This article is part of TPM Cafe, TPM’s home for opinion and news analysis.
This is a companion discussion topic for the original entry at https://talkingpointsmemo.com/?p=1357486
This is a companion discussion topic for the original entry at https://talkingpointsmemo.com/?p=1357486
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I am not following this whole thing super closely, but it seems to me that this whole thing smells a lot more like “the little people” were getting played to begin with. Any investor who bought this stock north of $50 was going to get hosed. Creating a small $$ bubble is going to end like any other bubble. Just because it was harming the short sellers, doesn’t mean it was good for the little guy.
Seems like other times when bitcoin has gotten really highly valued. The price starts to rocket up because for a short window, everyone thinks it’s going to keep getting bid up.
But maybe I’m misunderstanding something else.
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“Eat the rich” is trending #1 on Twitter.
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It’s not hard to imagine a scenario in which a hedge fund decided to beat its competition by leveraging the crowd against heavily shorted stocks, while avoiding all of the risk and the inevitable collapse of the bubble at the same time.
That’s one of thoughts I had last night. Even if that isn’t the case, you can bet the hedge funds are on Reddit also.
They are on Yahoo Finance message boards on actively traded stocks hyping or bashing stocks all the time …and have been since 2008. Not the big gunners from the hedge funds, but trolls they employ or low level employees.
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Saw data yesterday that 56% of Robinhood users had some position in GME (gamestop), which would indicate an actual following.
Not that they’re not being manipulated themselves.
But don’t mind watching the billionaires squirm a bit-- billions in losses due to a short squeeze is very sweet to see. And the demise of a hedge fund or all of them wouldn’t be a bad thing at all.
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“Maybe I’m misunderstanding”
My 22 yo nephew was talking about this Wednesday AM.
What your not getting is how deeply GenZ hates our Capitalist Overlords and how willing they are to unite in an effort to watch gleefully as these pricks on Wall Street have to eat their shorts.
These kids really despise our Casino Capitalism and are entirely intent on destroying it.
These kids are smart, tech savvy and motivated.
I wouldn’t bet against them. They have already forced Robin Hood to back down in less than 24 hours.
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Once the hedge funds were hip to what was going on, all they have to do is buy some call options and help GME rise. Buying call options while short is a method of insurance hedge funds deploy.
It’s like a swarm of minnows are going to take down a few whales. Not happening. Look at their quarterly profit statement when it comes out if you doubt me. They won’t lose.
Added:
Although there were some huge block trades of 50,000 -250,000 shares yesterday, most of the trades were 1,000 5,000 and 10,000 shares a pop. Little folks are not buying that many shares at between 300-400 bucks a share.
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Oh, I don’t doubt there are all sorts of games going on, and the deck is entirely stacked against the “regular” folks, most of whom will end up quite unhappy and bruised at the end of this.
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In most cases they probably are but a good clue as to whether this is true is trading volume. In the case of Gamestop, trading volume was relatively higher than normal but still well within the range that retail investors were really putting on their own short squeeze and, at least for the ones who got back out in time, making a quick profit while forcing a hedge fund to cover it’s bets.
But when you see trading volumes in the tens of millions then that is almost certainly the big players: hedge funds and institutional investors. Nokia I think was something like 70-million, way beyond the retail level, so that was probably a pump and dump by a big player working “the little people.”
IOW, the article is pretty much correct: this is not a free market and never has been and that’s not just because of regulation, it’s because the major players are the ones who make the rules particularly when it comes to order flow. They’re pretty damned arrogant about it too; e.g., in their world, the sqeeze on Gamestop would have been business as usual except the ‘wrong people’ made the money.
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Exactly, and that the author of the article thinks that the WSB subreddit is populated by “regular Janes and Joes” is part of the problem, sure it is, but it’s also populated by bots and astroturf organizations who push that community around like the “regular uninformed 14 to 35 year olds” that populate that subreddit and most of the rest of the reactionary subreddits. To those (not necessarily the author) that think only the “little guys” are the ones pushing the GameStop and other stocks around over the past few days is simply missing the point that while a very, very, very small handful are going to make some money, most of them will not have their finger on the sell button when the stocks drop or tank, and that “70 billion hedge fund losses” is also “69.9 other hedge fund gains”. I expect to see a whole lot of “I just lost my savings” memes on reddit next week but somehow those memes don’t “stick it to the man” so they probably won’t trend.
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An interesting article and entertaining read.
The fact that the very same financiers who made a killing in the market while a pandemic tore through our cities are able to simply turn off regular people’s ability to trade speaks to how profoundly broken the rules of the game are today.
Elizabeth Warren is right. If high rollers can do this, it’s time for a wealth tax.
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For “Pump and Dump” schemes, it doesn’t help the little guys that they don’t have access to the same resources for things like high frequency trades. They don’t have algorithms watching the stock prices and capable of deciding to dump the stock in milliseconds. By the time they might see the stock tanking, it’s going to be long gone, while the hedge funds’ algorithms will have gotten them out almost instantly.
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…it’s no different than if a casino decided to usher out their clientele just because they started winning.
But that’s exactly what casinos do when someone starts winning at blackjack because he knows how to count.
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At least not let the same company make hedges and investments.
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At the very least a brokerage-transaction tax.
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Absolutely.
And a wealth tax.
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The bigger problem is that in a great many cases, stock “values” are totally divorced from reality. Just as one example, Tesla’s market value is greater than the next 9 automakers COMBINED. That means they are bigger than GM, Ford, Volkswagen, Toyota, Honda, et al. together.
Now, I do think electric cars are the future. GM has vowed to be all-electric by 2035 and I applaud that. Most of the others will likely follow at least to make a good part of their fleets electric. What does that mean for Tesla? It means lots of competition from big companies with enormous global manufacturing capabilities and dealer networks. Tesla is not going to sell more cars than all the others combined.
The purpose of a stock market is to efficiently allocate capital. None of the shenanigans around GameStop, whether by hedge funds or kids in their parents’ basement does that. Some level of shorting can serve those ends by taking capital away from poorly managed companies, but there have to be limits.
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Can you sell a house that you don’t own? Can you sell a car that you don’t own? Can you say, “fraud?”
But selling stocks you don’t own is called “an investment strategy.”
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Casinos have enough tables and machines that they are not gambling. Only the players are sharing the risks. A casino owner would have to be a complete idiot to end up losing money.
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If you mean “naked shorting” where you don’t even borrow the shares, then, yeah, that should be banned. If you do borrow the shares, then it’s permissible, because you will have to return them at some point. Is that called “clothed shorting”?
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