IS Forum
Forum Index Register Members List Events Mark Forums Read Help

Go Back   International Skeptics Forum » General Topics » Economics, Business and Finance
 


Welcome to the International Skeptics Forum, where we discuss skepticism, critical thinking, the paranormal and science in a friendly but lively way. You are currently viewing the forum as a guest, which means you are missing out on discussing matters that are of interest to you. Please consider registering so you can gain full use of the forum features and interact with other Members. Registration is simple, fast and free! Click here to register today.
Reply
Old 27th January 2021, 07:59 AM   #1
SuburbanTurkey
Penultimate Amazing
 
SuburbanTurkey's Avatar
 
Join Date: Apr 2018
Location: Massachusetts, USA
Posts: 11,064
Wall Street Bets subreddit / Too late to buy Gamestop stock?

For those how haven't noticed, something unusual is happening on the stock market these last few days.

The price of Gamestop shares have been rocketing through the roof. And a massive buying campaign spearheaded by the WallStreetBets subreddit is the reason why.

From Slate:

Quote:
Around this time, institutional investors, apparently including at least one well-known hedge fund, took out massive short positions against the stock, which trades as GME. These investors figured that amateur investors saw Cohen’s big name and ignored the difficult fundamentals facing the business, overvaluing the stock as they bought it up in droves. So the professional investors tried to make money off GME’s decline by borrowing the stock, selling it high, buying it back low, and pocketing the difference, minus the fees to borrow the stock.

Lots of investors tried to short-sell the stock. (How many investors have “long” and “short” positions is not difficult to figure out.) As of Monday, 71.2 million shares of GameStop stock involved a short position, per Bloomberg, more than the total amount of publicly tradable shares, something that’s only possible because not all shares of GME are available for purchase.
https://slate.com/technology/2021/01...tbets-gme.html

To overly simplify, traditional hedge funds took out short positions on Gamestop, a video game retail outlet in decline. Members of the wall street bets subreddit noticed this and decided to launch a leaderless, crowd-sourced stock manipulation campaign to boost the price of the shares. Retail investors are buying up GME shares and causing the price to spike sharply upwards.

The goal is to cause massive financial harm to the hedge funds that have taken out large short positions against the stock. If the price can stay high enough, long enough, these firms will be forced to pay out big losses. This is also comingled with the rush of people jumping on to the stock seeing it as a license to print money.

There is no actual business reason for gamestop shares to be priced this way, and eventually the buying spree will have to end and the price will collapse back to a normal value. But the goal of the buyers is to keep the price inflated long enough to bankrupt these funds that made risky short sales.

We're seeing the birth of a new type of stock market manipulation, one that will be difficult to contend with as it is largely crowdsourced and leaderless.

I have no idea what to make of this, but it is objectively hilarious that hedge fund ghouls are looking to lose their shirts to a bunch of keyboard warriors.

You can watch the price manipulation in real time. Stock sign GME. look at the 5 day or 1 month to see the massive buying spree.

https://finance.yahoo.com/quote/GME
__________________
Gobble gobble

Last edited by SuburbanTurkey; 27th January 2021 at 08:01 AM.
SuburbanTurkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 08:08 AM   #2
TragicMonkey
Poisoned Waffles
 
TragicMonkey's Avatar
 
Join Date: Jun 2004
Location: Monkey
Posts: 60,796
I've been following. It's delightful! I've always considered shorting to be a nasty combination of gambling and vulturism.
__________________
You added nothing to that conversation, Barbara.
TragicMonkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 08:25 AM   #3
SuburbanTurkey
Penultimate Amazing
 
SuburbanTurkey's Avatar
 
Join Date: Apr 2018
Location: Massachusetts, USA
Posts: 11,064
Originally Posted by TragicMonkey View Post
I've been following. It's delightful! I've always considered shorting to be a nasty combination of gambling and vulturism.
That's where the whole "robinhood" angle kinda loses me.

Sure, the people that have short positions coming due during the buying spree are going to get cleaned out. They are rich hedge fund types, I won't shed a tear.

But others are still getting rich. People are still taking short positions on the stock, and they will absolutely make a killing whenever the buying frenzy stops and the mass sell off happens. one set of short selling hedge fund managers lose their shirts, another set of short selling hedge fun managers make a killing.

It seems pretty clear to me that anyone buying GME now is risking to lose pretty much the entire value once the bubble pops. Normally people would just consider this the risk of trying to time a bubble, but the goal of many seems almost like a suicide pact. They are encouraging eachother to hold the stock indefinitely, which, assuming they have any understanding of what they are doing, means they are planning to lose their investments purely to stick it to the short sellers.

Obviously this solidarity will break if a sufficiently large sell-off starts, and then it will be a run on the market as these people try to sell off their inflated stock before the value crashes back down to a normal price.
__________________
Gobble gobble
SuburbanTurkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 08:35 AM   #4
TragicMonkey
Poisoned Waffles
 
TragicMonkey's Avatar
 
Join Date: Jun 2004
Location: Monkey
Posts: 60,796
Originally Posted by SuburbanTurkey View Post
That's where the whole "robinhood" angle kinda loses me.

Sure, the people that have short positions coming due during the buying spree are going to get cleaned out. They are rich hedge fund types, I won't shed a tear.

But others are still getting rich. People are still taking short positions on the stock, and they will absolutely make a killing whenever the buying frenzy stops and the mass sell off happens. one set of short selling hedge fund managers lose their shirts, another set of short selling hedge fun managers make a killing.

It seems pretty clear to me that anyone buying GME now is risking to lose pretty much the entire value once the bubble pops. Normally people would just consider this the risk of trying to time a bubble, but the goal of many seems almost like a suicide pact. They are encouraging eachother to hold the stock indefinitely, which, assuming they have any understanding of what they are doing, means they are planning to lose their investments purely to stick it to the short sellers.

Obviously this solidarity will break if a sufficiently large sell-off starts, and then it will be a run on the market as these people try to sell off their inflated stock before the value crashes back down to a normal price.
Well, of course. The lesson here isn't that one side or the other must necessarily win anything, the lesson is that times have changed. Now that more of the public has access to the investment world, the scope of what might happen has broadened. That door can't be shut now, so the institutions and individuals who pay attention and adapt will thrive, those who cling to the past will die out. The cute aspect of this particular event is that the victims will be those on either side of this who let their greed outweigh sense.
__________________
You added nothing to that conversation, Barbara.
TragicMonkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 08:37 AM   #5
JoeMorgue
Self Employed
Remittance Man
 
JoeMorgue's Avatar
 
Join Date: Nov 2009
Location: Florida
Posts: 34,804
Wall Street is next only to politics in sooner or later information democracy is going to have to do something (I have near literally next to no idea what mind you, but nothing) to it as people realize how much of one big self feeding wizard duel it all is.
__________________
"When enough people make false promises, words stop meaning anything. Then there are no more answers, only better and better lies." - Jon Snow

"Every lie we tell incurs a debt to the truth. Sooner or later, that debt is paid." - Valery Legasov
JoeMorgue is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 08:41 AM   #6
SuburbanTurkey
Penultimate Amazing
 
SuburbanTurkey's Avatar
 
Join Date: Apr 2018
Location: Massachusetts, USA
Posts: 11,064
Originally Posted by JoeMorgue View Post
Wall Street is next only to politics in sooner or later information democracy is going to have to do something (I have near literally next to no idea what mind you, but nothing) to it as people realize how much of one big self feeding wizard duel it all is.
My hope is that this adventure of reddit weirdos manipulating the stock market knocks of a bit of the mysticism off the image of the stock market.

While there is real, fundamental value that undergirds much of the stock market, so much of what takes place there is little more than compulsive gambling and hair-brained schemes. This arbitrary passing of large sums of money has largely escaped scrutiny because it has long been only meaningfully accessible to the most elite and wealthy circles, but the democratizing power of the internet is knocking this down a peg.

Are these wall street bets weirdos posting emojis of rockets and moons really all that different than the elite freaks that cook up schemes on their Bloomberg terminals on Wall Street? Not really.

I hope this helps show that much of day trading is just get-rich-quick schemes operating off the backbone of the real economy, and much of it adds no real value and incurs tremendous risk for innocent bystanders.
__________________
Gobble gobble

Last edited by SuburbanTurkey; 27th January 2021 at 08:45 AM.
SuburbanTurkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 08:53 AM   #7
nelsondogg
Critical Thinker
 
Join Date: Feb 2004
Posts: 371
I don't get how this reddit group is able to inflate the price so much. Browsing through the subreddit they sound like Qanon nut jobs. Elon musk tweeted a link to them yesterday and that itself caused the stock to jump. Interesting to see if this is a one off occurrence or if this will become commonplace.
nelsondogg is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 08:56 AM   #8
Cavemonster
Philosopher
 
Join Date: Sep 2008
Posts: 6,701
Originally Posted by JoeMorgue View Post
Wall Street is next only to politics in sooner or later information democracy is going to have to do something (I have near literally next to no idea what mind you, but nothing) to it as people realize how much of one big self feeding wizard duel it all is.
It's interesting that you made this comparison. I've been following this WSB effort on reddit, and the first thing it reminded me of was the 4chan troll army's roll in the 2016 election. Not that I'm saying they're morally equivalent, but the manifesting of rando internet armies in substantial real world outcomes.

Not too long ago, getting enough people together to game a boat naming survey (Boaty McBoatface) was seen as a large triumph of social media power. And social media as an organizing tool for more traditional efforts is nothing new, but this feels like a different kind of force. Of course the stock market and politics have been BS in a million other ways for all time, but this emerging ability for new groups to game things really substantial for the luls is something else.
__________________
The weakness of all Utopias is this, ... They first assume that no man will want more than his share, and then are very ingenious in explaining whether his share will be delivered by motorcar or balloon.
-G.K. CHESTERTON
Cavemonster is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:04 AM   #9
SuburbanTurkey
Penultimate Amazing
 
SuburbanTurkey's Avatar
 
Join Date: Apr 2018
Location: Massachusetts, USA
Posts: 11,064
Originally Posted by Cavemonster View Post
It's interesting that you made this comparison. I've been following this WSB effort on reddit, and the first thing it reminded me of was the 4chan troll army's roll in the 2016 election. Not that I'm saying they're morally equivalent, but the manifesting of rando internet armies in substantial real world outcomes.

Not too long ago, getting enough people together to game a boat naming survey (Boaty McBoatface) was seen as a large triumph of social media power. And social media as an organizing tool for more traditional efforts is nothing new, but this feels like a different kind of force. Of course the stock market and politics have been BS in a million other ways for all time, but this emerging ability for new groups to game things really substantial for the luls is something else.
"Like 4chan got a bloomberg terminal" is the phrase on their banner at the site.

Yes, their stunts definitely smack of 4chan style antics of years gone by. Someone clever identifies a vulnerability and then there's mass action by the denizens of the site to try to make money and/or cause chaos.
__________________
Gobble gobble
SuburbanTurkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:11 AM   #10
Modified
Philosopher
 
Modified's Avatar
 
Join Date: Sep 2006
Posts: 6,985
Originally Posted by SuburbanTurkey View Post
That's where the whole "robinhood" angle kinda loses me.

Sure, the people that have short positions coming due during the buying spree are going to get cleaned out. They are rich hedge fund types, I won't shed a tear.

But others are still getting rich. People are still taking short positions on the stock, and they will absolutely make a killing whenever the buying frenzy stops and the mass sell off happens. one set of short selling hedge fund managers lose their shirts, another set of short selling hedge fun managers make a killing.

Those who took sort positions a week ago and were forced to liquidate them today will lose nine times their investment. Those who short today and cover at the normal price will make 90%. The put and call options are very expensive as you would expect. There isn't a good way to make huge money on the way down without huge risk or high cost.
Modified is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:15 AM   #11
JoeMorgue
Self Employed
Remittance Man
 
JoeMorgue's Avatar
 
Join Date: Nov 2009
Location: Florida
Posts: 34,804
Originally Posted by Cavemonster View Post
It's interesting that you made this comparison. I've been following this WSB effort on reddit, and the first thing it reminded me of was the 4chan troll army's roll in the 2016 election. Not that I'm saying they're morally equivalent, but the manifesting of rando internet armies in substantial real world outcomes.
Isn't that sort of the point though? That if a bunch of "rando internet yahoos" applying largely the same information, in largely the same way, to achieve largely the same results just for a different motivation strikes us as absurd, that should tell us something about the system.
__________________
"When enough people make false promises, words stop meaning anything. Then there are no more answers, only better and better lies." - Jon Snow

"Every lie we tell incurs a debt to the truth. Sooner or later, that debt is paid." - Valery Legasov
JoeMorgue is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:17 AM   #12
TragicMonkey
Poisoned Waffles
 
TragicMonkey's Avatar
 
Join Date: Jun 2004
Location: Monkey
Posts: 60,796
Originally Posted by Modified View Post
Those who took sort positions a week ago and were forced to liquidate them today will lose nine times their investment. Those who short today and cover at the normal price will make 90%. The put and call options are very expensive as you would expect. There isn't a good way to make huge money on the way down without huge risk or high cost.
I've always gone by the rule that if a stock is mentioned in the news it's too late to either buy or sell it.
__________________
You added nothing to that conversation, Barbara.
TragicMonkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:33 AM   #13
Modified
Philosopher
 
Modified's Avatar
 
Join Date: Sep 2006
Posts: 6,985
Originally Posted by nelsondogg View Post
I don't get how this reddit group is able to inflate the price so much. Browsing through the subreddit they sound like Qanon nut jobs. Elon musk tweeted a link to them yesterday and that itself caused the stock to jump. Interesting to see if this is a one off occurrence or if this will become commonplace.

Hedge funds and other shorters will learn from this before long. All their big short bets on small caps and mid caps will be protected with call options. This will take away a tiny bit of their profits in the long run, though they may find a way to profit even more by watching out for and capitalizing on these raids, which will become attempted raids.
Modified is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:36 AM   #14
Modified
Philosopher
 
Modified's Avatar
 
Join Date: Sep 2006
Posts: 6,985
Originally Posted by TragicMonkey View Post
I've always gone by the rule that if a stock is mentioned in the news it's too late to either buy or sell it.
Or that you should watch and wait a few days for the hype to wear off before trading with the news, and maybe one day for the hype to peak before trading against it.
Modified is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:43 AM   #15
JoeMorgue
Self Employed
Remittance Man
 
JoeMorgue's Avatar
 
Join Date: Nov 2009
Location: Florida
Posts: 34,804
It's the infinite monkey typewriter problem.

There's ~620,000 stock brokers in the United States.

Even if they all operated literally 100% at random a few of them would get rich.
__________________
"When enough people make false promises, words stop meaning anything. Then there are no more answers, only better and better lies." - Jon Snow

"Every lie we tell incurs a debt to the truth. Sooner or later, that debt is paid." - Valery Legasov
JoeMorgue is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:44 AM   #16
autumn1971
Illuminator
 
Join Date: Jan 2007
Posts: 3,518
Originally Posted by Modified View Post
Those who took sort positions a week ago and were forced to liquidate them today will lose nine times their investment. Those who short today and cover at the normal price will make 90%. The put and call options are very expensive as you would expect. There isn't a good way to make huge money on the way down without huge risk or high cost.
There isn’t a way to make a huge profit, but the short sellers have invested in call options.

None of the hedge funds will actually lose much on paper. Their deltas are covered
__________________
'A knave; a rascal; an eater of broken meats; a base, proud, shallow, beggardly, three-suited, hundred-pound, filthy, worsted-stocking knave; a lily-livered, action-taking knave, a whoreson, glass-gazing, superservicable, finical rogue;... the son and heir of a mongral bitch: one whom I will beat into clamorous whining, if thou deniest the least syllable of thy addition."'
-The Bard
autumn1971 is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:44 AM   #17
Cavemonster
Philosopher
 
Join Date: Sep 2008
Posts: 6,701
Originally Posted by JoeMorgue View Post
Isn't that sort of the point though? That if a bunch of "rando internet yahoos" applying largely the same information, in largely the same way, to achieve largely the same results just for a different motivation strikes us as absurd, that should tell us something about the system.
I don't disagree at all. The system is insane.
__________________
The weakness of all Utopias is this, ... They first assume that no man will want more than his share, and then are very ingenious in explaining whether his share will be delivered by motorcar or balloon.
-G.K. CHESTERTON
Cavemonster is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:49 AM   #18
Cavemonster
Philosopher
 
Join Date: Sep 2008
Posts: 6,701
Originally Posted by JoeMorgue View Post
It's the infinite monkey typewriter problem.

There's ~620,000 stock brokers in the United States.

Even if they all operated literally 100% at random a few of them would get rich.
Malcolm Gladwell (love him or hate him) goes into this in one of his pieces on survivorship bias (can't remember which book this was in).

If you had 1000 trying to call a coin flip at random, after like nine flips, you'd statistically have one dude who got all of them right and thinks he's psychic. Cloud it with a moderate amount of actual knowledge (very moderate) and you've got our investment geniuses.
__________________
The weakness of all Utopias is this, ... They first assume that no man will want more than his share, and then are very ingenious in explaining whether his share will be delivered by motorcar or balloon.
-G.K. CHESTERTON
Cavemonster is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:53 AM   #19
Cavemonster
Philosopher
 
Join Date: Sep 2008
Posts: 6,701
Originally Posted by nelsondogg View Post
I don't get how this reddit group is able to inflate the price so much. Browsing through the subreddit they sound like Qanon nut jobs. Elon musk tweeted a link to them yesterday and that itself caused the stock to jump. Interesting to see if this is a one off occurrence or if this will become commonplace.
There are like 3 million subscribers, and given how popular the sub has been lately, probably at least as many regular readers who participate but aren't subscribed.

Doing a little back of the napkin, I think they could have bought the company outright back at the beginning of the month if everyone was able to put in an average of $100. The shares were less than $20 when this started and a lot of their users could easily buy a few as a lark. And the weirdness of the whole endeavor made headlines and compounded the effect.
__________________
The weakness of all Utopias is this, ... They first assume that no man will want more than his share, and then are very ingenious in explaining whether his share will be delivered by motorcar or balloon.
-G.K. CHESTERTON
Cavemonster is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 09:55 AM   #20
SuburbanTurkey
Penultimate Amazing
 
SuburbanTurkey's Avatar
 
Join Date: Apr 2018
Location: Massachusetts, USA
Posts: 11,064
Retail investment outlets are now preventing trades on these stocks in an effort to allow the big institutions to escape the squeeze.

The elites don't like all these unwashed amateur daytraders trashing up the place. Only the rich are allowed to game the system for unearned wealth.
__________________
Gobble gobble
SuburbanTurkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 10:04 AM   #21
nelsondogg
Critical Thinker
 
Join Date: Feb 2004
Posts: 371
Originally Posted by Cavemonster View Post
There are like 3 million subscribers, and given how popular the sub has been lately, probably at least as many regular readers who participate but aren't subscribed.

Doing a little back of the napkin, I think they could have bought the company outright back at the beginning of the month if everyone was able to put in an average of $100. The shares were less than $20 when this started and a lot of their users could easily buy a few as a lark. And the weirdness of the whole endeavor made headlines and compounded the effect.
They are doing the same thing with AMC stock. It's like they are picking absolute turkeys to prop up. I guess to lure in short sellers. Crazy strategy but it's working for now.
nelsondogg is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 10:04 AM   #22
Modified
Philosopher
 
Modified's Avatar
 
Join Date: Sep 2006
Posts: 6,985
Originally Posted by autumn1971 View Post
There isn’t a way to make a huge profit, but the short sellers have invested in call options.

None of the hedge funds will actually lose much on paper. Their deltas are covered
Then the option writers will lose. If most of the raiders get out with a profit, then that money will come from somewhere. Many of them will get burned, but I think overall a huge amount of money will flow to them from professional investors. Given that 130% of the float was shorted at one point, it's almost a certainty.

Those who shorted after this started (and that number is huge, given the rate of short-cycling) paid a high price for those calls. Of course they may have profited on them today, but at some point we'll come to the end of the line.
Modified is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 10:06 AM   #23
Modified
Philosopher
 
Modified's Avatar
 
Join Date: Sep 2006
Posts: 6,985
Originally Posted by nelsondogg View Post
They are doing the same thing with AMC stock. It's like they are picking absolute turkeys to prop up. I guess to lure in short sellers. Crazy strategy but it's working for now.
AMC was already heavily shorted. It's just another raid, though with a lot less fuel (short interest) than Gamestop.
Modified is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 11:30 AM   #24
lomiller
Penultimate Amazing
 
lomiller's Avatar
 
Join Date: Jul 2007
Posts: 12,071
Originally Posted by TragicMonkey View Post
I've been following. It's delightful! I've always considered shorting to be a nasty combination of gambling and vulturism.
This is an extremely flawed interpretation of short selling.

Short selling drives down the price of overvalued assets. In doing so it serves as a natural mechanism to moderate or even prevent bubbles. If there had been more short selling of MBS in the mid 90's, it would have moderated the sub-prime housing market and helped stabilize the financial system by giving banks a customer to sell their MBS when the bubble burst.
__________________
"Anything's possible, but only a few things actually happen"
lomiller is online now   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 11:36 AM   #25
Distracted1
Philosopher
 
Join Date: Dec 2007
Location: No longer Philadelphia :(
Posts: 5,689
Another demonstration of the value of the Serf.
__________________
The man with one watch knows what time it is, the man with two watches is never sure.
Distracted1 is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 11:39 AM   #26
TragicMonkey
Poisoned Waffles
 
TragicMonkey's Avatar
 
Join Date: Jun 2004
Location: Monkey
Posts: 60,796
Originally Posted by lomiller View Post
This is an extremely flawed interpretation of short selling.

Short selling drives down the price of overvalued assets. In doing so it serves as a natural mechanism to moderate or even prevent bubbles. If there had been more short selling of MBS in the mid 90's, it would have moderated the sub-prime housing market and helped stabilize the financial system by giving banks a customer to sell their MBS when the bubble burst.
I think it's immoral to gamble with borrowed money, and foolish to ever bet more than one can afford to lose. These would be unpopular notions with most of Wall Street investors and finance bros. Especially the ones currently taking a bath over this Gamestop debacle.
__________________
You added nothing to that conversation, Barbara.
TragicMonkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 11:42 AM   #27
TragicMonkey
Poisoned Waffles
 
TragicMonkey's Avatar
 
Join Date: Jun 2004
Location: Monkey
Posts: 60,796
Originally Posted by JoeMorgue View Post
It's the infinite monkey typewriter problem.

There's ~620,000 stock brokers in the United States.

Even if they all operated literally 100% at random a few of them would get rich.
I believe there have been studies demonstrating that totally random stock selection pays off measurably better than experts' selections.
__________________
You added nothing to that conversation, Barbara.
TragicMonkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 11:49 AM   #28
mumblethrax
Species traitor
 
mumblethrax's Avatar
 
Join Date: Apr 2004
Posts: 2,912
Originally Posted by lomiller View Post
This is an extremely flawed interpretation of short selling.

Short selling drives down the price of overvalued assets. In doing so it serves as a natural mechanism to moderate or even prevent bubbles. If there had been more short selling of MBS in the mid 90's, it would have moderated the sub-prime housing market and helped stabilize the financial system by giving banks a customer to sell their MBS when the bubble burst.
Pretty much. And this is probably why Elon Musk hates them. They're unattractive for ordinary investors, because there's a limited upside and unlimited liability. What the reddit thing shows is that it's much easier to manipulate markets with pump & dump schemes than with shorts.
mumblethrax is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 11:50 AM   #29
jnelso99
Muse
 
Join Date: Jun 2003
Posts: 978
Isn't (wasn't?) there some crazy TV stock broker guy on CNN or something where if you did the exact opposite of what he advised you'd make more money?
jnelso99 is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 11:55 AM   #30
JoeMorgue
Self Employed
Remittance Man
 
JoeMorgue's Avatar
 
Join Date: Nov 2009
Location: Florida
Posts: 34,804
I ever do love investment economics.

"Well my plan is foolproof. Unless someone gets greedy. Or panics. Or panics because they think someone is going to get greedy. Or gets greedy because they think someone is going to panic."
__________________
"When enough people make false promises, words stop meaning anything. Then there are no more answers, only better and better lies." - Jon Snow

"Every lie we tell incurs a debt to the truth. Sooner or later, that debt is paid." - Valery Legasov
JoeMorgue is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 12:02 PM   #31
Checkmite
Skepticifimisticalationist
 
Checkmite's Avatar
 
Join Date: Jun 2002
Location: Gulf Coast
Posts: 27,048
Let me get this straight.

A bunch of 1%'ers with enough excess cash to be able to throw thousands of dollars of it into a worthless stock as "a joke", are causing financial damage to a different group of 1%'ers because that second group arranged their own stock buys as a bet that a certain declining national retail corporation would continue to decline; and I'm not only supposed to care about this, I'm supposed to actually be cheering the first group of 1%'ers because the second group of 1%'ers with their bet was causing financial damage to the owners and runners of the national retail corporation, which is a third group of 1%'ers.

I'm living in poverty, so you'll have to excuse me from the fanboying.
__________________
"¿WHAT KIND OF BIRD?
¿A PARANORMAL BIRD?"
--- Carlos S., 2002
Checkmite is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 12:04 PM   #32
TragicMonkey
Poisoned Waffles
 
TragicMonkey's Avatar
 
Join Date: Jun 2004
Location: Monkey
Posts: 60,796
Originally Posted by Checkmite View Post
Let me get this straight.

A bunch of 1%'ers with enough excess cash to be able to throw thousands of dollars of it into a worthless stock as "a joke", are causing financial damage to a different group of 1%'ers because that second group arranged their own stock buys as a bet that a certain declining national retail corporation would continue to decline; and I'm not only supposed to care about this, I'm supposed to actually be cheering the first group of 1%'ers because the second group of 1%'ers with their bet was causing financial damage to the owners and runners of the national retail corporation, which is a third group of 1%'ers.

I'm living in poverty, so you'll have to excuse me from the fanboying.
The Reddit-driven crowd is not "1%'ers". Unless you want to do the thing where you include all the Amazonian tribes in the math so anybody making $20K a year is in the same group as the billionaires.
__________________
You added nothing to that conversation, Barbara.
TragicMonkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 12:08 PM   #33
Checkmite
Skepticifimisticalationist
 
Checkmite's Avatar
 
Join Date: Jun 2002
Location: Gulf Coast
Posts: 27,048
Originally Posted by TragicMonkey View Post
The Reddit-driven crowd is not "1%'ers".
Oh I highly doubt that. Is there actual evidence to show this effect is largely the result of several thousands of individuals suddenly buying one share each at $20 causing the price to skyrocket, as opposed to a few dozen people buying hundreds or thousands of dollars of stock at a time, which is how market trading usually works?
__________________
"¿WHAT KIND OF BIRD?
¿A PARANORMAL BIRD?"
--- Carlos S., 2002
Checkmite is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 12:12 PM   #34
TragicMonkey
Poisoned Waffles
 
TragicMonkey's Avatar
 
Join Date: Jun 2004
Location: Monkey
Posts: 60,796
Originally Posted by Checkmite View Post
Oh I highly doubt that. Is there actual evidence to show this effect is largely the result of several thousands of individuals suddenly buying one share each at $20 causing the price to skyrocket, as opposed to a few dozen people buying hundreds or thousands of dollars of stock at a time, which is how market trading usually works?
You think someone has to be in "the 1%" to have hundreds or thousands of dollars?
__________________
You added nothing to that conversation, Barbara.
TragicMonkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 12:20 PM   #35
BobTheCoward
Penultimate Amazing
 
Join Date: Nov 2010
Posts: 21,131
I thought the way a short worked was the shorter pays a fee monthly to the lender. Then when the shorter chooses, they buy the stock, return it to the lender, and stop paying the fee.

What is incorrect there? If not incorrect, why would Melvin have to sell? Could they just pay their fee and let it take longer?
BobTheCoward is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 12:21 PM   #36
Checkmite
Skepticifimisticalationist
 
Checkmite's Avatar
 
Join Date: Jun 2002
Location: Gulf Coast
Posts: 27,048
Originally Posted by TragicMonkey View Post
You think someone has to be in "the 1%" to have hundreds or thousands of dollars?
Lying around disposable, to spend as a lark "for the lolz"? Hey maybe not; but if not, they're close enough at the very least that there's little difference, from the perspective of someone in my position. Certainly no difference at all in terms of which of the three groups in this case I'm supposed to be cheering for, feeling sorry for, or disliking more than the others.
__________________
"¿WHAT KIND OF BIRD?
¿A PARANORMAL BIRD?"
--- Carlos S., 2002
Checkmite is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 12:22 PM   #37
JoeMorgue
Self Employed
Remittance Man
 
JoeMorgue's Avatar
 
Join Date: Nov 2009
Location: Florida
Posts: 34,804
I don't really see what difference it makes.

The point (as much as I can tell and in as much as it has one) of these is show that people who aren't Wall Street Investment Insiders can affect the stock market in the same way the old guard could.
__________________
"When enough people make false promises, words stop meaning anything. Then there are no more answers, only better and better lies." - Jon Snow

"Every lie we tell incurs a debt to the truth. Sooner or later, that debt is paid." - Valery Legasov
JoeMorgue is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 12:26 PM   #38
SuburbanTurkey
Penultimate Amazing
 
SuburbanTurkey's Avatar
 
Join Date: Apr 2018
Location: Massachusetts, USA
Posts: 11,064
Originally Posted by JoeMorgue View Post
I don't really see what difference it makes.

The point (as much as I can tell and in as much as it has one) of these is show that people who aren't Wall Street Investment Insiders can affect the stock market in the same way the old guard could.
It also proposes a problem that isn't immediately easy to remedy.

This is absolutely market manipulation. These people are deliberately pumping up this stock as part of a stunt or get rich scheme.

But there's no leader or group of conspirators. It's thousands of individual investors, many making small purchases. It's the financial equivalent of a DDOS strike, no one person is really playing a large role.

I think it absolutely exposes weaknesses in our stock market system, though the wallstreet bet memers are not the problem. The problem is that our institutions are able to make such absurdly risky, overleveraged positions to begin with.

The number of short sales exceeds the total available stock for Gamestop. It's all make believe. Speculative nonsense that, until now, only served to enrich the elite few.
__________________
Gobble gobble

Last edited by SuburbanTurkey; 27th January 2021 at 12:39 PM.
SuburbanTurkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 12:27 PM   #39
TragicMonkey
Poisoned Waffles
 
TragicMonkey's Avatar
 
Join Date: Jun 2004
Location: Monkey
Posts: 60,796
Originally Posted by Checkmite View Post
Lying around disposable, to spend as a lark "for the lolz"? Hey maybe not; but if not, they're close enough at the very least that there's little difference, from the perspective of someone in my position. Certainly no difference at all in terms of which of the three groups in this case I'm supposed to be cheering for, feeling sorry for, or disliking more than the others.
I did a little research. To be in the American 1% it looks like you need an income of over $400,000 a year.

If you simply hate everyone who has any money to spend on stocks then no, nobody will be surprised you "don't cheer" for anybody in this matter.
__________________
You added nothing to that conversation, Barbara.
TragicMonkey is offline   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Old 27th January 2021, 12:29 PM   #40
lobosrul5
Master Poster
 
lobosrul5's Avatar
 
Join Date: Nov 2017
Posts: 2,397
Originally Posted by BobTheCoward View Post
I thought the way a short worked was the shorter pays a fee monthly to the lender. Then when the shorter chooses, they buy the stock, return it to the lender, and stop paying the fee.

What is incorrect there? If not incorrect, why would Melvin have to sell? Could they just pay their fee and let it take longer?
For a retail investor you will eventually be forced to cover. The broker isn't going to sit there and watch as your account balance become negative. Its basically the same as a margin call. That will be automatically triggered in a self-service online account, ie Etrade or Schwab. For a hedge fund they probably have some very nervous creditors right now.
lobosrul5 is online now   Quote this post in a PM   Nominate this post for this month's language award Copy a direct link to this post Reply With Quote Back to Top
Reply

International Skeptics Forum » General Topics » Economics, Business and Finance

Bookmarks

Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Forum Jump


All times are GMT -7. The time now is 07:54 PM.
Powered by vBulletin. Copyright ©2000 - 2021, Jelsoft Enterprises Ltd.

This forum began as part of the James Randi Education Foundation (JREF). However, the forum now exists as
an independent entity with no affiliation with or endorsement by the JREF, including the section in reference to "JREF" topics.

Disclaimer: Messages posted in the Forum are solely the opinion of their authors.