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Gamestop and shorting on Wall Street


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Not sure if this belongs in the politics sub forum but has anyone else seen/been involved with what has been going on with the Gamestop stock on the NYSE recently?

Last summer their stock was around $4. Hedge funds shorted on it expecting it to decline and for them to make a tidy profit by buying back that stock at a lower value. Instead, due to a group of committed redditors, myself included, the price has peaked at $380 today and is set to continue rising.

Its part of an anti-Wall Street movement of small time investors attempting to screw hedge funds and professional traders.

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Not sure if this belongs in the politics sub forum but has anyone else seen/been involved with what has been going on with the Gamestop stock on the NYSE recently? Last summer their stock was aro

I'm actually finding this hilarious, just because it shows the efficient market hypothesis for what it has always been - fantasy. @Farmduck as far as I know it wasn't just Melvin Capital that was shor

7 minutes ago, Tommygilf said:

Not sure if this belongs in the politics sub forum but has anyone else seen/been involved with what has been going on with the Gamestop stock on the NYSE recently?

Last summer their stock was around $4. Hedge funds shorted on it expecting it to decline and for them to make a tidy profit by buying back that stock at a lower value. Instead, due to a group of committed redditors, myself included, the price has peaked at $380 today and is set to continue rising.

Its part of an anti-Wall Street movement of small time investors attempting to screw hedge funds and professional traders.

I posted something in the politics forum (a basic explainer).

It's an interesting move, and to hear the wailing from some parts of Wall Street is quite funny.  'How dare they screw with the market, that was our job!'

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With the best, thats a good bit of PR, though I would say the Bedford team, theres, like, you know, 13 blokes who can get together at the weekend to have a game together, which doesnt point to expansion of the game. Point, yeah go on!

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4 minutes ago, Bedford Roughyed said:

I posted something in the politics forum (a basic explainer).

It's an interesting move, and to hear the wailing from some parts of Wall Street is quite funny.  'How dare they screw with the market, that was our job!'

Sorry mate I didn't check in all honesty, will have a look now.

That reaction is frankly gold and is precisely why I am investing - they are complaining about people being better organised than them (and are using their influence over stories and news outlets to try dampen the effect).

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Reposted here for a wider audience -
 

 

With the best, thats a good bit of PR, though I would say the Bedford team, theres, like, you know, 13 blokes who can get together at the weekend to have a game together, which doesnt point to expansion of the game. Point, yeah go on!

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Economics has always been a blind spot for me, partly because of short selling and the break with reality over the years.  I just don't understand it most of the time.

With the best, thats a good bit of PR, though I would say the Bedford team, theres, like, you know, 13 blokes who can get together at the weekend to have a game together, which doesnt point to expansion of the game. Point, yeah go on!

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I hope those Redditors didn't go too high. $50 would have been enough to hurt the short sellers. To get it up over $200 a lot of them must have been buying at well above a sensible price.

I always believed the stock market was detached from reality and I proved it last year by buying my first ever shares 2 days after the Covid crash. One of mine has gone up 335% and I'm up 35% overall. I have another one that's gone up 120% and even Harvey Norman. whose stores were practically empty for 3 months, has gone up 70%. My lithium mines in Argentina are up 20% and I only bought them 2 months ago.

The whole game is a farce.

(My 335% stock is actually infinity %. When it hit the 300% mark I sold enough to cover my initial outlay so I now have an $1800 block of shares in Channel 7 on an effective outlay of $0. But I "earned" that money with my 25 keystrokes so taxation is theft or something.)

 

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6 hours ago, Farmduck said:

The whole game is a farce.

(My 335% stock is actually infinity %. When it hit the 300% mark I sold enough to cover my initial outlay so I now have an $1800 block of shares in Channel 7 on an effective outlay of $0. But I "earned" that money with my 25 keystrokes so taxation is theft or something.)

 

Agreed.

And anything that shows that up is good.

I think I've said that I've a very good friend who is now a partner in a major accountancy/consulting firm. He specialises in untangling global finance trails that have been deliberately made fuzzy by people and businesses wanting to hide their money. He then has to explain back these trails and what they mean to people who are not specalists.

The fact that he regards most of these additional financial instruments around the stock market as, at best, a joke, and, at worst, incomprehensible and designed to delude, pretty much tells me all I need to know.

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Build a man a fire, and he'll be warm for a day. Set a man on fire, and he'll be warm for the rest of his life. (Terry Pratchett)

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Also ironic that every Hedge Fund mouthpiece is whining to whoever will listen about how unfair this all is and how it is "market manipulation".

They've tried to shut down discussion boards and groups, stopped trading apps from enabling individual investors to buy in, are asking for government regulation (which of course they have always vehemently supported), and of course their repeated shorting of stocks in the first place, all a vain attempt to manipulate the market even further - just in their favour.

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32 minutes ago, Tommygilf said:

Also ironic that every Hedge Fund mouthpiece is whining to whoever will listen about how unfair this all is and how it is "market manipulation".

They've tried to shut down discussion boards and groups, stopped trading apps from enabling individual investors to buy in, are asking for government regulation (which of course they have always vehemently supported), and of course their repeated shorting of stocks in the first place, all a vain attempt to manipulate the market even further - just in their favour.

Tommy, this is all fascinating. It's the first I've heard of it. Where can I read an overview of the story? Who organised it, how did they mobilise so many people, what are the figures involved? How much have they ''hurt'' their opponents?

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5 minutes ago, fighting irish said:

Tommy, this is all fascinating. It's the first I've heard of it. Where can I read an overview of the story? Who organised it, how did they mobilise so many people, what are the figures involved? How much have they ''hurt'' their opponents?

Gamestop: 'Failing' firm soars in value as amateurs buy stock - BBC News

Here's a BBC article on it - answers some of your questions, but not all

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Sadly, this whole episode won't be nearly as effective as some think. When Melvin Capital started shorting GME, it was trading in the $3-$4 range. Clearly they were valuing it at lower than that. The head of Melvin is well-known for doing this so clearly he has some skill as an analyst. Buying it at $20 for a joke is OK if you can afford to drop some spare cash but how many of those Redditors were still buying after the $20 mark? GME's 5-year chart shows $20-$30 as a maximum realistic price. I wonder how many Redditors paid $100 for shares that are really only worth $5 tops.

On their way to hurting Melvin Capital I wonder how many unsophisticated investors they burned as well. I also wonder how many other billionaires they made richer. Cohen only has 13% of GME so it's reasonable to assume lots of other big-money types owned some of the other 87% and they've now made a shipload out of this.

Lastly, how much of the money lost by Melvin was pension funds? We know it wasn't the bosses' money. It's possible that some of the people who lose out here will be on less money than the Redditors who burned them.

Much as I like the idea, it's not as simple as the Redditors may like to think.

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9 minutes ago, fighting irish said:

Tommy, this is all fascinating. It's the first I've heard of it. Where can I read an overview of the story? Who organised it, how did they mobilise so many people, what are the figures involved? How much have they ''hurt'' their opponents?

Most recent estimate is that Melvin Capital, the short seller, has lost $4billion, about 30% of its total funds.

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5 minutes ago, Farmduck said:

Most recent estimate is that Melvin Capital, the short seller, has lost $4billion, about 30% of its total funds.

Wow. How did they mobilise so many small investors to act in unison, without the ''cat getting out of the bag''?

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12 hours ago, Tommygilf said:

Not sure if this belongs in the politics sub forum but has anyone else seen/been involved with what has been going on with the Gamestop stock on the NYSE recently?

Last summer their stock was around $4. Hedge funds shorted on it expecting it to decline and for them to make a tidy profit by buying back that stock at a lower value. Instead, due to a group of committed redditors, myself included, the price has peaked at $380 today and is set to continue rising.

Its part of an anti-Wall Street movement of small time investors attempting to screw hedge funds and professional traders.

 

 

4 minutes ago, Farmduck said:

Sadly, this whole episode won't be nearly as effective as some think. When Melvin Capital started shorting GME, it was trading in the $3-$4 range. Clearly they were valuing it at lower than that. The head of Melvin is well-known for doing this so clearly he has some skill as an analyst. Buying it at $20 for a joke is OK if you can afford to drop some spare cash but how many of those Redditors were still buying after the $20 mark? GME's 5-year chart shows $20-$30 as a maximum realistic price. I wonder how many Redditors paid $100 for shares that are really only worth $5 tops.

On their way to hurting Melvin Capital I wonder how many unsophisticated investors they burned as well. I also wonder how many other billionaires they made richer. Cohen only has 13% of GME so it's reasonable to assume lots of other big-money types owned some of the other 87% and they've now made a shipload out of this.

Lastly, how much of the money lost by Melvin was pension funds? We know it wasn't the bosses' money. It's possible that some of the people who lose out here will be on less money than the Redditors who burned them.

Much as I like the idea, it's not as simple as the Redditors may like to think.

I'm actually finding this hilarious, just because it shows the efficient market hypothesis for what it has always been - fantasy. @Farmduck as far as I know it wasn't just Melvin Capital that was short-selling it, lots of other hedge funds were, and that's why Gamestop in particular was ripe for this to happen. Ultimately what hurts regular people is more likely to be the activities of the hedge funds and the full-time speculators than a bunch of Redditors.

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5 minutes ago, Saint 1 said:

 

 

I'm actually finding this hilarious, just because it shows the efficient market hypothesis for what it has always been - fantasy. @Farmduck as far as I know it wasn't just Melvin Capital that was short-selling it, lots of other hedge funds were, and that's why Gamestop in particular was ripe for this to happen. Ultimately what hurts regular people is more likely to be the activities of the hedge funds and the full-time speculators than a bunch of Redditors.

Exactly. One-off, this may impact some people who aren't to blame.

Longer term, both this behaviour of 'investors' and multiple equivalents are damaging to many, many more people.

The orthodoxy that capital is king, even if it's fake and destructive, has to be challenged.

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Build a man a fire, and he'll be warm for a day. Set a man on fire, and he'll be warm for the rest of his life. (Terry Pratchett)

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6 minutes ago, fighting irish said:

Wow. How did they mobilise so many small investors to act in unison, without the ''cat getting out of the bag''?

The cat was always out of the bag. They organised on an open public forum and just hit hard over a 2-day binge. That doubled the price and then the short sellers had to start buying to cover their positions. Some Redditors kept buying and the momentum just had its own life.

One lesson here comes from Warren Buffet. Despite years as a 1%er, Buffet has always insisted on living in and keeping his funds' offices in Nebraska because he doesn't want his analysts living in the Wall St bubble. Buffet's other piece of simple wisdom is to only buy stock he's prepared to sit on for a few years. Basically, invest, don't speculate.

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I'm just surprised at the level of support to cause such a rise.

The early buyers must have been really upset at them.

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37 minutes ago, fighting irish said:

Tommy, this is all fascinating. It's the first I've heard of it. Where can I read an overview of the story? Who organised it, how did they mobilise so many people, what are the figures involved? How much have they ''hurt'' their opponents?

There is the Reddit group r/wallstreetbets I suppose for the original sources. Basically its come from the democratisation of the investment system and thousands of small to mid time investors. People like Elon Musk are championing it too as not only is it all a bit of a meme, but his own Tesla brand was repeatedly shorted by these companies too.

I'm wary of some of the "official" news outlets such as CNBC, as they like others are being leaned on by Wall Street to decrease the value of the stock (and thus decrease the losses).

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4 minutes ago, Tommygilf said:

There is the Reddit group r/wallstreetbets I suppose for the original sources. Basically its come from the democratisation of the investment system and thousands of small to mid time investors. People like Elon Musk are championing it too as not only is it all a bit of a meme, but his own Tesla brand was repeatedly shorted by these companies too.

I'm wary of some of the "official" news outlets such as CNBC, as they like others are being leaned on by Wall Street to decrease the value of the stock (and thus decrease the losses).

Most banks offer similar services. My "broker" is just a section of my online banking site. They charge $30/trade and trades are a minimum $500. If I buy or sell during Stock Exchange hours, it usually all happens within 5 minutes of me clicking the button.

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53 minutes ago, fighting irish said:

Tommy, this is all fascinating. It's the first I've heard of it. Where can I read an overview of the story? Who organised it, how did they mobilise so many people, what are the figures involved? How much have they ''hurt'' their opponents?

https://marker.medium.com/gamestop-proves-were-in-a-meme-stock-bubble-b3f39163a77f

With the best, thats a good bit of PR, though I would say the Bedford team, theres, like, you know, 13 blokes who can get together at the weekend to have a game together, which doesnt point to expansion of the game. Point, yeah go on!

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5 minutes ago, Farmduck said:

Most banks offer similar services. My "broker" is just a section of my online banking site. They charge $30/trade and trades are a minimum $500. If I buy or sell during Stock Exchange hours, it usually all happens within 5 minutes of me clicking the button.

The point here is that trades are for stocks roughly between $15 to $250 a share, and with basically $0 commission. It makes the services offered by banks look like dial-up vs Wifi

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6 minutes ago, Farmduck said:

Most banks offer similar services. My "broker" is just a section of my online banking site. They charge $30/trade and trades are a minimum $500. If I buy or sell during Stock Exchange hours, it usually all happens within 5 minutes of me clicking the button.

Most people will just do it on their phone nowadays, Trading 212 being popular. Pretty instant and minimal cost associated (beyond that of the trade)

 

24 minutes ago, fighting irish said:

I'm just surprised at the level of support to cause such a rise.

The early buyers must have been really upset at them.

To be fair, Wallstreetbets has 2 million subscribers. Also, without trying to explain the particular mechanisms that I only half-read about, Gamestop was essentially in a particular position where it had been shorted so much that it was far more vulnerable to this than any other stock.

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24 minutes ago, Tommygilf said:

The point here is that trades are for stocks roughly between $15 to $250 a share, and with basically $0 commission. It makes the services offered by banks look like dial-up vs Wifi

Zero commission isn't the same as zero fees though.  https://cdn.robinhood.com/assets/robinhood/legal/RHF Fee Schedule.pdf

If you read the footnote about ATACs that could generate some substantial fees.

They say you can spend as little as $1, which would probably mean buying fractional shares, but the fine print says fractional shares can't be transferred outside the App.

You also have possible bank fees moving cash for trades, which I don't have because my bank and broker are the same.

Those apps look good but I'm happy with my system.

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Massive simplification coming up

 

Remember when they sold short Melvin basically sold a bunch a stock at $3 (or whatever it was I havent looked it up) expecting to be able to purchase that stock at £2.50 or whatever thus making a gain.

 

They entered into contracts to deliver those stock on a set date at a price of $3, they now have to purchase those stocks to complete those contracts, even if the price they now have to buy them at is $240 now, at that point they will be buying at $240 and getting $3 for them. That is where Melvin lose money AND unless there are now vastly more shares being traded than Melvin has to purchase the individual micro investors will get their money as well, they are providing the shares for Melvin to buy

 

However it is a bit of a pyramid scheme, you dont want to be one of those left at the end with a share bought at $200 when Melvin has fulfilled all it's contracts and there is no demand left - at that point the price will drop back to it's true value

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