Reddittors vs Wall Street

[monkey]

once again, I don't think the people on reddit care if they lose money

I got the impression they all say that, whether they mean it or not. The ones who don't really mean it might get out in time to make some money.

I'm confused. Are these rich people who can afford to chuck away a few hundred dollars? Or are these the downtrodden victims of the Wall Street villains who slave at two jobs to be able to feed their kids?

There's a lot of people involved, you'll find any stereotype you like if you go looking. It seems to me it's a great big in-joke and people are projecting whatever bias they want onto it.

Also, everyone in the USA just got $600, having a few extra hundred might not mean you are rich, but using that money for this might not make you wise.

[plodder]

Not just that, but it's actually costing the masters of the universe money, which is currently flowing towards the clowns. Of course, they'll get their revenge, by squeezing them and crushing them until there's nothing left, i.e. a return to business as usual.

[lpm]

A bunch of people are screwing around. And amusing to see how vulnerable the supposed masters of the universe of finance are to it.

One hedge fund is fatally vulnerable to it, maybe a couple more lost badly. This does not make up the masters of the universe. There are thousands of hedge funds. 99.9% of them are making money out of this little comedy, 0.1% are devastated.

[El Pollo Diablo]

The share can be taken off the market temporarily if regulators suspect a pump and dump, it happens infrequently but does happen. I can't think of any examples off the top of my head but I'm sure more organised people can find some if they look. I mean, it quite blatantly is one and my heart breaks for genuine small investors and the staff that are going to get destroyed by this.

You could easily prevent more than say 10% of a company's stock being involved in shorting with a bit of regulation and a bit of IT. I mean, these places somehow implemented FATCA, the poor sods.

Both sides are bad guys but the majority are victims so nobody comes off well in this whole fiasco. I say take steps to limit the damage that either shorting or pump and dumps can do and simply limit how much of a shares stock can be borrowed and make sure it can only be borrowed once. That way everyone gets what they want but in much slower and more manageable motion.

This seems a reasonable take

[bolo]

the coke-fueled titans of Wall Street

You appear to be under the impression that the people losing money at the hedge funds are the fund managers. In fact, most of the losses will fall to the hedge fund investors, which are mostly institutions. Among these apparently evil investors are things like pension funds for government workers and labor unions, university endowments, and the funds that back insurance payouts.

I'm sure none of us are crying for the fund managers whose Christmas bonuses will be a little less next year.

I admit I don't know who's invested in the particular hedge funds in question. Perhaps they are indeed coke-fueled titans. Always possible. The coke-fueled titans have to put their money somewhere, I suppose.

[lpm]

Not just that, but it's actually costing the masters of the universe money, which is currently flowing towards the clowns. Of course, they'll get their revenge, by squeezing them and crushing them until there's nothing left, i.e. a return to business as usual.

The Reddit clowns don't make any money till they sell. You know how a Ponzi scheme works, right? You sit on a huge paper profit, then everyone tries to collect and it instantly evaporates to nothing. The winners are the early entrants who took the payout and passed on the dud to the fools piling in late.

The existence of bubbles is a feature of stock markets, not a threat to them. Bubbles pop, the stock market goes on, the rich keep getting richer.

[headshot]

Weeeeeeeeee!!!!!!

[plodder]

the coke-fueled titans of Wall Street

You appear to be under the impression that the people losing money at the hedge funds are the fund managers. In fact, most of the losses will fall to the hedge fund investors, which are mostly institutions. Among these apparently evil investors are things like pension funds for government workers and labor unions, university endowments, and the funds that back insurance payouts.

I'm sure none of us are crying for the fund managers whose Christmas bonuses will be a little less next year.

I admit I don't know who's invested in the particular hedge funds in question. Perhaps they are indeed coke-fueled titans. Always possible. The coke-fueled titans have to put their money somewhere, I suppose.

If your pension fund is involved in this kind of casino gambling I'll be astonished. They tend to invest in ultra reliable boring things like water companies. The people who give their cash to these kind of investors are cynical wheeler dealers.

[dyqik]

the coke-fueled titans of Wall Street

You appear to be under the impression that the people losing money at the hedge funds are the fund managers. In fact, most of the losses will fall to the hedge fund investors, which are mostly institutions. Among these apparently evil investors are things like pension funds for government workers and labor unions, university endowments, and the funds that back insurance payouts.

I'm sure none of us are crying for the fund managers whose Christmas bonuses will be a little less next year.

I admit I don't know who's invested in the particular hedge funds in question. Perhaps they are indeed coke-fueled titans. Always possible. The coke-fueled titans have to put their money somewhere, I suppose.

If your pension fund is involved in this kind of casino gambling I'll be astonished. They tend to invest in ultra reliable boring things like water companies. The people who give their cash to these kind of investors are cynical wheeler dealers.

Yeah, if your pension fund is exposed to one stock being short squeezed, get a new pension fund. And sue the old one.

[nekomatic]

You know why they’re called hedge funds, right?

[lpm]

You appear to be under the impression that the people losing money at the hedge funds are the fund managers. In fact, most of the losses will fall to the hedge fund investors, which are mostly institutions. Among these apparently evil investors are things like pension funds for government workers and labor unions, university endowments, and the funds that back insurance payouts.

I'm sure none of us are crying for the fund managers whose Christmas bonuses will be a little less next year.

I admit I don't know who's invested in the particular hedge funds in question. Perhaps they are indeed coke-fueled titans. Always possible. The coke-fueled titans have to put their money somewhere, I suppose.

If your pension fund is involved in this kind of casino gambling I'll be astonished. They tend to invest in ultra reliable boring things like water companies. The people who give their cash to these kind of investors are cynical wheeler dealers.

Yeah, if your pension fund is exposed to one stock being short squeezed, get a new pension fund. And sue the old one.

Huh?

Pension funds invest in a huge range of stuff, not a single stock or a single hedge fund or a single thing like water companies.

Basic portfolio theory: spread it around.

This particular hedge fund that got screwed seems particularly aggressive and would be on the very high risk end of any investors portfolio. Given there are thousands of hedge funds to choose from, there's also thousands of risk segments for any investor to get a mix from.

Anyone who invested everything in this one hedge fund accepted the risk of losing everything in return for seeking aggressive returns. The same as any retail investor who put their entire $600 cash at hand in a single stock.

[lpm]

You know why they’re called hedge funds, right?

Invest in garden centres?

[dyqik]

If your pension fund is involved in this kind of casino gambling I'll be astonished. They tend to invest in ultra reliable boring things like water companies. The people who give their cash to these kind of investors are cynical wheeler dealers.

Yeah, if your pension fund is exposed to one stock being short squeezed, get a new pension fund. And sue the old one.

Huh?

Pension funds invest in a huge range of stuff, not a single stock or a single hedge fund or a single thing like water companies.

Basic portfolio theory: spread it around.

That's exactly what I'm saying, yes. If your pension fund takes a big hit from this, it's not got a diverse portfolio.

[plodder]

Yeah, if your pension fund is exposed to one stock being short squeezed, get a new pension fund. And sue the old one.

Pension funds will certainly invest in stocks that some c.nt will try and short, but your typical government or boring pension fund won't be doing the whole wolf of wall st thing. They'll be ticking over with boring fruitful investments of a far more traditional sort. If you've gone for some sort of mega high yield high risk pension then you're gambling - not something most people (especially the little microscope people like me) want to be doing too much of.

There needs to be a distinction made here, between a functional capitalism that everyone understands, that rewards value and hard work and good ideas, and a dysfunctional capitalism that allows wealthy bullies to rampage around whilst claiming it's for everyone else's good.

[Bird on a Fire]

If lpm lends me 10% of the shares for a fee and I sell them to dyqik who lends them to lpm for a fee and she sells them to me and etc. what percentage of the shares have been shorted if the same 10% have been shorted several times over?

The issue with shorts is that they are time-limited. At some point, everyone has to give everyone the original shares back. The autistic stonks bros of Reddit owned some of the shares that actually existed, and wouldn't sell them to the hedge funds, causing the price to skyrocket.

Many of the earliest posters have shown screenshots showing that they've cashed in part of their investment. They've turned spare savings into tens of millions of dollars and still get to annoy the coked-up titans.

[Bird on a Fire]

lmfao at the audacity of suggesting that de facto practice of short-selling by hedge farms is a social good

[dyqik]

Yeah, if your pension fund is exposed to one stock being short squeezed, get a new pension fund. And sue the old one.

Pension funds will certainly invest in stocks that some c.nt will try and short, but your typical government or boring pension fund won't be doing the whole wolf of wall st thing. They'll be ticking over with boring fruitful investments of a far more traditional sort. If you've gone for some sort of mega high yield high risk pension then you're gambling - not something most people (especially the little microscope people like me) want to be doing too much of.

That's not really right. Most US (at least) pensions are in lifecycle funds, which are targeted at being safe on a target retirement date (in 5 year increments). These have a risk profile that reduces over time, with risky investments 30-20 years out from maturity, and a move to lower risk investments after that. In the "high" (not actually anywhere near as high as the hedge fund risks here) risk phase, they take diverse higher risk stock market type positions, plus some safer investments of the type you are talking about. But as an investor in that fund, you are interested in the 30 year yields on that fund, so there's plenty of time for things to average out. Later, when there's less time to recover, they move everything over to the safer boring investments.

But the portfolio of any lifecycle fund in any phase shouldn't be anywhere close to significantly exposed to a single stock.

[bolo]

If your pension fund is involved in this kind of casino gambling I'll be astonished.

My pension fund is the Federal Employee Retirement System, which is invested exclusively in (arguably fictional) government bonds. So no, no hedge funds for me.

They tend to invest in ultra reliable boring things like water companies.

This isn't really true any more. As of the end of 2018, the pension funds of Fortune 1000 companies held about 10% of their assets in "alternative" investments, including about 3.8% in hedge funds and 4.3% in private equity (source). As of 2014, U.S. state and local public employee pension funds held $660 billion in hedge funds and private equity funds (source, yeah, it's old, feel free to find something more recent).

[Bird on a Fire]

Re: naked shorts, Investipedia says:

The percentage of the GameStop float sold short is at 139.57%, the highest level for any equity worldwide (with short interest over $100 million) and a completely absurd number. (While some say this could be a sign of naked shorting, S3 analysts argue including "synthetic longs" in the float calculation gives a more accurate picture and short interest is closer to 58%.)

Due to the lack of stock borrow supply, existing shorts are paying a 31% stock borrow fee and new shorts are paying an over 80% fee. This shortage/high fees combined with a stock rally makes it difficult for short sellers to keep their positions profitably and creates a prime short squeeze target. 2021 has only brought bad news for the bears in such crowded positions. The 16 stocks that had over 40% of their float sold short at the end of 2020 are up an average of 96% year-to-date, according to Bespoke Investment Group.

https://www.investopedia.com/short-sell ... op-5097616

$5 billion!!!

[bolo]

BTW, when I say pension fund, I mean a fund that a government entity or a company or a union manages in order to provide a (usually) defined-benefit pension to its retirees. I don't mean a mutual fund (or similar) that an individual worker invests in to provide assets for their own retirement. I agree that individuals saving for their own retirement rarely invest in hedge funds. Most of them aren't even legally allowed to.

[Herainestold]

lmfao at the audacity of suggesting that de facto practice of short-selling by hedge farms is a social good

In a rational world, neither short selling nor hedge funds would exist. Of course, neither would capitalism.

[bjn]

Re: naked shorts, Investipedia says:

The percentage of the GameStop float sold short is at 139.57%, the highest level for any equity worldwide (with short interest over $100 million) and a completely absurd number. (While some say this could be a sign of naked shorting, S3 analysts argue including "synthetic longs" in the float calculation gives a more accurate picture and short interest is closer to 58%.)

Due to the lack of stock borrow supply, existing shorts are paying a 31% stock borrow fee and new shorts are paying an over 80% fee. This shortage/high fees combined with a stock rally makes it difficult for short sellers to keep their positions profitably and creates a prime short squeeze target. 2021 has only brought bad news for the bears in such crowded positions. The 16 stocks that had over 40% of their float sold short at the end of 2020 are up an average of 96% year-to-date, according to Bespoke Investment Group.

https://www.investopedia.com/short-sell ... op-5097616

$5 billion!!!

I read elsewhere that something like 40% of GameStops shares is held by executives who have limitations on freely trading them. Which means they have shorted over 200% of the available shares. Regardless of the reddit clowns dicking around, there was going to be a short squeeze at some point anyway. The short sellers were overexposed anyway.

[jdc]

keeping to the theme of links to old articles, this antique piece from 2010 says it's gone from being high net worth individuals to institutions holding a majority of hedge fund assets: https://www.ipe.com/hedge-funds-into-th ... 35.article ("last year" being 2009, obvs)

The perception has long been that those who invest in hedge funds are high net-worth individuals. That was largely true when hedge funds first began many years ago, but it is no longer the case. Today, investors in hedge funds are more likely to be institutions, such as university endowments, charitable foundations, public and private sector pension funds, and sovereign wealth funds.

This investor transformation has been a gradual process that reached a material milestone last year when, according to research by AIMA, institutions, for the first time, accounted for an absolute majority of hedge fund assets under management. Research has also shown that during much of the past 10 years, institutional investors represented the majority of net new investment capital in the industry.

A recent survey by also found that 75% of assets managed by the largest hedge fund firms came from institutional investors.

Within the institutional investor base, pension funds are a very important constituency. Of the total capital from institutions, AIMA's research suggests that about one-third comes from pensions.

In the US, private sector pension funds look to allocate, on average, about 10% of their assets to hedge funds, a little ahead of public sector pensions, which target 8% on average. In the UK, some of the larger schemes have allocated up to 15% of their portfolio to hedge funds.

[Bird on a Fire]

lmfao at the audacity of suggesting that de facto practice of short-selling by hedge farms is a social good

In a rational world, neither short selling nor hedge funds would exist. Of course, neither would capitalism.

Herainestold has always been the most puzzling of lpm's sock accounts.

[Bird on a Fire]

keeping to the theme of links to old articles, this antique piece from 2010 says it's gone from being high net worth individuals to institutions holding a majority of hedge fund assets: https://www.ipe.com/hedge-funds-into-th ... 35.article ("last year" being 2009, obvs)

The perception has long been that those who invest in hedge funds are high net-worth individuals. That was largely true when hedge funds first began many years ago, but it is no longer the case. Today, investors in hedge funds are more likely to be institutions, such as university endowments, charitable foundations, public and private sector pension funds, and sovereign wealth funds.

This investor transformation has been a gradual process that reached a material milestone last year when, according to research by AIMA, institutions, for the first time, accounted for an absolute majority of hedge fund assets under management. Research has also shown that during much of the past 10 years, institutional investors represented the majority of net new investment capital in the industry.

A recent survey by also found that 75% of assets managed by the largest hedge fund firms came from institutional investors.

Within the institutional investor base, pension funds are a very important constituency. Of the total capital from institutions, AIMA's research suggests that about one-third comes from pensions.

In the US, private sector pension funds look to allocate, on average, about 10% of their assets to hedge funds, a little ahead of public sector pensions, which target 8% on average. In the UK, some of the larger schemes have allocated up to 15% of their portfolio to hedge funds.

I wonder how the big crash and subsequent restructuring affected the balance.