Business, Economics, and Taxes: Capitalism. Yay? >=(

[Handyman]

Jesus the more I read about what WSB did...man they called it right and Melvin really screwed the pooch making it obvious what their positions were. Melvin is in more trouble than I think a lot of you realize now.

What Went Wrong

Melvin in Trouble

The New York firm, founded by Gabe Plotkin, a protégé of Point72 founder Steve Cohen, was forced earlier this week to seek a $2.75bn cash injection from its larger rivals Citadel and Point72, after it had lost about $3.75bn, or 30 per cent, in the first three weeks of the year, according to two people familiar with the matter.

That is not a good way to start the year...

 

[ScoobyDoo]

It's all gambling. The fact that the US puts all it's apples into the Stock Market cart which is just a refined form of gambling fits in perfectly with all the poors who panic every time a Democrat suggests tax increases.

We need to drown Reagan's Ghost in a bathtub and exorcise the demons.

 

[dxmnkd316]

Yeah I imagine a large part of this is due to margin calls. Also, do they do mark-to-market for options? If that's the case, even a longer term short on GME or one of the others over a proper time frame could be affected if they were bought on margin and they have to cover the updated value of the options.

I have no idea to be honest. I suppose it depends on the type of account and how big you are. I wouldn't be shocked to see the small fries dabbling in options getting hit with margin calls. But if you're big enough and experienced enough, maybe you don't? I don't ever get into options, so I don't get too far into the weeds about what the requirements and implications are.

I seem to remember MTM being a problem with the SXVY (was that the symbol?). IIRC, they were a triple-leveraged short on the VIX. So if the S&P ever dropped by X%, that fund would basically be worthless. Well, the S&P was on a very long winning streak and volatility was low. But that ended. The VIX spiked and the SXVY became worthless overnight. I remember a lot of people losing their shirts that day. It was ****ing ugly.

Edit: Ok, it was SVXY and back in 2018. Went from $420 to $40 in hours.

 

[dxmnkd316]

So basically the "efficient market" people are upset about a more efficient market.

The "Hi, My name is 'Market Maker'" nametag changed hands and a lot of powerful people aren't happy some "small" hedge funds are fucking this up for the 9- and 10-figure funds.

 

[Handyman]

The trading bros dont seem to **ahem** buy that Melvin is getting out. They think it is misinformation to try and depress the stock price and force a sell off by the WSB crowd. They seem to want to be holding firm for now.

(I am not on reddit this is from twitter...I cant stand reddit)

This is nuts. Fun way to spend the day though :^) (when you have no investment in it)

 

[dxmnkd316]

this dude might be proof time travel is possible
/u/deep****ingvalue

dumped something like $50K into gamestop long calls in 2019, and posted about it on WSB. now worth tens of millions of dollars

Jesus. $50k in long calls on a gamestop is like me betting $50k on the Gophers winning the Super Bowl. That's... not how the universe works as we know it. I think time travel might actually be a more reasonable explanation.

 

[Handyman]

I have no idea to be honest. I suppose it depends on the type of account and how big you are. I wouldn't be shocked to see the small fries dabbling in options getting hit with margin calls. But if you're big enough and experienced enough, maybe you don't? I don't ever get into options, so I don't get too far into the weeds about what the requirements and implications are.

It would seem in this case the WSB Trading Bros seemed to have the means to play the game on a small level and when banding together could play it at a pretty elite level. I would never get into options either.

Someone on Twitter said it best "this is a bunch of millionaires fighting with a bunch of billionaires". That is why this is the outlier.

 

[dxmnkd316]

I think that is antiquated and wrong. First of all most of this stuff isnt being done on reddit that is just stuff like the GME bs. They are playing a game and only the early adopters will have any shot to really do anything of value. (and will likely get in trouble over it since they are open about it) People are communicating in real time and doing quite well at it and are not broadcasting it for the world to see.

What we are seeing with Gamestop is that being weaponized. That is a small subset of what is going on though. It is a big deal because it is taking down Melvin but it is an outlier. It has people scared but most of the people who are doing this kind of stuff aren't trying to burn the market for the lulz.

I think this is exactly right.

"Now I am become Death, the destroyer of worlds"

 

[dxmnkd316]

It would seem in this case the WSB Trading Bros seemed to have the means to play the game on a small level and when banding together could play it at a pretty elite level. I would never get into options either.

Someone on Twitter said it best "this is a bunch of millionaires fighting with a bunch of billionaires". That is why this is the outlier.

No, I think it's millionaires and billionaires fighting over who gets to control the Botnet (the cultist rubes who have robin hood accounts). The millionaires have somehow taken control of the Botnet and pointed it at the billionaires.

 

[Handyman]

Ohhh...interesting take!

 

[Jimjamesak]

Watching the media desperately trying to explain this while crying “regulation” is quite funny.

Of course it’s only “regulation” for us, none of them give a s- when a hedge fund runs a company into the ground and puts people out of work.

 

[Kepler]

No, I think it's millionaires and billionaires fighting over who gets to control the Botnet (the cultist rubes who have robin hood accounts). The millionaires have somehow taken control of the Botnet and pointed it at the billionaires.

Huh. That's interesting. Who are the millionaires here, Chamath?

 

[Kepler]

On Bloomberg right now, "the Mooch says Gamestop is proof of concept for Bitcoin."

This has been lunatic Mad Libs.

 

[rufus]

Jesus the more I read about what WSB did...man they called it right and Melvin really screwed the pooch making it obvious what their positions were. Melvin is in more trouble than I think a lot of you realize now.

What Went Wrong

Melvin in Trouble



That is not a good way to start the year...

I saw GSX Techedu listed the other day as one of the top movers, it was trading at something like 40 cents, but it went up something like 2000% in one day. Now i know why.

 

[Kepler]

Bloomberg host says Gamestop is the finance equivalent of the capitol insurrection.

Mooch says don't be an idiot.

 

[Kepler]

From WSB:

This is about so much more than profiting.

This is about teaching a bunch of elitist F-CKS what a real free market is about. You don't get to shout capitalism when everything is going your way and then cry to the government when you f-cked yourself.

This isn't the capitol riot. It's the Minneapolis protest. Except instead of police brutality it's Finance Brutality, and instead of BLM it's a million incel bros.

 

[aparch]

Watching the media desperately trying to explain this while crying “regulation” is quite funny.

Of course it’s only “regulation” for us, none of them give a s- when a hedge fund runs a company into the ground and puts people out of work.

This... this times infinity. That's why I'm rooting for the little guy in this. They found a guy openly flaunting how much his hedge fund would make if $GME tanked, and they stuck it to him.



And none of the stocks highly shorted are secret. There are lists out there.

As it is, AMC was rumored to be one of those highly shorted companies; they received a bump in stock price (thanks to Reddit or not) and they actually sold stock to plug up their bleeding bottom line. Unbelievably, AMC was actually being responsible with their blessed bump.

Would be interesting to know if Gamestop was able to do the same.

 

[dxmnkd316]

Ohhh...interesting take!

I've said something similar for a year or two now. The hedge funds aren't necessarily long TSLA because it's a good company. THey're long TSLA because they have found a way to monetize someone else's money and their stupidity. That's been their frontier for a while. It's a pump 'n dump done legally, I guess, because it's too slow. They've found a way to turn it into a cult and we've seen it take off*.

TSLA will come down. It's price to book is 50. FIFTY. Alphabet's is 6. Twitter is 5. Amazon's has never gone above 28. Apple is getting there at 33**. Moderna's is 22. For reference, GME is 68, trading around 1 for the last three years. GME and TSLA are a lie and ripe for a deep sell-off.


*Same thing with Apple to some extent. Maybe not so much now since AAPL how grown large enough and rich enough to actually control their destiny. Almost like the market sent them soaring fast enough to reach financial escape velocity. Maybe Tesla does this too. I don't know and I don't intend to bet my own money on it. I think AAPL had two things going for it: An absolute stable, but ruthless, genius running the show AND a market that didn't exist because no one thought of downloading you life into a phone. Tesla doesn't have that yet. Maybe with some of the battery tech, but I'd be betting on some VC firm run by an MIT finance grad who knows a guy in their materials science and electronics programs who invents the real next gen battery. Anyways...

**Holy crap. I didn't realize AAPL now had a market cap of $2.5T.

 

[Spartanforlife4]

Watching the media desperately trying to explain this while crying “regulation” is quite funny.

Of course it’s only “regulation” for us, none of them give a s- when a hedge fund runs a company into the ground and puts people out of work.

Banks destroy the housing industry and entire economy? Here's cash and some oversight we'll forgot about in eight years.

A single hedge fund maybe shuts down? Can't have that.

 

[Kepler]

Oh boy, here comes Cramer.

Edit: bah, it's some sane chick.