed over by the article. Seeing a few big winners like Nikola one may be under mistaken impression this is a good strategy. Having a big win is seldom enough to beat the market. If you allocate 5% of your capital for a short and it goes bankrupt, you only increased your total capital by 5%. Making the historical 10% average (including dividends) with an index fund is less risky and more consistent, probably.
- 2020aj 4y ago
  The full article indeed discusses these shortcomings and does not make it appear that short selling is more effective. It portrays it almost as a form of activism
- bbor 4y ago
  I hope it’s not too rude for HN to say that you’re missing the whole point of the article. 1. Presumably that discussion took place pre-FTX. 2. I don’t think he said “1000% in a day”, just in general. 3. The article goes into repeated, extensive detail about how short selling is financially dubious and extremely risky. 4. It goes into his childhood because it’s a profile piece. I mean this with no offense, only because I’ve been there many times: did you feel personally attacked by this guys takes on crypto/stocks/our world at large?
  - paulpauper 4y ago
    Good points, agree. Short selling needs to be weighed with risks vs. reward. Unlimited downside is a major risk. Would not recommend it.
- rhaway84773 4y ago
  The article goes on and on about how risky shorting is and how many firms have failed. No one thinks of shorting as a good business strategy. That’s why when Elon Musk goes on about how shorts are these shadowy super powerful figures you know he’s completely bullshitting because shorts are among the few (only?) actors interested in downward price discovery, while the rest of the world, including governments all over, would much prefer constant price growth with the correction to be suffered by a future generation/government.
dilyevsky 4y ago
Heh in 2020 short sellers were devil’s incarnate and now they publish puff pieces about them. As often happens there are two sides to everything but I for one am looking forward to a more healthy investing environment (yeah right like that’s going to happen).
- paulgb 4y ago
  That seems to have been a momentary blip coinciding with when retail investors momentarily forgot that stocks could go anywhere but up. The Big Short (2015) and The China Hustle (2017) both portrayed short sellers as the heroes, for example.
  - dilyevsky 4y ago
    Which is even more hilarious because those swaps that burry and others bought actually accelerated banking collapse.
vishnugupta 4y ago
Ah such a shame the article just missed one of the most explosive reports [1] by Hindenburg Research. It's shaken up the richest man in India and the BJP government as a consequence. The story even made it to HN's front page. [1] https://hindenburgresearch.com/?p=2376 https://hindenburgresearch.com/?p=2376
- curiousgal 4y ago
  I am going to play the "Devil"'s advocate here, let's suppose that the report is true and that the company has committed all sorts of fraud. What would happen to the mass of people it employs it it were to go under? I just don't believe that entire families should suffer because the CEO has been lying to investors.
  - skybrian 4y ago
    If the underlying businesses are valuable then after bankruptcy, the stockholders lose, but the businesses should continue to operate under new owners. This happens all the time. (Hertz is one example.) It doesn’t happen when the whole business was a confidence game, like FTX.
  - shapefrog 4y ago
    If my criminal fraudulent enterprise collapsing means no more private school for timmy and jane my children, I should be permitted to perpetuate my fraud on others?
    - kerpotgh 4y ago
      [dead]
  - snapcaster 4y ago
    I appreciate the satanic advocacy My response is that this isn't just a "belief" kind of thing where if hindenburg doesn't release the report everything is fine. There is actually a fraud occurring, and when a fraud is occurring that means there is a "hole" like a place where people expect there to be money but there isn't. This means eventually it would have manifested at one point or another, and often the nature of these "holes" is that they become exponentially wider probably meaning the fallout is even more intense the longer it goes on
mprime1 4y ago
If you find this interesting, check out ‘King of Stonks’ (on Netflix). It’s a fun critique of corporate greed and capitalism gone wild. The story centers around an activist short seller who could be inspired by the stories in this article. (German series but the dubbing is good)

116 points by kamaal 4y ago

If anyone is interested, here's a chart of Nikola insider stock trades graphed alongside the price of $NKLA: https://www.quiverquant.com/insiders/NKLA https://www.quiverquant.com/insiders/NKLA Here's a chart of Riot insider stock trades graphed alongside the price of $RIOT: https://www.quiverquant.com/insiders/RIOT https://www.quiverquant.com/insiders/RIOT

lend000 4y ago
Nice demonstration of how insiders don't know shit about longer term price movements of their own stock, especially when driven by the macro environment. The only way insiders could theoretically make money using an unfair edge is trading intraday earnings releases with leverage (which only a few people are in a position to know about, and which the SEC is very good at detecting nowadays).
- shapefrog 4y ago
  > Nice demonstration of how insiders don't know shit about longer term price movements of their own stock if insiders done know shit about their own stock - what chance does twitter investing newsletter writter have > especially when driven by the macro environment The headwind / tailwind of the macro environment is really the biggest factor - this should be the #1 lesson for anyone investing anything.
- paulpauper 4y ago
  Insiders will buy a little stock to make a much larger position go up in value (paper wealth) due to positive press and as a gesture of confidence. And then sell the inflated stock or borrow against it later. Or hedge it
  - chollida1 4y ago
    How are you assuming insiders hedge their stock?

tristor 4y ago

Fascinating article, and it sounds like this guy isn't just making money doing this but is actively working to expose bad actors in the marketplace. I applaud his work, and I hope to see more of this in the future. There's a lot of just crazy fraudulent stuff happening in the market over the last decade, and I'm hoping with the music slowing down, that we'll see a lot of the frauds fall over.

gsatic 4y ago
And that leads to - why not let the govt make money exposing bad actors? Why should the tax payer fund the cops?
- filoleg 4y ago
  > why not let the govt make money exposing bad actors?Why should the tax payer fund the cops? Do you mind elaborating? Just trying to figure out what you meant there. Are you talking literally about police funding and how it could have been better used for funding SEC? Or are you talking about it in a more metaphorical sense, and questioning why random tax payers are doing the job of catching instances of malicious insider trading instead of SEC doing that? If it is the latter, then there is one solid incentive - whistleblowers get a reward between 10-30% of the monetary sanctions recovered on that case by SEC, as long as the case was successful and led to over $1mil recovered[0]. 0. https://www.sec.gov/whistleblower/frequently-asked-questions https://www.sec.gov/whistleblower/frequently-asked-questions
- luckylion 4y ago
  They're not making money "exposing bad actors", they're making money by betting that exposing the bad actors will move investors to sell and stay away from those bad actors within some period of time. But that's not a given outcome, and the government shouldn't speculate with taxes.
- ajb 4y ago
  We've tried profit making cops, it leads to corruption: https://en.m.wikipedia.org/wiki/Jonathan_Wild https://en.m.wikipedia.org/wiki/Jonathan_Wild https://www.bbc.co.uk/news/blogs-echochambers-29228851 https://www.bbc.co.uk/news/blogs-echochambers-29228851

joki777 4y ago

[dead]

polio 4y ago

I love short sellers. They serve a vital moral purpose in financial markets, as the article describes. Here's hoping the new rate regime will serve them better.

draw_down 4y ago
[dead]
MuffinFlavored 4y ago
i feel like i’ve read (in comment sections on reddit) the opposite? that short sellers are predatory and “bad”
- quintushoratius 4y ago
  It all depends on which side of the sale you're on. The interesting thing about short sellers is, we only focus on the short sellers, not the people or companies that are loaning the stocks to them. When the short seller loses, they stand to make a bundle.
chii 4y ago
> moral purpose in financial markets i wouldn't really describe it as moral, but more a corrective force to ensure efficiency in the markets. It's neutral (or amoral), rather than moral.

wakahiu 4y ago

https://archive.ph/2022.01.24-140647/https://nymag.com/intelligencer/2022/01/nathan-anderson-hindenburg-research-short-selling.html https://archive.ph/2022.01.24-140647/https://nymag.com/intel...

berkle4455 4y ago

I’m confused how/why activist short-selling is legal but pump-and-dump scams are illegal. Isn’t it basically the same? Short sellers often get it wrong or blatantly distribute FUD. Hindenburg has proven to be well-researched and legit though.

deleted 4y ago
[deleted]
ProjectArcturis 4y ago
If you libel a company, that's illegal. If you publish unflattering but true things, that's perfectly fine.
kgwgk 4y ago
Short-selling is not "basically" market manipulation - but it can be: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3198384A https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3198384A
pkkm 4y ago
> Short sellers often (...) blatantly distribute FUD. I'm going to call a [citation needed] on that. It's already very illegal to spread false information in order to profit from short-selling. In fact, I'd say that shorts are overly scrutinized in comparison to longs. Both are important for price discovery and both have the potential to cause a misallocation of capital if they spread false information in favor of their position, yet people seem to have a positivity bias that makes them more willing to forgive someone who spoke positively of an overhyped stock than someone who spoke negatively of a good stock. Given short-sellers' importance in exposing "creative accounting" and excessive hype, I worry that the current popular sentiment against them will discourage further shorting even more than the financial incentives already do (a long has an unbounded upside with the downside capped at 100%, while a short has an unbounded downside with the upside capped at 100%).
- cokecramer 4y ago
  [dead]

paulpauper 4y ago

Then, on June 9, 2020, Anderson came across a tweet from Milton. His truck company, Nikola, had gone public on NASDAQ five days before: “I’ve wanted to say this my whole adult life; $NKLA is now worth more than Ford and [Fiat Chrysler]. Nipping on the heels of GM …” Given that Ford and GM trade at very low multiple and have not done much in a long time, even decades, this is not that undoable. I think the survivorship bias with shorting is huge. So many people and firms try and fail. The risks seem to be glossed over by the article. Seeing a few big winners like Nikola one may be under mistaken impression this is a good strategy. Having a big win is seldom enough to beat the market. If you allocate 5% of your capital for a short and it goes bankrupt, you only increased your total capital by 5%. Making the historical 10% average (including dividends) with an index fund is less risky and more consistent, probably.

2020aj 4y ago
The full article indeed discusses these shortcomings and does not make it appear that short selling is more effective. It portrays it almost as a form of activism
bbor 4y ago
I hope it’s not too rude for HN to say that you’re missing the whole point of the article. 1. Presumably that discussion took place pre-FTX. 2. I don’t think he said “1000% in a day”, just in general. 3. The article goes into repeated, extensive detail about how short selling is financially dubious and extremely risky. 4. It goes into his childhood because it’s a profile piece. I mean this with no offense, only because I’ve been there many times: did you feel personally attacked by this guys takes on crypto/stocks/our world at large?
- paulpauper 4y ago
  Good points, agree. Short selling needs to be weighed with risks vs. reward. Unlimited downside is a major risk. Would not recommend it.
rhaway84773 4y ago
The article goes on and on about how risky shorting is and how many firms have failed. No one thinks of shorting as a good business strategy. That’s why when Elon Musk goes on about how shorts are these shadowy super powerful figures you know he’s completely bullshitting because shorts are among the few (only?) actors interested in downward price discovery, while the rest of the world, including governments all over, would much prefer constant price growth with the correction to be suffered by a future generation/government.

dilyevsky 4y ago

Heh in 2020 short sellers were devil’s incarnate and now they publish puff pieces about them. As often happens there are two sides to everything but I for one am looking forward to a more healthy investing environment (yeah right like that’s going to happen).

paulgb 4y ago
That seems to have been a momentary blip coinciding with when retail investors momentarily forgot that stocks could go anywhere but up. The Big Short (2015) and The China Hustle (2017) both portrayed short sellers as the heroes, for example.
- dilyevsky 4y ago
  Which is even more hilarious because those swaps that burry and others bought actually accelerated banking collapse.

vishnugupta 4y ago

Ah such a shame the article just missed one of the most explosive reports [1] by Hindenburg Research. It's shaken up the richest man in India and the BJP government as a consequence. The story even made it to HN's front page. [1] https://hindenburgresearch.com/?p=2376 https://hindenburgresearch.com/?p=2376

curiousgal 4y ago
I am going to play the "Devil"'s advocate here, let's suppose that the report is true and that the company has committed all sorts of fraud. What would happen to the mass of people it employs it it were to go under? I just don't believe that entire families should suffer because the CEO has been lying to investors.
- skybrian 4y ago
  If the underlying businesses are valuable then after bankruptcy, the stockholders lose, but the businesses should continue to operate under new owners. This happens all the time. (Hertz is one example.) It doesn’t happen when the whole business was a confidence game, like FTX.
- shapefrog 4y ago
  If my criminal fraudulent enterprise collapsing means no more private school for timmy and jane my children, I should be permitted to perpetuate my fraud on others?
  - kerpotgh 4y ago
    [dead]
- snapcaster 4y ago
  I appreciate the satanic advocacy My response is that this isn't just a "belief" kind of thing where if hindenburg doesn't release the report everything is fine. There is actually a fraud occurring, and when a fraud is occurring that means there is a "hole" like a place where people expect there to be money but there isn't. This means eventually it would have manifested at one point or another, and often the nature of these "holes" is that they become exponentially wider probably meaning the fallout is even more intense the longer it goes on

mprime1 4y ago

If you find this interesting, check out ‘King of Stonks’ (on Netflix). It’s a fun critique of corporate greed and capitalism gone wild. The story centers around an activist short seller who could be inspired by the stories in this article. (German series but the dubbing is good)