Redditors vs the hedge funds

[NoXion]

Looks there's a bit of a battle going on here:

How GameStop found itself at the center of a groundbreaking battle between Wall Street and small investors

The video game retailer has become one of the hottest stocks this year in a tale that illustrates the changing face of investing

www.theguardian.com

If it means the hedge fund guys get fucked, I'm all for it. Burn it, burn it, burn it, burn it all down.

And they're diversifying:

 

[Idaho]

Just mentioned that in the global meltdown thread. Gamestop gone from $18 to $350 this year.

 

[SpookyFrank]

Looks pretty amusing. Wouldn't be possible if the whole system wasn't completely divorced from reality of course, so any hedge fund tosspot who loses out has only themselves to blame.

 

[chilango]

Maybe I'm being dense, but I don't see any good guys in this.

 

[Idaho]

Maybe I'm being dense, but I don't see any good guys in this.

Probably because there often isn't any such thing as a good guy? I am not too bothered about people getting a pay day at the expense of a hedge fund.

 

[NoXion]

Maybe I'm being dense, but I don't see any good guys in this.

Life is not a movie. There are no good guys. I just like seeing hedge fund scum being inconvenienced.

 

[chilango]

We'll be the ones paying for it one or another.

Fuck the lot of them.

 

[Idaho]

We'll be the ones paying for it one or another.

Fuck the lot of them.

How will you have to pay for the tug of war over a computer game retailer between day traders and hedge funds?

 

[NoXion]

How will you have to pay from the tug of war over a computer game retailer between day traders and hedge funds?

They might tighten the regulations concerning buying stocks. But since chilango doesn't strike me as the type to buy stocks, I too am at a loss to figure out the source of his pessimism.

 

[BigTom]

Maybe I'm being dense, but I don't see any good guys in this.

There aren't really but it's quite funny watching a big hedge fund get wrecked by a bunch of meme-lord redditors who have basically found an exploit in the system which they are abusing. Kind of like when fascists and cops fight each other, you know.

 

[two sheds]

I'm lost with this - if the redditors decide they can afford the losses and so just don't sell then when do the hedge funds lose out of it?

good guy/bad guy be fucked, if this is small investors trying to fuck over hedge funds I'm tempted to throw in some cash to help. Have never invested but seems a good starting point assuming you're going to throw away anything you put in.

 

[Idaho]

Except these "fascists" are mainly young people with minimal savings, no pensions and big mortgages (or even just rent) big student loans, goofing around and making/losing money.

 

[two sheds]

and as soon as the hedge funds realize it's a 'thing' they'll be in there with their instant trading software so they can profit from it

 

[SpookyFrank]

I'm lost with this - if the redditors decide they can afford the losses and so just don't sell then when do the hedge funds lose out of it?

The hedge funds have a short position, meaning they've already sold shares they didn't actually own, shares they are obliged to buy and return to the owner at some later date. If they are forced to buy the shares at a higher price than they sold them for, they end up out of pocket.

It's quite tricky to understand short selling, not because it's complicated but because it's too absurd to be real.

 

[two sheds]

ta - so they agree to buy at a particular date? Six months, a year? No way to know when that is exactly though?

 

[SpookyFrank]

ta - so they agree to buy at a particular date? Six months, a year? No way to know when that is exactly though?

Presumably the borrowing bit has some end date attached.

 

[Idaho]

I'm lost with this - if the redditors decide they can afford the losses and so just don't sell then when do the hedge funds lose out of it?

good guy/bad guy be fucked, if this is small investors trying to fuck over hedge funds I'm tempted to throw in some cash to help. Have never invested but seems a good starting point assuming you're going to throw away anything you put in.

It's a little complex to explain. It's called a short squeeze. So the hedge fund borrow the shares with the intention of paying for them in the future at a much lower price. In this case the hedge funds bought huge "short" positions on loan. As the value of the share price goes up, they are forced to buy shares at the new high price... further pushing up the price - a viscous circle for them.

E2a - didn't see SpookyFrank reply...

 

[Idaho]

It's quite tricky to understand short selling, not because it's complicated but because it's too absurd to be real.

There are legitimate and sensible uses for an active "futures" market - but now the majority of it is super high stakes gambling by hedge funds.

 

[platinumsage]

It's quite tricky to understand short selling, not because it's complicated but because it's too absurd to be real.

Here's an example, hedge funds sniffing out fraud:

Wirecard shows why bans on short-selling are badly misguided

www.fnlondon.com

 

[two sheds]

There are legitimate and sensible uses for an active "futures" market

Yes if for example you can in some way guarantee a price for suppliers to produce vegetables at a reasonable selling price next year. But any examples for this sort of short buying?

 

[BigTom]

Except these "fascists" are mainly young people with minimal savings, no pensions and big mortgages (or even just rent) big student loans, goofing around and making/losing money.

most of the ones I see post on reddit started investments with more than $10k, some with over $100k so it's not really people with little capital, although there will be a bunch of people who have gone in with a few hundred or low thousands of dollars.

 

[mauvais]

It's just pump and dump, isn't it? With a social media angle.

 

[Idaho]

Yes if for example you can in some way guarantee a price for suppliers to produce vegetables at a reasonable selling price next year. But any examples for this sort of short buying?

I suppose an active "call" market (buying projected gains) can only really work if there is an active "put" market (shorting/losses).

 

[chilango]

It's just some small capitalists fucking about with some bigger capitalists.

I repeat.

Fuck them all.

 

[BigTom]

It's just pump and dump, isn't it? With a social media angle.

semantically no.
pump and dump is when someone who owns shares acts to pump up the price then sells it to buyers who see the artificially raising prices, then when prices start to fall those buyers have no-one to sell to, causing a crash.

In this case there are short sellers who have to buy shares at whatever price it is because of commitments they've previously made, and their need to rebuy those shares pushes up the price because the buyers of those shares are refusing to sell at a lower price.

Similar kind of effect but not the same thing

 

[Idaho]

It's just pump and dump, isn't it? With a social media angle.

Yeah to some extent. But there is a kind of community element to it. Among the top threads there at the moment:

 

[mauvais]

Yes if for example you can in some way guarantee a price for suppliers to produce vegetables at a reasonable selling price next year. But any examples for this sort of short buying?

I've never really understood the sort of moral objection to short selling. Within a capitalist market, anyway.

 

[two sheds]

Here's an example, hedge funds sniffing out fraud:

Wirecard shows why bans on short-selling are badly misguided

www.fnlondon.com

I sort of understand that, but surely there are other ways of sniffing out fraud? And doesn't the short selling just hurt other investors (possibly small) who have bought the shares?

Sorry I really don't understand this shit.

 

[Idaho]

It's just some small capitalists fucking about with some bigger capitalists.

I repeat.

Fuck them all.

I think this is ridiculously simplistic.

 

[mauvais]

semantically no.
pump and dump is when someone who owns shares acts to pump up the price then sells it to buyers who see the artificially raising prices, then when prices start to fall those buyers have no-one to sell to, causing a crash.

In this case there are short sellers who have to buy shares at whatever price it is because of commitments they've previously made, and their need to rebuy those shares pushes up the price because the buyers of those shares are refusing to sell at a lower price.

Similar kind of effect but not the same thing

Yeah, this is a fair point.