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I stand corrected. Everybody get an ingot and work on your temper(ing).Vanadium 50 said:
Why Did Reddit Trigger a GameStop Stock Surge?
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Chi del gitano <bang!> I giorni abbella? <bang!> La zingarella! <bang!>
kyphysics
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This was my last straw.
It's insanity!
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russ_watters said:
That's a little strong. Maybe "enticed".
You have a bunch of (millions, it seems) unsophisticated investors talking to each other. This conversation is being held at an emotional level, where members dare each other to take on risky positions. Rational thinking is not just ignored, but actively discouraged.
In the classic pump and dump, someone takes an illiquid stock, typically an OTC penny stock, buys it, touts it without disclosing their position (the pump) and then sells it (the dump) after the price rises but before it falls again. Typically, this is "punped" to thousands.
In this case, someone has taken an illiquid stock (GME) and touted it, with a little "stick it to the Man" thrown in. It remains to be seen whether they had a stake in this before, and when they sold it. A pump-and-dump redistributes wealth, but not from the rich to the poor, but from those who got in late to those who got in early.
As I said, it remains to be seen whether this was intentional or a "lucky accident". But if I were going to try a pump and dump, this is exactly the pool of targets I would choose.
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I was reading your post at face value, but I guess you aren't sure.Vanadium 50 said:
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What if the holders of put options decide to cover their liability by selling other equities that they owned resulting in driving down the prices of the shares of viable companies. Such a thing happened in 1901 when two investors competed for control of the Northern Pacific Railroad trying to outbid one another drove up the shares from $150 to $1000 in three days that forced put holder to sell holdings in other stocks/bonds they owned causing a panic on Wall Street. A truce was called and it was finally agreed to settle on a strike price of $150.
For the detailed account see https://www.americanheritage.com/jacob-schiff-and-northern-pacific-corner#2
There are two factors always present in the investing world, greed and fear which can interact synergistically to hurt everyone.
For the detailed account see https://www.americanheritage.com/jacob-schiff-and-northern-pacific-corner#2
There are two factors always present in the investing world, greed and fear which can interact synergistically to hurt everyone.
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russ_watters said:
It's certainly possible that the order of events was "tout first, buy second". Certainly we will know more when the feds get through with them.
kyphysics
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https://www.cnbc.com/2021/01/31/mel...rcent-after-betting-against-gamestop-wsj.htmlnduka-san said:
Melvin lost 53% in January.
Citadel lost 3% in January.
https://markets.businessinsider.com...sses-on-gamestop-data-shows-2021-1-1030020684
Overall, short-sellers of GME have lost about $19 billion in January.
Unclear how much the WSB crowd won. Smart people have made the case that probably a good chunk of the short squeeze winnings were from big players themselves (not just the Reddit crowd), b/c the rallies in the stock were too huge for just retail to have created (they argue).
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Ended the day down 100, or 31%.
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I suspect a few early and large participants made a lot, but the vast majority will probably lose, even if the net is positive.kyphysics said:
[edit] Assuming those who gained aren't arrested/sued and forced to give it back.
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nduka-san said:
Not picking on you, but lots of people seem not to understand something very basic. There are two sides to every trade. One guy makes $100 and another guy loses $100. How much was "lost in total'? $100? $0? Some other number? The question doesn't make sense.
One can ask about how an individual trader did, if you know his positions. One can talk about how the money flows, although I am not sure this is useful, as 90% of it flowed from one "Wall Street Fat Cat" to another. As far as the Reddit guys, the money is flowing from people who got in the game late to people who got in early.
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russ_watters said:
And down another 44 to $181 in extended hours trading. I'm looking at the analyst's target prices. They are as low as $1.60. The most bullish analyst sets a price target at $16 based on a belief of an EPS of "only" -0.29 or 1Q21.
kyphysics
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Saw the following comments on Yahoo! Finance's GME page:russ_watters said:
Copied a few posts from this user, who claims he/she was one of the first WSB members and was in on pump and dump schemes previously with the moderators. Who knows if this is true or not, but there does sometimes "feel" (I obviously cannot prove it) like there is a "scammy" element to some WSB posts.
I think a lot of people are probably genuine, but then sometimes there's just an indescribable feel you have that someone is leading you on. The post/story seems a little too contrived. Hard to know, but I wouldn't be surprised if this whole thing did turn out to be a scam from the WSB crew.
The thing about it is, there was also a very smart element to it that combined company fundamentals + squeeze possibilities. Chamath Palihapitiya (billionaire venture capitalist) pointed to this WSB post that sort of started it all:
If you read the original "plan" on WSB, it's pretty technical and well-thought out. Many financial pundits have praised the WSB's analysis of this weakness in hedge funds shorting GME and the willingness to "attack it." Even Michael Burry (he deletes his tweets quickly after posting for some reason), had said last week that one of the elements of this GME situation was a legitimate or plausible turn-around story (with the hiring of Ryan Cohen and move to greater e-commerce). This is mentioned in that post hatching the gamma squeeze plan.
I could see a situation where there was a legitimately good idea investing idea (based on the GME turn-around story + squeeze potential) that then had "pump and dump" fuel added to it in the later stages. That would make most sense for how I am piecing everything together.
But, who knows?
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I heard a discussion earlier this evening that some Redditors bought GameStop (GME) as a protest, but others (looters) got into take advantage of the protest to 'pump and dump', and then after the stock appreciated, others (opportunists) got into take advantage of the volatility.
Still there were those, like a young kid who got ten shares of Gamestop at $6/per share ($60) back on December 30, 2019. The gift was from his mother. The youngster "decided to sell the stock Wednesday evening at over 53 times the value his mother bought it at, cashing in his shares for a tidy $3,200." The mom mentioned that "$2,200 will be deposited in his savings account while the rest will go to future investments."
https://www.wivb.com/news/texas-fifth-grader-cashes-in-gamestop-stock-his-mom-gave-him-2-years-ago/
https://www.marketwatch.com/story/t...ve-him-for-kwanzaa-for-almost-3200-2021-01-28
There may be other stories like that.
Still there were those, like a young kid who got ten shares of Gamestop at $6/per share ($60) back on December 30, 2019. The gift was from his mother. The youngster "decided to sell the stock Wednesday evening at over 53 times the value his mother bought it at, cashing in his shares for a tidy $3,200." The mom mentioned that "$2,200 will be deposited in his savings account while the rest will go to future investments."
https://www.wivb.com/news/texas-fifth-grader-cashes-in-gamestop-stock-his-mom-gave-him-2-years-ago/
https://www.marketwatch.com/story/t...ve-him-for-kwanzaa-for-almost-3200-2021-01-28
There may be other stories like that.
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One could argue that each guy makes $0 in the trade...Vanadium 50 said:
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That's not the impression I get.russ_watters said:
Many of these made money. They identified a stock that was shorted like crazy, expected that to break down, invested, and made money when the short squeeze came as expected. Some made millions with relatively modest investments. You dismissed all of that as "playing video games". We must have fundamentally different concepts of playing video games.
Neither "wall" nor "street" are literal, but "bets" must be?
At least for one of them we don't need to wait. Keith Gill/Roaring Kitty made no mystery of their position in the stock they advertised when it was low. They gave frequent updates on it. $53,000 -> $48 million by Jan 27. At least $20 million of that is diversified now, as far as I understand.Vanadium 50 said:
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What impression do you get and where did you get it? Have you browsed reddit in the past week?mfb said:
"Many", yes. Is "many" more than half? Unlikely.
Do you really believe that? What do you think is a reasonable price for a share of Gamestop stock?
No, not all. I've listed multiple separate groups with separate motivations. The people playing video games is only one of the groups -- albeit I suspect the largest. And, of course, the most important group is the one doing the pumping.
Dunno - I've been very descriptive in what I think the motivations are, but you haven't, so I have no idea what you think "playing video games" means. Unless the above is what you expect the only/predominant motivation of the "investors" is. Do you really believe it?
Nor have you defined/described what you think "investing" or "betting" is.
No, it doesn't necessarily have to be, but it is. Again: have you been on reddit lately? Have you browsed the sub? I just scrolled through several hundred posts of a thread, 90% of which said exactly the same thing; "IF HE'S STILL IN, I'M STILL IN". Do you really think they are serious posts? "Investors"? It's not an "investing" forum, and in my view, the title accurately reflects the point of the sub.
Caveat: I disagree that "wall" and "street" aren't literal, but that isn't critical here.
Congrats to him/er. We'll have to wait and see if s/he gets arrested for it.
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Sample of the logic underpinning Friday's valuation of GME:russ_watters said:
I'm convinced. I plan to cash-out my 401k and put it all in GME tomorrow. Anyone disagree with my strategy? (How dare you!)
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GME closing Monday, $225.00 -$100.00 -30.77%russ_watters said:
Well Russ, you could be contrarian.
I did read a headline from someone claiming GME should go higher. I'm not sure from what basis though or when then might be.
Maybe Gamestop should go into financial services for Gamers.
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Can't tell if sarcastic; contrarian to whom? Does anyone here think GME stock is worth >$100 / share? I'd really be shocked if everyone here didn't agree it isn't.Astronuc said:
[edit]
People often say something like "it is worth whatever people are willing to pay"
That's actually a lazy non-answer by people who aren't party to the transaction. Stock values are expected to change over time. The person selling believes it is or will be worth less than the sale price and the person buying believes it is or will be worth more. Each of them have a reason for their belief, and only the seller could believe "it is worth whatever people are willing to pay" because the buyer is the guy he's talking about. The buyer must have an actual reason for being willing to pay it based on a future expected price.
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I get the impression that it is far more mixed. Many people are in for irrational reasons, but that doesn't mean they are into harm the hedge funds. Irrational belief that they are likely to make more money is another option.russ_watters said:
Yes I have browsed reddit last week.
I don't think I have enough information to make or judge such a statement, so I won't.russ_watters said:
Far lower than the current price, obviously. That's not the question. You don't need a stock to multiply its value by 100 to profit from it.
Well, at least you posted the statement without a qualifier. It certainly didn't read like a statement about a more limited group.
I'm not playing this silly game again.
The posts on the sub are not representative of actual stock transactions.
Users in WSB are not anywhere close to a wall, and they don't trade on a literal street either. Sure, both of them have a historic origin, but if you say "Wall Street" today you neither refer to the fort that gave the street the name, nor the physical street that gave the stock exchange its common name.
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Part of a Bloomberg article this evening:
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Given that you presented my opinion as an all-or-nothing when it isn't, we may disagree less than you have indicated.mfb said:
That's a twisted and inverted phrasing so I can't tell if you agree or disagree. Untwisting: do you agree that many people are in it to harm the hedge funds?
Agreed. I mentioned that.
Good to know...
Ok...so, your statement that I quoted was a throw-away, then? Completely lacking in meaning or value?
That's exactly the question. Again, I think you're disagreeing to agree. But here's what you said:
"They identified a stock that was shorted like crazy, expected that to break down, invested, and made money when the short squeeze came as expected."
And here's what I just quoted from reddit:
"IF HE'S STILL IN, I'M STILL IN"
Do you honestly believe someone who makes a post like that set a mental value for GME stock? I don't think you do. I don't think someone who says that even knows what "shorted like crazy" means, and I suspect you don't think they do either.
Well;
1. I've made other posts in this thread that provide context/explanation to my position.
2. Market movers don't make up the entirety of people buying/selling stocks.
Frankly, I consider your last few responses to me silly games. You're in attack mode for a reason I think I know, attacking to defend a position you won't state. I think it would be a lot easier for both of us if you would explicitly state your opinion in response to my explicitly stated opinion and then we could peacefully/respectfully agree to disagree.
If you have information to support that, I'd like to see it. Perhaps more to the point, some post actual screenshots from their portfolio trackers...or so we're led to believe. If you have information that those are falsified, I'd really love to see it.
Note: I'll not assume your statement was meant to be absolute. Hint.
[edit]
Well, at face value that's false -- this entire incident is openly reported/acknowledged to be based on reddit hype. Unless you are claiming that the reddit hype is a follower of a movement that started elsewhere, but I don't think you are.
So you acknowledge it is an actual street, named for an actual wall, and presumably you are aware that the New York Stock Exchange is located on that street (and GME is traded on the NYSE). And many of the investment firms who trade there are located there. So you chose to pick this argument because people can access the market remotely? Seriously? Why are you doing this? I don't want to be in such an argument.
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I thought from my 'Haha' response to one's post, one could tell I was being sarcastic. Contrarian to those who believe the stock price will fall.russ_watters said:
Based on normal stats, the stock price should probably be around $10 or less per share. Earnings per share -$4.22, Ex-Dividend Date March 14, 2019, so it's situation is precarious. To survive, they would have to change their business model.
Before hours this morning, the stock prices is $140 or less.
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Astronuc said:
One might want to buy even if they thought it wouldn't survive. The Merrill Lynch analyst set a target at$1.60, which would value the company at $110M. Is the brand name and 5500 store leases worth that? No idea - but I wouldn't dismiss it as impossible. I could easily imagine a company looking to expand its physical footprint might find this appealing.
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russ_watters said:
I agree.
FWIW, here is my position: if a Redditor were to identity a stock positioned to move up based on other's shorting, announces that on Reddit, then buys the stock, then decides to sell it (um...diversify), , announces that on Reddit, then sells the stock, they have nothing to worry about.
The farther one's actions diverge from that, the more trouble they are in. This is at least as true on the selling side as the buying - if they are saying "diamond hands everyone!" as they are liquidating their position, that is a problem.
What actually happened? I don't know. I sure don't want to accuse people of committing a crime if I don't even know for sure if a crime has been committed. We will know more when the feds get through with them.
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Astronuc said:
$130 now and still falling. AMC too.
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Relative to the number of people who bought GME? Would surprise me, but I don't have numbers.russ_watters said:
No, it just didn't claim what you interpreted into it.russ_watters said:
I'm not sure what you call your explicitly stated opinion. On what in particular?russ_watters said:
Do you think they are representative? If 72% of the comments on WSB say "if he is in then I am in" then 72% of the money invested in GME is done for that reason? I don't think you believe that. Stock transactions don't have a "reason" field (and if they would have, we would have no guarantee of honesty) so there is no hard data, but equaling number of comments to invested money would be absurd.russ_watters said:
Note the recurring pattern here: You extrapolate from ... something to arrive at a conclusion. I question that conclusion, say that we don't have enough data. And then you ask me to post my own conclusion, and criticize me if I don't have one.
Yes of course! The names have an historic origin, but they shouldn't be taken literally when referring to the stock market. NYSE is not a wall, it's not a street either, it just got that name for historic reasons. WSB is named after bets, but that doesn't mean everything discussed there is a bet, and pointing to the subreddit name isn't going to tell us anything. If you want some more obscure names, check out /r/trees and /r/marijuanaenthusiasts.russ_watters said:
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russ_watters said:
I don't think that's necessarily true. There are counter-examples: loan sharking, prostitution, minimum wage.
russ_watters said:
But those are highly regulated. Furthermore, one cannot simply snap one's fingers and buy or sell a substantial fraction of a company. If I want to buy 100 shares of Coca-Cola, Etrade will execute that trade in a few seconds. if I want to buy 100 million, that is going to take some time.
Indeed, the Robinhoodlums (I know it's Reddit, but I couldn't resist) noticed that because of others' positions, GME was relatively illiquid, and a smaller-than-average purchase would produce larger-than-average swing.
russ_watters said:
A short moves the price down just as a sale does. It's a creatively financed sale. Why is one good and the other evil? It is it just "Rich people do it, and i don't understand it, but I know I don't like rich people, so..."
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Astronuc said:
$113 now. Lost half the value overnight.