Reddit Attacks Wall Street

  • #1
russ_watters
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Two weeks ago Gamestop was worth $20 a share. Today it's worth $350. As I just heard on CNBC: for the same money, you could by Gamestop or you could buy Delta. Why is this happening? Because a reddit sub saw that Wall Street was bearish on Gamestop and got annoyed. So in order to Stick it to the Man, they started buying. And buying. And buying. And it worked! Cost hedge funds billions, earned assumed to be real redditors millions (on paper). Meanwhile, Gamestop is still dying, though it feels better about it.

I predict that next week there will be a run on Kleenex.

https://www.cnn.com/2021/01/27/investing/gamestop-reddit-stock/index.html
 
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  • #2
Jarvis323
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It's pretty cool that they pulled this off. It's too bad that Wall Street fat cats have the power to sway regulators to step in and protect them when their bets go wrong.
 
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  • #3
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Short it using CFD's if you are that way inclined. During my days of share trading I saw all sorts of similar stuff. That's why I gave away short term trading - first I was not that good at it and secondly long term trading based on buying when below a line of linear regression and selling when above worked well (ie relying on regression to the mean) and was much easier on the nerves. Or you can simply switch between classes depending on how far above or below you were - above go for high yield defensive bonds - below - high growth although I found a small cap index fund was a bit better - strange. Medium term trading was OK but it still required you to watch your positions like a hawk. You could do long term trading on the weekend. ETF's have really changed things from when I did it.

Thanks
Bill
 
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  • #4
fresh_42
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s-jokes9.jpg?fit=scale&fm=pjpg&h=335&ixlib=php-3.3.jpg
 
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  • #5
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I wouldn't call it an attack. Hedge funds use the same tactics to game the system and no one bats an eyelash.
 
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  • #6
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Short it using CFD's if you are that way inclined.

CFDs are illegal in the US.
 
  • #8
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Robinhood just stopped orders for GME and AMC. Such a rigged system. That platform is now dead.
 
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  • #9
russ_watters
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Watching the graph in real-time is wild. It opened at 290, now at 440.
 
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  • #10
nduka-san
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Robinhood just stopped orders for GME and AMC. Such a rigged system. That platform is now dead.
i use robinhood for buying doge coin and ill admit its a little dead
 
  • #11
kyphysics
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Maybe disregard my tweet pastes above...The wallstreetbets Reddit has many people saying they are buying all over the world. Even though Robinhood has paused trading on those targeted stocks, non-U.S. investors can buy (people are reporting in from Canada, Singapore, Australia, India, etc.).

That seems to debunk the "evidence" listed above.

Very crazy stuff! The whole world is watching and getting involved.
 
  • #12
nduka-san
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its fun to watch the little guy win
 
  • #14
fresh_42
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Can we call this outsider trading in contrast to the usual insider trading of the established trading places?
 
  • #15
nduka-san
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Can we call this outsider trading in contrast to the usual insider trading of the established trading places?
i think it is outsider trading, don't take my word for it though.
 
  • #16
nduka-san
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throwback stocks like GameStop, AMC, Nokia, and even Tootsie Roll, soared thanks to cyberbulls.
 
  • #17
russ_watters
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I wouldn't call it an attack.
My understanding is part of the motivation of the redditors is to harm the hedge funds(which they did). I think it's fair to call that an attack. I'm not sure what else to call it. Competition? Maybe, but in managing my portfolio, what good/harm I'm doing to other investors never enters my head.
Hedge funds use the same tactics to game the system and no one bats an eyelash.
These reddit users batted an eyelash. I think it's fair to say that if hedge fund managers knowingly take actions that will depress a stock (while they profit from it), that's an attack too. So, the way I see this; the hedge fund managers attacked Gamestop. Reddit saw that and didn't like it, so they counter-attacked on Gamestop's behalf (successfully).

What I'm not sure the redditors have thought through is their own endgame and risk.
 
  • #18
russ_watters
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Can we call this outsider trading in contrast to the usual insider trading of the established trading places?
I'd call it a pump and dump if an investment firm did it. It would be illegal. Not illegal for outsiders as far as I know, but still wrong if some make a ton of money while others lose a ton.
 
  • #19
nduka-san
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I'd call it a pump and dump if an investment firm did it. It would be illegal. Not illegal for outsiders as far as I know, but still wrong if some make a ton of money while others lose a ton.
I find it hilarious that one of the stocks was tootsie rolls going up by 14 dollars in 5 days
 
  • #20
fresh_42
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It would be illegal.
Yes, as is speeding. Me, too, once signed these forms where I had to promise not to do it, before they let me have a look on how it is done. And it is done. It's only a matter how it is disguised as.
 
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  • #21
russ_watters
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Yes, as is speeding. Me, too, once signed these forms where I had to promise not to do it, before they let me have a look on how it is done. And it is done. It's only a matter how it is disguised as.
What? You're defending investment companies that defraud their investors? Am I misunderstanding you?
 
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  • #22
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Not illegal for outsiders as far as I know

It certainly is. 15 USC 77. Penalty up to 5 years in prison.
 
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  • #23
nduka-san
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It certainly is. 15 USC 77. Penalty up to 5 years in prison.
wow that's harsh
 
  • #24
russ_watters
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It certainly is. 15 USC 77. Penalty up to 5 years in prison.
Doesn't the first exception say it doesn't apply to individual investors? It's kind of a double-negative, so I'm unclear.
 
  • #25
fresh_42
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What? You're defending investment companies that defraud their investors? Am I misunderstanding you?
I am not defending it. I only claim that it is happening. Analysts regularly visit companies ahead of balance reports, and at other times. Their job is to gather information. Maybe it will also be available in the NYT, WJ or FT, but personal contacts work different from press conferences, so I won't bet on it.

11a.m. Broker xxx has a long phone call with fund manger yyy about buying 100,000 stocks of zzz at the price of ppp. An hour later he is somewhere outside to have lunch. And guess who else has lunch at the same time in the financial districts of the world. And this is only one opportunity to talk about the weather.

The only question is where to draw the line. If you call a market that rocks up because of simultaneous, global orders already an attack, then you have to forbid automatic stop-loss orders and computer trading.

Edit: quod licet iovi non licet bovi
 
  • #26
russ_watters
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I am not defending it. I only claim that it is happening. Analysts regularly visit companies ahead of balance reports...
You're talking about insider trading. I'm talking about a pump-and-dump. Totally different things. I agree that the line for insider trading is blurry. The line for a pump-and-dump may be blurry too.
 
  • #27
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Doesn't the first exception say it doesn't apply to individual investors?

Which section and which line?
 
  • #29
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I don't get it. 77a says, it its entirety 'This subchapter may be cited as the “Securities Act of 1933”. '
 
  • #30
nduka-san
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i wonder how this will affect the companys ?
 
  • #31
kyphysics
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My understanding is part of the motivation of the redditors is to harm the hedge funds(which they did). I think it's fair to call that an attack. I'm not sure what else to call it. Competition? Maybe, but in managing my portfolio, what good/harm I'm doing to other investors never enters my head.
It's not wrong to short squeeze in the markets, as it happens all the time. Hedge funds do it to each other when they smell blood from a vulnerable position. Big institutional investors can do it to the entire market of shorts if they want to as well (just push up all the indexes). "Hurt" would be considered what naturally happens in any of these transactions.

The part that does seem illegal potentially is market manipulation via collusion to do this. That's why these Redditers are saying, "We like the stock." They are saying they just want to buy it for its own sake to deny they are colluding to short squeeze big hedge fund shorts.

As far as I can tell, it's the outright collusion that would be illegal market manipulation - not short squeezing, which is perfectly legal. Mark Cuban - not saying I agree with him - had some interesting comments, Russ:


Any thoughts on his take?
 
  • #32
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There are a number of claims here that I would like to challenge, but unfortunately I will need to do this in chunks.

One is the implication is that this is largely victimless. Sure, "Wall Street" (which isn't an entity, but that'll have to wait) is harmed, but they are rich, and therefore evil, so it's okay. But GameStop's credit just vanished - they can't borrow against the value of the company while its stock is being manipulated. And GameStop is surely troubled - that was kind of the point. They may not survive this, especially if this triggers loans to be called in.

If GameStop goes under, what happens to the people who work in their 5500 stores? They are out of a job.

One might argue that it's OK - they are inessential, they are uninportant, it's a small price to pay for sticking it to The Man, you can't amke an omelette without breaking some eggs, etc. That's fair enough, but it needs to be argued on those grounds, and not just ignore these people who are likely to be harmed, and are less able to deal with it than a hedge fund manager.

Disclaimer: I own Russell 2000 index funds, and GME is part of the Russell 2000.
 
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  • #33
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One is the implication is that this is largely victimless. Sure, "Wall Street" (which isn't an entity, but that'll have to wait) is harmed, but they are rich, and therefore evil, so it's okay.
No, they are evil because they prey on retail investors, play by different rules and when they get in trouble they just call up the SEC or brokerages and halt the stocks where they are under pressure. So much for free market.
 
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  • #34
russ_watters
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I expect that in the end most of the redditors who are participating in this action will be harmed as well.
 
  • #35
russ_watters
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I don't get it. 77a says, it its entirety 'This subchapter may be cited as the “Securities Act of 1933”. '
Oops, somehow the link I got from google took me straight to 77d and I didn't notice. It says:
(a)In generalThe provisions of section 77e of this title shall not apply to—
(1)transactions by any person other than an issuer, underwriter, or dealer.

Anyway, it's a long law and I'm not inclined to try to read through and digest it. I hope you're right that it applies to individual investors. Even if it does, I'm not confident it will be applied. I have the same concern about bitcoin.
 

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