The Big Finance, Money and Economics thread

MaxiRobriguez

Bob McKinlay
Not sure why we don't have one of these already?

Big thread to cover important news stories re: finance, money and/or economics, and a thread to ask questions get advice as well.

Kicking off the thread with the fact that the £13bn hedge fund Melvin looks set to go bankrupt today after a Reddit subforum chocked full of millenials wanting to incite generational warfare initiated a short squeeze on Melvin who have a huge oversized short position in the bricks and mortar retailer Gamestop.

https://www.theguardian.com/culture...he-memes-come-in-and-who-is-winning-or-losing

A few kids have made millions, but they might end up in jail. A few more kids who've been pulled along for the ride yesterday (and today, pre market gamestop share price is up another 30%) are likely to end up losing 95%+ of their "investment" over the next couple weeks.
 

Project Zeus

Stuart Pearce
The hedge funds have tried to manipulate the market at every turn here.

Props to those who identified that they'd overshorted the company and are forcing them to pay for their greed.

I'd be selling my Gamestop shares today if I'd been brave enough to get in, mind.

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Redemption

just like that!
They probably did break the law on market manipulation.

It was a fun troll so I hope they can afford the Lolz. They will lose a lot of money - they now hold a lot of stock that was way overvalued.
 

Redemption

just like that!
The hedge funds have tried to manipulate the market at every turn here.

Props to those who identified that they'd overshorted the company and are forcing them to pay for their greed.

I'd be selling my Gamestop shares today if I'd been brave enough to get in, mind.

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Who would you sell them too?
 

MaxiRobriguez

Bob McKinlay
Have they actually broken any laws though? The market has always been vulnerble and subject to manipulation.

Yes but usually it's done on the quiet. This has been in public view on a forum. Their only defence (the instigators this is) is that sharing stock tips online isn't illegal. Whilst this is clearly an organised yet decentralised campaign, it's difficult to actually prove it. So, they might get away with it, but given that this is small time Charlies bankrupting hedge funds then expect the institutions to find a way to retrospectively punish.

Who would you sell them too?

Hedge funds still haven't exited all their positions, so there's still potential for forced buying. There's also a tonne of people who are waking up in the U.S now and reading about the story for the first time who think they might be able to make a quick buck.

Ultimately though by the end of the next week the price will have come down fairly substantially.
 

Cortez the Killer

Impressive member
Saw this on Twitter that someone had copied from Reddit which might help understanding.
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MaxiRobriguez

Bob McKinlay
Short squeezes aren't new, and often happen naturally (i.e, no one cares about a hedge fund short position, they're just buying a stock because they think it will do OK).

The final sentence is a Boris-like psasing on of responsibility. Hedge funds do not (at least publicly) initiate an organised-with-other-hedge-funds attack on other short sellers. That's not legal. Hedge funds take short positions yes, but they're not illegal and short positions by themselves don't impact the underlying business. Hedge funds are what the name suggests - funds which hedge bets, rather than funds that accumulate long-only assets in a specific sector/industry/geography.

This is just a pump'n'dump scheme masquerading as small-person justice. The small people that initiated the squeeze (who had six figures invested, clearly "hard up), will make millions. The retail investors who've joined the squeeze late will lose thousands as the scheme collapses under the weight of itself. This has played out many times before.

This isn't going to end with a "justice for the little guy" wiki entry.
 

MaxiRobriguez

Bob McKinlay
Moving house?

Government is set to debate extending the stamp-duty freeze on houses worth up to £500k on Monday.

I suspect the outcome will be that it won't get extended.

If you're in the process of moving house, experts are saying the backlog at solicitors are quite large that up to 1/4 legal cases won't be processed until after the freeze ends, and buyers will be faced with stamp duty bills they perhaps did not expect.

If you're browsing the market now, be careful of using calculators which currently have stamp duty fees removed. You will (unless extension given) have to pay stamp duty.
 

Project Zeus

Stuart Pearce
Short squeezes aren't new, and often happen naturally (i.e, no one cares about a hedge fund short position, they're just buying a stock because they think it will do OK).

The final sentence is a Boris-like psasing on of responsibility. Hedge funds do not (at least publicly) initiate an organised-with-other-hedge-funds attack on other short sellers. That's not legal. Hedge funds take short positions yes, but they're not illegal and short positions by themselves don't impact the underlying business. Hedge funds are what the name suggests - funds which hedge bets, rather than funds that accumulate long-only assets in a specific sector/industry/geography.

This is just a pump'n'dump scheme masquerading as small-person justice. The small people that initiated the squeeze (who had six figures invested, clearly "hard up), will make millions. The retail investors who've joined the squeeze late will lose thousands as the scheme collapses under the weight of itself. This has played out many times before.

This isn't going to end with a "justice for the little guy" wiki entry.
How do you legislate against a meme, though?

I think it's quite likely that reddit will close the subreddits, they already have temporarily over the last few days. But without any centralised organisation pushing the market, it's surely nothing more than twenty-first century word of mouth.

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MaxiRobriguez

Bob McKinlay
How do you legislate against a meme, though?

I think it's quite likely that reddit will close the subreddits, they already have temporarily over the last few days. But without any centralised organisation pushing the market, it's surely nothing more than twenty-first century word of mouth.

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I suspect the answer is to regulate the shorts, rather than the short-attackers. For example only allow a certain % of the float to be short (so as to not expose to an attack), legally limit leverage spent on shorts.. etc. Obviously means the current bunch of Redditors get away scot free, but would stop/reduce chance of it happening again.

If nothing is done I suspect the next step is for unscrupulous hedge funds to use Reddit (or online forums) to initiate short attacks in the future. If you can't beat the useful idiots, control them.
 

Project Zeus

Stuart Pearce
I suspect the answer is to regulate the shorts, rather than the short-attackers. For example only allow a certain % of the float to be short (so as to not expose to an attack), legally limit leverage spent on shorts.. etc. Obviously means the current bunch of Redditors get away scot free, but would stop/reduce chance of it happening again.

If nothing is done I suspect the next step is for unscrupulous hedge funds to use Reddit (or online forums) to initiate short attacks in the future. If you can't beat the useful idiots, control them.
The second already happens - I frequent the financial subreddits a fair bit, and there's been a huge spike in bots pushing certain tickers in recent months.

I think you're absolutely right about regulating shorts. It's been very interesting to watch unfold, but it's too volatile a game for me to want to get involved.

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Redemption

just like that!
In Market Theory Shorts have an efficiency function as they're supposed to reduce overvaluation and find questionable practices like accounting inconsistencies etc.

It would be a surprise to see anyone attempt to regulate them.
 

MaxiRobriguez

Bob McKinlay
In Market Theory Shorts have an efficiency function as they're supposed to reduce overvaluation and find questionable practices like accounting inconsistencies etc.

It would be a surprise to see anyone attempt to regulate them.

Re: overvaluation, pretty much every index apart from the UK is overvalued at the moment. S&P500 is at dot-com prices.

RE: account inconsistencies, wirecard in Germany had a tonne of a short action against it, but still plodded on for ages despite eventually succumbing to their accounting inconsistencies (aka fuck-tonne of fraud).

GameStop price is down 20% now US markets are open. End of the squeeze happening on the day the initiators of the attack said would be day where the stock hit the highs- what a surprise.
 

Redemption

just like that!
Re: overvaluation, pretty much every index apart from the UK is overvalued at the moment. S&P500 is at dot-com prices.

RE: account inconsistencies, wirecard in Germany had a tonne of a short action against it, but still plodded on for ages despite eventually succumbing to their accounting inconsistencies (aka fuck-tonne of fraud).

GameStop price is down 20% now US markets are open. End of the squeeze happening on the day the initiators of the attack said would be day where the stock hit the highs- what a surprise.

Yes, so what? What if these are just the ones that got away, etc?

Anyway, my I used the word 'supposed' for a reason.

I can't see anyone regulating shorts.
 

Masuka

Jack Burkitt
The American broker app RobinHood took all the ‘meme’ stocks off their platform so they could no longer be bought. Corruption right in front of your eyes.
 

MaxiRobriguez

Bob McKinlay
The American broker app RobinHood took all the ‘meme’ stocks off their platform so they could no longer be bought. Corruption right in front of your eyes.

AKA protecting inexperienced traders from losing their shirt in a complex battle against much stronger opposition.

It needed to be done to save some kids from themselves.
 

Project Zeus

Stuart Pearce
AKA protecting inexperienced traders from losing their shirt in a complex battle against much stronger opposition.

It needed to be done to save some kids from themselves.
I don't recall the brokers looking to protect investors in 2008, or last March when the markets tanked.

They're looking to save the hedge funds their money, not the casual investor - a lot of free broker apps, like RobinHood, make their money by selling user data to hedge funds.

So much for the free market.

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Masuka

Jack Burkitt
AKA protecting inexperienced traders from losing their shirt in a complex battle against much stronger opposition.

It needed to be done to save some kids from themselves.

No chance they were thinking of the retail investor when they did this :lol:

Plus they did it after hours when most retail investors can’t trade so they logged in and share prices had halved.
 

MaxiRobriguez

Bob McKinlay
I don't recall the brokers looking to protect investors in 2008, or last March when the markets tanked.

There is a world of difference between buying a basket of diversified shares in a systematic market crash where prices are falling, compared to buying a single stock that is being manipulated to completely unrealistic prices in a targeted short squeeze.

Even if the brokers are protecting the hedge funds rather than their customers, those inexperienced little guys who tried to get in the action today have been spared an immediate 30% loss, and a bigger loss over a long time frame too.
 

Rogue

Jack Burkitt
Robinhood halted buying on everything related to WSB.

You can still sell them though.

How the fuck is THAT not market manipulation?
 

MaxiRobriguez

Bob McKinlay
Robinhood halted buying on everything related to WSB.

You can still sell them though.

How the fuck is THAT not market manipulation?

It'll reduce the probability of an already overpriced asset going higher yes, but doesn't stop it. Still need a buyer to sell the asset.

There are circuit breakers that stop selling if there's too much selling action, no one ever complains about them.

Checks and controls against stupidity aren't necessarily a bad thing...
 
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