Scrutable

This is hilarious.

Hedge Funds were short-selling Gamestop (the Blockbuster of video games, apparently), and then "parlaying" those shorts, ie making multiple bets that the stock's value would hit $0. Apparently they were also writing articles and spreading rumours about the company's imminent collapse.

Reddittors found out, and decided to f.ck them over by buying the stock. The value went up from $20 to $250 or something, so the hedge funds have lost many multiples of their short position. ETA as the price rose, hedge funds had to buy the stock to cover their short positions, but had placed more bets than there was actual stock in existence, causing the price to balloon. Many reddittors got out with 10x their investments.

But who's behind it? Superficially it seems to be just a bunch of highly online day-traders bored during a pandemic that's exacerbating economic inequalities. But could it perhaps be just another big Wall Street w.nker gambling with people's lives?

https://www.washingtonpost.com/business ... le.science

A clearer explanation:

One twitter thread was suggesting that machine learning algorithms might have picked up on the chatter, and also helped pump the stock.

Apparently Berkshire Hathaway stock sometimes gets a bump when Anne Hathaway is trending, and since more than one algorithm responds, it's a genuine price increase.

Capitalism is so stupid.

This was posted in response, which I haven't verified, but very much want to be real.

ETA: https://www.theglobeandmail.com/investi ... -marx-and/

This tracking of macroeconomic fluctuations may have had something to do with wanting to know when the workers’ uprising would occur (they believed it would be triggered when the economy collapsed into a depression). But it likely also had something to do with gathering intelligence that would assist with managing their investments.

Whenever I see weird economic crap like this, I wonder if capitalism is finally going to get its just desserts. At least the hedge fund crooks are losing their shirts. Very satisfying.

By the looks of it GameStop is f.cked as a business though. They are losing money and at some point the share price will reflect that again, and some poor suckers will be left holding dud stock. GameStop could issue new shares to cash in on the high price, but what could they then do with the cash to justify the stupid high valuation.

Markets can stay irrational longer than most people can stay solvent.

Nice write up in Ars Technica

Astonishing. They’re settling traps for short sellers.

https://www.reddit.com/r/wallstreetbets ... nderstand/

I was just coming here to start a thread, it's been all over twitter the last couple of days, and it's pretty hilarious.

So the parasites who make their money by shorting are being f.cked over?

Everyone realises that it's the Reddittors who are the villains, right?

A few of them will make money. But at the likely cost of driving GameStop into bankruptcy and its employees to the unemployment lines, plus a bunch of reddit gamblers losing their money.

Sadly, the rich investors in the hedge funds are actually the good guys here.

lpm wrote: ↑

Thu Jan 28, 2021 9:37 am

Everyone realises that it's the Reddittors who are the villains, right?

A few of them will make money. But at the likely cost of driving GameStop into bankruptcy and its employees to the unemployment lines, plus a bunch of reddit gamblers losing their money.

Sadly, the rich investors in the hedge funds are actually the good guys here.

No, sorry, you're all c.nts.

I mean, they're all c.nts, sorry lpm. But when it comes to capitalism little c.nts are better than big ones, even when there's millions of them. I'm not sure where this millions of little c.nts line is going now, so I'll stop.

ta disco

Don't be childish Plods - or worse, pretend to be childish.

Capitalists making long term investments create jobs. We all like job opportunities, right? We like entrepreneurial people who'll take over the restaurant that nearly went bust in the pandemic, and who will keep employing a dozen people instead of it shutting its doors for good? We like this capitalist who will hopefully make profits, employ decorators to improve the business, invest in another restaurant and get the builders in for a refurb, who will train up apprentice chefs?

GameStop is obviously a shaky business. Traditional retail in the digital age, with the pandemic depression on top. But there are some entrepreneurial types who think it has a chance. They think the existing management f.cked up and is driving it into bankruptcy, but a new team could turn it around and give it a profitable future for the long term.

Suppose these long term investors reckon it could be worth $20 a share. However the share price has only fallen to $30. The existing management keeps bumbling along with its crap strategy. Along come short sellers who reckon $30 is way too high and the business is heading to $0. They keep selling, driving the price to $5.

Now the long term investors get excited. They can go for it. Sure, it's going to be risky, and this bricks-and-mortar business still might well go bust, but the chance to turn $5 into $20 is worth that risk. They'll buy the company or a large stake in it, install new management and hope to make it thrive.

Before they do so, however, along come the Reddit pump-and-dump crowd and drive the company's shares up to $300.

The long term investors abandon their plan. Obviously they won't be investing at anything above $5.

The outcome is that GameStop lingers on in half life, a struggling company with struggling management, business steadily worsening until the day it has to start shutting the doors and telling its shop staff not to bother coming in tomorrow. At some point in the journey to bankruptcy the share price falls to $5 and below, but too late - the rot has spread too far and the original long term investors have lost interest.

The short sellers were a useful lubricant for GameStop - they could see it was overvalued, pushed the share price lower, and won the company the interest of a serious long term investor. The Reddit pump-and-dump idiots are the pollutant in the story - making the company toxic and driving away genuine investors.

Imagine a video of a sturdy gentleman with a beard writing on a whiteboard. The framerate has been increased, and he is gesticulating wildly. Electronic music plays in the background. It is mildly amusing.

This is lpm explaining why hedge funds shorting GameStop is good actually.

Give one reason why shorting GameShop is bad.

lpm wrote: ↑

Thu Jan 28, 2021 10:36 am

Give one reason why shorting GameShop is bad.

Give one reason why short selling should be risk-free.

lpm wrote: ↑

Thu Jan 28, 2021 10:36 am

Give one reason why shorting GameShop is bad.

It hastens the end of a business.

plodder wrote: ↑

Thu Jan 28, 2021 10:49 am

lpm wrote: ↑

Thu Jan 28, 2021 10:36 am

Give one reason why shorting GameShop is bad.

Give one reason why short selling should be risk-free.

Under no circumstances should short selling be risk-free. It is, and always should be, a risky thing to do.

plodder wrote: ↑

Thu Jan 28, 2021 10:50 am

lpm wrote: ↑

Thu Jan 28, 2021 10:36 am

Give one reason why shorting GameShop is bad.

It hastens the end of a business.

No it doesn't.

Yes it does. It drives their share price down which makes it harder to secure finance.

It also attracts other short sellers who descend like vultures. These pricks will work in concert to artificially screw a business into the ground.

They may see themselves as the dung beetles of the financial world, clearing up messes that others want to ignore, but they are more like parasitic worms with the host's death as part of their life cycle.

You are making a very basic mistake.

The amount of cash or debt a company has is not related to the share price.

When the share price falls the company does not have less money.