Largely the fault of the Federal Reserve and the Treasury pumping money into the economy like a dam broke. When you have a hammer, every problem is wearing a nail shaped hat and pumping money into the market by lowering interest rates to zero and buying bonds inflates equity prices and leads to an even greater concentration of wealth. It really does make it feel like our republic is nearer its end than its beginning.
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Point of clarification: The Redditors driving the stock up are not the ones making money. That would be the existing holders of an otherwise garbage stock that are happily selling it to them. If I owned any of that stock I’d be gleefully selling to to them as well, like selling a broken car for new car prices.
The Redditors will still own the stock when it crashes, which it will. The people who sold them the stock will own the money. This is in no way a victory for the redditors. But they seem to be having fun so hooray I guess?
As for short sellers, they actually do have a function in the stock markets. When they have to buy stocks that have fallen to cover their bets, that helps put a floor in the market. It is actually a stabilizing function. Without shortsellers there would be no bottom in a crash.
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This is always the case in runaway bull markets when everyone has lost their goddamn minds. The hangover is always the worst for those who are unprepared for it.
It’s easy to feel like a genius in a bull market, and a lot of first-time day traders are probably very bullish on their investing sense right now.
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This is something that really freaks me out right now. The stock market isn’t rising because all these companies are doing gangbuster business. The market didn’t even react when the idiots stormed Congress. These are warning signs that something is off. When markets behave like this, it’s often because there are weird incentives in play. The mortgage crisis is a great example–the market configured itself so that there appeared to be no downside to bad loans. So lenders kept lending until it was utterly untenable, and then a massive crash.
I wonder what’s going wrong right now.
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I’m fresh out’s fucks for 1%'ers. Really.
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I guess I’m not understanding this whole thing. I thought the point of what the redditors is doing is to put the hedge fund out of business, not to make money and that all the apparent money that is being made is just on paper. What did I not get?
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This guy was pumping GME back in July. He went from $55k to $11M. His analysis is so flawed it’s almost comical. But he spends an hour rationalizing it for the camera.
Tell me he’s not an r/Wallstreetbets ringleader.
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The point is to punish and tr0ll the hedge fund for undervaluing and endangering companies the redditors love (I assume because of good childhood memories about buying video games, going to the movies, etc.).
Ultimately most of them are going to lose their money, but the amounts each individual in the brigade invested are probably small enough that they can afford it as the price of buying LULZ. Collectively, though, it was enough to screw up the hedge fund’s plan for profits. I don’t think most of the Redditors anticipated that they’d put Melvin Capital out of business.
The outcome has been that three companies that actually do something productive are still in existence while a firm that only shuffles money around in highly irresponsible ways is now gone. I don’t know if the redditors are good guys in general (probably not) but I’ll take that as a win for the capitalism that the regulators are supposedly defending.
That’s for the SEC to decide. But there’s nothing illegal about doing what Jim Cramer and the other cable business news pundits and “analysts” do all the time when they’re talking stocks they own up or down for the peons/suckers.
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Did you find u/deepfuckingvalue’s YouTube account?
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i wouldn’t argue against regulation, i just think that short selling can and does provide social goods that might be missed in its absence. i certainly believe there are other “investment” instruments that are much less useful to society which should be dealt with ahead of that,
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That’s one of the things that surprises me about this. Who has good memories of Game Stop?
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They used to sell used DVDs at GameStop in addition to games. I found some real gems there.
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Right, some little kid traded in his copy of The Mummy 2 for $1.50 worth of credit so he could use it towards Majora’s Mask and then they sold it to you for $8. This is who they want to save from the “vulture capitalists”? I’m all for stopping hedge funds from tearing down productive companies, but I guess I don’t see the aesthetic beauty of Game Stop.
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I’m not sure how that counts as a public good. It’s not like the ability to short something grants outside observers some special power to detect when that thing is overpriced. It just means there’s a financial incentive to detect it, which is supposed to be what regulators’ and auditors’ salaries are for.
Besides which, if short sellers think Acme Inc. is about to collapse, that doesn’t help the shareholders, i.e. the people actually exposed to the danger identified. In fact it means making money directly at their expense. Which also means short sellers have an incentive not to want shareholders to realise the extent of their peril.
The best you could say is that at least this way someone profits from disasters. But putting it that way suggests where there might be a problem.
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Are they really trying to save GameStop or are they just having some fun? Or perhaps just making sure it goes out with a bang?
I’m just saying, finding Oldboy (the real one, not that Josh Hartnett crap) for 10.99 at GameStop counts as a good memory in my book.
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They’re egging on $150 GameStop. Clearly they don’t expect any more gullibility of customers even if the gamer magazine the publish turns ripe somehow. GameStop’s going to have to throw down to open local restaurants until they wind down.
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I think the way people are reacting to this is interesting.
A lot of people seem to believe stocks have some ‘true’ price, and further that doing things that would push a stock price away from that true price is morally wrong.
The former might be true in some metaphysical sense, but on this planet, we discover what things cost by trading them. And the latter would seem to imply that the entire stock market should be banned.
I mean, I get it. Gamestop at $90bazillion makes no sense. The problem becomes similar to distinguishing pornography from literature with sex - you know it when you see it, but good luck finding agreement. And in practice when you try, you’re just going to restrict who gets to take part in the market.
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Regular (i.e. not “naked”) short selling can be a signalling mechanism that there’s something wrong with a stock that has everyone irrationally enthralled (e.g. Uber). But yes, strong regulation, disclosures, and accounting compliance are better ways to achieve the same results against shady companies with a softer landing. Unfortunately, those things are anathema to “free” market fundies who’ve called the tune in the U.S. for 40 years.
And @navarro’s point about the benefit to responsible pension funds and institutional investors is also a valid one.
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And Wall Streeters are angels…? Gimme a break.
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