Gamestop, AMC, and the Angry Hedge Funds

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Expand view Topic review: Gamestop, AMC, and the Angry Hedge Funds

Re: Gamestop, AMC, and the Angry Hedge Funds

by MajorMitchell » Tue Feb 02, 2021 3:08 pm

I asked my whippersnapper nephew about this and he thought it most amusing & told me the tale as he knows it.and it was most entertaining. His tiny wargame consultancy/host(?) site is going so well the blighter has gone and registered it with Australian Tax Office & got an Australian Business Number.
People actually pay him to coach them in playing some daffy computer wargame. He said the best part of having his own operation is occasionally telling problem customers that their account is closed and refunding their money.

Re: Gamestop, AMC, and the Angry Hedge Funds

by flash2015 » Mon Feb 01, 2021 5:11 pm

Short interest has already fallen massively, from 114% of free floating shares to 39%:

https://www.bloomberg.com/news/articles ... e-covering

Re: Gamestop, AMC, and the Angry Hedge Funds

by flash2015 » Sun Jan 31, 2021 6:48 pm

Ezio wrote:
Sun Jan 31, 2021 5:49 pm
RoganJosh wrote:
Sun Jan 31, 2021 3:57 pm
Hedge funds bends and breaks rules all the time - and everything they do is notoriously monitored. I'm not trying to defend hedge funds here. But you guys are blinded by your desire to punish the hedge funds.

Sure, Melvin capital took losses. Who capitalized from those losses? The guys that sold them the shorts capitalized from those losses.

Correct me if I'm wrong, but reddit users did not sell those shorts. The reddit users bought stock at a low price en masse, and then sold it at a higher price. That's a pump and dump. They're not capitalizing of Melvin's losses, they're capitalizing of the losses of the retail investors who enter the frenzy late. They're just using the hedge fond connection to justify running a classical fraud scheme.

And that's what this is. This is not retail investors capitalizing at the cost of hedge funds, this is retail investors scamming other retail investors.
When Melvin has to cover their shorts, they eat their loss. By retail investors buying the stock and driving it up, these same retail investors get to sell to Melvin. Melvin will eventually be forced to buy the stock at the insanely high price from retail investors.

This is how retail investors can directly profit off of Melvin. Technically you're correct that they're not "profiting off the Melvin's losses", but they will be profiting while causing Melvin's losses. At least the ones who get to sell.

Because of how big the short positions are, most people should be able to sell.

In my opinion, that's the largest difference between this and a generic "pump and dump" like you have described: there's a guaranteed external buyer who *has* to purchase a huge amount of stock in the future. In Pump and dumps, the ones who lose most are the guys who buy in at the end, and in this case we *know* a particular hedge fund still has to buy.
Lots of big assumptions here. This assumes that shorts will just throw up their hands and all start buying on a certain day without taking any other action. This assumes that shorts with the biggest losses will actually have the money to pay the money for the shares at these extraordinarily high prices. This assumes that there can be a coordination of the GME crowd to sell in some systematic way. It assumes that high frequency traders/hedge funds and others won't also be also taking advantage of any coordinated decision to sell. It assumes there won't be trading halts/other restrictions etc. on the way down stopping retail investors from getting out.

This is all going to end in tears for most people involved.

Re: Gamestop, AMC, and the Angry Hedge Funds

by flash2015 » Sun Jan 31, 2021 6:18 pm

I just saw this thread on wallstreetbets. People are buying at $300 and still believing they are guaranteed to make money:

"When all is said and done, we should all be extremely richer than we were in December."

https://www.reddit.com/r/wallstreetbets ... ease_read/

It isn't about "sticking it to the man". They are in it because they believe they will make lots of money.

Re: Gamestop, AMC, and the Angry Hedge Funds

by Ezio » Sun Jan 31, 2021 5:49 pm

RoganJosh wrote:
Sun Jan 31, 2021 3:57 pm
Hedge funds bends and breaks rules all the time - and everything they do is notoriously monitored. I'm not trying to defend hedge funds here. But you guys are blinded by your desire to punish the hedge funds.

Sure, Melvin capital took losses. Who capitalized from those losses? The guys that sold them the shorts capitalized from those losses.

Correct me if I'm wrong, but reddit users did not sell those shorts. The reddit users bought stock at a low price en masse, and then sold it at a higher price. That's a pump and dump. They're not capitalizing of Melvin's losses, they're capitalizing of the losses of the retail investors who enter the frenzy late. They're just using the hedge fond connection to justify running a classical fraud scheme.

And that's what this is. This is not retail investors capitalizing at the cost of hedge funds, this is retail investors scamming other retail investors.
When Melvin has to cover their shorts, they eat their loss. By retail investors buying the stock and driving it up, these same retail investors get to sell to Melvin. Melvin will eventually be forced to buy the stock at the insanely high price from retail investors.

This is how retail investors can directly profit off of Melvin. Technically you're correct that they're not "profiting off the Melvin's losses", but they will be profiting while causing Melvin's losses. At least the ones who get to sell.

Because of how big the short positions are, most people should be able to sell.

In my opinion, that's the largest difference between this and a generic "pump and dump" like you have described: there's a guaranteed external buyer who *has* to purchase a huge amount of stock in the future. In Pump and dumps, the ones who lose most are the guys who buy in at the end, and in this case we *know* a particular hedge fund still has to buy.

Re: Gamestop, AMC, and the Angry Hedge Funds

by goldfinger0303 » Sun Jan 31, 2021 5:09 pm

I think also more to the point is, nobody on r/wsb has made a mathematical price target case from the short squeeze. That is the kind of stuff that will defend you from accusations of a pump and dump.

Build a case for what the share price should go to. You have past examples of short squeezes as well (some marijuana stock a few years ago spiked 1600%), you have the number of free float shares versus shorted shares, so why aren't they doing that?

Instead, they're telling people to hold on to $1000 while we don't know if they're selling out or not.

Re: Gamestop, AMC, and the Angry Hedge Funds

by RoganJosh » Sun Jan 31, 2021 3:57 pm

Hedge funds bends and breaks rules all the time - and everything they do is notoriously monitored. I'm not trying to defend hedge funds here. But you guys are blinded by your desire to punish the hedge funds.

Sure, Melvin capital took losses. Who capitalized from those losses? The guys that sold them the shorts capitalized from those losses.

Correct me if I'm wrong, but reddit users did not sell those shorts. The reddit users bought stock at a low price en masse, and then sold it at a higher price. That's a pump and dump. They're not capitalizing of Melvin's losses, they're capitalizing of the losses of the retail investors who enter the frenzy late. They're just using the hedge fond connection to justify running a classical fraud scheme.

And that's what this is. This is not retail investors capitalizing at the cost of hedge funds, this is retail investors scamming other retail investors.

Re: Gamestop, AMC, and the Angry Hedge Funds

by bo_sox48 » Sun Jan 31, 2021 3:24 pm

The fact that people are actually saying that all these hedge fund managers are held accountable for breaking the rules like a month after worst-person-on-Earth Steve Cohen bought a baseball team in New York City and was cheered on as the rich guy here to save the day is just laughable.

Re: Gamestop, AMC, and the Angry Hedge Funds

by bo_sox48 » Sun Jan 31, 2021 3:21 pm

goldfinger0303 wrote:
Sun Jan 31, 2021 8:39 am
bo_sox48 wrote:
Sun Jan 31, 2021 3:55 am
but if 10 hedge fund managers sat together in a ritzy hotel lobby drinking obscenely expensive scotch and agreed to pump and dump a stock and agreed on profit targets, is that market manipulation?
Yes. That's....that's actually a textbook example of market manipulation.
That’s right, it technically is, and yet nobody would care lol

Re: Gamestop, AMC, and the Angry Hedge Funds

by Jamiet99uk » Sun Jan 31, 2021 12:35 pm

A law which is not enforced is barely a law at all.

Re: Gamestop, AMC, and the Angry Hedge Funds

by Wusti » Sun Jan 31, 2021 11:03 am

RoganJosh wrote:
Sun Jan 31, 2021 6:46 am
Seriously, are you guys not aware that pump and dump is market manipulation? Are you not aware that pump and dump is illegal?

https://www.fbi.gov/scams-and-safety/co ... dump-fraud
I think the point here RoganJosh is that people know it to be nothing less than what established hedge funds and others in the Wall Street bubble do each and every fucking day - so no one give s flying fuck about a law that is flaunted daiy.

Re: Gamestop, AMC, and the Angry Hedge Funds

by goldfinger0303 » Sun Jan 31, 2021 8:39 am

bo_sox48 wrote:
Sun Jan 31, 2021 3:55 am
but if 10 hedge fund managers sat together in a ritzy hotel lobby drinking obscenely expensive scotch and agreed to pump and dump a stock and agreed on profit targets, is that market manipulation?
Yes. That's....that's actually a textbook example of market manipulation.

Re: Gamestop, AMC, and the Angry Hedge Funds

by RoganJosh » Sun Jan 31, 2021 6:46 am

Seriously, are you guys not aware that pump and dump is market manipulation? Are you not aware that pump and dump is illegal?

https://www.fbi.gov/scams-and-safety/co ... dump-fraud

Re: Gamestop, AMC, and the Angry Hedge Funds

by Matticus13 » Sun Jan 31, 2021 4:41 am

RoganJosh wrote:
Sun Jan 31, 2021 3:21 am
This is still one of the oldest frauds in the book. That they presented it as being some anti-hedge operation doesn't change that.
No sir. This will surely be classified as fraud shortly (since the 1% run dis bitch). This is a totally new phenomenon that currently can't be classified as fraud. If this were a crime, they would have all the evidence to prosecute individuals in the Reddit thread. I'm going to bet it all on double zero! :donate: :donate: :donate: :donate: :donate: :donate: :donate: :donate:

Re: Gamestop, AMC, and the Angry Hedge Funds

by bo_sox48 » Sun Jan 31, 2021 3:55 am

Hedges never manipulate the market, oh no.

I don’t know the regulations around market manipulation, but if 10 hedge fund managers sat together in a ritzy hotel lobby drinking obscenely expensive scotch and agreed to pump and dump a stock and agreed on profit targets, is that market manipulation? If agreeing to a strategy because it’s a good one is illegal, I think I’ve manipulated the market at every neighborhood poker game I’ve ever played.

Re: Gamestop, AMC, and the Angry Hedge Funds

by RoganJosh » Sun Jan 31, 2021 3:21 am

This is still one of the oldest frauds in the book. That they presented it as being some anti-hedge operation doesn't change that.

Re: Gamestop, AMC, and the Angry Hedge Funds

by RoganJosh » Sun Jan 31, 2021 3:12 am

Jamiet99uk wrote:
Sun Jan 31, 2021 1:29 am
Literally the first news story you get when you Google that phrase is an article with the headline:

"Good luck proving Reddit traders did anything illegal by pumping GameStop"
That's exactly what I said. If a hedge fund did it, they would be held accountable. But with the flat structure of reddit, there's no one to hold accountable.

Re: Gamestop, AMC, and the Angry Hedge Funds

by flash2015 » Sun Jan 31, 2021 2:50 am

leon1122 wrote:
Sat Jan 30, 2021 10:09 pm
I believe Rogan's point is that with pyramid schemes, those who get in early make bank while those at the bottom of the pyramid who join in late will lose out. The same is true with GME. bo_sox, you joined early and cashed out for a profit. Those who are buying now at $300 will not be making a profit, and some of them will take a heavy loss. The point where this comparison breaks down is that the people who join a pyramid scheme at the bottom are still expecting to make money, while those who are joining in the GME frenzy now know full well that they're likely to lose their money, and they're okay with it.
I don't know whether that is true. I follow the M1Finance thread on reddit (I just switched over to M1 from another firm which shut down) and the thread has been flooded with people showing off their "pies" (portfolio) proud of how much money they are making off GME and questions from people wanting to invest in GME now in the hope of getting in on the fast cash.

Re: Gamestop, AMC, and the Angry Hedge Funds

by Matticus13 » Sun Jan 31, 2021 2:20 am

leon1122 wrote:
Sat Jan 30, 2021 10:09 pm
I believe Rogan's point is that with pyramid schemes, those who get in early make bank while those at the bottom of the pyramid who join in late will lose out. The same is true with GME. bo_sox, you joined early and cashed out for a profit. Those who are buying now at $300 will not be making a profit, and some of them will take a heavy loss. The point where this comparison breaks down is that the people who join a pyramid scheme at the bottom are still expecting to make money, while those who are joining in the GME frenzy now know full well that they're likely to lose their money, and they're okay with it.
There's still plenty of money to be made. Time to start shorting :smirk:

Re: Gamestop, AMC, and the Angry Hedge Funds

by Matticus13 » Sun Jan 31, 2021 2:17 am

RoganJosh wrote:
Sun Jan 31, 2021 12:58 am
bo_sox48 wrote:
Sat Jan 30, 2021 11:38 pm
It means my stake is sold, and you implied that I was unable to speak objectively because I had a stake.
No hedge fund could have done what reddit did in this case, without being held accountable. The problem for regulators, in this case, is the flat structure. No one investor is responsible. But what happened is and was illegal.
It would never hold up in court, so I'm not sure how you can definitively call it illegal.

If we can't charge billionaire investors like Carl Ichan, Elon Musk, and others for deliberately tweeting out "how great this company is" to push up the prices of stock they own, you aren't going to be able to charge Joe Blow with manipulation either. People publish advice on which stocks they are shorting or investing in to encourage the masses to pile in ALL THE TIME. How is a Reddit thread any different?

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