Redditors vs the hedge funds

[Idaho]

Sorry I really don't understand this shit.

Hardly anyone does. Definitely not me, and mostly not the majority of people who do it for a living.

 

[two sheds]

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

Doesn't it aim to put companies out of business who might but might not otherwise fail?

 

[NoXion]

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

I repeat.

Fuck them all.

Wait, so if I buy Gamestop stock to spite the hedge funds, I would become a capitalist?

Didn't know it was so easy.

 

[BigTom]

Yeah, this is a fair point.

tbf actually there could be some pump and dump going on as well with redditors who bought in early now saying the price could go over $1000, pumping up the shares which they are preparing to dump on other redditors.
but the "short squeeze" effect is the main thing and what started this.

 

[two sheds]

so like pyramid schemes you need to get in at the start

 

[mauvais]

Doesn't it aim to put companies out of business who might but might not otherwise fail?

Potentially. But then traditional selling of a large holding could trigger the same response - floods the market with shares, causes the price to fall, causes follow-on selling, death spiral fucks the company's ability to borrow capital, fucks it completely.

Neither will yield a failure if there's sufficient confidence in the stock.

 

[two sheds]

Potentially. But then traditional selling of a large holding could trigger the same response - floods the market with shares, causes the price to fall, causes follow-on selling, death spiral fucks the company's ability to borrow capital, fucks it completely.

Neither will yield a failure if there's sufficient confidence in the stock.

Yes fair play. Although 'confidence' doesn't necessarily reflect anything tangible about the company?

 

[mauvais]

Yes fair play. Although 'confidence' doesn't necessarily reflect anything tangible about the company?

I mean, if a company is really boring and makes a regular profit, which is something relatively tangible, it's hard to totally break confidence in that. You can certainly have misplaced confidence or misplaced alarmism though.

 

[chilango]

I think this is ridiculously simplistic.

That's the beauty of armchair spectating.

 

[strung out]

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.

To be fair, most people who have been in a non public sector pension for more than a couple of years will have more than $10k capital to invest. The majority of people are participants in the stock market, knowingly or not through their pensions.

 

[stdP]

so like pyramid schemes you need to get in at the start

The same holds true for pretty much any investment - gains are always highest for those who spot the opportunity first. Once enough people start doing it, people start cottoning on something is afoot and the odds start to narrow, diminishing any potential gains.

Although 'confidence' doesn't necessarily reflect anything tangible about the company?

Especially not in this market, where share prices have become increasingly divorced from any sort of economic fundamentals. Tesla is a good example (additionally it is - or certainly used to be - one of the most shorted stocks in existence, i.e. there's lots of people who've taken short positions against it) as their share price is stratospherically high despite them barely earned a profit. They're an interesting company and have certainly made some great strides and some cool products but are they really worth more as a company than the next ten automotive manufacturers put together, and got rapidly so much better that their share price increased 7-8x in 2020...?

IMHO all of the QE and covid money printed by governments has created too much cash swilling around looking for investment opportunities, generating what might be a large bubble similar to the dotcom era. It's the sort of environment that can make shorts very inviting but to use the immortal quote, "the market can remain irrational for longer than you can remain solvent".

 

[chilango]

To be fair, most people who have been in a non public sector pension for more than a couple of years will have more than $10k capital to invest. The majority of people are participants in the stock market, knowingly or not through their pensions.

Most people? Really?

(I take your point that many will though)

 

[two sheds]

The same holds true for pretty much any investment - gains are always highest for those who spot the opportunity first. Once enough people start doing it, people start cottoning on something is afoot and the odds start to narrow, diminishing any potential gains.



Especially not in this market, where share prices have become increasingly divorced from any sort of economic fundamentals. Tesla is a good example (additionally it is - or certainly used to be - one of the most shorted stocks in existence, i.e. there's lots of people who've taken short positions against it) as their share price is stratospherically high despite them barely earned a profit. They're an interesting company and have certainly made some great strides and some cool products but are they really worth more as a company than the next ten automotive manufacturers put together, and got rapidly so much better that their share price increased 7-8x in 2020...?

IMHO all of the QE and covid money printed by governments has created too much cash swilling around looking for investment opportunities, generating what might be a large bubble similar to the dotcom era. It's the sort of environment that can make shorts very inviting but to use the immortal quote, "the market can remain irrational for longer than you can remain solvent".

ta I did think of tesla (although I did see that they're not actually worth more than the next ten, only more than the next five or six, which doesn't change what you've said).

 

[stdP]

ta I did think of tesla (although I did see that they're not actually worth more than the next ten, only more than the next five or six, which doesn't change what you've said).

Entirely possible my info is wrong of course, but I think that's where it was when I read about it some months back. I'm just here as the backseat doom-monger

 

[teqniq]

So the subtext to this would appear to that it's ok when the extremely wealthy do it but otherwise...From the replies:

 

[not-bono-ever]

The short sellers will have borrowed the stock from an institution that hold a long position ( of have gone long in order to cover the lend) . The tranche size, premium fix and tenor will be contracted up front . Where this gets interesting is if the lender looks to either close it at at maturity or offer a rollover - the costs can cripple the borrower if they are desperate to see it through and not realise the loss. Reputational damage isn’t going to help the borrower wrt the rest of their business. Meh. Vulture scum add nothing

 

[strung out]

Most people? Really?

(I take your point that many will though)

Hard to say I guess, but auto enrolment means that employees should be getting at least 8% of their salary put in their pension, so it doesn't take long to build up £10k+. Appreciate that's not the case for people who opt out or are on very small salaries though.

 

[Idaho]

Most people? Really?

(I take your point that many will though)

Isn't the average pension pot £30k? Not sure if this is mean or mode though... Although most who work in the public sector will have a pension much more valuable than this.

 

[two sheds]

Entirely possible my info is wrong of course, but I think that's where it was when I read about it some months back. I'm just here as the backseat doom-monger

my information is from reddit there was a post saying they were larger than the next ten then another post a few days later saying they were only larger than the last five or six.

Of course I have no idea which is true

 

[Supine]

Isn't the average pension pot £30k? Not sure if this is mean or mode though... Although most who work in the public sector will have a pension much more valuable than this.

a pension pot of £30k would give virtually no pension

 

[strung out]

a pension pot of £30k would give virtually no pension

Lots of people with pension pots that size will be nowhere near retirement though.

 

[chilango]

My "pension pot" is closer to £300 than £30k so I guess that colours my views on this.

 

[BigTom]

To be fair, most people who have been in a non public sector pension for more than a couple of years will have more than $10k capital to invest. The majority of people are participants in the stock market, knowingly or not through their pensions.

This isn't pension funds doing these investments though. This is people with savings investing their money. I mean I saw one post on reddit of someone who invested $3,000,000 into GME stock... 3 million. But in any case getting up to $10k savings is not easily in reach of most people. I really do not think we are seeing people pulling money out of their 401ks (American payroll pension scheme) or whatever to do this.

Edit: this is the post from Reddit

 

[The Pale King]

I found this a helpful explainer: The GameStop Fiasco Proves We’re in a ‘Meme Stock’ Bubble

They bankrupted hedge fund right of the bat, 3 billion emergency loan to shore them up! Reminiscent of dogecoin in some ways but more focused and I like the anti-hedgefund bit. But when people get bored/move on, it will be the least savvy latecomers losing their shirts like always, no? They won't hold the stock forever. Unless the hedge funds buy it back to cover their losses and the circle begins again

 

[The Pale King]

My "pension pot" is closer to £300 than £30k so I guess that colours my views on this.

Aye mine's more an egg-cup than a pot

 

[ffsear]

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

I repeat.

Fuck them all.

People speculating on shit started thousands of years before capitalism.

 

[strung out]

This isn't pension funds doing these investments though. This is people with savings investing their money. I mean I saw one post on reddit of someone who invested $3,000,000 into GME stock... 3 million. But in any case getting up to $10k savings is not easily in reach of most people. I really do not think we are seeing people pulling money out of their 401ks (American payroll pension scheme) or whatever to do this.

You know you can invest in individual stocks from within a pension, right? Even if you have to take one of the default funds from your workplace provider initially, it's trivial to transfer the funds out and manage it yourself from a SIPP.

 

[BigTom]

You know you can invest in individual stocks from within a pension, right? Even if you have to take one of the default funds from your workplace provider initially, it's trivial to transfer the funds out and manage it yourself from a SIPP.

Yes, but like I said, I really do not think that is what we are seeing happening from what I've seen on reddit.

 

[chilango]

People speculating on shit started thousands of years before capitalism.

We're not living "thousands of years before capitalism" though.

 

[Idaho]

a pension pot of £30k would give virtually no pension

Which is why people have no choice but to try and gamble on the markets, or have an old age in penury. I am, when it comes down to it, totally uninterested in stock markets, investments, etc - but I'm very interested in having a comfortable old age.