GameStop Stock surges due to meme traders

[tstorm823]

the question to ask is whether shorting usefully contributes this overall efficient allocation of resources, not whether it encourages the "right" behaviours in individuals.

A) That's the same question twice, just with scare quotes.
B) Gambling is almost certainly one of the least efficient allocations of resources. Shorting is pretty much just gambling, trying to turn your money into more money at the expense of the "losers" without anyone actually generating real goods or services in the exchange.

 

[Eacaraxe]

Nope don’t agree with that. Short sellers can something’s correct badly performing companies with poor internal finances and bad companies like Sam Bankman’s FTX.

Funny how organizations that do stupid shit like short 140% of a target's float and exploit every formal and informal institutional trick in the book to hide it, just don't seem to enter that calculus. If a short is a "corrective" or "punitive" action, so is a short squeeze. Weird how there's so little controversy when it's Porsche squeezing Volkwagen while positioning itself for a hostile takeover...or you know, Deutsche Bank, Scion Capital, or Cornwall Capitol playing a critical role blowing up the whole goddamn global economy for a decade.

But you know, retail traders do it (AKA, the poors) and suddenly it's the financial apocalypse.

 

[Agema]

B) Gambling is almost certainly one of the least efficient allocations of resources. Shorting is pretty much just gambling, trying to turn your money into more money at the expense of the "losers" without anyone actually generating real goods or services in the exchange.

A lot of people smart about shorting are probably doing better than gambling, much like poker is gambling but also a game where skill can be rewarded.

Secondly, even what might be akin to "gambling" is potentially capable of serving a market purpose - helping signal the appropriate price of shares, creating forms of market stabilisation, etc. Not that I specifically know where shorting stands on these sorts of things, but it's the kind of thing that may popularly attract opprobrium for what's obvious about it whilst being underappreciated for what's not obvious.

 

[tstorm823]

but it's the kind of thing that may popularly attract opprobrium for what's obvious about it whilst being underappreciated for what's not obvious.

I really don't think there is anything not obvious.

 

[Eacaraxe]

...Not that I specifically know where shorting stands on these sorts of things...

Trust me, we can tell you don't know.

 

[Seanchaidh]

I hate peanuts so much that I don't even have any and I want to sell the peanuts that I don't have; I don't just want to have no peanuts, I want to have negative peanuts. This is useful price information somehow.

 

[Satinavian]

I don't see any benefit of short selling of stocks.

There is a benefit for selling goods (you don't yet have ) at a fixed price at a future date. This was introduced to safeguard buyers and sellers from market fluctuations and allow for better planning. And yes, while some people also used it for gambling (particularly oil or gold) it is really hard to distinguish from non gambling transactions.

But i don't see why this would have to be allowed for stocks as well. Those are not produced, they don't have to be stored in warehouses, they don't go bad. The only business cases for short selling stocks boils down to gambling.



A big problem of the finance industry is that it is too removed from the real economy. Too much derivatives and meaningless transactions. Shorting stocks is just a symptom of it. Not the worst though. There exist things like "loaning stocks to trade with them" and many more stupidity for the sake of creating leverage - to be able to gamble with money and items you don't have. Sure, the potential ROI is high and the financial institutions are happy because they get a percentage of a higher number, but if goes wrong, you create bad loans and defaults that others have to deal with.


But the time of big finance is limited. Eventually AI will replace all those gamblers and do a better job for the economy.

 

[Schadrach]

without anyone actually generating real goods or services in the exchange.

This also describes pretty much all stock trading after the IPO.

 

[The Rogue Wolf]

I don't see any benefit of short selling of stocks.

It can make rich people richer.

 

[Dirty Hipsters]

I don't see any benefit of short selling of stocks.

There is a benefit for selling goods (you don't yet have ) at a fixed price at a future date. This was introduced to safeguard buyers and sellers from market fluctuations and allow for better planning. And yes, while some people also used it for gambling (particularly oil or gold) it is really hard to distinguish from non gambling transactions.

But i don't see why this would have to be allowed for stocks as well. Those are not produced, they don't have to be stored in warehouses, they don't go bad. The only business cases for short selling stocks boils down to gambling.



A big problem of the finance industry is that it is too removed from the real economy. Too much derivatives and meaningless transactions. Shorting stocks is just a symptom of it. Not the worst though. There exist things like "loaning stocks to trade with them" and many more stupidity for the sake of creating leverage - to be able to gamble with money and items you don't have. Sure, the potential ROI is high and the financial institutions are happy because they get a percentage of a higher number, but if goes wrong, you create bad loans and defaults that others have to deal with.


But the time of big finance is limited. Eventually AI will replace all those gamblers and do a better job for the economy.

There's a reason that the finance industry didn't balk at NFTs the way the rest of us did. They're already used to paying for and trading theoretical things that don't exist, which only have value because someone with a lot of money said they did.

 

[Eacaraxe]

This also describes pretty much all stock trading after the IPO.

I mean, nowadays, yeah. But it's not like companies offer dividends as a matter of course any more.

 

[tstorm823]

This also describes pretty much all stock trading after the IPO.

Having value in shares allows for future issuing of additional shares. And there is something to be said for having an outlet to store and exchange wealth that doesn't involve hoarding things of objective value, that even if nothing is directly created by a stock trading, it's better than sitting on otherwise useful resources.

Short selling doesn't really have those things, the idea of it is that the stocks end up back in the same hands, just with a middleman taking a cut of the value lost over time. I'm in no way against middlemen as a concept, logistics are hard and people in the middle make the logistics run in lots of situations, but just not selling stocks is a very simple thing that does not require a middleman involved.

 

[Seanchaidh]

Having value in shares allows for future issuing of additional shares.

It's hardly required. Just asking a price for the shares does that. But an existing trade volume does contain an amount of information about whether they can probably be sold at some price. Information that could very well be wrong but often isn't.

 

[Seanchaidh]

i don't know what all this means, but it seems relevant

 

[crimson5pheonix]

i don't know what all this means, but it seems relevant

I mean they're right. Gamestop successfully parleyed this freak incident into enough liquid cash to continue zombiying around probably for years if they wanted. Or just have the most ridiculous golden parachutes if the crowd finally dumps them thinking they've achieved victory.

 

[Seanchaidh]

I mean they're right. Gamestop successfully parleyed this freak incident into enough liquid cash to continue zombiying around probably for years if they wanted. Or just have the most ridiculous golden parachutes if the crowd finally dumps them thinking they've achieved victory.

they were issuing new shares during all this? heh

 

[crimson5pheonix]

they were issuing new shares during all this? heh

Yeah, right on the morning of the "big squeeze", they dumped millions of new shares. In addition to raking in money off the meme traders, I'm willing to bet the hedges that were in serious risk of going underwater secured enough shares to be able to get out if things stay stupid.

 

[Eacaraxe]

Yeah, right on the morning of the "big squeeze", they dumped millions of new shares. In addition to raking in money off the meme traders, I'm willing to bet the hedges that were in serious risk of going underwater secured enough shares to be able to get out if things stay stupid.

But on the bright side, while everyone was focused on Gill's 120k worth of options expiring 6/21, someone rug-pulled Wall Street by quietly building a gamma ramp of call options expiring today. Meanwhile, on Wednesday Gill bought short-term options expiring today, and yesterday sold 80k and exercised 40k of those 6/21 options -- right in the middle of that price "volatility" (read, mass wash trading to drive share price down) during the shareholder meeting clusterfuck. It's likely hedges went naked again to cover that wash trading, in order to suppress share price.

(In case no one heard, the shareholder meeting had to be canceled due to technical issues. Their servers couldn't handle the load of so many people trying to stream it.)

End result, he's nearly doubled his position in $GME, and market makers have to deliver 4 million $GME shares to Gill today. Which potentially sets off that gamma ramp.

i don't know what all this means, but it seems relevant

There's evidence they actually didn't close their short positions and are just lying (like others). There was insufficient evidence of purchase activity equivalent to Citron's short position, as of the time of that tweet. It's more likely they obfuscated their position via derivatives and swaps (again, like others).

It's funny to me hedges and market "media" want to talk about Gamestop's "fundamentals" as if it's relevant. When hedges massively overleveraged themselves shorting Gamestop, it stopped being about Gamestop's fundamentals and about theirs.