Watching HN get caught up in this Gamestop bubble over the past week has been eye-opening to me about the community. The kind of information being spread around WSB was fully ridiculous. Wild conspiracy theories, financial advice with no basis in reality, astroturfing, and mob behavior. There has been an incredible amount of bleed-over between the garbage I've seen posted on WSB and the things posted in these HN threads and far too much reverence for a cesspool.
I think HN likes to believe it is evidence based and rational instead of emotional and greedy. A more enlightened and civilized corner of the internet. I have not been seeing much of that lately. It turns out the promise of riches is enough to make any community lose it's collective mind.
Here is a truism for you all: In any casino the players may win or lose, but the house always wins. If you think any bet is a guaranteed win, you have lost your rationality.
Conspiracies happen so frequently on Wall St that “conspiracy theories” should be closer to a priori assumption than irrational fringe ideas.
Were people skeptical of Moodys A+ ratings of subprime mortgages conspiracy theorists? And that’s far from the only example of financial fraud . There’s a lot of money at stake.
Citadel is most of Robinhoods revenue, they put money on the opposite side of the trade via Melvin, and Robinhoods decision to restrict trading benefited the short position of the trade . The stock markets been around for over a century and online trading around over 20 years, with many volatile stocks and bubbles, yet restricting trading in one direction has no precedent. The conflict of interest Robinhood had is crystal clear and at a minimum calls for a deep investigation. Accepting their PR, which has barely explained anything is about as far from rational as possible. They described the collateral requirements as “opaque” and “pretty technical” with no real clarity, and never explained other details such as why they restricted fully cleared non-margin cash accounts or why they removed tickets from their search bars.
I’m not saying with any confidence there was foul play, but there’s more than enough conflict of interest and unprecedented behavior to call for an investigation far more than what we’re getting. Especially with regards to who was buying when so many retail traders were unable to.
Financial markets should be open and transparent. They are not supposed to be casinos with arbitrary hedge funds playing the house. To resign yourself to that idea is far more irrational than calling for openness and investigation into the many unanswered questions around what happened.
I have been seeing people on WSB claim that the stock price shown on the ticker is "manipulated by the hedgies" and asking when the real stock price is going to finally appear. This is pretty similar to Q people asking when it will be revealed that 45 is still the president. That one absolutely fits my definition of "wild conspiracy theory."
In terms of more popular accusations of wrongdoing among brokerages as they shut down the buy side, that seems plausible but hard to prove coordination unless someone recorded the conversation in a smoke filled room. If there was big money to make and a way to get away with it, I assume most corporations would engage in illegal activities.
I’m certainly not denying there’s plenty of misinformation and far fetched theories floating around. I think there’s a big middle ground between “accept every half brained idea on Reddit” and “take a 300 word corporate blog post at face value.”
It is a fact that the relevant ticker symbols were hidden in Robinhood UI during the restrictions. This could simply be because the UI always hid symbols with restrictions, but that would be a strange decision in the first place (why not just always show the tickers info?) and in context is another oddity worth looking into.
My suggested middle ground is, call for investigation. Maybe there’s no smoking gun but if, for example, it was uncovered that a huge amount of institutional short covering took place during the restrictions that would be more hints that foul play occurred and justify more investigation.
In the future, if we don’t get answers , well connected players can manipulate markets by blaming opaque clearing house requirements unless more transparency is added.
My concern is that by being too dismissive of calls for investigation, we lose the political steam to at least try and get better answers that we deserve.
> I have been seeing people on WSB claim that the stock price shown on the ticker is "manipulated by the hedgies" and asking when the real stock price is going to finally appear. This is pretty similar to Q people asking when it will be revealed that 45 is still the president.
I don't think it's fair to draw an equivalence between the two theories.
It's pretty easy for a large market participant to impact the bid/offer when there isn't much liquidity, especially if the natural buyers are restricted from trading. The price moves because of supply and demand.
The WSB perspective is perhaps a bit uninformed, but it's not particularly bizarre (unlike the QAnon garbage). They're just asking "when will the price reflect our pent-up demand rather than artificial supply?"
Unfortunately, the reality is that prices get set during these moments of absolute craziness. That's why you sometimes see hedge funds reload after hours after an earnings miss on one of their long positions. They want to absorb the supply so the stock doesn't crash lower.
Look at GME today. The price moved a couple of percent even though nobody has the slightest reason to believe that GME stock is worth this particular price. Some say it should be higher due to flows around positioning, and others say it should be lower because of fundamentals.
> there’s more than enough conflict of interest and unprecedented behavior to call for an investigation
Fair. I don't think anyone is reasonably calling for investigations to be halted. At the very least, there is public education required.
But there is a difference between saying "whoah, that's weird" and the combination of trading on it, encouraging others to trade on it, spreading one's hypothesis with zero facts and calling everyone who points out the issues with one's argument [1] a shill. There was a lot of the latter.
[1] With respect to why "fully cleared non-margin cash accounts" got restricted, it's because the bottleneck was clearing collateral. Not Robinhood's margin risk. Clearinghouses don't care about how a trade was financed. They care about the risk of (a) the broker going under and (b) the collateral being insufficient to settle the trades. When their risk limits get hit, the broker has to reduce flow and/or pony up.
I was sceptical at first too because of the fact that they only restricted buy orders, but it makes perfect sense from the perspective of a broker in this situation. Thomas Peterffy explains it pretty well in [1], basically if you have a short squeeze and the supply is limited because of people holding their shares, the stock would basically go to infinity. Those that sold call options are out of business and the brokers have to take the counterparty risk and are themselves insolvent as a result.
[1] https://youtu.be/kV_P8wnY854
> if you have a short squeeze and the supply is limited because of people holding their shares, the stock would basically go to infinity.
Whoa whoa whoa. This is a slippery slope argument.
If everybody is holding their shares as in your scenario, then the only way to buy shares would be to get them from a short seller. Market-makers typically have an obligation to maintain continuous and two-sided quotations, but there are exceptions to this rule in mitigating technical or legal circumstances (solvency risk seems like it would be a valid exception).
If nobody is selling and everyone is buying, the price ought to go higher. That is what happens in unadulterated markets. But the price won't go to "infinity." Rather, it will go to the level at which long holders decide the payoff for selling is irresistible. They will begin to sell. A new price will be set.
It is true that some hedge funds (including Melvin) would potentially have been ruined if the natural buyers had been permitted to bid for the stock. However, exchanges don't halt securities just because a hedge fund is about to go under. That is a fundamentally unfair practice. Hedge funds have failed in the past, too; not every market participant is Too Big To Fail. Their PB would be left to cover the short position, and would be responsible for whatever loss remains after the hedge fund goes broke.
>Conspiracies happen so frequently on Wall St that “conspiracy theories” should be closer to a priori assumption than irrational fringe ideas.
This is not good logic. There may be a lot of dodgy stuff going on and there may even be conspiracies, but even if you accept that there is a conspiracy that doesn't make it any more likely that the conspiracies being peddled by WSB are correct.
It's like I pick a card out of a deck, I tell you my card is 7 of spades but I have a history of lying. Most likely, the card isn't the 7 of spades. But that doesn't mean it's likely that the card is the 9 of diamonds. That's what this logic is saying - that it must be the (often clearly wrong) assertion simply because the only specific alternative is from someone you don't trust.
It's absolutely not, I know nothing about the guy on WSB, it's not an attack against him to simply say that the average person on the internet claiming something extremely unlikely is just most likely lying.
"I tell you my card is 7 of spades but I have a history of lying. Most likely, the card isn't the 7 of spades. But that doesn't mean it's likely that the card is the 9 of diamonds."
I suggested that such reasoning could, in a nutshell, be summarized as "ad hominem".
Nobody is saying that we should not be investigating Citadel or Robinhood or the hedge funds. The problem is that people are treating these conspiracy theories as facts and acting on this misinformation. Many people got duped into buying GME at a heavy loss. Others are going to abandon the stock market altogether because they think it's rigged.
I hate to respond to this "rigged" word but the markets are rigged except not in the way you think. If you try to bet on value plays you will never succeed. If you bet on the stocks the hedge funds support, you will succeed. Go against them and your account will just die. Learn to see what they want and that's how you join the house. It's just hard for a regular person to understand that.
If you pick and choose where conspiracies happen based on your political slant, then you aren't thinking critically. By the same level of rationality that Robinhood took action to protect Citadel's positions, China could have released the coronavirus because it would have a greater impact on freer countries.
Conspiracies happen everywhere, all the time, but you need to avoid applying a bias because of political implications. I highly doubt there are more conspiracies happening anywhere in the private sector than in most large governments.
Thank you so much for spelling this out. I have no dog in that race, but with everything you said, and politicians from AOC to Ted Cruz calling for an investigation, calling the allegations of wrongdoing "conspiracies" is simply being in denial.
Neither AOC nor Cruz would benefit from saying there's no need for an investigation. And Elizabeth Warren, who you'd think would be most on top of this, published a list of reasonable questions and people immediately attacked her for defending the hedge funds.
> HN likes to believe it is evidence based and rational instead of emotional and greedy
To offer a hopeful counterpoint, informed comments and rebuttals were honestly engaged with throughout the fiasco. There was active learning, from somewhat experts seeing cracks that hadn't been so apparent before, to novices seeing the magnificent and horrifying complexity behind our abstractions.
I don't see that on Reddit. I don't see that on Twitter. I barely see it in print media, where the focus is on stoking schadenfreude and counting up who's losing to whom and by how much.
/r/wallstreetbets went from less than 2 million to over 8 million in a single week, so their mods had to deal with a lot of bot spam resulting in some legitimate discussion getting destroyed in the process. The over-reaction got tempered as the community pointed out that any anti-GME settlement was being silenced. /r/investing and /r/stocks behaved about how you'd imagine HN behaves.
> A more enlightened and civilized corner of the internet.
Oh, HN is more enlightened and civilized. It's just the bar is incredibly low.
In seriousness, I've received a lot of wisdom on HN, it's just I have to approach it (as I do with any data) with a jaundiced eye, and keep in mind the community: a lot of very experienced software types, from all over the industry. On software topics, I can usually trust HN. Diet/nutrition, philosophy and finance discussions on HN, I take a much more careful view of.
I find that most people don't realize they are always betting. Keeping your wealth tucked under your mattress in USD is still a bet. Everything is a bet and everything has different risk profiles.
If someone sees that shorts in GME are over leveraged, well in hindsight they were absolutely right to buy in to this "gambling".
I find the most irrational actors with regards to investing are the people who only do "safe" bets and feel like that carries zero risk profile.
This was me. I lost money on GME betting on the fact that more shorted shares still had to be covered.
The short squeeze wasn't a complete failure. It happened, it was just much smaller than many predicted. I still wonder what would've happened if Robinhood didn't shut off demand by preventing people from buying shares. My investment thesis didn't foresee this happening. I don't think anyone did.
The other large part of the problem was that a lot of people, including myself, were going off of stale short interest data. Updated estimates for GME were reported to be 39% of float vs +100% on 1 Feb [1]. Hedge funds pay for more accurate data which us retail investors don't get visibility on.
It's over for now, but please bear this in mind when talking to people that may have lost money on this. Some people did some research, knew the risk and allocated money they were willing to lose. I learned a lot along the way, it might make some hedge funds think twice about aggressively shorting a stock, and it was just plain fun to be part of it.
That a small-time broker (as is Robin Hood) wouldn't have enough capital to cover a giant short-squeeze was entirely foreseeable by people who understand what it takes to successfully execute one.
Big players know that when they plan big market moves, they need to notify their brokers in advance, so the broker can prepare.
What we had here was a bunch of retail investors who are somewhat more informed than the average retail investor, but not well versed in the nuts and bolts of the maneuver they were involved in, and therefore the executed it without sufficient planning.
Also, I think to execute a short squeeze successfully, it is by no means sufficient that the outstanding short interest exceeds 100% - that boundary has no significance.
I think what is required is that you control long interest of 100% or more of the net shares (or float). (The shorts being > 100% is neither necessary nor sufficient for that.)
It seems accurate information on short interest, etc, is very important for investors. Why can’t this be updated as often as possible (e.g at least daily) for the public?
Can I suggest that if you couldn't foresee the chance of a trading halt in a massive short squeeze like this, then your risk modelling wasn't as sophisticated as you seem to think it was?
I remember for me during 2008 I finally understood how NOTHING has intrinsic value, it’s always about what others perceive in the market. Real estate, dollars, gold, stock all arbitrary in a way I never considered. All built on sand.
> NOTHING has intrinsic value. [...] All built on sand.
That's... just not true? Many things have non-arbitrary value. You need dollars to pay taxes. You need real estate to sleep and work. You can make pretty things that last a long time from gold.
Ye many things has intrisic value. If your house is worth (about) zero it is probably on some cliff about to fall into the sea or there is posion in the ground, though.
Ha ha I love this comment. So simple and yet illustrates the point exactly. Although if I were starving and you said I could have it for one dollar and I wouldn't be able to eat for the next 72 hours, you'd probably have my dollar.
I agree there is some amount of risk in everything. When I say bet, I mean a zero-sum game like in a casino. Somone needs to lose money in order for you to gain money. No new money is being created in an options play or a GameStop squeeze. For you to gain 10 dollars, ten people must lose a dollar. The best you can do is encourage more players to join the bet to increase the size of the pot and the less they know the rules of the game the better.
That scenario is pretty dissimilar to something like the value of a currency, which has value in proportion to the participants' trust in its stable value and how easily they can trade it for goods and services.
So to standardize on terms, I mean "bet" like I am betting on roulette, not "bet" as in I bet my bank will still be solvent tomorrow.
Yes, I'd agree that the longer the timescale, the more you can capture new value that is being created as companies grow, make money and pay dividends.
I'm not really convinced a low traffic SE article proves the opposite however.
While wsb is on the verge of going full Q'Anon, I find it equally curious how people seem to be willing to deny foul play when you have people like Jim Cramer confessing/bragging to it.
Search for "short ladder" online, all the results I can find are literally days old, many from reddit itself.
Beyond that, the burden of proof is clearly on the "short ladder"-believing crowd, and so far what they have come up with is frankly embarasing.
I have zero problem believing that hedge funds would be more than willing to engage in shady behaviour if it can save them a billion or two, but screaming the nonsensical "SHORT LADDER" every time a highly pumped stock drops is ridiculous.
Does shady stuff happen? Yes. But the short ladder attack is a dumb idea promulgated by people who don't know how things work, and the proof it's happening, fractional prices, is even more spectacularly stupid. This is "how can there be more votes than voters" levels of crazy.
The observation was that during the duration of restricted trading and therefore reduced momentum, there had been sequences of trades with batches of 100 shares sold at continuously smaller values with very little difference between one batch and the next and the difference was in 3rd and 4th decimals.
The fact that retail was restricted to selling and hedge funds were not, further corroborates foul play.
> there had been sequences of trades with batches of 100 shares sold at continuously smaller values with very little difference between one batch and the next and the difference was in 3rd and 4th decimals
This sounds like the interaction between run-of-the-mill execution algorithms.
Bidding algo is likely a market maker putting out small quotes (100 shares is a standard lot) and adjusting down (up) the price each time the bid (offer) is hit (lifted). Selling algo trying to liquidate a larger block without moving the market. It is hitting the top bid from time to time. If those two are the only market participants talking for a few milliseconds, they'll walk down the price in 100-share increments. Given how volatile GameStop was, I suspect the predatory algorithms, who sniff out this sort of stuff, were offline.
> Do you have any links that further elaborate or perhaps suggestions for papers/books in algo trading?
One of the things I'm realizing from all this is there aren't many good, succinct sources on market microstructure. It's complicated. But it's not that complicated. (It's just usually boring.)
The best I can recommend is how I learned it. Start with a respected paper [1]. Trace through the references until you find something you understand. Then work your way forward.
There has been some solid advice from people over there, you have to filter the mania, but there are some gems over there.
This morning there were two opposing top posts. 1) summarized as gamble your apes, 2) summarized as manage your risk and don't buy stocks with debt.
There was also a post by a legit investor claiming they covered their losses by selling at peak and everyone should have done this explaining the benefits.
Single stock trading is always a gamble, you should spread your risk and manage your losses in such a way that you win in the end (by selling losses to cover taxes on gains etc).
If you want good financial advice you can find it on WSB, but in general (imo) you should go there to make yourself feel good about your index fund or bad about your index fund. Either way, don't get caught up in the fervor.
Hindsight is 20/20. Being the guy on the sidelines saying "I knew this was gonna happen" after the fact never adds any value. It's you trying to make yourself feel special. If you were so confident in your predictions, show me where you shorted the stock and made a bunch of money off it going down. If not, please stfu with your grandmom truisms.
I'm not talking about hindsight or who was right or wrong. Honestly I have no idea how this will continue play out. Anyone who claims they do is misinformed or selling you something. The price went up and down by a huge amount so the lucky will already have big wins. Maybe there will still be more big winners to come or maybe not. Many people seem to have not been aware of what game they were playing and were caught up in hype and frenzy, even here on dear old HN.
Uh, plenty of people knew this was gonna happen with the benefit of foresight. The problem is that short-selling is a risky position because your losses are unbounded, which means that 1) it's harder to do than taking a long position, and 2) it's possible for even a correct short bet to lose money due to volatility.
I found the discussion on HN generally ok; there were a few fervent zealots, but when they became a liability to the discussion, they were voted away. Unfounded conspiracy theories were occasionally floated, but generally quickly addressed, skeptically and adequately.
There were massive gaps of knowledge, sure, but I think the discussion contributed to reducing that.
> If you think any bet is a guaranteed win, you have lost your rationality.
True, but there are of course better and worse opportunities, and occasionally excellent ones. For example, IPO pops are on average a risk-adjusted win, and for good (and well understood) institutional reasons.
I'm currently awaiting 9 February for the shorts interest to be released, to see if they are right or wrong. I think it's really interesting what's happening/happened.
I'm not sure if I see a fallacy, that if you can hold a squeeze that another squeeze could happen if enough shorts stay open. Anyone can elaborate on that?
Taking into account that shorting costs money ( 30% interest at a certain moment, mentioned by S3 partners ), people can hold longer than shorts. And buying them would make the available pool to buy back much smaller.
What is wrong with that theory? It's similar to cornering the market ( if the stocks aren't tradeable again by the brokers) and GME doesn't have that much shares.
Ps. Only put some play money in it, practically nothing. Just curious what the odds are.
And I don't think I'm a meme guy, but to my perception there is logic in it. ( Eg. I'm not buying conspiracy theories about RH, because the flow was logical that they just needed money. ).
> Taking into account that shorting costs money, people can hold longer than shorts. And buying them would make the available pool to buy back much smaller.
The volume being traded has been incredibly high, the available pool to buy hasn't been small. More than the total number of outstanding shares has traded per day over the last 10 days. https://finance.yahoo.com/quote/GME/key-statistics
The short interest likely isn't constant, either. Some people probably got out and took a bath on old positions, and others got in with new ones when it was super high. Anyone who started shorting at 300 or 400 is feeling pretty good.
> More than the total number of outstanding shares has traded per day over the last 10 days.
This is important, but more important is what percent of those were used to cover shorts. If a large portion wind up in retail's hands or are part of the theory of hedge funds selling back and forth (I haven't seen much concrete evidence of that), that volume doesn't change the math much.
> This is important, but more important is what percent of those were used to cover shorts. If a large portion wind up in retail's hands or are part of the theory of hedge funds selling back and forth (I haven't seen much concrete evidence of that), that volume doesn't change the math much.
Definitely, but I haven't seen any data sources that tell us exactly that. We see that retail bought a bunch, sold a bunch, institutions bought a bunch, sold a bunch... but we don't know the full path.
And not knowing that is what makes it a huge, at-this-point-irresponsible gamble, in my mind.
Cue “but it was always Feb 9” ignoring that Jan 29 was “dday” before that. Then after Feb 9 it’ll be some later date in case there’s still tubes to fleece.
Not even the lack of people holding? Tons of people were selling throughout the 1/29 settlement date for that short interest, there wasn't an unavailability of shares. If you weren't one of the people selling then, I'm not seeing what would make it better in the future.
edit: we may be talking about different things here. You're suggesting that if there are still funds very exposed on shorts in the info disclosed 2/9, then there's a potential for trying to make the stock rally again later this month? Vs that anything is already due this month? (I'm just skeptical still because the turnover is so high - I doubt the remaining interest has as high exposure cause I would guess they got in at higher prices.)
Why do you try to get personal? As said before, I don't care about when to sell or buy, my financial interest in it is way too low too care about it. I just think it's interesting and try to learn from it ( that's the only reason why I even bought a little, to keep me interested).
What's your formula to state a lack of people holding vs. the amount of shorts that were outstanding?
I don't see how you can easily come to that conclusion with 139% shorts outstanding at a certain moment.
If the amount of shorts were lessened to 50%, which we'll know on 9 February i can agree.
But I can't know for sure now and i want to know with what logic "you can" be sure.
Edit: Yes, I'm suggesting that there are "possibly" still a large amount of shorts and that I can't know till 9 February to see what could happen.
If the amount of shorts is low, than GME will continue to drop to a normal value.
If it's high, it depends on when the shorts were initiated, so it's still unclear then.
There's just a higher possibility to dismiss a potential squeeze on the 9th of February.
So I'm looking for additional info why people can already dismiss this reasoning.
Edit 2: ( can't reply on your comment)
I agree, there's a lot of uncertainty in it... A lot of "unknowns" for now.
I'm just careful dismissing it as a pure meme though. Since I can't fully dismiss it as such and I'm open to additional info surrounding this ( hence my original question).
I think we agree on where the uncertainty is, I just initially read you as saying you believed there was a definite ongoing squeeze, vs a possibility of continuing the play. And I just want to caution people against believing there's any sure things going on here; we don't have enough data in real enough time to know exactly. What we do have data on is that a LOT of shares are being sold every day, more than 100% of outstanding shares, so those could've been used to close out short positions, or they might not have been. And it could've been a few sellers selling a lot, or tons of sellers selling small amounts, etc. We can't know for now.
Only a tiny fraction of HN posts on any specific topic. HN is effectively filtering their user base to those who care about some specific topic. Often this mixes the experts with the misinformed, but it really depends on the link.
For example, if you post that putting high efficiency solar panels on an EV could significantly offset the need for charging infrastructure people will respond very differently depending on what the original topic was. Aesthetics, implementation, practicality, cost, and your specific calculation etc go from critical to unimportant depending on the topic.
wait til you really think about the covid bubble for more than 2 minutes. at a population level, you'll see a broad range of misperceptions everywhere. you'll see people missing the forest for the trees (private gatherings vs masks), focusing on trivialities (restaurants, fomites, masks again) and simply ignoring how much low-level emotion (fear, impotence) and instinct (othering strangers) drive our beliefs (have to protect ourselves from those selfish others, rather than the friends and family who present the highest risk).
Public health is a drastically different battlefield then public equity. It’s closer to seatbelt laws and geopolitics then it is to day trading. Of course there are going to be different arguments, different misinformation, etc. But you don’t hyper rationalize a public health crisis with arguments like:
“I personally am low risk so...”
“Actually I don’t need to wear a mask when I do this in public because...”
“My political leader disagrees with public health officials so...”
> "You don’t hyper rationalize a public health crisis like you would a line of python code."
when lives are at stake is exactly when we should 'hyper-rationalize' (which doesn't mean don't consider emotion at all). we don't build bridges, go into war, or write aircraft control software thinking we'll wing it.
Apologies I made an edit to my comment before yours posted that’s bad etiquette on my part. Hyper rationalization means following a technically correct path that misses the Forrest for the trees, in this case you could get away without wearing a mask while running through a park and maintaining a ten foot buffer, but you shouldn’t because it signals to others that it’s ok not to wear a mask and makes it less likely for others to conform if there is a list of semi exceptions.
> "...that it’s ok not to wear a mask and makes it less likely for others to conform if there is a list of semi exceptions."
by your definition, that's hyper-rationalized (missing forest for trees) and exactly the kind of othering belief being highlighting: let's ignore actual risks and shared goals, and instead try to outwit those damn fools that are surely out there trying to kill us.
masks worn outside are largely for signaling (as your example admits) and self-mollification rather than infection reduction. it's unlikely that outdoor mask-wearing has reduced spread meaningfully or measurably.
but outdoor mask-wearing in turn gives us permission to not wear them at home or at private gatherings, because we've already 'done our part' against those selfish others, and this lowering of the guard in private does measurably increase spread. if you're really concerned about spread, you'd focus solely on minimizing close (<3ft) and prolonged (>15min) shared breathing indoors, not showing others outdoors how conformant and fearful you might be.
I really enjoy bitcoin speculation because it is so purely about human psychology with no inconvenient external realities or objective value to get in the way.
hear, hear. I've been flagging and downvoting till I'm just disgusted. the HN community overall appears to be as credulous and naive as any other. If we don't take out the trash this place is going to stink.
I wouldn’t say HN is particularly evidence driven, just that that’s how they want to see themselves. The hive mind here has world class knowledge on tech and math but with financial issues it’s pretty average. And some of the philosophical points made here leave you scratching your head, look at fears of AGI or people thinking we live in a simulation. Those are hip viewpoints but to the average person they look ridiculous.
Anyone who takes WSB seriously is dumb and deserves to lose their money. The sub is explicitly about using the stock market like a casino to gamble. Loss porn is real and we’re going to see a lot of it soon. To continue the casino analogy, /u/DeepFuckingValue is the dude at the craps table with the hot hand. Everyone is onboard until the winning stops, so the house is doing everything it can to reset the game.
I'm gonna go out on a limb here and suggest the group with teams of PhDs writing high frequency trading algorithms might have an advantage over a dude with a Robinhood account.
HFTs certainly have an edge on micro/milli/seconds timescales, where price moves are more predictable. But that expertise doesn't necessarily generalize to mid/low-frequency trading where human traders and the real world come into play.
Eh, i know nothing on the subject - BUT - from people more informed than I, it sounds like the hedge funds were bullying the stock into the ground to make a profit. While not strictly a "house edge", i'd call that close - in that the funds available to a select few have more power than you in this case.
They have the odds stacked in their favor by nature of the size of their pockets and the ease by which they can flex this muscle to manipulate stocks in the direction they choose.
Sure, individuals could coordinate to flex similar levels of funds but even ignoring legality it's still difficult.
Wall street is the house and the markets are the casino. Wall street firms collectively make the rules through regulatory influence and have huge advantages in technology, expertise, information, and capital. The people reliably getting rich are the owners and employees of Wall Street firms.
You either didn't trade options or didn't play casino games. Any trader knows he takes a gamble(calculated but still a gamble) and if something unexpected happens(i.e your stock buying is being halted and people panic for various reasons) you just made the wrong bet. Regardless if you are right you still loose.
> I think HN likes to believe it is evidence based and rational instead of emotional and greedy.
Rational and evidence driven? Did HN became a scientific forum while I wasn't looking? This is a social network, which makes it opinion driven. Rationality and evidence are important, but they come second.
Hell, some of us don't even read articles before opining.
I expect a lot of Redditors will be very disappointed when they realize just how much money hedge funds made, on average, out of this episode.
The WSB moderators really did everyone a disservice by letting obvious misinformation flood the subreddit. It’s hard to view the later stages of the GameStop phenomenon as anything other than a Reddit-fueled pump and dump scheme.
The past few days they've shared not only the largest long holders of these stocks, but also the pension funds that were boosted as well. A few teacher pension funds got a good uptick and they were sharing that around.
The cats at wsb might be self proclaimed retards, but they're not that stupid. They know lots of other folks are going to make money off of them. You know, if you actually visit the sub, you'd know that.
>The cats at wsb might be self proclaimed retards, but they're not that stupid. They know lots of other folks are going to make money off of them. You know, if you actually visit the sub, you'd know that.
The sub you seem to like so much died last week. Whatever is left of it has been diluted when literally millions of people flooded it. "Eternal September" hit them hard.
Right now it's filled with Q-level conspiracy theories, they parrot each other's talking point without understanding any of it ("short ladder" being the most funny and telling example of this). I can assure you that the vast majority of these people are wildly clueless about what's happening right now, they just keep telling each other that they're going to be rich.
So much this. /r/wallstreetbets is going to struggle to recover. It's absolutely Eternal September.
I've been subbed to WSB for about 5 years, ever since someone at work (prop trading) mentioned it as basically being a bunch of 25-30 yo finance people hanging out and doing dumb shit in their personal accounts for fun. I'll admit, I did some dumb stuff myself, trying to time UVXY/TVIX plays. (Basically netted 0 of course). But it was fun to shitpost about it. This is astrology for finance bros.
And it'd been going a bit down-hill already, but most people were still that same description: young blood, day job in finance, knows what they're doing at both a mechanical and risk level, etc. And the content reflected it.
Then somehow, one of those internet things happened. WSB became a hit, people flooded in, the mod team was overwhelmed, media attention flooded in making everything worse, etc. I feel like this is what a lot of /r/the_donald people ended up now that they're looking for a new cause. So much of the rhetoric I saw once the WSB Old Guard had been overwhelmed mirrored the kind of stuff you saw out of the_donald back in 2016.
Seems the daily thread grows so big so fast that it becomes dog slow to even browse.
But yeah, a lot of the comments are just one liner garbage memes: HODL! TO THE MOOOOOON! FISTS ON CHEST NO FEAR! TO VALHALLA! DIAMOND HANDS! As well as echo chamber "encouragement" to HODL! until $1000/$9000/the moon because Mark Cuban is on our side!
I struggle to see the political claim that these people are being flooded with Trumpers. This event was and has been pretty bipartisan.
From what I’ve seen thus far is the media trying to use the Q / Trumper angle against this community to tarnish its public perception and recent novelty.
I am happy to be proven wrong though, I just don’t see it.
There are some elements of something The_Donald-like, but it's true that it's
not (yet?) the same thing.
They push a lot of very strong and completely unsubstantiated conspiracy claims
in particular, and they'll quickly accuse anybody dissenting of being a shill or
having an ulterior purpose.
This is good OG WSB content, written by one of the users that was in on the play
from the very start.
But there's the problem: since he knew what he was doing, he managed to sell at
the right moment and make huge benefits. That doesn't fit the narrative nu-WSB
wants to push. So this very good old-school WSB post can't even get half a
thousand upvotes.
Meanwhile post some vaguely conspirationist anti-wall street article and skyrocket
to the top of the frontpage.
So yeah, it's not The_Donald, but there's definitely this strong anti-system, populist, "everybody is out to get me" conspirationist, fact-adverse mindset that you find in these types of communities.
Note in particular that, somewhat ironically, WSB calls itself "4chan with a bloomberg terminal", so it seems fitting that it's following a similar trajectory of ironic edgyness turning genuine as new people get in and take it at face value.
While gp is right about the influx of users (Ive only been around wsb for 4 years or so), which I will address later, I agree with you on the tarnishing tactic being used. What I saw was very open "fuck the big money people" that transcended party lines, often explicitly.
That said, there are sure to be a large portion of "the right", on the sub, as the fact of the matter is that a significant percentage of the US is!
As for what caused the influx, I think you can blame reddit for getting rid of all the edgier communities, and lots of people like that sort of thing, so over the years as a wsb post hit /all the numbers would jump because people would say " hey, I like this place, its edgy and self-deprecating" and over time it changed the demographics. I think back then though people mostly lurked, this influx has caused a lot more mime-posting.
Aren't "the right" typically pro big business people? That's been the big joke. Trailer park white trash right wingers defending big business. Why would you assume they're all right wingers when they're all "fuck the big money people". Aren't leftists the first ones to say, "fuck the big money people"?
Why would any part of the media even want to do that? This is a classic man-bites-dog story, and is being treated as such everywhere I look.
I'm seeing it implied fairly regularly here and on Reddit that journalists are somehow anti-WSB, but I just don't see it, and I don't know why it would ever be the case.
Maybe people are mixing up market analysts (who work for financial institutions) with finance journalists (who work for news organisations)?
Maybe people think journalists are afraid of losing valuable sources in big banks if they don't denigrate the day traders (even though all those big firms also made a fortune in this mess)?
I'm necessarily saying it's "Trumpers", just that lots of the rhetoric, especially stuff that gets to the front page of r/all, seems to be the kind of all-caps, hyper-reductionist, chest-beating "SO MUCH WINNING" kind of rhetoric we saw in 2016. I do think this is bipartisan, in that there's no one side of the political spectrum that's flooding in here, but I think we're seeing the kind of hype devices that were used to (apparently) great effect in 2016.
And that's always step #1. This type of content (DIAMOND HANDS HODL TO THE MOON APE STRONGS!!!!) is easy to spam everywhere, so more reasonable people are driven away or drowned in the noise.
Even if the userbase is bipartisan these extreme, emotional takes are guaranteed to take over by sheer volume unless the moderation steps in hard. I can't really blame the mods for failing to do that at the moment though, if I were them I'd probably have closed the sub temporarily...
This is entirely true, and easily verified by checking subreddit user overlap. WSB overlaps heavily with a number of right-wing subreddits, and, naturally, /r/unemployment.
The amount of misinformation being propagated in the subreddit has reached absurd levels. I wonder where the voices of reason will migrate to once this fiasco dies down further.
There are plenty of "Average people" that entered near the top, and since not everyone can sell simultaneously, that means a ton of people are losing the life savings they dumped into this out of excitement as it crashed back down.
I think the point being made here is that the whole narrative of "average people beating wall street" is pretty naive and quite bullshit. All in on, maybe a few handful of people got 10x or even 100x their money, but most of the gains were most likely made by hedge funds and with the exception of one or two hedge funds who were squeezed, the majority of losses will probably be by average people.
Lurking the wsb threads now it's clear that none of these people have exit strategies, or even strategies at all.
Even if that fabled squeeze was to take place I'm sure many of them would still be left holding the bags because they wouldn't know when to sell. And again, at this point I'm really not sold on that squeeze theory at all, it seems very plausible that it ended last week and now we're just seeing a good old pump-and-dump taking place.
In the end some people are going to be very lucky and some others are going to learn a very expensive lesson about the dangers of gambling.
Well in fairness to WSB, it was really built around loss porn, not sticking it to the hedge funds. So even those people losing their life savings are contributing the to the WSB cause so long as they show off all the red.
> The Reddit poster Volkswagens1, who declined to give his name but said he lives in the Pacific Northwest, showed The Washington Post an image indicating roughly $400,000 in potential GameStop losses from the day but insisted he would not sell.
> He said he’s poured most of his saving and checking accounts into the stocks and spent the last week “doing as much research as possible,” including sacrificing sleep and calling in sick to work, to make sure he was staying on top of the market’s moves.
(There's also a quote about him doing this because he's been poor for too long, but my take is that if you have enough assets to face a $400k loss, you weren't poor before you entered that position, even if you may now be).
> if you have enough assets to face a $400k loss, you weren't poor
It’s not clear to me this has sunk in w ‘Volkswagens1 nor the loss has really been faced. I’d bet the sober second thought will come after this article was published
$400K is 1/2 the average cost of a house in Seattle. I'd suggest there's an argument that if you can't own (no mortgage) a house in your area, you're still 'poor'.
Still not a great move to dump your entire worth into meme stocks.
You cannot cite the average cost of a house while dismissing the idea of buying a house using a mortgage. Mortgages are a part of the housing market and are part of the reason prices are what they are. If there were no mortgages prices would be lower, and the market would be structured completely differently.
I suspect the stories will emerge once the GME price truly tanks. No, I don't think it'll be millions of people, but reading the level of delusion in that sub I don't think it's going to be tens of people either.
It doesn't even have to be big sums. Just someone who only had say $2,000 trying to make a quick play at the peak but ended up with less than $2,000 after all is settled. That'll turn some away from stocks for a good while.
> “I have $6k in $AMC that’s like 90% of my money.”
That could be a lot of money to him, but it is not a lot of money compared to what an average worker earns in a year. A probably-young guy losing $6k on a risky stock bet is not life-destroying.
Also, depending on when he bought he could actually be up. And even if he bought at the top, it would still be worth something like 40% of that.
The thing that kills me is the handful of responses of people defending it by basically saying "people will go to the movies after covid", without the context of where AMC was at before covid. Even during it's best years, AMC wasn't worth what people think it will be. It's just a complete lack of reasoning.
So strange that YOLO has come to mean the opposite of what one would do if worried about the fact one only lives once. But I guess that's true for much slang.
YOLO has always meant, you only live once, gotta try everything. Not you only live once, make it last as long as possible and never do anything dangerous or with possible (probable even) negative repercussions.
There is this example [0]. Maybe not their whole life savings, but still a sizeable chunk. I'm sure there are a LOT of other people in similar scenarios now, who may not have fared much better.
I definitely saw someone bragging about using their $20,000 line of credit from dental school (I assume this is intended for living expenses) to buy GME stock.
That's kind of worse than YOLOing your life savings, because if this prevents them from continuing their education, it just fucked their life.
> There are plenty of "Average people" that entered near the top, and since not everyone can sell simultaneously, that means a ton of people are losing the life savings they dumped into this out of excitement as it crashed back down.
Most of "average people" entered at or near the top. The ones that did not were so engaged in gambling that they did not sell when it did 20x return. Call it what it is: fear of missing out.
Even DeepFuckingValue, who sold at least some of this position and netted a lot of money after taxes was not smart enough to say that 20x return in a few months is a time to pack the toys and go home so he could fight another day, leaving millions on a table in a futile hope that it would do much, much better.
I think DeepFuckingValue is smarter than you give him credit for. It's worth leaving $20M on the table if it lets you tell the SEC "look, I'm clearly an idiot, there's no way I could have been deliberately engineering a pump and dump scheme".
Better to take $15M of profit than to gamble $35M on the SEC deciding not to prosecute.
My point is that the sub didn't take him and GME seriously until December or something. You can't be a laughing stock and a pump and dump mastermind at the same time.
I'm not so sure about that. Spending 2 years trying to pump the stock and failing doesn't change what happened later. You can't escape a murder charge by saying "I spent two years trying and failing to kill the victim"!
If he did offload his entire position at the "top", and became seen as a symbolic catalyst of a subsequent drop, I reckon it's randomers on the internet that took a loss that he'd be more worried about.
Especially when the newspapers decided to plaster his real identity all over the place.
It's completely possible that DFV has a second account that he doesn't share screenshots of, that bought puts on the stock near the peak just to hedge.
Any uptick a pension fund would have had was lost once GME reverted back.
Pension funds are buy and hold, so they could care less about short term fluctuations in 0.05% of their portfolio.
Just because a fund’s normal MO is to buy and hold doesn’t mean they’re asleep at the wheel and won’t react if their value hypothesis is (more than) realized overnight.
NB: They sold 25M shares at ~$20/share. That's probably much more than what they paid for these shares but it's nowhere near where GME was over the past few days.
Without knowing when they entered their position. It was hovering around $4 for a long time last year.
Even if they bought in at $5, selling at $20 is absolutely a win. Yes, they could have gambled and HODL'd, but there's no reason to gamble after seeing a 4x increase on a stock very few people expected would ever break $10.
Just to clarify from the article - the Ontario Pension Fund was invested and cashed out stock in a commercial real estate company called Macerich that was getting associated with Gamestop on /r/wsb, not Gamestop itself.
Not that they had any way of knowing what would happen. $20 could have been the peak for all anyone knew, and by the end of next week selling at $20 might look like a smart move.
Pension funds are not buy and hold as a rule. They also invest in a variety of other vehicles, including hedge funds with different strategies. I guess you could say they buy and hold in the hedge fund, but that's different. Very conceivable that a pension fund had a meaningful uptick because one of the funds it invests in timed GME's crash well.
GME didn't fully revert back yet, and I'm sure a lot of them realized their gains around the peak and sold.
Pensions dont make short term investments, they already had GME shares since a long time ago. They do sell when extraordinary circumstances happen and buy other stocks to hold long term again.
13Fs (reports that show what certain funds are holding) are filed quarterly. While you can see who owned GME as of 12/31/2020 the flows of the past few weeks is not public knowledge yet.
> A few teacher pension funds got a good uptick and they were sharing that around.
The Ontario Teachers Pension Plan, who was holding GME, is one of the largest hedge funds in existence, worth over 200 billion dollars. For comparison, Maverick Capital is worth only $15 billion. That is not a case of some little guy teachers making out well, it is the rich (if not the richest) hedge funds getting richer.
A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction and risk management techniques to improve performance, such as short selling, leverage, and derivatives.
That is what the OTPP does. That the hedge fund exists to fund pensions is irrelevant. If you dig into the investors behind other funds, you are likely to find that they are also investing to help fund their own retirement.
"Additionally, we complement our efforts by using external hedge fund managers, which gives us access to unique approaches that both add performance and diversify risk."
Hedge fund isn't a technical term, despite having "hedge" in the name. It just means an actively managed fund that anyone finds interesting in some way.
Hedge funds generally have LPs, which they recruit. You can theoretically buy into a hedge fund. You can't buy into a pension fund directly. The incentive structures are different.
I highly doubt anyone is against pension funds making money - even if they are run as a hedge fund.
The political opposition to hedge funds has to do with the fact that they often cater (or are assumed to cater) to the 1%. Who cares if it is 200B? It probably represents the financial interests of tens-of-thousands of teachers.
Depending on how you think the fund should be divided for wealth purposes, if we assume an equal division, the fund alone puts many Ontario teachers into the top 1%. Never mind what other wealth they may have.
They are the 1% you are talking about. I expect what you're really saying is that the political opposition opposes strangers who are perceived as being different, whereas the top 1% comprised of teachers are relatable and maybe even your close friends so you can be happy for their success.
No - this isn't close to true. I'm saying (at least in the US) you need a net-worth of 10M to be in the top 1%. Or, in terms of income, make 500k a year household income.
The Ontario Teacher's Pension Fund averages member 600k per member in assets (200B divided by 330k members). I don't know the Canadian stats but having around 1M in assets as a 60 year old places them around the top 20% or 10% cut-off - not the top 1%.
Regardless, I don't care if people get rich but it is clear that occupy Wall Street was a movement against the perceived notion that billionaires were exploiting the rules - not that teacher's pensions funds were gaining 2% per year more than an index fund.
This isn't some teachers trying to eek out a retirement. It is one of the most prolific hedge funds in existence. They are literally what the movement was against, but the movement only served to help them.
Not that I expect anyone thought that they were buying up shares from retail investors to put the movement in motion. They had to know they would help other funds to hurt the one fund being targeted. It shouldn't surprise anyone that hedge funds have made out like bandits in this.
A personal investor wouldn't be appropriately called a hedge fund, though. A hedge fund is, by definition, funded by a pool of investors. We are talking about hedge funds here.
Op was surely referring to [Jim] Simons' medallion fund and those like it - where it's closed except to family/friends, and in Simon's case fellow colleagues', personal funds, where often a single founder holds a bulk of the interest.
uh yeah there are also a ton of people losing a lot bc they got convinced to buy in at 300+. the OGs maybe, but the sub has basically quadrupled in size and brought a lot of new people who don't know anything + people looking to capitalize on that.
> The WSB moderators really did everyone a disservice by letting obvious misinformation flood the subreddit.
Well, on the flip side a lot of redditors learned from the school of hard knocks, which is the best teacher in a lot of ways. Moderators suppressing posts won't teach a lesson you can only learn by losing money.
WSB moderators were (and still are) actively suppressing posts that don’t toe the line. I had a seasoned Reddit account that had been in WSB for a long time. As soon as I started commenting about how the short squeeze wasn’t a sure thing, my posts stopped showing up. They’ve been dismissing any comments that aren’t about GME going to the moon as hedge fund shills or bots.
It’s extremely difficult to find any posts or comments critical of GameStop in the sub right now. If you sort by new, the critical comments are quickly removed.
Moderators aren’t just letting Redditors figure it out. They’re shaping the conversation into the illusion of a consensus.
I had to unsub (having been a member for years) because my homepage was full of, "WE ARE HOLDING:diamond: :hands:!!!!I :diamond: LOVE :hands: THIS :diamond: STOCK :rocket::rocket::rocket::rocket::rocket::rocket:" posts with 50k upvotes and a list of gold a mile long.
Same here. I used to love talking shit on WSB. Unfortunately that can’t happen anymore since the culture has changed completely.
Long time members know just how awesome that community was, and I think it’ll never be the same.
This is exactly the problem. Every thread has 1000s of comments and it's very hard to find the good ones since 90%, including many of the most upvoted ones, are garbage. Cannot blame them given the 7M members who joined the sub in 2 weeks. For now I stick to r/stocks.
> WSB moderators were (and still are) actively suppressing posts that don’t toe the line.
We remove far more pro-"meme stock" content than anti-"meme stock". Your anecdote is just that, a single data point. All you need to do is pull the data yourself and you would see that, but instead you are taking personal offence to your content being removed.
At this point, almost all content that is removed, is done automatically, either using Reddit's crowd control algorithm, or using our (countless) content flags.
We also revised posting requirements countless times. You may very well have been cleared to post yesterday, but not today.
If you are willing to post your username, I can look into it for you.
Prior to January it was quite easy. It just takes an hour or two each day to improve the bots and handle the manual stuff.
The past two weeks were very difficult but the entire moderator team has stepped up to the challenge, in particular u/zjz.
Unfortunately, the stress of moderation continues even away from reddit. Even during social events at work, WSB comes up frequently. Personally, I took a few days off.
I disagree. Just this morning I saw a number of posts warning people that they could lose their shirts over this and to be sure that they weren't investing anything they couldn't afford to lose.
Sure, there's a large contingent that denies this and holds onto their wishful thinking of a $10,000/share price, but you can't fix stupid.
its bleeding on to HN as well. Just take a look at my comments that criticize their conspiracy theory.
They seem to monitor this threads on HN and downvote anything that doesn't fit their HF "deep state" narrative.
OR its likely that "smart" HN users bought into the hype and they are fully bought into the narrative that blames external factors than their own due diligence.
I suggest you start to treat the hn community a little less defiantly: to me your attitude seems contemptuous and condescending. If you humbly listen to downvotes then perhaps you will start to see good reasons for reader’s reactions to your comments.
I skimmed your comment history. Many of your comments are creating narrative from thin air - no different from the worst Qanon offender where there might be some fact but your spin is not. Tying in political arguments (like I just did) is also poor form IMHO. Many of your comments mention downvoting, which is a seriously bad smell to me. At the level of an individual comment, mentioning voting is usually an automatic downvote from me, and I presume others. Relevant HN guidelines: “Please don't comment about the voting on comments. It never does any good, and it makes boring reading.”, “Please don't post insinuations about astroturfing, shilling, brigading, foreign agents and the like. It degrades discussion and is usually mistaken. If you're worried about abuse, email hn@ycombinator.com and we'll look at the data.”
Edit: I am not saying your comments lack truth, I am just saying that it matters how you write it down.
It’s already turning into a conspiracy theory. The popular narrative is that GME would have continued going up, but RobinHood colluded with hedge funds to stop it. It doesn’t make any sense and ignores the incentives that RobinHood had to continue allowing people to buy.
However, when to they’ve become completely invested (some times literally) in the narrative that GME was going to make them all rich while the hedge funds went bankrupt, it’s difficult to admit that they were wrong.
The path to building wealth using boring old index funds is often paid for by day trading losses. At least, that's why I switched from individual stocks to index funds.
Some people learn not to touch fire by reading a book or learning from the mistakes of others. For others, the only way they learn not to touch fire is by touching it.
Its funny how people don't see the $100,000+ portfolio losses (and much less often, gains) all over that subreddit and don't immediately realize that a ton of the people who visit it are Wall Street finance people. That's seriously the meme among the people only secondarily connected with WSB; its not "autists" or "the vox populi", its wall street bros (WSB?) who have to spend all day being super serious at their job, and WSB is their way of letting off steam.
And if you think that these firms weren't already feeding every single post and comment on reddit into their HFT algorithms, you better at least believe that after this whole thing, they're gonna be doing that, and adding some extra weight to `if subreddit === "wallstreetbets"`.
From that point of view, WSB is rather icky; its people who know what they're doing (most of the time) subtly and anonymously impersonating an idiot to influence the actual idiots.
Whereas Hacker News is just a bunch of people who don't know what they're doing pretending to be experts to influence the actual idiots. You can find charlatans pretty much anywhere money or people with money congregate.
The difference is the HN hype train might cause you some headaches from picking an immature tech stack. Whereas the WSB echo chamber has literally ruined thousands of people's lives and retirements.
If someone is going to ruin their life or retirement based proximately to posts in a Reddit forum, it’s very hard for me to assign root cause to the Reddit forum.
At most that’s the first or second “Why?” but there is surely a deeper issue.
Many people were prudent blue-chip investors whose retirement was ruined by the housing crisis. There doesn't seem to be any 'smart money', just 'big money'.
Blue chips were down around 40% in 2008. If you left your money in, you were back even by 2012. Even if you were slowly withdrawing some starting in December 2008 (the worst of it), you were even by 2013.
I have no doubt there exists someone who was ruined by 2008, but most prudent blue chip investors were not.
There seems to be the narrative that WSB ruined the retirement accounts of thousands of people. Why do we not hold the person responsible for their actions? Why is it never the fault of the person, but instead "the ephemeral entity" who is to blame?
I think you see that pattern in a lot of subcultures that glorify destructive and reckless behavior. Look at hard drug subreddits, like /r/stims, or binge drinking fraternity culture, or that Facebook group where everyone points loaded guns at their crotch.
Participants will willingly acknowledge that the behavior is destructive or reckless. But they do so in a way that glorifies it. "Woah, I totally blacked out again last night. So crazy. High Five". When the most self-destructive member receives the most attention that acts as a pretty powerful incentive.
Humans are social animals. And the way most of us avoid bad decisions day-to-day is to look at our peer group and think "would this be something that a normal, respectable person would do". When you create a subculture filled with self-destructive people, it normalizes and encourages self-destructive behavior, even when people rationally know they shouldn't be engaging in it.
I've been visiting WSB for couple of years now, and generally the mods have been really hands off, so them letting misinformation flood the subreddit is par for the course. Good or bad, that's how it is.
Honestly lots of investing communities are like this - do your own due diligence, etc. It is surprising how _much_ misinformation is being spread in WSB as of late, and feels like a weird cult more than ever, but WSB was never about heavy moderation.
I suspect they didn't do a disservice to their own bank accounts. Random internet strangers care as much about you as do politicians and hedge fund owners.
This is my experience as well. Many put their whole stimulus in it, and I can’t escape the idea that Wall Street knew all this would happen and they just found a way to get a large chunk of that other stimulus money that went to the people and not to corporations. An artificial movement that they may have created themselves that had an ethos of “bankrupting Wall Street”. Lol. A taxpayer funded pump and dump of epic proportions enabled by new tech sockpuppeting abilities and control. Before Cambridge Analytica I would say take your tinfoil hat off, but now I don’t know anymore. I consider nothing real online and go from there.
As if "Wall St." is one giant conspiracy. What happened to criticizing "Wall St." for treating the economy like a casino and driving the stock market into a giant bubble? Where are all those complaints about how "Wall St." is recklessly risking our retirement accounts? The contradictory conspiracy theories are astonishing.
Game theory inevitably takes over; I better sell before the next guy does and lowers the price even further. The only people with diamond anything are the ones who bailed and took their profits early.
The people with "diamond hands" are the ones who opened short positions when the stock was trading in the $300+ range. They are probably to busy looking up which sports cars to buy with all the money they made to bother looking at WSB right now.
I mean, that’s one take. Another take is a hedge fund who bailed out AMC with debt for shares was richly rewarded, and some of the public short selling hedge funds like Melvin still lost their shirts.
I wouldn't be surprised if hedge funds overall made a profit and retail investors overall made a loss in the GME fiasco. More likely than not, even.
My pet conspiracy theory is that WSB is just a cat's paw for another hedge fund that saw an opportunity to make money and wanted to try out a new approach.
It is a near certainty that hedge funds fleeced retail investors who bought GME above $100/share. The real problem with WSB is not the people who post there, it is the large crowd of unsophisticated lurkers who overestimate their own knowledge and abilities. The media did not help by hyping this story and making it sound like "Wall St." was terrified by a mob of Redditors. Two hedge funds lost some money, but as many have pointed out, those funds will probably still turn a profit on the year. Meanwhile, a bunch of hedge funds, algos, and prop traders are raking in cash from the spike in volatility, and a bunch of HFTs took advantage of the spike in volume. I expect a small bump in sports car and yacht sales in the NYC region as a bunch of "Wall St. bros" spend the giant bonuses they are taking home from this whole episode.
As to the scam aspect, I give it a 50/50 chance that someone saw an opportunity to pump-and-dump some symbols with very high short interest. I doubt it was a hedge fund, it was probably an individual, probably someone living outside the reach of US law enforcement. The alternative is that a bunch of idiots actually came up with the idea that they could take on "Wall St." and managed to trigger a short squeeze, many of whom have yet to realize that the party's over.
On the bright side, though, at least it was a zero sum game (well, it will have been by the time the stock is back to where it started). Money was transferred from the early shorts and late longs to the early longs and late shorts; with the market makers taking a bit of a cut.
Many other scams (or, for example, theft and robbery) destroy value (as, for example, a stolen wallet is a much bigger loss to the owner than it is a gain for the thief). Or, say, the 2008 GFC made a few people extremely rich (unscrupulous mortgage peddlers, investment bankers creating "complex, highly leveraged, exotic trades [...] without necessarily understanding all of the implications of those monstrosities", etc.), while wreaking havoc orders of magnitude greater on the entire world.
I don't see why everyone is against pump and dump schemes yet the system is literally designed for them to happen. It's an inevitable fact that they will happen when you set up a free market and a bunch of (stupid) humans from the general public, as also clearly demonstrated in the crypto scene.
If people don't want them to occur, the short-term incentives, market, and exchanges themselves need to be re-structured in a way such that takes into account what a group of humans with free communication would do.
First of all, there is no such thing as a free market, certainly not in the capital markets. There are mountains of regulations covering stock, options, futures, and debt trades. Trading is routinely halted on various securities in extreme circumstances. Insider trading is restricted, and the restrictions become more significant for higher level management. Companies are required to report certain information to the public.
Markets exist to solve problems of valuation and capital allocation. Pump-and-dump schemes distort valuations in very extreme ways and work against the purpose of equity markets. That is a basic reason why they should be banned. Another reason is that scams introduce unnecessary risk to someone making an investment decision; ideally investors should only focus on risks related to a company's business, not the risk that the information they were given about that company is false. The extra risk will drive away investors and the result will be less capital available to otherwise promising ventures, which again works against the goals of capital markets.
It is not really possible to restructure markets in a way that would avoid pump-and-dump schemes, because the problem with a pump-and-dump scheme is not actually related to the rules governing the market. The problem is that the pump-and-dump scheme involves deliberately spreading false information; yet it is equally possible that investors hear true information and rush to buy, and the market should allow for that situation.
I guess my main question is, why does the stock price go up if mountains of people suddenly buy a stock?
It's because we base pricing based on a simple free market order book algorithm.
If the markets enforced a pricing algorithm that included certain time-based functions instead of basing it purely out of the order book, and mandate that all transactions happen at the algorithm's determined price (instead of the free market price), a lot of problems including pump-and-dump schemes and insider trading could be theoretically eliminated. We could completely legalize insider trading, for example, if we technologically mandated that large orders took weeks to execute while single shares traded in milliseconds.
(I'm an engineer, not a financial expert; I view this problem as very similar to e.g. API limits and firewalls that implement rules to prevent abuse.)
"The price" is just a convenient way to talk about the theoretical "value" of a company. Brokers use it to determine whether or not margin maintenance requires are being met, but in reality there is no single price at any given time. There are always two prices, the highest bid and the lowest ask, and those two prices are only meaningful for the size of the bid/ask in the order book.
How would an algorithm determine the price? The whole point of the equity markets is price discovery. The price should rise when people rush to buy, and it should fall when people rush to sell. In many cases that is the "right thing," in the sense that the rush to buy/sell is in response to a real change in a company's circumstances (e.g. an outstanding earnings report, a natural disaster that harms the business, etc.).
Limiting the execution of a large order would not stop insider trading, because you do not need to go to equity markets to buy/sell stock -- you can enter into a private agreement with someone to transfer shares in exchange for money. Limiting large order executions would also make index funds impossible -- index funds have to trade the stocks that make up the underlying index when customers buy or sell, and a large fund may have many individual customers buying or selling on any given day.
Money was made by fools at the expense of greater fools. Short-term trading is a zero-sum game, always has been, always will be.
Except for the HFT firms and market makers, who basically own the Robinhood flow and who thrive in foolish volatility. Guess who's paying so that r/WSB bros pay zero commisions? It's not the Red Cross.
The subreddit surged from 1 to 8 mil redditors in less than two weeks. I think the mods couldn't have stopped the disinformation even if they tried, just due to sheer increase in volume of posts.
Nobody removed the ability to sell stocks. Some brokers removed the ability to buy stocks (because they were near broke and couldn't afford it), which probably saved some potential buyers some money and brought this train wreck to a halt a bit earlier.
There's a simple lesson. Buy and hold a low-fee index fund. Stop trying to pick stocks. And for God's sake stop trying to day trade stocks.
Deviating from buy-and-hold indexing is mathematically a zero-sum game. Winning this game is also one of the most monetarily rewarding games on Earth. It's extremely unlikely that you're anywhere near good enough to win this game. If you don't know who the fool at the table is, it's probably you.
> There's a simple lesson. Buy and hold a low-fee index fund. Stop trying to pick stocks. And for God's sake stop trying to day trade stocks.
It's a tough lesson to learn. When I realized, I think last Wednesday evening, that intelligent people honestly believed Ken Griffin was ordering Robinhood to block traders from buying GameStop stock so a short of his could make money, I started pricing out puts. (Didn't do anything.)
I burned my hands with thankfully little money in the '08 crisis. It chastened me, and I've been more disciplined since. And I was a professional options market maker. (It's a bit of a running joke: sell-side traders running godawful personal accounts with a handful of hero trades and boatloads of losers.)
I'm not sure I would have been more disciplined had I entered the markets at the tail of a 10-year bull market. Certainly not if the most-accessible trading app encouraged me to day trade. And if my financial identity was largely based on a subreddit that egged me on. It's a difficult problem, and I don't think there are easy answers.
(Counterfactual: individual investing is not hopeless. There is ample evidence that individual investors can and do generate abnormal returns. But it's seldom the people day trading, and when it is, it's not them holding concentrated positions over multiple days.)
> There is ample evidence that individual investors can and do generate abnormal returns.
I actually agree with this. But didn't want to put it in, because so many people hear this qualification and just assume it means they can be the next /u/deepfuckingvalue.
To put it in the larger framework, I would say individuals can win in opportunities that are too awkward for institutions. Like patiently holding beaten down value stocks. But there's two caveats. One, is that most times this style of investing is painful, with long periods of underperformance. Two is that the outperformance is reasonably capped. Maybe an extra two or three percent a year. It's not going to catapult you to /u/deepfuckingvalue levels. For large enough opportunities, the institutions will swallow the awkwardness. That only leaves small rewards for a lot of pain.
Thanks. I do appreciate you bringing this point up.
This is the first time i've heard of individual investors beating the market. If some can do so consistently, shouldn't they be running a hedge fund instead of twiddling with their retirement?
Many/most strategies become less profitable percentage-wise as you scale up the trading volumes. You end up pushing the market around and affecting the patterns upon which you rely.
If they've found some pattern that very reliably makes 40k to 50k a year on a 300k investment, with downside semivariance similar to the S&P 500, they're beating the market, but maybe the pattern will never make more than 80k a year, even with infinite bankroll.
Not as simple. With buy and hold of index funds, you limit your upside. There is close to zero chance to make 1,000% within a year. Stock picking has potentially a bigger downside, but also more upside.
This being a zero-sum game doesn’t matter, if you have either an edge or are simply lucky. So instead of saying it’s all bullshit, it probably makes more sense to put 90% in index funds but expose yourself to a bigger upside with stock picking.
I think that's kind of the GP's point - they are advocating for not being lured by the (scant) potential for enormous gains, and instead taking the easy route to moderate gains (which will amount to large gains over time, as long as you reinvest).
> it probably makes more sense to put 90% in index funds but expose yourself to a bigger upside with stock picking.
Does it though? Unless you are an experienced professional financial trader (or are in possession of inside information), you are almost certain to have higher gains over time with indexed funds. If you really want to gamble on individual stocks, you may as well put 90% in index funds and put the rest on a roulette wheel.
If you think that your chances are higher at roulette, good for you. Other people take other chances.
A few more thoughts:
- Maybe you don’t have to be THAT smart to beat the index.
- Maybe you don’t have to be consistently good or right or lucky, but only once or twice, because money has a nonlinear utility. If you strike it big in your early thirties, you have a different life than if you consistently save up till 65.
- Of course, gambling away your small investment in the beginning might give you less to compound over the years, which results in significant less money at age 65.
- Maybe stock picking helps you better to stay invested during booms and busts.
I have no answers to these questions and I’m in the process to figure things out for myself right now. However, buying puts on DAX and SPX in February 2020 made me a small fortune, which is now a very real house I just bought.
of course it's all possible. but chances are you aren't as bright as you think and just as the other 95-97% of retail investors (actual number based on studies) you won't outgrow the s&p500
> This being a zero-sum game doesn’t matter, if you have either an edge or are simply lucky
Picking stocks is basically "I'm feeling lucky".
People do win the lottery and not buying a ticket prevents you from ever winning it.
The upside definitely exists, but you get emotionally invested rather than financially.
Picking stocks is good for your sense of agency in investment & feeling connected to the results of your actions - the emotional part of that shouldn't be ignored.
Trading stocks at that risk level is very much a tribal gladiatorial feeling, rather than actual financial sense.
We're actually seeing that in action recently - poor financial sense, massive entertainment value.
same can be said for investing in lotteries. Also more upside, and if you're lucky, well that's all you need. So why not put 90% of your money into index funds and use the remaining 10% to buy lottery tickets?
Because the chance for return is so small with lottery tickets. Futhermore: Most people don't need $50 million but rather 50k-500k. It makes sense to pick a bet with better odds.
10% in a stock that has a 50% chance of better performance than the SPX? Sounds reasonable.
Or an event-driven trade where you do a short-term bet on a thing. These opportunities don't come very often, but once in a while, they do. Why not expose yourself to them?
True. Just like in the casino, if you want to make real money, you must put all you have on one lucky number. Betting small amounts on red or black limits your upside severely.
>Deviating from buy-and-hold indexing is mathematically a zero-sum game.
If buy and hold indexing is not mathematically zero (which I agree it is not), then plenty of deviations from it are also not zero sum (which is empirically true).
Any stock gives partial ownership of a (hopefully) productive asset. Larger collections of them (like index funds) provide some reduction in volatility, but index funds are by no means the only way to structure risk/volatility tradeoffs.
But the probability that that the average WSB retail investor reconstructs a Robinhood account with superior mean-variance optimization than an index fund, is about the same chance that my dog builds a fusion reactor after getting into my toolbox.
I disagree. The lesson here is 1) figure out the memestocks before they become memes, 2) buy low and depending on memefication potential sell high.
At some point I was > 1200% with GME, but, I got greedy. I could have made bank in nearly every swing but hindsight is 20/20.
The goal is to outpace the market even with small amounts while investing most of the portfolio at safer stocks/long term plays. Ended up my GME saga at > 300%.
I don't see how those lessons are actionable? I mean yes to make money in stock picking all you have to do is buy low and sell high. Question is can you do that consistently enough to make a better return than index funds?
As long as it averages out you are fine. I was in GME at 33ish. I was also at 17 and I was impatient (and I really didn't know what the heck I was doing then, too impatient, not that I do know now..).
I am not suggesting to do that instead of index funds, I suggest doing both, throwing a small portion of your portfolio in meme stocks before they gain traction, this is where sentiment analysis comes in, can yield very good results. As long as you get out fast enough.
By fast enough, I do not suggest chasing old returns, that is, returns like TSLA/GME. You only need to outrun the market at that particular day, do it often enough whilst throwing profits in index funds and you are getting ahead.
I am willing to bet (hah), and I will try to verify (at least in virtual) that after GME, sentiment analysis on WSB, r/stocks, r/investing and news can provide good enough yields by exploiting people's FOMO, in particular the chase for TLSA/GME returns and the belief that we are in control. The goal is to track potential trends in WSB, observe them getting traction in r/stocks and r/investing, and once they are mentioned on the news to start getting out.
Problem with TSLA and GME is they are only meme stocks in hindsight. You may have gotten lucky on those and gotten in early enough, but that’s not a strategy.
Hypothetically let’s say analyzing sentiment on some narrow range of data like WSB reliably produced outsized returns, that will very quickly self correct as people catch on.
I suppose if you are the only one that has the secret sauce then sure. But if that’s the case you probably should’ve be posting it here.
> Hypothetically let’s say analyzing sentiment on some narrow range of data like WSB reliably produced outsized returns, that will very quickly self correct as people catch on.
Any advantage is neutralized only if/when it becomes public knowledge. I am certainly not the first that came to this hypothesis, and I won't be the last. I need only to stay ahead of the curve.
I think you're absolutely correct. Stock picking is roughly a winner-take all game where you are facing off against incredibly smart and prepared people.
Unfortunately, I have heard of several people[1] that have switched from passive funds to research and stock picking. One week of market silliness may have un-did decades of teaching the public to not pick individual stocks.
While it's nice that more people are going to start reading 10-Qs and learning what a put is, it's almost certainly going to be a net-negative.
It's not just that they're established etc. It's that they're right. GME likely has no future beyond slowly closing down and liquidating. Anyone who bet that way will win in the long term.
There’s a lot of anger against the financial system but unfortunately not much financial education to understand why it is working so poorly for average investors. That anger makes people lash out to try to change the status quo, which in this case caused Redditors to buy GME in spite of its ridiculously high valuation. But because they don’t actually understand the mechanics of the market the hedge funds will easily out maneuver them.
Melvin Capital was a big loser with their fund down 50%, but the funds that held GameStop made out fine. A lot more of the volatility was probably driven by hedge funds than people think, and a lot less driven by Redditors. A billion dollars is an insane amount of money and even 6 million wallstreetsbets members working together can barely make a dent in these prices.
At the end of the day hedge funds will be fine and retail investors will be left holding the bag. Their very real anger is valid, but should be turned toward the actual causes of financial injustice and not playing into the hand of hedge funds.
Ironically, the shorts who have been blamed for much of this mess are the only ones screaming about the broken regulatory system, including the toothless SEC, and warning about asset bubbles driven by low interest rates that are making it very difficult to responsibly invest. If average investors would listen to these contrary voices instead of breathless longs on CNBC they would have a more complete view of what’s happening in markets today.
Is there actually a way to target the financial system? Seems to me the best anybody could have hoped for was to make a hedgefund bleed.
So far as I can tell, there's no political way to meaningfully touch that segment of society. Politicians can't be trusted to regulate such a complex system, even if they could be trusted not to be bribed into compliance. The existing regulatory institutions seem captured. Even poking at the hive with $gme seemed to cause institution involved to close ranks, and try to delegitimize retail traders, even discounting all brokerage's decision to limit trading on the stocks.
A lot of people want their pound of flesh for '08, especially young folk who's families lost everything.
Is it? I've heard a lot of talk like this. The last decade has been spectacular in the markets. I know plenty of average investors who've outperformed the S&P by investing in tech, TSLA, etc. Real estate is on fire. I think a lot of average people are in dire straights right now, while a lot of average investors are doing quite well. And then there are the top 0.1+% who are doing disproportionately well, perhaps that is the larger source of the problem?
> That anger makes people lash out to try to change the status quo, which in this case caused Redditors to buy GME in spite of its ridiculously high valuation
Is it anger motivating people to buy?
I get mixing anger in with the greed and hysteria. Were I to play blackjack with the house being, I don't know, the Sackler family, I'd certainly get a high out of it and I'd certainly bet more. But I wouldn't be at the table because of the anger. The anger would just amplify the other motivations.
> Were I to play blackjack with the house being ... the Sackler family, I'd certainly get a high out of it and I'd certainly bet more.
You playing at a gambling game with negative expected value against people you hate and you want to give them MORE money? I'm sure they'd love that. Any casino prefers irrational customers over the ones that can do math. (The ones that can do math are still welcome, just not as appreciated)
> You playing at a gambling game with negative expected value
The GP used to be a professional options trader. I know several professional traders who are very good at counting cards. I wouldn't be so quick to assume they have negative expectation in blackjack.
I think this analogy would be better as playing poker with an enemy and a seasoned pro. You relentlessly raise, trying to draw your enemy into over bidding, even as you both lose money to the pro.
For people not reading the article and thinking this hedge fund was short these stocks:
> In December, AMC signed a commitment letter with Mudrick Capital that called for the hedge fund to buy $100 million of new secured bonds that pay 15% cash or 17% deferred interest. In exchange, Mudrick received a commitment fee equal to about 8 million AMC shares.
ie, this firm indirectly bet on an AMC recovery, investing in them as “distressed debt”, but the recovery in their stock came true suddenly.
And on AMC covered by their shares too it looks like. But the article title and comments here made it sound like they were the same short selling hedge funds targeted for squeezing by wsb, when the truth is more complicated.
When, the media, brokers, clearing houses, or hedge funds disagree with you, that means they're obviously conspiring.
When the media, celebrity-billionaires, politicians, other hedge funds, and early investors support you, that's confirmation that you were right. There's no way they could be motivated by other incentives like money or free publicity.
I thought the goal was to punish the HFs that were shorting GME, which was pretty much achieved. I don’t think anyone(reasonable) was expecting the rest of the financial market to sit back and watch and miss the opportunity to join the party.
A LOT of people bought GME at $350 thinking they would get rich. Propoganda on WSB basically convinced you that it would go to $1000 next week. At some point it stopped being about hedge funds and became a standard pump and dump.
Perhaps at first. But if you browse through WSB right now, the prevailing narrative is that it wasn't achieved; the hedge funds are lying, they haven't stopped shorting, and you'd better keep buying and holding or the hedge funds will win.
This became the goal for some people. The original goal (way back when nobody knew who /u/deepfuckingvalue was) was to get rich on a short squeeze, because the counterparty on that trade had made a dumb gamble. If it had been some pension fund or even just retail investors on the other side that would have been fine too.
They may have punished a few HFs, but now a lot of retail investors will be paying the price as the price drops. Obviously it's clear to most of us that jumping in the hype at $300 was probably not wise, but that's what happens when the hype train pushes through.
People have been saying that(HFs having made more money out of this than they lost/will recover in a short time) for a while now, but I doubt that a lot of the cult-like newbie flood on WSB/other investment or crypto subreddits that has been getting "we rekd the billionairs" drilled into their head for the past 3 weeks in every crevice of the internet will acknowledge this.
You can still see people "just pumping their life savings" into GME on there. I sincerely hope that they know what they're doing.
I think you missed the position this fund took, which I think was to bail out amc with a "distressed debt agreement" for shares, which they then used to make a killing. So, to me it sounds like it's really that long hedge funds profited from shorts and reddit investors were taken along for the ride if they had good timing. Shorts still "got rekt" and the people who helped bail out AMC were rewarded.
Hedge funds weren't the real winners, but rather prop shops/market making firms. January was the best month in the history of the universe for all the major prop shops: Citadel, Jane St, IMC, etc.
The two "vols": volume and volatility are the corner stones of all market making performance. Bonuses are mighty fine this year, that is for sure.
The people who adhered to the original plan (to overcome the million person prisoners dilemma) of setting a limit sell order at 420.69 should still have made a ton of money.
Imagine the balls of the person that pitched/approved selling uncovered calls on something that can 2x per day for a few days. "Let's collect $200M in options premium, but if the trend continues we'll lose $1B or even 10x more". Madness. Congrats on the trade tho.
It was and is a heavily shorted and volatile stock. It's anomalous relative to the rest of the market at this point in time. But there is almost always someone out on the long tail of settlement shitshows.
Wow there are a lot of boomers in here. The point of the Reddit push was to screw the short sellers who did get screwed. And obviously it’s a pump and dump. And even more obviously everyone knows they are risking their money, no one is risking their life savings as someone else commented. And even if they did that’s their choice
"Nobody" thought some hedge funds or bond holders would win along the ride, right?
Regardless if they were tipped off about the restrictions in advance or not I think they were good citizens taking risks and helping two companies found in distress due covid.
This is because the big kids use big kid's brokerages. Which is to say, well capitalized brokerages that communicate well with their clients on possible capitalization needs.
It is no shock at all that a cheap broker with a million new clients wasn't sufficiently well capitalized for a big kids play.
The restrictions affected the price and the price affected everyone involved. I wouldn't be surprised if the big boys received a call before a decision was made to make sure they dump everything they have before they unleash the restrictions panic.
"Long buyers, who have an incentive to push positive propaganda about a company they are invested in (regardless of whether or not it is true), are good."
"Short sellers, who have an incentive to push negative propaganda about a company they are invested in (regardless of whether or not it is true), are bad."
This is self-evidently incoherent and is actually being too generous to Musk, who in real life is even stupider than my strawman[1]. And Elon Musk obviously has a creepy grudge against short sellers, as evidenced by his disgraceful comments in a 2018 analyst call[2]. The only thing approaching a principle that Musk has bothered to offer is that short sellers can hurt companies by artificially pushing the stock price down. But long buyers can hurt competitors by artificially pushing a stock price up! There's no "moral" difference. Musk just has absolutely no leg to stand on here - which is why he's myopically focused on Reddit and Twitter instead of people who are actually competent about finance.
The only reason Elon Musk is "morally" opposed to short sellers is that they are hurting his personal bank account, and he's not satisfied with being merely the richest person in the world. And the only reason you share his opinion is that you are caught up in his cult of personality. Looking at your comment history: read more news and less Reddit.
I think HN likes to believe it is evidence based and rational instead of emotional and greedy. A more enlightened and civilized corner of the internet. I have not been seeing much of that lately. It turns out the promise of riches is enough to make any community lose it's collective mind.
Here is a truism for you all: In any casino the players may win or lose, but the house always wins. If you think any bet is a guaranteed win, you have lost your rationality.