Stocks and Trading Thread - Channeling your inner Mono

[garbon]

Totally agreed with Tamas.
Not many people hate the rich just for being rich. Musk got to where he is for actual innovation and clever marketing. He is really trying to push forward civilization with his space stuff too. This is absolutely the kind of thing that should see success for you.

They probably should. It is heartbreaking to think about how much wealth a single individual can have, while we having people dying because they can't afford food/healthy food, healthcare and/or a place to live.

As opposed to the shorters who are looking to profit from driving a company that employs 10s of thousands of largely poor young people into the ground.

Gamestop is a piece of shit company that exploits its employees and is overly reliant on a dying business model. I don't think many will be sad to see it go.

One oddity I've realised is that with the current state of the Republicans, I've drifted further and further to the left as I've aged. Actually, I think that's what Tim said the other day too!

[Syt]

Totally agreed with Tamas.
Not many people hate the rich just for being rich. Musk got to where he is for actual innovation and clever marketing. He is really trying to push forward civilization with his space stuff too. This is absolutely the kind of thing that should see success for you.

They probably should. It is heartbreaking to think about how much wealth a single individual can have, while we having people dying because they can't afford food/healthy food, healthcare and/or a place to live.

This. I think if you work hard or have a groundbreaking business model you deserve to make money from it and get rich. But I believe the increasing agglomeration of wealth in the hands of a few is not a good thing, not least for the economy. Maybe I'm naive, but I feel putting some of that money into the hands of people who will actually spend it can't be anything but a stimulus for the economy. That can be private individuals who use it for consumption, or the state who can use the money for infrastructure, education etc.

[Syt]

One oddity I've realised is that with the current state of the Republicans, I've drifted further and further to the left as I've aged. Actually, I think that's what Tim said the other day too!

I saw on Steam that you got the Drama Queen achievement in Civ6. Years ago I would have found that hilariously appropriate. These days, not so much.

[garbon]

One oddity I've realised is that with the current state of the Republicans, I've drifted further and further to the left as I've aged. Actually, I think that's what Tim said the other day too!

I saw on Steam that you got the Drama Queen achievement in Civ6. Years ago I would have found that hilariously appropriate. These days, not so much.

[The Minsky Moment]

A few more points:

+stock shorts don't kill companies. Inability to generate operating income and repay debt kills companies. It doesn't matter whether GameStop stock trades on the secondary market at $500 or $10.  What matters is that their revenue has been declining for 10 straight years, they are running near -$100 million net income per quarter, and even operating cash flow is negative this year.  What matters is that they are still a brick and mortar retailer in a business transitioning rapidly to digital delivery and cloud-based subscription models.

+the hedge fund guys are complaining that if hedge fund managers coordinated in the same way the subreddit did, they'd go to jail.  They are right.  That differential treatment didn't matter back in the days where a bunch of minnows would trade stock tips on a bulletin board. But it looks very different when there is active coordination of a combined capital pool that matches or exceeds the largest hedge funds.  It's not so much David vs Goliath as 3 million Lilliputians coming together to take down some Gullivers.

+ what the subreddit leaders are doing is egging people on to pay $500 for something worth $10; an indeterminate number of them may be personally profiting from this. Even if they succeed in crushing the shorts, eventually the price will correct and a lot of ordinary individuals will sustain big losses.

+Robinhood issues a press release saying that they imposed trading restrictions because otherwise they would have breached net capital regs and been unable to meet clearinghouse deposits.  That has some plausibility given the news they just had to draw a few hundred mil in additional loans.  Either way, Congress will investigate and the truth will out..

[Tamas]

One thing I would add is that coordinating hedge fund managers would go to jail if they were stupid enough to do it publicly. That they do it privately I have no doubt.

One thing comes to mind is Kodak. Last year it had some violent price moves thanks to silly vaccine related news and whatnot. It was obviously some shady coordinated insider tradimg bullshit but it didn't even register in the news.

[Syt]

+the hedge fund guys are complaining that if hedge fund managers coordinated in the same way the subreddit did, they'd go to jail.  They are right.  That differential treatment didn't matter back in the days where a bunch of minnows would trade stock tips on a bulletin board. But it looks very different when there is active coordination of a combined capital pool that matches or exceeds the largest hedge funds.  It's not so much David vs Goliath as 3 million Lilliputians coming together to take down some Gullivers.

Then the Lilliputians should have founded a company with their funds first and then made the transaction as that company?

[crazy canuck]

A few more points:

+stock shorts don't kill companies. Inability to generate operating income and repay debt kills companies. It doesn't matter whether GameStop stock trades on the secondary market at $500 or $10.  What matters is that their revenue has been declining for 10 straight years, they are running near -$100 million net income per quarter, and even operating cash flow is negative this year.  What matters is that they are still a brick and mortar retailer in a business transitioning rapidly to digital delivery and cloud-based subscription models.

Stock shorts can harm companies who might otherwise seek to finance changes to their business through equity offerings.

+the hedge fund guys are complaining that if hedge fund managers coordinated in the same way the subreddit did, they'd go to jail.  They are right.  That differential treatment didn't matter back in the days where a bunch of minnows would trade stock tips on a bulletin board. But it looks very different when there is active coordination of a combined capital pool that matches or exceeds the largest hedge funds.  It's not so much David vs Goliath as 3 million Lilliputians coming together to take down some Gullivers.

Not only does it look different.  It is different.  The Lilliputians are the market and the folks who are used to the concentration of information in the hands of the few are feeling the effects.

+ what the subreddit leaders are doing is egging people on to pay $500 for something worth $10; an indeterminate number of them may be personally profiting from this. Even if they succeed in crushing the shorts, eventually the price will correct and a lot of ordinary individuals will sustain big losses.

Here is the big disconnect.  Now we are try to judge what a stock is really worth, when has that been a thing in recent years. 

[Josquius]

Totally agreed with Tamas.
Not many people hate the rich just for being rich. Musk got to where he is for actual innovation and clever marketing. He is really trying to push forward civilization with his space stuff too. This is absolutely the kind of thing that should see success for you.
As opposed to the shorters who are looking to profit from driving a company that employs 10s of thousands of largely poor young people into the ground.

If your company goes bankrupt and blames the people shorting stock, and you buy that, you are a fool. You are the sort of person I would want to short, but Americans aren't allowed to short people these days (since 1865 anyway).

Who is doing that?
Companies rise and fall naturally all the time.
At the same time there are those who actively gamble on their failing. And when you've billions resting on companies going under its in your interest to make sure they do.
I've seen way too many examples of stock market shenanigans crushing companies that might otherwise have lived on.
It's not the company themselves that are worth feeling for in this case. They often have shitty management who will go onto retire rich and happy. It's all the normal people who lose their jobs out of it.

[Sheilbh]

Interesting reading this thread and the FT's ongoing coverage of Wirecard and the fallout - particularly around the allegations (which regulators believed ) that negative reports were being made corruptly to help short sellers in hedge funds.

[alfred russel]

I've seen way too many examples of stock market shenanigans crushing companies that might otherwise have lived on.

Can you name any that resulted from shorting stock?

[alfred russel]

+the hedge fund guys are complaining that if hedge fund managers coordinated in the same way the subreddit did, they'd go to jail.  They are right.  That differential treatment didn't matter back in the days where a bunch of minnows would trade stock tips on a bulletin board. But it looks very different when there is active coordination of a combined capital pool that matches or exceeds the largest hedge funds.  It's not so much David vs Goliath as 3 million Lilliputians coming together to take down some Gullivers.

I think the concept that the market is rigged against the small guy is 99% bullshit, but there are places it does have validity.

A bunch of wealthy guys can band together, pool their money, and use their collective billions to squeeze the fuck out of shorts, launch hostile takeovers, or short a stock into oblivion. We call such collectives "hedge funds". The managers of such collectives even get their compensation at significantly reduced tax rates due to the treatment of carried interest.

Smaller investors are legally excluded from forming hedge funds. If they folks on reddit were able to meet the wealth requirements to form a hedge fund, they could have done so and run up the price of Gamestop with their collective money, and it would all be legal (assuming of course that they are really driving Gamestop, which I don't believe).

[Grey Fox]

What are the mechanisms to deal with the voting rights associated to the stock being loaned-sold-bought-resold? 

[Admiral Yi]

Smaller investors are legally excluded from forming hedge funds. If they folks on reddit were able to meet the wealth requirements to form a hedge fund, they could have done so and run up the price of Gamestop with their collective money, and it would all be legal (assuming of course that they are really driving Gamestop, which I don't believe).

And that hedge fund would be in the exact same situation the reditteers are now: owning shares they paid $300 for in a company that's worth $6 a share.

[Malthus]

Looking around Reddit, it looks like classic bubble language - most of the posts are encouraging everyone to buy, buy, buy. The idea is that the price must go up, because of all the short sellers, so you can't lose.

I assume that when this is all over, a lot of investors will be left owning piles of low value stocks that they bought at the top of the enthusiasm.