(Sorry for the annoying repetition:) Large threads are paginated. To see all the comments, you'll need to click More at the bottom of each page, or do this sort of thing:

https://news.ycombinator.com/item?id=25957748&p=2

https://news.ycombinator.com/item?id=25957748&p=3

After the crash of 2008, I spent some time working with Dick Fuld. Yes, the former head of Lehman Brothers. Yes, the one people describe as "disgraced," among other terms. Here’s the irony, though — Dick was one of the only people I encountered at that level of business/finance who wasn’t a scumbag. Unlike so many virtue-signaling Silicon Valley darlings, the guy behind the curtain was an honorable dude. And again, that’s a direct account from someone who has no vested interest or a book to sell or anything of that sort.

Dick and I worked closely together, one on one. After enough time, after he trusted me, I finally got to ask him about what the hell actually happened. The man had a ton of PTSD — and probably still does — but eventually it became clear that the real story was completely, utterly, unbelievably stupid.

Yes, Lehman was doing a bunch of stupid stuff, and the management under Dick were behaving like cowboys. But at the end of the day, that was the entire market at that time. What sunk Lehman was, in the end, a decision by all of the other big banks and the regulators that they’d let Lehman die because of something that might be best summarized as "lol idk sorry Dick but we’re just gonna let you go and let the Fed bail the rest of us out sorry bro lol." Like really. That’s how it went behind those closed doors in the lairs of the lizards that control the universe. Lehman had already suffered near-death in 1994 — the world has now forgotten that Dick was the hero that saved the firm back then — and now it was to be made a sacrificial lamb for everyone else’s benefit.

Why am I telling you this story? What is the point? Well, what I am trying to say is that these supposed "adults in the room" who are so much smarter and better than the the "retail investors" are pretty much the same sort of immature, self-centered children as the other side. The difference is, they’ve got the regulators and the politicians in their pockets. So when they say "lol oops" and literally blow up the global economy to save face, nothing happens to them. But for some reason when it’s the retail guys, a moral panic ensues.

In my eyes, the Internet-connected retail investor is learning the power of what I call "massively multiplayer liquidity." Yes, there’s some growing pains, but let’s not kill this wild new phenomenon before we learn what it can do. Because, from what I’ve seen from the other side of things, I doubt these self-styled "retards" will ever end up as depraved and corrupt as the people they’re disrupting.

Play ball, kids. And as Dick always used to say, "don’t get left with nothing other than a ham sandwich."

What reason? Because it demystifies the room. It pulls the veil off and we get to see behind the curtain.

Strangely enough, I had a fleeting thought that this is why few firms went under and most got bailed out. I actually had this thought after watching the Big Short or another Wall Street movie about the 2008 crash. I thought that it was strange that Lehman was the odd one out and it struck me as a frat party. Only the cool kids survive.

@numair, you sound very candid and forthright. I appreciate it. I find it's difficult for people to mask their tone and reading this honest tone is refreshing. I wish you success in your endeavors.

Says Dick Fuld. I doubt that's true, though, because at the time Lehman was going under, they didn't know that all the other banks were going with them. Remember, the bailouts didn't come until a few weeks later when the money market funds broke the buck triggering $trillions of withdrawals in what would essentially be a financial system wide run on the bank. The regulators didn't like the idea that a failing bank should be bailed out (as they shouldn't), and they couldn't find a merger partner like they did with Bear Stearns, so they let it fail. The bailouts didn't come until they realized that the fallout from Lehman's failure would bring down the whole system. Yeah, Dick Fuld wasn't really any different than any of the CEO's that got a bailout, but to cast him as the good guy among the group is ridiculous.

As far as good and bad people, well... The senior $LARGE_CONSUMER_BANK Vice-President who told me how much he loved the profit he was making off the overdraft fees he thought were "an honest service" to his poorest customers, with a huge smile on his face, was definitely a lot more evil than Dick.

But look, if you’ve had direct experiences with a bunch of the CEOs and senior execs at these firms, feel free to provide a counter! If you’re basing things on journalist accounts, however, you’re going to be in for a surprise when you learn who pays their bills and takes them on trips...

The market is incredibly complex. If you thought that executives can foresee the downstream effects of a given market event because they are "all-knowing, all-wise", then of course you are an idiot.

But nobody you were arguing with even remotely thinks this. Of course, there is uncertainty. There was never going to be a "very orderly" draw-down, but the issues from the moral hazard of propping up Lehman were (and remain) a big consideration when considering bailouts.

The SEC thinks this, the linked statement suggests believe they can foresee rapid and severe losses that normal traders can't. Someone in this argument likely agrees with the SEC.

My understanding is that the GFC happened because the whole economy was levered to hell. At the risk of referencing the big short, there was a scene in that film where a stripper has levered herself up so much she owns five home. The reason the GFC happened was in reality because average people were levered up on real estate and couldn't afford their repayments.

I fully understand that the financial system also took on too much risk and many understood those risks, but the narrative that hedgefunds are entirely to blame for the GFC, and that they were the only ones being irresponsible with leverage, is surely wrong?

If the blame was with anyone it should be the regulators... Why were individuals and hedgefunds able to take so much risk? In the absent of regulation individuals and hedgefunds should be expected to take maximum risk for their own gain. Just like how WSBs did when they were all exploiting the infinite leverage glitch.

Another thing that I don't think is true here is that the government is only there for the hedgefunds... If this last year has proven anything it's that the government is perfectly wiling to bail out individuals if they feel it's necessary to save the economy. And if the financial system is so rigged against individuals then isn't it odd how those individuals seem to be so able to destroy the hedgefunds with relative ease from a free smart phone app?

I'm not trying to be edgy, I genuinely don't understand why people seem to blame hedgefunds for every inequality problem in society.

We have a culture of people not feeling the negative repercussions of "bad actions". Buying multiple homes was irresponsible, mortgage brokers immediately selling every loan is a moral hazard and Wall street levering up on CDOs were all problems. All of them deserve blame BUT the hedge funds and mortgage brokers got bailouts and the home buyers didnt. That smells like BS to me and anger at the people that allowed that to happen, hedge funds and bankers included, looks justified to me

What bail outs are you referring to? Are you talking about the TARP program? Because didn't most of that go to banks (not hedge funds) and wasn't that actually a net benefit to tax payers? I'm not asking rhetorically, I'm honestly just not that well informed on the details of the TARP program being from the UK and having not been old enough to have direct experience of the GFC.

I do agree that more should have been done to help those struggling with mortgage debt, but again it's weird to blame hedge funds for this. To blame the hedge funds you would first have to assume they planned to take down the global economy, and then secondly assume that they have some level of responsibly over the government's decision to purchase toxic assets from the banks. It was the government who took the tax payer's money and gave it to the banks.

It's also not like all hedge funds were involved in the GFC either. I guess I don't really understand what Melvin Capital did that was so bad that people now want to bankrupt the company. Being angry at certain individuals and companies for taking on the excessive risk that caused the GFC is understandable, but being angry at all hedge funds or all of "Wall Street" is silly. A lot (and I'd assume most) of these companies are perfectly responsible and acting within the law.

And to be honest it's worse than just targeting random Hedge Funds, a lot of the posts I've seen on Reddit seem to be complaining about capitalism and the financial system in the general. I think this is partly why I'm feeling the need to question what and who we're angry at here. I want to make sure we're justified when we're bankrupting these companies and making their employees redundant. A mob as big as this without a clear target should worry everyone.

No, you absolutely don't. Consider criminal charges - they differentiate between intentional harm, reckless harm and negligent harm, but they all blame the guy being charged.

As someone once told me when I lamented that I don't talk to a certain person more often, they stopped me and pointed out that the phone system works in both directions. There are two people not talking to each other, not just me.

Dick participated, he could have blown the whistle, and he didn't, so he deserves a share of the guilt. He is not innocent. But if you didn't build the house of cards, then it's not your fault, it's the group's fault. If you colluded to remove people who would have said something, then you get more of a share of the blame. Anyone could have blown the whistle, not just you. Even if it's obvious that you are the most likely whistleblower, there could have been others. (And if you were the most obvious, you can't anonymously tip someone off because everyone will know it's you, so you're doubly screwed.)

One of the things slimeballs have intuited for millenia is that if you really believe something crazy, nobody is going to pick up that you're lying because you believe it. You've lied to yourself, and then fastidiously avoided looking at the lie so that you can maintain your innocence, and your profit stream. You're guilty as sin, with extra sins piled on top.

We should encourage conscientious people to play more poker, I guess.

Exactly. and that's why they went under. Let's look at all possibilities :

- Maybe Dick knew that the management under him was behaving like cowboys, and tried to stop it. Then that's sad, but so far no one seem to have given any tangible proof that this was the case.

- Maybe Dick knew the that the management under him was behaving like cowboys, and did not tried to stop it. And he got what he deserved.

- Maybe Dick just did not realize that the management under him was behaving like cowboys. Then the company he was a part of got what it deserved for putting that man - who was not competent enough to realize what was going on - in a position of power.

- Maybe Dick did not realize that the management under him was behaving like cowboys. But the "company policy" prevented him from acting. Then he should have left. You don't reach such positions without playing the game.

Maybe Lehman was not the only one doing all of that. But Lehman was definitely one. As such they maybe should not have been the only one to die, but they definitely deserved what they got. I don't buy the "I was a clueless nice guy that got caught in the middle of it" story. He's not sorry he did it, he's only sorry he got caught, otherwise he would just have left sooner.

Interestingly we might have another name for it - democracy went through similar growing pains as the people took power from the grown ups in the room.

Worked out mostly ok :-)

The appropriate thing to do is for the SEC to subpoena Reddit and RobinHood, correlate trades with posts to prove intent to manipulate the price (which IS illegal), and charge every individual with market manipulation.

Just like any other individuals guilty of market manipulation (Libor riggers, Navinder Sarao, etc).

Robinhood should probably also be investigated for abetting this, although it's a gray area.

The 2008 recession is not really a comparable event to the current GME short squeeze. It was rather a broad series of events, most of which were unfortunately legal, some of which were probably not.

In that case I would be in favour of charging the ratings agencies with fraud, and possibly the financial regulators with gross incompetence.

Edit: I don't see it as "big guys vs small guys". I see it as "law abiding people vs not".

So my reaction is not "its unfair to prosecute the little guy," but rather "we didnt get those criminals but at least we can get these criminals."

I'm not sure I see a clear line in there to call any of it illegal.

Anyone who told others to buy and hold with promises of short covering and higher prices is party to market manipulation, and it is absolutely, definitely illegal. Whether they'll be able to unmask and charge people behind the anonymity of WSB is another question though.

A good lawyer can argue that these people are exercising their first amendment right of free speech. They are not reporting false data and most of these people commenting have "average" net worth not millions/billions.

Its also very hard to prove to a jury that a message from such an average joe on a message board is enough to form a "scheme" with million other readers on wsb.

And, anyone who bought shares or told someone to buy shares with the intent of driving up the price also did something illegal - but it's something that is done constantly and considered a fundamental part of the market, either as an attack on a company in the classic hedge fund short->bankruptcy or, more benignly, like buying up shares of a takeover target slowly so people don't notice you are interested and buy it, which would raise the price.

Of course, I'd like to both as you personally and additionally air out a sentiment of the ease of access being delivered to retail investors. What was once prohibitive has now been given to the individual. Do you have any sentiments that you're willing to share on that notion?

As an additional thought; personally, I can't believe the behavior of some of the brokers that have come to light recently. RobinHood who, as they said in a tweet in 2016 "let the people invest" and now, in 2021 we see how true they maintain their values by restricting the very same people they sought to empower by disallowing trading on their platform. It is despicable.

The only two i-banks that got help from the Fed were Morgan and Goldman, and they only got it by converting to commercial bank holding companies first. So really, no i-banks got help from the Fed.

- The contributions from the various institutions were as follows:

- $300 million: Bankers Trust, Barclays, Chase, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, Merrill Lynch, J.P.Morgan, Morgan Stanley, Salomon Smith Barney, UBS

- $125 million: Société Générale

- $100 million: Paribas and Lehman Brothers

- Bear Stearns and Crédit Agricole declined to participate.

https://en.wikipedia.org/wiki/Long-Term_Capital_Management#1...

But they sure would like to be. I've seen WSB. The entire system is selecting for sociopoaths.

I will ask you a different question: if LEH was so strong, why didn't the Koreans invest? Why didn't BARC invest before BK? The issue, again and again and as explained at massive length in several books, they had very shaky funding, they had a lot of stuff that no-one knew how to value, they insisted to everyone that this stuff was very very valuable...it was not. If the real estate was so valuable, why couldn't they sell it? Every single person who I have ever met in the same position (I have met many) is in denial...that is why they are in that position. Fuld made numerous mistakes that can be summarised as: he thought he had pocket aces, he had 72o.

Asking Dick Fuld for opinions on Dick Fuld is not smart.

And it's such a trope. I swear, it feels like the quality of discussion on HN has gotten measurably more low-brow in the last few days.

when I refused to go along they turned me into a scapegoat. THIS is why I had to do what I had to do.

Absolutely.

Dick and Trump are examples of scapegoats. Throw someone under the bus publicly, so you can continue doing what you're doing while the public is busy staring at the spectacle.

Right now it appears that the public wants to be able to trade on their terms because there is this narrative that the little guy is finally sticking it to the big bad hedge funds. In reality there is probably very little truth to this. However, support for the individual investor plays extremely well which is why you see politicians from both sides joining forces on this issue. A rumor makes it halfway around the world while the truth is still putting its pants on. Nobody is interested in the subtleties around these issues where there almost certainly should be regulations in place or at least warnings from those who do actually know better. But late in bull markets when speculation is running wild those who try to be the voice of reason are run over by the masses until they shut up and go away.

Galbraith wrote about this in the 1950’s and if you read his account of the 1929 crash the parallels are eerily similar. Nobody wants to be told they aren’t making money due to skill but because they’re caught up in a dangerous bubble. In the aftermath of a crash when tremendous sums are lost, nobody blames the speculators, they always find another scapegoat- the regulators, the brokerages, the hedge funds- whomever. It doesn’t matter so long as the speculator is held up as a victim. I expect this to end no differently.

There's a hurried rush of small investors hoping to turn their meagre savings into a big win, backed by the anxiety that if they don't try then they'll forever regret missing their one and only chance at a comfortable life.

This sort of event would be less likely if America's wealth disparity weren't so grotesquely skewed.

What's funny is how the HN community tries to defend the firms they've whined about for years. Is what's going on irrational? Yup. But it pulls back the curtain of what the financial firms do to the economy and their own manipulation tactics.

None of this could have happened if they weren't shorting GME at 143%+ of float. They were greedy, this is the consequence. In 2006-2008, they ALL were greedy and so the government had to bail them out. No lessons were learned. If the SEC wants to do something, remove these instruments that allow infinite leverage and collapses.

Besides the jokes and the memes, Chamath went on CNBC and argued that WSB provided very good due diligence in some instances. Yes a lot of it is utter garbage, no doubt, but when there are specialists there able to call each other out, you get to see good analysis.

There's a problem with bailing out big companies again and again. While not bailing out small investors (directly).

The other problem is that there's no real defense against CNBC/Twitter amplified end-user stupidity: https://www.youtube.com/watch?v=lMUtU0tOmNE

Every stock trading app/site/service requires submitting tons of "risk declaration" forms. (Sure, all of it is next next finish. It's the EULA/TOS all again, but with money.) And that's the problem.

He has an entertainment component, but fundamentally encourages people to educate themselves and manage a portfolio of stocks who choose to do so.

The mob bullshit we’re seeing now is just the new normal - brigades of internet idiots, motivated by profit or ignorance to run around like a drunken monkey. It’s no different than the political drama we’ve seen fomented by irresponsible social media like Twitter, Facebook, Reddit, etc.

In general, shorting stocks is a beneficial action because it helps prevent shares from becoming overvalued.

So, yea, the fact that GME had 143% of its shares shorted is a function of greed. But, no, greed in this case was not a problem so long as GME's share price was fairly valued.

Sorry, but hasn't the news spinning and generally misconstruing news stories to the benefit of their advertisers and financiers agendas been the issue the past few years?

There is clearly no coordinated agenda among news agencies here. It is a compelling story and a bunch of people wrote their hot takes on the topic.

The problem is that hedge funds constantly benefit from a much lower risk due to market structures designed to stabilize the market. Many of the WSB people are willing to risk a big large loss in order to reveal this flaw of the system. Many of them will not be fine, and, if they're successful, some hedge funds will be bankrupt and all of them will be scared moving forward.

Most of those people don't own stock and don't know how to buy stock.

And I would guess most of them tune out stories about stocks going up or down like they tune out commercial breaks or the business segment of news shows.

As another example, lots of people assume Elon Musk got mad at short sellers because he took it personally, when in fact they were fucking with his ability to raise money he needed to ramp up production and meet manufacturing goals.

These things don't happen in a vacuum. Large funds making public bets against a company have a material impact on that company's liquidity.

Obviously the person who owns stock, or is set to earn billions when the share price reaches a certain level is going to be adversarial to someone whose actions result in the share price being depressed - even if that is the fair value.

> Large funds making public bets against a company have a material impact on that company's liquidity.

There are always bigger fish - and if the public bet is wrong, someone can, and will earn money at the funds' cost.

Edit: shareholders dislike shorts the same way employers dislike employees sharing salary information; it's a losing proposition for them, but a fair one.

Not when they get to simply turn off the half of the market moving against them they aren't.

First link of one practice: short and distort https://www.investopedia.com/articles/analyst/030102.asp

You can google more yourself.

As we all know, MXWL wasn't bankrupted, but neither did they thrive on their own. GME also has 4 times the short interest that those people were talking about. It also lacks a trove of patents that are worth something even in a fire sale. In fact the only thing they really have, IMO, is ThinkGeek, and the last time I looked they had fucked that up by merging its catalog into their own hamfisted storefront.

Honestly, given the current generation of consoles, I think they may be better off rebranding as ThinkGeek and having a Gamestop section at each store. We'll see if the new guy has any ideas like that.

Aren't you over-generalizing just slightly? Even in a post with many comments, only a small number of community members (if this is a community at all) post anything. And not a huge number vote, either.

It is FOMO for sure, but the real emotions I get from talking with people are outrage and revenge. Everyone feels like the system (economic and political) is rigged against the public. The dopamine hit from sticking it to the man is palpable.

I see the idea parroted a lot that if everyone holds the line, the shorts will have to buy every outstanding share of GME stock at whatever inflated price it’s at. They won’t, though. The bubble will pop.

> These are friends I have know for years who have never mentioned stocks before but now are talking about "holding the line".

That's what radicalization sounds like.

In these times it’s revealing that there seems to be a severe lack of solidarity and trust. In a crisis it is paramount that everyone does their best and that the strong carry the weak. That’s a very fundamental property of a community. But instead the inequality rises and many fear for their livelihoods. This erodes trust and can turn fear into anger.

At some point in the future there will be the last straw. It might be the financial crisis, the environment, war or everything at the same time. The kinds of problems cannot be explained away; excuses and lies won’t help. Only a sharp turn towards solidarity and sustainability can avert it.

The overwhelming majority of examples I have seen so far are only concerned with causing hedges funds to collapse and to put brokers out of business, personal losses be damned.

And I see little reason to doubt this. Everyone knows Gamestop is a company with an obsolete business model, a bad reputation and little chance of turning things around. Everyone knows that there is little to no chance of making any money on holding. But $500 isn't a lot of money. 3 million people each putting $500 in to GME is. Obviously there are some who are putting in far more. Current market cap is $24 billion. Its coming from somewhere. I suspect once this is all over we will find that some major players got involved as well and put a lot of money into GME to topple their rivals. But that isn't the main narrative and most of the people buying in are doing so to make a statement.

This has started a discussion. A lot of people are getting a 101 education on how the stock market really works and they are learning just how little it actually has to do with real value and the economy. I predict there will be serious public pressure for regulatory reform. People are going to want to make shorting and high speed trading illegal.

I don’t see how you can draw this conclusion from these events. If this level of price volatility was commonly caused by market participants, then it would be such big news when it happens. They’re not common at all, they represent a small number of events where a small number of shares were traded overvalue for very short periods of time. Nobody is concerned that stocks are overvalued because short squeezes are just happening all the time. Squeezes are also short sellers getting punished for trying to profit off somebody else’s losses, which as far as I can tell most people think is very morally righteous. The only time they’re controversial is when intervention occurs to rescue the short seller.

Let's say instead of buying a Latte every working days at starbucks over the last five years you had invested it in tesla stocks. Or maybe for every starbucks latte you drank, you invested the same amount in ETF and in Tesla (pay 3 latte, drink one). Where would your life be? Would you still be at your 9-to-5 or would you go work for that non-profit? Or would you just be lazing around on the sofa or at the beach sipping pina-coladas?

Anyway, sometimes it takes a lot of energy to deal with the KIMO (Know I Missed Out).

If once in a while I want to use some of my disposable income to spin a roulette wheel or buy GME, and can keep it under control, I see no problem. If I win, it's a nice surprise. But if I don't feel like playing, of course I won't win anything.

Despite having watched it since Monday or before, I don't think about what I could've won on GME this week any more than what I could've won at some dog track. I decided not to play, and that's that. My life continues on as normal.

When I get the FOMO urge I think about how BBY just sucks as a store, how much better Netflix is than AMC, and how airlines regularly go bankrupt.

I believe that GameStop has a future as they have a lot of mind share and goodwill. But they need to get rid of their brick and mortar stores.

- SBUX instead of buying Starbucks

- MO instead of buying cigarettes (see The Millionaire Next Door for this analysis)

- LVMH instead of buying LV, M, or H

- NVDA instead of buying video cards and AAA games

- CVS instead of shopping at convenience stores

Well...yeah.

With crud like rwsb posters asking if letting their deep in-the-money calls expire unassigned will screw the funds more-- it may well be the case that it isn't fund blood in the water that you see in this feeding frenzy, at least not anymore.

As for the shorts, Melvin and Citron are out but new shorters get in every day. The higher the price goes the more incentive there is to short. Most will probably lose money as the bubble inflates. But a few will make out like kings when it pops.

Consider a potential attitude that Citadel is going to get away with this blocking. I mean, maybe ... just maybe ... they'll get an SEC fine of a few hundred million (while protecting many hedge funds from billions in losses). In a worst case scenario a sacrificial scapegoat or two goes to a minimum security country club or house arrest for 6 months/1 year. But that will take a few months/years to come to pass and public sentiment will be much less hot. So they're probably gonna force the price down to unwind existing shorts.

So, since there is a potential that the price will be pushed down due to the above ... doesn't it make sense to open a new short position?

Hating the hedge funds is rational, for many.

There is a lot of thing one could have done "for the LULz" but decided to browse HN, Imgur or Reddit instead.

- Bitcoin. I heard about it when it was still possible to mint it on CPU, but chose to run SETI@Home instead.

- Bitcoin when it was at merely $9000.

- Ethereum when it was going under $1.

- Dogecoin like anytime before yesterday (up 6x or something today).

- #GME when options where pennies on the dollar, or even the stock at $20 in early January.

- $Tesla in January, February, March of 2020 or anytime before the split.

- $Tesla instead of putting down $1000 to reserve a slot to buy a model 3 at its announcement, put it in the stock, or even better, in long dated calls.

- $Amazon or $Apple last march or anytime before that.

- $SPCE after it crashed in March (a WSB hyped stock)

We remember the winners we missed way more than the losers, because the winners are still present in our lives today, whereas the losers never became noteworthy (because they lost).

But it’s extremely difficult to tell them apart ahead of time. So current me needs to give past me a pass... past me failed at something that is very difficult; no shame in that. Wistful regret, maybe, in a "what if..." kind of way, but I think everyone has those in their life, and not just about money.

Can't have the poors making money!

There's no limit on the number of coins. Mining is designed to be forever-easy. The coin is _designed_ for rapid deflation.

Why are people treating it as anything other than the joke it was intended to be?

Yes, but the increase in coins is constant. So as a percentage of available supply, the inflation rate approaches 0%.

Right now, there are 128,000,000,000 DOGE in circulation. The block target for Doge is 1 minute, with a reward of 10,000 DOGE, which gives a yearly minting of 5,256,000,000 doge, which gives and inflation rate of 4.11%. Next year, another 5.256T gets added, which is an inflation of 3.94%.

And of course, since it's a cryptocurrency, there are bound to be permanent losses in the supply because of people losing their wallet files. This is difficult to track because even with a public ledger, there's no way to be sure if unspent DOGE is simply not being spent, or if the private key to spend it was lost.

When too much fiat is printed, it decreases its value and is called inflation.

But when assets lose value, it is called deflation.

So, do you call cryptocurrency a fiat currency or a speculative asset? Because falling value will happen, it will be just termed inflation or deflation.

Same thing with the girl one never talked to.

What I'm worried about is that there were more than one Melvin Capital with several banks now involved who do not own enough shares to cover the shorts.

Which means we are literally witnessing a money printer go brrr situation where as long as there are people buying in due to FOMO or some us-vs-them politics, the prices will rally.

The most shocking part is how exposed not only the brokers are but now the banks are also exposed. We are literally seeing a repeat of 1929.

https://www.history.com/news/1929-stock-market-crash-warning...

Maybe, but I'm pretty well off (at least compared to the rest of the country) and I still feel the same way. It's primal if you ask me.

RoaringKitty found the stock underpriced in 2019 and then managed to turn 50k into 13M in 1.5 years + and is still holding 22M in stock and calls.

Highly unlikely. It doesn’t matter how rich the rich are if you’re poor and want to gamble your way out. The problem is with poverty, which is completely unrelated to wealth disparity.

One you can fix by making life worse for everyone, the other you can fix by making life better for the poor.

The entire account value of normal RH users in the range of 1-5k

Most people just joining don't have 1k to just throw at a lottery ticket, and remember that until today RH allowed fractional shares of GME

-

But you know, that's not even it...

The other day GME did 20 Billion in volume in a single trading day. More than the S&P 500.

I don't understand how people think retail can account for that.

But most other funds, or trading desks, or market makers, or brokerages (etc) are most likely printing money right now.

How exactly would they do it? Shorting it again would involve calling the top for a stock whose price recently has been unpredictable, but very high.

Writing options seems nuts for something this volatile. I guess they could "buy volatility" with a straddle but again what would the numbers have to be on this where they turn a profit? It's not like the rest of the market is underestimating the volatility, it's evident to everyone.

The other thing is, the price WILL go down eventually. Even if not today. A fund with billions of dollars can afford to sit on a short of GME at $400 for a long time. Longer than the upward pressure will last. The narrative was that the short squeeze will happen today, and prices will skyrocket. You only had to be in it for a little while. Now the narrative is changing, and it will maybe be next week, or even farther out. Sure the meme is to hold forever, but anyone holding any amount that will maybe make a difference are going to see that life changing number and sell eventually.

Just look at Citadel... how much money do you think they've made off early access to majority of retail orders for GME as RH exploded?

And how much more money will they make on an ongoing basis after this from all the new users?

The volume has been insane, someone is making money besides retail investors, and they won't be the ones left holding the bag after the musical chairs stop...

I disagree. I think a big part of why this whole thing is fascinating is the depth. Yesterday morning, financial press were blathering generalities pinning WSB as market manipulators and calling for regulation to stop them. That is, stop retail investors trading at a scale that moves markets. IE, the stuff that insiders get away with regularly.

Between yesterday afternoon and now, millions of people have been catching up on the detailed mechanics of stock trade execution. There's a mad dash from reporter to get interviews with brokers, clearing house operators & such.

Note that the maneuver itself was analyzed in detail, and in public. That's what allowed big names like Cuban, Musk, various politicians and such to take a side and comment on it intelligibly.

Ultimately, whoever is holding these meme stock shorts needs to buys stock to cover their positions. I acknowledge that brokers had legitimate/legal/normative reasons to stop retail buys. But, it's also true that they created a window where short sellers could buy without competition from retail investors. Maybe brokers are covered legally against market manipulation charges because clearing houses were genuinely short on liquidity. But, (1) that doesn't change what happened and (2) Isn't this the regulator's job?

The reason people are cheerleading is because of these shenanigans. "Rigged" gets thrown around often, usually it's devoid of subtlety. This time, it's detailed. We can debate the details and construction of the rig. Truths fly around reddit for an afternoon, and are discarded the following day.

Few people cheerleading because they want a no regulation, pre-depression stock market. They just aren't willing to accept a rigged system. In any case, who are the speculators here? Short sellers like Melvin or Redditors? Short sellers future-sold 140% of the stock... hoping for a crash and potentially creating one. Redditors recognized this by looking at publicly available information and discussing it in the open.

Of course not. Immediately a false narrative was created that citadel forced them to do it under threat that they would stop their order flow. Had any politician or public figure merely suggested we let the CEO of Robinhood explain the decision, they would’ve been dragged by the Twitter mob. Just look at how Steve Cohen, Lee Cooperman and John Fortt were shamed for raising what I believed to be perfectly legitimate questions. But nobody is interested in legitimate questions when it’s hive mind mob rule which is what always takes hold in a bubble. In fact the vilification of naysayers is one of the tell tale signs of a speculative bubble.

To answer the last question who are the speculators here, shorts or wsbers? Both. But what I’m talking about are the speculators who are simply buying this up with the expectation they will make huge gains like deep fucking value. They can say all they want about how they don’t care about potential losses and this is something bigger. Total nonsense. Let’s see who gets blamed and who plays the victim if we get a crash.

It’s an interesting world when Mark Cuban and chamath palyhapitia can be portrayed as champions of the little guy when they have made billions of dollars at their expense. Chamath takes a SPAC public every Tuesday. Who do we think are buying these up? Warren Buffett? Didn’t Cuban make his fortune selling a worthless business to Yahoo? These guys are using this entire thing to build their own popularity.

Going back to "Citadel rumour.." It certainly was off the cuff and certainly doesn't encompasse everything. That said, RH is financially dependant on Citadel and Citadel is in a position to benefit from RH's decision.

Whatever you think of Cuban, these people are being drawn in for the same reason you and I are talking about it. It's saucy.

I think your "vilification of naysayers" point is off-mark. This is not about whether or not GME bets make money. The whole saga is a naysaying of sorts. Naysaying to the rigging.

I suspect I'm probably on the same side as you regarding the larger point. Speculation, HFT, etc are negatives to be curtailed not expanded. But, the "me but not thee" way that financial markets have been structured is an outrage.

The "revenge for 08'" stuff is symbolic. But, the symbolism is fairly subtle. The firms being protected from long tail risk (right, wrongly or even essentially are, again, being shielded from long term risk on bets only they have access to. This includes clearing houses and market makers. The "systemic risk" is the risk that these guys lose money. Stability is premised on them not losing money.

Leon got shamed not for his commentary on the speculation around the stock, but for the complete failure-to-read-the-room commentary on his taxes, commenting on marginal tax rates and "fair shares" as "bullshit":

> "This fair share is a bullshit concept. It’s just a way of attacking wealthy people, and I think it’s inappropriate," Cooperman said Thursday. "We’ve all got to work together and pull together."

And for that matter, calling these narratives false seems premature. As far as I know there hasn't been any actual investigation by regulators into the reason Robinhood took those steps (although multiple politicians from across the spectrum have called for one). It seems many public figures would love to give Robinhood the opportunity to explain themselves

People don’t seem to realize that brokerages do this all the time to limit their risk. If you have less than $25k in a trading account for example, a brokerage is mandated by law to not allow day trading (that is entering and exiting the same position on the same day). Do you know what happens if you do? You are labeled a pattern day trader and you can only exit positions. Actually the fact that they were letting people exit trades was a big clue to me that this was risk mitigation while this collusion with citadel narrative was making the rounds.

Conspiracy or no, the end result is so far from your day trading 25K minimum example. Your example is a rule that already existed going in, rather than a rule that changed temporarily to convenience one side for a day.

Ok let's say I'm a retail investor using RH. Why should I need to divine what my brokerage is doing from Twitter posts and Reddit? My should I need to wait hours for their explanation that comes in the form of a handwavey blog post?

Is the regulator in this case the SEC, the exchange, or some other party?

Who do they think is selling counter party is?

All they’ve managed to do transfer wealth from one hedge fund to another. And eventually when this pops they have transferred wealth from themselves to other winning hedge funds.

Which part has little truth to it?

The big hedge funds are apparently losing money (billions!) on Gamestop, unless that's being mis-reported. Some of the "little guys" (reddit people) definitely were a part of the reason for that.

A few hedge funds (of different sizes) are indeed losing billions. A few other hedge funds have taken the opposite side of this bet and are making money. The vast majority of hedge funds have no position in this stock and are completely unaffected.

In addition a bunch of HFT shops and similar making a lot money off the volatility and order flow all this has caused.

Perhaps, but for every dollar that gets transferred to a small handful of regular investor, I suspect at least 10, if not a 100, is probably being transferred to different institutional investors.

I just don't buy the Wall Street vs The People narrative. This is Wall Street vs Wall Street with The People picking up scraps from the battle field and hoping they don't get stepped on.

Conversely, a few investors that bought cheap might have made huge returns - if they sold at inflated prices (passing the hot potato to the next greater fool). If they didn't sell, then the paper gains will vanish.

https://www.google.com/amp/s/www.marketwatch.com/amp/story/l...

A Korean fund made a billion dollars on a 12 million dollar GmE investment and they were only the 7th largest holder of GME shares. The wsb narrative of this sticking it to Wall Street is just false.

I personally think it’s a narrative propped up intentionally by wsb insiders for their own gain. This is just a modern distributed boiler room. Retail traders always pay in those scenarios.

Yes, in particularly the passionate pleas to buy in more and HODL, stick it to the man, stick it to the evil shorts. While enabling the early longs to cash out profitably.

Bit like Bitcoin, really.

I've been noticing some interesting patterns. Accounts that seem to have been abandoned for months or years are commenting all of a sudden.

Makes me think some of these very similar looking frantic lunatic posts are part manufactured.

It'll take a good effort to show it conclusively

Some are losing money. But that is nothing new. Hedge funds die every day ... on paper. But which brokerage houses are going under? Other hedge funds are doing fine, likely profiting on this. The fact that a few are held out as victims sounds, to me, like the other funds just stoking the panic. I don't see any non-paper houses closing over this. This is Gamestop, not the mortgage crisis.

There are thousands of hedge funds, just because a handful have been caught with their trousers round their ankles doesn’t mean the others aren’t profiting from current volatility.

It seems like they've all closed their shorts already, most of them did on like day 2 I believe.

In addition, other hedge funds have been on the winning side of this trade. Some of the orders for GME last few days have been absolutely massive, not coming from retail.

The data doesn't back up the broader (and presumably intended) interpretation of their statements.

In my (inexpert) opinion THAT is the definition of market manipulation.

I've seen this "claim" all over the internet. It's not true. The statements released by Melvin Capital were unambiguous and of course short interest on Gamestop is going to go up when it surges to such high prices.

Why are so many people repeating the same misleading talking points over and over?

Source?

This whole thing is disgusting. Once the euphoria had subsided, people will realize that the hedge funds have come out as bandits, having traded nickles for dollar bills.

Which ones? Citadel/Melvin/Citron (is this all the same one?) and which others?

Money is lost when a retail investor holds onto their shares not just when the stock price rises.

At the same time I keep hearing that the stock market is actually undervalued on average given current interest rates - and those aren't going to change anytime soon.

Definitely things are frothy and there are bubbles in some stocks, but maybe this market still has legs - at least while the fed is buying 120 billion of debt each month.

[1] I found it, it was Joe Kennedy in 1929: https://archive.fortune.com/magazines/fortune/fortune_archiv...

It seems like the big money is changing its clothes to pose as children in order to get priority on the life boats ("Women and children first!").

The social circle of firms closely connected to this ruin of Robinhood and which had been short GME are the speculators. Short for longer than intraday == speculative. Short as a market maker for an hour or two is good for efficient clearing.

It's on the guys with the big money to gather their fortitude and ride this out in the most-trust-inducing ways they can. I think the big money is naive if they think it could be otherwise.

One more thing, I am reminded that a lot of the time, a retail investor will buy something, a weak stock, and ride it down to zero out of misguided optimism. Conducting margin calls on zero notice is going to be toxic to such people and I don't think the finance world really wants that money to leave the market for good.

The whole premise of your argument is based on ‘probably’

That’s where we ended up after 1929, until the current billionaire class removed all the guard rails.

Nobody deep on SV stocks and unicorn chasing wants to admit they’re in the bubble too. Why does society owe floating a coder bros data science project?

Anything not science is a meme. That billionaires should exist is a meme. This is social philosophy, not truth. And it’s gamed.

America is a bubble in time and it’s having a real (environmental) impact on the future.

Billionaires are not experts. They’re rich and can pay the fines and schmooze. That is not expertise. It’s selling "free market" and manipulating it based on a meme that speculative finance expertise is real. All it is is social engineering of the masses to accept deflation of their economic position.

We need to let people build their communities without tethering agency to outsiders who control the flow of imaginary capital.

Pretending a value in a database is real ownership of something is insane and continues to lead humanity towards fascism to protect the oligopoly at the top of the meme pyramid.

You’re selling an appeal to authority that is a complete mirage, only existing in your head because of years of reinforcement.

That's what happens when capital runs amok.

I’ve been following finance for decades.

American communities are under financed because of capital extraction to improve margins. It’s a mathematical fact which carries far more weight than your hand wavy generalizations.

The extraction has decimated US communities, empowered slave labor across the globe, and entrenched power in hedge funds.

Do the actual research instead of parroting cable news sound bites.

The same pattern happened when manufacturing was pulled from cities to rural areas 100 years ago. This time the capital was pulled from rural areas and sent overseas simply to improve profit. We can decimate the planet on any continent. We do it in Asia to externalize real costs and boost financial margins.

You’re talking in a pure emotional abstract.

The hedge funds are the speculators in this case. They're playing a dangerous game where you can short more stock than what actually exists. Why this is allowed? Who the fuck knows.

In other words, this works simply because stocks can be sold and borrowed, and they don't carry provenance with them. To stop this, you'd have to do the equivalent of DRMing books and revoking the first sale doctrine. Which I imagine would turn shorting into a much more complex market mechanic than it is today.

(Disclaimer: the extent of my expertise on stock markets is me knowing how to spell "stonks".)

Imagine you short 50% of the outstanding shares.

Now there are 50% more long positions than outstanding shares.

It's not substantially different from having 100% or 150% more long positions than outstanding shares.

If the total long or short positions exceed the underlying economics by a lot, you create all sort of weird incentives for manipulation, as can be seen in the CDS market sometimes.

I fully agree that derivatives can create all sort of problems in many cases, including when the nominal amount of the positions is much higher than the actual amount of the underlying.

Not sure it would be worth it, I think historically excessive shorting has rarely been a problem, except for a few colourful episodes like these.

It sounds simple, but the details make it hard.

I borrow it.

I sell it to Tom.

I borrow the share from Tom's broker.

Tom's broker and I both have no idea it's "the" "same" share I borrowed.

Boom, 200% short interest on "that" share.

The fact that buying was limited yesterday is evidence that the little guy is actually winning here.

Trading was stopped to save the hedge funds, because if they go under or lose too much, the clearinghouse has to front that. If the clearinghouse goes under the whole market will crash.

As has been explained in multiple other places, the limitations were as a result of Robinhood et. al. being unable to cover the risks involved in providing instant trading capabilities for a stock as volatile as the ones that got restricted. That has nothing to do with "the little guy is winning" whatsoever, and in fact may indicate that "the little guy" is about to lose his shirt, due to lack of predictability.

Trading was not stopped "to save the hedge funds". This is an outright lie that needs to be squashed. Stop saying this. I don't mean to be rude, but the narrative you're spreading is actively dangerous and not supported by any of the facts we have available to us.

Yes RH had to cover more, because the clearinghouse was also starting to be stretched by the risk from the violatility. If the hedge funds go down, the clearinghouse wouldn't have been able to front their cash, and they would've gone down as well.

You're also missing the point that the clearinghouse firms didn't just ask for more money from brokers. In many cases they told brokers to step selling these securities.

There's increased risk on both sides, but the long side is at least finite (and probably there's not much margin). The short side is not. The unknown risk the clearinghouse needs to worry about is the short (hedge fund) side.

The claim that "the hedge funds" operate in unison and/or are all short is probably the largest misconception about this whole situation. Very "us vs. them" and also very wrong.

That to me looks like the clearing houses themselves are worried, which means the whole thing poses a risk (even if easily mitigated) to the greater market.

[1]: https://blog.robinhood.com/news/2021/1/28/keeping-customers-...

If crazy retail investors can bankrupt Robinhood or other over-leveraged brokerage firms, that's also a win for the little guys.

I don't think many HN posters with their stable, extremely well-paid technology careers can truly empathize with the strain of aggressive nihilism on display at WSB.

"I'm only gambling with my future, so nothing to lose."

Once one accepts that "socialized risk and private profits" isn't acceptable, then one must also accept that either we must allow even the too big to fail actors to fail, or we must not accept any actor to be too big to fail at all.

If public money is used to rescue a bank or clearinghouse, then the public should own it. A government institution can buy any failing bank/clearing house/ if it's so vital, and then the public owns it. Buying a commercial bank or clearing house at cents for the dollar and then selling it again in better times isn't necessarily a bad idea. It's certainly a better idea in terms of moral hazard than simply "bailing out" banks without ownership.