Gamestop

Colm Fagan said:
Here is what I posted on this topic on another forum:
"I have conflicting views. Like everyone, I enjoy seeing hedge funds get stuffed occasionally. The downside is that it will put professionals off short-selling if a group of amateurs, conspiring together, can exploit the unlimited upside to bankrupt them. Short sellers can discharge a valuable service to society. Back in 2008, if the Irish government had heeded the hedge funds that were short-selling the Irish banks, rather than the bureaucrats (libel laws prevent me from using a different noun) who insisted the banks were solvent, Irish taxpayers might have been spared a few billion."
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What alternative should the Govt have taken if it heeded the hedge funds?
 
The idea that back in 2008 the government should have listened to hedge funds is a farce. The damage was already done. Hedge funds are spinning the story to pretend they are somehow all knowing but really that are parasites to the financial system. Some day in a brave new world we may reset the system to have a proper stock market that serves the true interests of their respective economy's and let the elite bee like drones get tossed out as they do nothing good.
 
Hedge funds who short shares do actually provide a service to the investment community in two ways -
  1. they provide liquidity in providing shares to buy
  2. they do some price discovery work and present an alternative view to the idea that share prices only go one way (not always well done, but that's a another argument)
When they get it wrong - as apparently Melvin Capital did then they make huge losses - but then no one said that Hedge fund managers know everything, well except Hedge fund managers

And if enough small investors are prepared to buy shares at $200, $300 and lose their investment well the Hedge Funds will learn a lesson and maybe provide better price discovery for a while
 
jpd said:
Hedge funds who short shares do actually provide a service to the investment community in two ways -
  1. they provide liquidity in providing shares to buy
  2. they do some price discovery work and present an alternative view to the idea that share prices only go one way (not always well done, but that's a another argument)
When they get it wrong - as apparently Melvin Capital did then they make huge losses - but then no one said that Hedge fund managers know everything, well except Hedge fund managers

And if enough small investors are prepared to buy shares at $200, $300 and lose their investment well the Hedge Funds will learn a lesson and maybe provide better price discovery for a while
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I heard this said many times and personally I don't fully accept it. Often pushed by paid sponsors to suggest a, "you need us as we are good". Truth is they only really serve their own interests and they can often be the cause of a lot of harm. Bigger story here so probably the wrong thread.
 
john luc said:
Truth is they only really serve their own interests and they can often be the cause of a lot of harm. Bigger story here so probably the wrong thread.
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Yea if they were really all about price discovery and stopping bubbles they would be all over Tesla now but they prefer to gang up on small stocks like gamestop. Many of the hedge funds are probably involved in inflating the Tesla bubble aswell
 
joe sod said:
Yea if they were really all about price discovery and stopping bubbles they would be all over Tesla now but they prefer to gang up on small stocks like gamestop. Many of the hedge funds are probably involved in inflating the Tesla bubble aswell
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Elon Musk is constantly giving out about the short sellers of Tesla. Explains why he came out again about it over the last week - stating people shouldn't sell things they don't have (from the guy selling cars not yet ready)
 
NoRegretsCoyote said:
People are taking big bets. Some are winning, some are losing. It's not stopping Gamestop from buying and selling video games from stores or whatever else they do.

I have not seen anything in this story that necessitates either more or less public intervention.
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Most of the 'bets' are on the Robin Hood app. When this began really hurting the Hedge Funds in favours of these bets, the app actively prevented further buying of Gamestop shares, while allowing selling of these same shares.
Obviously, this reduced the price of the share.
Surely that intervention looks suspicious?
 
john luc said:
I heard this said many times and personally I don't fully accept it. Often pushed by paid sponsors to suggest a, "you need us as we are good". Truth is they only really serve their own interests and they can often be the cause of a lot of harm. Bigger story here so probably the wrong thread.
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First off - "hedge funds" is a catch all phrase which covers a multitude of trading strategies. Initially they were funds that offered different return characteristics to the general market which would be a hedge within a portfolio of investments. And that is still the case. There are many hedge funds who target fairly ordinary returns but aim to reduce the volatility of the returns.

Short selling by itself isn't necessairily a predatory strategy. Many long / short funds are effectively about focussing on the relative merits of a particular company verus the industry. So if I think AIB has a better strategy than Bank of Ireland but I want to avoid outright exposure to the banking industry, I can buy AIB, sell BOI - I hedge out some of the macro risk.

Then, apart from providing liquidity, borrowing stock has long provided additional returns to long only buy and hold funds - especially pension funds who are mandated to hold the general market. These types of funds are adding an additional percent or two of return to long only funds by borrowing the entire portfolio for the year. So there is benefit to the pension and insurance funds.

Finally, short selling has long been around - it has always been a tool to shift risk and even out demand and supply. Christmas funds which used be run by local shops and butchers are sort of a short sale of groceries. The big agricultural exchanges in the US allowed farmers short sell their produce in return for guaranteed prices. It's nothing new
 
lledlledlled said:
Surely that intervention looks suspicious?
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Why is the simplest explanation in these situation overlooked. US Brokers are requried to post collateral to the clearing houses based on the value fo the trading they are clearing. A small, under capitalised internet broker sees a massive increase in volume and value and takes steps to cap it until they can address their capital requirements - would the simpler, if less shocking explanation.

There are often halts put on trading particular stocks in most US brokers - especially if trading activity seems unusal or suspicious. The onus is on the broker to ensure there isn't any breach of trading laws. So it's usually short term while they investigate and then lift restrictions. It just doesn't make the news
 
EmmDee said:
Short selling by itself isn't necessairily a predatory strategy.
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Agreed, but short selling and telling everyone that you have done so, 'cause you are a smart investor has the effect (usually) of driving the price down. Not just betting on the race but effecting the outcome.
 
cremeegg said:
Agreed, but short selling and telling everyone that you have done so, 'cause you are a smart investor has the effect (usually) of driving the price down. Not just betting on the race but effecting the outcome.
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Yeah - I think what the reddit crowd spotted was a market disfunction which they jumped on - like a prefect arbitrage. Where I worry that many may get burned is thinking it is a permanent adjustment and that the company share price was way under-valued because of fundamentals purely driven by short sellers.

The reality is that a "brick and mortar" seller of physical games is not a long term growth business. If the company doesn't have a new strategy, the people predicting a trend towards zero will be correct. This will be seen as a temporary blip because of a short term technical squeeze. And people jumping in at $300 and being advised to hold on are in danger of being the ones that get hurt
 
It's laughable that most US states ban gambling and bookie shops.

But no issues day trading on stocks, shares and crypto currencies.

It's the "gambling" element that drives this type of market. And just like gambling on a horse, only bet what you can afford to lose.

Unfortunately too many bet too much and it ends in tears for them.
 
Has there been much mention of the Gamestop/Reddit phenomenon in irish media in the last few days? It's quite a story in the US.
 
EmmDee said:
Why is the simplest explanation in these situation overlooked. US Brokers are requried to post collateral to the clearing houses based on the value fo the trading they are clearing. A small, under capitalised internet broker sees a massive increase in volume and value and takes steps to cap it until they can address their capital requirements - would the simpler, if less shocking explanation.

There are often halts put on trading particular stocks in most US brokers - especially if trading activity seems unusal or suspicious. The onus is on the broker to ensure there isn't any breach of trading laws. So it's usually short term while they investigate and then lift restrictions. It just doesn't make the news
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That could be a plausible explanation if it wasn't for the relationship between Robinhood, Citadel and Melvin.

If collateral requirements were the issue surely increasing margin requirements would have achieved the same result without giving such advantage to the market makers. That's what other brokers (who don't sell their order flow) did. Also RH CEO said there were no liquidity issues (though he did simultaneously raise a yard). RH's conduct stinks.
 
peemac said:
Unfortunately too many bet too much and it ends in tears for them.
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I may have the wrong end of the stick here, but I don't endear to this sentiment.
The small retail investors who 'piled in' knew exactly what they were doing. It is questionable as to how much they did actually pile in. My understanding is that the biggest losers were the big-boy hedge funds, who also know what risks they are taking. So it's strange to hear this type of sentiment.
Realistically retail investors could only drive the price so high. But it was enough to expose the naked shorts trades at play forcing the big hedge funds to buy back into the market against their own strategy. This is the big money, this is the money that drove Gamestop to massive highs, not the retail investors.
I open to being corrected on that, but that is my understanding.
 
WolfeTone said:
The small retail investors who 'piled in' knew exactly what they were doing.
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I doubt this. The first ones knew what they were doing, and this has been months in the making. Then everyone jumped on the bandwagon, most of them blindly, and millions will lose money. Maybe small amounts individually, but the vast majority haven't a clue what they're doing, and don't realise they're gambling.
I think I read a note that over 50% of all Robinhood clients had purchased shares in GME. Find me 6.5m people who know what they're doing, and not just following.
 
RedOnion said:
Then everyone jumped on the bandwagon, most of them blindly, and millions will lose money. Maybe small amounts individually
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Yep, that is my sentiment, mostly small individual amounts that is why I dont subscribe to "there will be tears" theory.
 
And like all gambles the people who have made money on the gamestop bet on are looking at the next thing rather than just walking away. They probably lose it all again on the next bet that doesn't go their way. For some reason they are now trying to do the same with SLV etf
 
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