Free Republic
Browse · Search
General/Chat
Topics · Post Article

Skip to comments.

The GameStop Hedge Fund fiasco, explained. No, this isn’t a bad thing. Some are trying to position the GameStop populist uprising as something bad, even a "Ponzi Scheme." It's not.
NOQ Report ^ | 01/28/2021 | Carl Durrek

Posted on 01/28/2021 8:54:41 AM PST by SeekAndFind

A subreddit, r/WallStreetBets, has caused mass hysteria in the financial markets as many hedge funds and Wall Street elites have lost billions as a result of their GameStop play. Was what they did “market manipulation?” Absolutely. Is that inherently wrong or even illegal. Absolutely not.

Briefly, members of the subreddit noticed that most of the active shares for GameStop were in a short position, meaning hedge funds were betting that the stock price would drop dramatically, making them a lot of money. So, the Redditors put out the word to buy Gamestop stocks and drive the price up. It worked. One can argue it worked better than any other price pumping play in history that wasn’t attached to actual news about a company.

Politicians, trading companies, and Wall Street analysts have called for a moratorium on trades of the stocks until market volatility subsides. In other words, they’re trying to buy time for those who have shorted and even continue to short the stock to get their ducks in order to mitigate damage. It’s a play that works against the little guy in favor of the big guys.



JD talked about this in-depth on his latest episode of Conservative News Briefs (in its triumphant return after months of being offline). For those who want a shorter breakdown, here’s a brief explainer video from Anything Goes (explicit language):

They’re working against the short squeeze to protect assets, oftentimes their own. THIS is the only thing that’s bad about all of this. Is shorting stocks bad? No. It’s part of the gamble, and anyone who says the stock market isn’t legalized gambling is delusional. Is pumping the stock the way the subreddit did bad? No. Again, it’s all a gamble.

Hedge fund managers are claiming they don’t like volatility. The truth is they don’t like volatility they don’t control. This action by the masses driven by the “little guys” isn’t in the hedge fund managers’ playbook, which is why they’re trying to quash it.

CLICK ABOVE ARTICLE LINK FOR THE VIDEO



TOPICS: Business/Economy; Computers/Internet; Society
KEYWORDS: gamestop; hedgefunds; reddit; stockmarket
Navigation: use the links below to view more comments.
first previous 1-20 ... 101-120121-140141-160161-173 next last
To: Boogieman
If the technology exists to increase convenience, cut through red tape, etc, and you choose not to make it available to the public, the next guy will, and then he’ll just be the one to reap the profits instead of you.

Convenience for whom?

Let's step back and ask ourselves who the "customer" is in these securities markets. The original purpose of issuing publicly traded shares of stock was for a company to raise money for capital to expand, invest in new opportunities, replace capital equipment, etc. Over the years, stock trading has effectively replaced the company owner with the investor as the "customer" in most trades. Making it more convenient to do this has simply accelerated the process and placed more intermediaries between the company's management and the owners/investors.

Have you noticed that GameStop's management and its business prospects haven't even come up in any of the conversations and media reports about the events of the last few days? This isn't even about GameStop anymore; it's about speculators playing games with its shares.

Interestingly, this is one of the reasons why someone like Donald Trump apparently never liked the idea of going public with his companies. As far as I can tell, his companies were all organized as sole proprietorships or limited partnerships. This limited his options for growth, but it protected him from the uncertainty that comes with losing control of the ownership of your own company.

121 posted on 01/28/2021 11:01:06 AM PST by Alberta's Child ("There's somebody new and he sure ain't no rodeo man.")
[ Post Reply | Private Reply | To 78 | View Replies]

To: RinaseaofDs

They are not begging,

THEY ARE ORDERING GME to sell. Or the whole house of cards burns, but Gamestop will be first.


122 posted on 01/28/2021 11:01:40 AM PST by redgolum (If this culture today is civilization, I will be the barbarian )
[ Post Reply | Private Reply | To 107 | View Replies]

To: tbw2

Just honest people being attacked by the crooks.

If one is not part of the clique you can’t play. sounds a lot like those moron in politics doesn’t it?


123 posted on 01/28/2021 11:02:19 AM PST by JayAr36 (My disgust with government is complete.)
[ Post Reply | Private Reply | To 117 | View Replies]

To: redgolum

Um that’s a good thing isn’t it?🤔


124 posted on 01/28/2021 11:02:33 AM PST by BiteYourSelf ( Earth first we'll strip mine the other planets later.)
[ Post Reply | Private Reply | To 70 | View Replies]

To: redgolum

Can they order them to sell?


125 posted on 01/28/2021 11:03:06 AM PST by RinaseaofDs
[ Post Reply | Private Reply | To 122 | View Replies]

To: SeekAndFind
Irony...some folks on WallStreetBets are saying that Robinhood is showing that they (the user) cancelled buy orders this morning when the users say they did no such thing, info on the app is showing that the user cancelled the order...

Imagine that, a computer being programmed to show information that is not true? HMMMMM
126 posted on 01/28/2021 11:05:33 AM PST by The Louiswu (HOLD ON GME)
[ Post Reply | Private Reply | To 1 | View Replies]

Comment #127 Removed by Moderator

To: RinaseaofDs

Legally, no.

But yes they can. Threats, bribes, kicking the CEO out of the club.

The hedgies don’t care at this point, they have to have that stock back to $4 by settling tomorrow or 2008 looks like a minor dip


128 posted on 01/28/2021 11:05:53 AM PST by redgolum (If this culture today is civilization, I will be the barbarian )
[ Post Reply | Private Reply | To 125 | View Replies]

To: redgolum

Hedge funds would just love for Gamestop to issue more shares, directly to them, so they can cover their naked shorts.


129 posted on 01/28/2021 11:07:15 AM PST by PapaBear3625 ("Those who can make you believe absurdities, can make you commit atrocities." -- Voltaire)
[ Post Reply | Private Reply | To 119 | View Replies]

To: Boogieman
Great post. Suppose there are a million shares of company stock on the market trading at $10/share, and a bunch of small-time opportunists rig the game so that the price runs up to $300/share. The company's market capitalization has (theoretically) grown from $10 million to $300 million overnight.

If a group of institutional investors are on the hook for 100% of the shares in a short sale, then they have to cough up $300 million collectively to cover their trades in a company that's really only worth $10 million. They're on the hook for a $290 million loss. But if the run-up from $10/share to $300/share is being driven by a million small operators who have been buying it up at $300/share and no one speculator owns more than one share, then each person is only facing a $290 loss while the collective loss would still be $290 million.

When you crowd-source chaos, this helps spread the risk considerably.

130 posted on 01/28/2021 11:09:08 AM PST by Alberta's Child ("There's somebody new and he sure ain't no rodeo man.")
[ Post Reply | Private Reply | To 81 | View Replies]

To: PapaBear3625

That is my bet.
It does two things
1. Covers their shorts
2. Screws the investment insurrectionists.

And it pumps a lot of money into GME’s coffers. Not sure if it is legal, but that stopped meaning anything around March 2020

But if I was on the board (which I do wonder who is), I would cash out now, and move to the islands. Which with the travel bans should be impossible.


131 posted on 01/28/2021 11:09:40 AM PST by redgolum (If this culture today is civilization, I will be the barbarian )
[ Post Reply | Private Reply | To 129 | View Replies]

To: Alberta's Child

“Making it more convenient to do this has simply accelerated the process and placed more intermediaries between the company’s management and the owners/investors.”

Then your issue is really with publicly traded stock in general it seems. As long as we are allowing it, and we have the technology to make it easier to do with a lower threshhold of entry, someone is going to be happy to provide that service, since there is a demand for it.

For example, when automobiles were first invented, I’m sure they were quite expensive, and only the richest man in the average town could own one. After Henry Ford came along, everyone could own one. The rich men obviously would be perturbed about all those vulgarians clogging the roads, but if Henry Ford had decided, out of principle, to not make the cars more affordable, someone else would have. Only outlawing driving of cars by the poor could have stopped it.


132 posted on 01/28/2021 11:10:27 AM PST by Boogieman
[ Post Reply | Private Reply | To 121 | View Replies]

To: redgolum

Then let them burn.

I hope I hope it happens.

So sweet if it does.


133 posted on 01/28/2021 11:11:11 AM PST by RinaseaofDs
[ Post Reply | Private Reply | To 128 | View Replies]

To: grey_whiskers
I may be wrong about this, but I thought I read yesterday that a "naked short" is legal as long as the buyer/speculator can take possession of the shares within a certain period of time (1-2 business days?).

At any rate, it was also explained that the short interest in GME could legitimately exceed 100% if there were large numbers of shares changing hands at multiple times during the course of a trading day -- i.e., Short Seller A borrows 100 shares from Short Seller B, then immediately lends the same 100 shares to Short Seller C, etc.

I may be totally wrong about this, but this is what I understand from reading up on this story yesterday here on FR and in other places.

134 posted on 01/28/2021 11:13:11 AM PST by Alberta's Child ("There's somebody new and he sure ain't no rodeo man.")
[ Post Reply | Private Reply | To 95 | View Replies]

Mark Cuban crying like a baby on CNBC...got his ass handed to him yesterday..he looked scared as hell. American Airlines is the next “mob” target....get ya popcorn...


135 posted on 01/28/2021 11:13:15 AM PST by basalt
[ Post Reply | Private Reply | To 133 | View Replies]

To: SeekAndFind

there is nothing wrong with a hedge-fund betting against a company
that the HF thinks is dying

or not
please discuss


136 posted on 01/28/2021 11:13:22 AM PST by RockyTx
[ Post Reply | Private Reply | To 1 | View Replies]

To: KC Burke

100% agree.


137 posted on 01/28/2021 11:13:23 AM PST by okkev68
[ Post Reply | Private Reply | To 83 | View Replies]

To: RinaseaofDs; redgolum
Can they order you to buy health care?

But seriously...

I don't think they can order you to sell, but what they are doing is getting the trading houses to block additional purchases of the stock.

When the only option is to hold or sell, as the price begins to fall people will begin to sell to bank their gains.

The question I have is whether the holders of the debt will make the margin calls on the short traders, or if they will wait and let them take new short positions (which are also sell trades) to ride the fall until they recoup their initial losses?

If the stock is already over-sold, there may not be new stock to sell. On the other hand, if they illegally over-sold stocks that didn't exist, who's going to stop them from continuing to do it in a manipulated market that can only go down due to blocking future purchases? The Biden DoJ or SEC? At some point, the market will be "balanced" again by getting the short position down below 100% of outstanding shares.

-PJ

138 posted on 01/28/2021 11:13:31 AM PST by Political Junkie Too (Freedom of the press is the People's right to publish, not CNN's right to the 1st question.)
[ Post Reply | Private Reply | To 125 | View Replies]

To: Alberta's Child

Yes, and now this is a new risk that investors will simply have to take into account before they decide that shorting a stock is, in their actuarial analysis, an acceptable risk.

The first people to encounter a novel risk like this are going to be unprepared, and that’s perhaps unfair to them, but life is not fair.


139 posted on 01/28/2021 11:14:13 AM PST by Boogieman
[ Post Reply | Private Reply | To 130 | View Replies]

To: Political Junkie Too

Of course they can order you to sell.

They banned churches from meeting. They sent cops roaming the streets to break up parties. They banned speech. They are trying to ban people who worked with Trump from ever working again.

“Law” is not longer something that matters.


140 posted on 01/28/2021 11:15:39 AM PST by redgolum (If this culture today is civilization, I will be the barbarian )
[ Post Reply | Private Reply | To 138 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-20 ... 101-120121-140141-160161-173 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
General/Chat
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson