GME-ing the stonk market
Jragghen
Registered User regular
Registered User regular
Got approval to corral this discussion over here since the Economy and Financial Literacy threads keep getting into loops as more people learn about the whole thing.
What's going on?
A subreddit named /r/wallstreetbets has been around for a while and is honestly kinda insane. At any rate, recently, they noticed that a vulture capitalist firm had a huge short position on GME, Gamestop's stock, effectively a bet that the stock would reduce in price in the future. And by huge, we mean "more stock than exists." This set up a short squeeze, where people could buy up the stock and hold (thereby driving up the price), which in turn would make the short positions have to fulfill their contracts to buy the stock (thereby driving up the price FURTHER). This specific scenario is actually something called a gamma squeeze? It's not an area of expertise, and hopefully others can further clarify everything. In addition to this, of course, also partially driven by some people who genuinely think the company can pivot from its current problems, etc, etc.
It then took on a life of its own as news articles about it happened, because said hedge fund got bodied and had to be bailed out a couple billion dollars by other investors. This has created a katamari situation as more and more people get in to try to "get rich quick", and the question is who will be holding the bag when the music stops, and when that music will stop.
Drunk on their own power, other stocks are undergoing similar runs and push-ups, including the likes of AMC (which arguably has better value given their niche and that it will likely rebound at least somewhat once the pandemic is over) and Blackberry (...memes). If anything, the longest-reaching outcome of this whole thing will likely be that the populace as a whole will realize that the stock market is largely made up numbers, but who the heck knows.
Anyway, things this thread is NOT for:
It's not a gambling/investment/etc thread - it's a "let's stop dragging the economy and personal finance threads off-topic" thread. :P
What's going on?
A subreddit named /r/wallstreetbets has been around for a while and is honestly kinda insane. At any rate, recently, they noticed that a vulture capitalist firm had a huge short position on GME, Gamestop's stock, effectively a bet that the stock would reduce in price in the future. And by huge, we mean "more stock than exists." This set up a short squeeze, where people could buy up the stock and hold (thereby driving up the price), which in turn would make the short positions have to fulfill their contracts to buy the stock (thereby driving up the price FURTHER). This specific scenario is actually something called a gamma squeeze? It's not an area of expertise, and hopefully others can further clarify everything. In addition to this, of course, also partially driven by some people who genuinely think the company can pivot from its current problems, etc, etc.
It then took on a life of its own as news articles about it happened, because said hedge fund got bodied and had to be bailed out a couple billion dollars by other investors. This has created a katamari situation as more and more people get in to try to "get rich quick", and the question is who will be holding the bag when the music stops, and when that music will stop.
Drunk on their own power, other stocks are undergoing similar runs and push-ups, including the likes of AMC (which arguably has better value given their niche and that it will likely rebound at least somewhat once the pandemic is over) and Blackberry (...memes). If anything, the longest-reaching outcome of this whole thing will likely be that the populace as a whole will realize that the stock market is largely made up numbers, but who the heck knows.
Anyway, things this thread is NOT for:
- Giving advice on stocks to buy. If you're going down that route, reddit is over there.
- Discussing gambles you personally have made.
It's not a gambling/investment/etc thread - it's a "let's stop dragging the economy and personal finance threads off-topic" thread. :P
Jragghen on
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To be fair they're probably quite well hedged, but never anticipated that they might have to pay hundreds of dollars after losing a $5 bet because the market simply stopped marketing.
They also did not expect a liquidity squeeze because it's a collective action problem.
Also interesting are the moves to stop Reddit and maybe save the short sellers.
I can definitely believe it. I mean after all that happened with Jeffrey Epstein, and the continuing revelations of how many people did business with him or outright paid him money, even after he was convicted -- I became a real believer in the class solidarity that exists between the very rich.
Tweet is from a business reporter for the Washington Post.
WaPo just published THICC.
This has all been worth it.
Let's play Mario Kart or something...
Yeah, there's a multi-actor prisoners' dilemma going on here. The last one to defect is going to lose everything, because once people start selling in bulk the price is going to drop 80%.
pleasepaypreacher.net
Let's play Mario Kart or something...
Which is why people are still short selling GME too.
I'm not sure if the correct analogy is a game on chicken or a tug-of-war.
All of this is short terms capital gains so it's taxed at income rates anyway.
It should have zero impact unless GME manages to get blown up to make it into the DOW or something, or unless it causes a widespread disillusionment on what the stock market actually is and causes the whole thing to crash.
More likely, it'll end up with some new regulation which benefits the big players over the small ones.
(also capital gains is horseshit but that's for a different thread)
The toothless estate tax and various trust loop holes cause this condition via enabling large generational transfers of capital.
you're required to have at least a few arbor vitaes out front, or at the very least a boxwood
Capital gains tax has next to no impact on the market at reasonable rates. It'd have to start getting close to or completely erase the premium you're getting for taking a risk. In general most of these people taking crazy bets are doing so in the short term and thus paying income tax rates on gains.
Ok thank you, I didn't think so, but you know having lost my retirement already in 2008 I'm getting tired of wondering if the money I'm putting away will actually be there when I retire.
pleasepaypreacher.net
I don't like calling it gambling because, at least in the unique case of GME, they borrowed more than exists
Like, you can mathematically look at that that and go okay, Expected Value on this is > 1
You can't guarantee you'll be in the money at the end since you can hold too long, but that's not gambling
I also think GME is qualitatively different from AMC, BB, BBBY for that reason
GME wont but TESLA probably will
So far, this has seemed to be a separate thing going on apart from the market at large, and aimed directly at the greedy short selling firms. But it is a protest movement, and it has started growing out into other stocks, and no one really knows what the end game is. The market at large was/is on incredibly shaky ground (IMO) right now regardless of what's going on with GME, but if short sellers start going belly up...I could see it starting a domino effect. They're all so fucking cash rich at the moment though that it seems unlikely. Also..the rich have never been doing better and walked right by the pandemic unfazed, so that also helps stability.
Essentially, yeah. The coordination let them manipulate the market in a way individuals normally can't.
3DS: 0473-8507-2652
Switch: SW-5185-4991-5118
PSN: AbEntropy
You're timing the exit which makes it gambling, because you also know that it's a squeeze with no underlying value.
Or it lets someone else manipulate the market by using social media to convince a bunch of randos to all throw their money into this or that thing that they don't understand.
I agree with this part, but the rest is gambling in the same way that texas holdem poker is gambling.
You’re trying to make your bet and win the pot by out playing the others at the table.
https://www.cnbc.com/2021/01/27/chamath-palihapitiya-closes-gamestop-position-but-defends-individual-investors-right-to.html
Blockbuster is doing it too I believe
Which imo is more manipulative than anything on wsb, at least up till now.
The market is still very much marketing - what has happened here is about as pure an example of the modern stock market as possible.
"Investors" identified an opportunity in the market (in this case, the weak position of another "investor"), and they moved to take advantage.
Tweeter is Jennifer Epstein, a White House reporter at Bloomberg News
Never thought I'd hear that the president is monitoring the situation around GameStop