Stock market is a "fully-fledged epic bubble" and will burst
Discussion
vulture1 said:
Joey Deacon said:
ferrisbueller said:
Joey Deacon said:
ferrisbueller said:
Have you read the story?
So a load of people on Reddit all agreed to buy GameStop shares and pushed the price up by 145% in a couple of hours?"The company has become a high-profile battleground between bullish chatroom-driven day traders, especially on online platform Reddit, and hedge fund short sellers, who have been betting against the stock."
"GameStop’s rally is one in a series of eye-catching market moves to stir concerns among fund managers, some of whom say trading by individual investors is pushing stock prices out of whack with fundamentals."
So essentially it was pumped by the Reddit group members to increase the price to force the hedge fund short sellers to lose money?
Am I missing something, essentially it was pumped and is not worth anywhere near the share price?
There is also the side story that an actual billionaire investor (Ryan Cohen - ex chewy.com) has bought a decent chunk of the business as he thinks he can turn it around. So these redditors are getting a three-for-one in that GameStop keeps on going and improves, some greedy wall street types go to the wall and these activists make themselves some life-altering money. The shorts out there are for 130% of the float so whoever is short has to unwind themselves multiple times and institutional investors will sometimes help each other out to keep the whole scam going. But retail investors aren't in on the scam and therefore have no allegiances to short selling hedge fund folk and GameStop has a lot of retail investors so the pool of institutional investors around to help is small. There are apparently other hedge funds getting ready to eat Melvin Capital and are piling in as the share price keeps going up and up.
The same thing is happening with Blackberry but is a few days behind GameStop. There's a little-guy-protesting element to the whole thing - a protest about short sellers trying to ruin companies so they can make billions.
The thing with Gamestop is that they're seemingly too rusted on to the bricks and mortar and physical stock. This is a bit of a losing strategy as retailers such as Walmart and Target are getting into the action quite strongly and that more of the software is being downloaded and not distributed on physical media. They also have little or nothing in the way of mobile gaming market share. On the flipside, they have a loyalty program with 55 million members, are very underbaked on the whole e-commerce thing and have a strong nostalgia factor with people who now have disposable income and who will also have kids to buy for. Hence the potential....
btdk5 said:
ATM said:
Gamestop touched 250 after hours.
Elon musk tweeted a link to the reddit page so that’s going to send a hoard of mindless ‘investors’ buying in. Have a read of the story when Elon tweeted use signal, referring to a messaging app, people blindly bought into signal advance, some penny stock tech firm sending its share price up 6350% in 3 days.
Musk tweeted code about gamestop and WSB as the people shorting GameStop are also shorting Tesla stock very heavily and have done so for a long time.
Edited by rodericb on Wednesday 27th January 13:04
The always thoughtful John Authers had an interesting take on GameStop this morning https://www.bloomberg.com/opinion/articles/2021-01...
A brief extract:
''This feeds into the debate over whether we have a speculative bubble at present. Markets are pervaded by gloom and worry, so there is no lack of fear — even if confidence that interest rates will never rise is growing excessive. Meanwhile, there is little in the way of greed. Cryptocurrency has generated excitement, as has Tesla Inc., but in the main the frenzy over a historic opportunity to get rich, of the kind that was everywhere in 1999, is lacking. This is a different, worried world. The last two decades have stripped it of its positivity. The mood is nothing like the great bubbles of the past.
Instead of greed, this latest bout of speculation, and especially the extraordinary excitement at GameStop, has a different emotional driver: anger. The people investing today are driven by righteous anger, about generational injustice, about what they see as the corruption and unfairness of the way banks were bailed out in 2008 without having to pay legal penalties later, and about lacerating poverty and inequality. This makes it unlike any of the speculative rallies and crashes that have preceded it. ''
A brief extract:
''This feeds into the debate over whether we have a speculative bubble at present. Markets are pervaded by gloom and worry, so there is no lack of fear — even if confidence that interest rates will never rise is growing excessive. Meanwhile, there is little in the way of greed. Cryptocurrency has generated excitement, as has Tesla Inc., but in the main the frenzy over a historic opportunity to get rich, of the kind that was everywhere in 1999, is lacking. This is a different, worried world. The last two decades have stripped it of its positivity. The mood is nothing like the great bubbles of the past.
Instead of greed, this latest bout of speculation, and especially the extraordinary excitement at GameStop, has a different emotional driver: anger. The people investing today are driven by righteous anger, about generational injustice, about what they see as the corruption and unfairness of the way banks were bailed out in 2008 without having to pay legal penalties later, and about lacerating poverty and inequality. This makes it unlike any of the speculative rallies and crashes that have preceded it. ''
rodericb said:
btdk5 said:
ATM said:
Gamestop touched 250 after hours.
Elon musk tweeted a link to the reddit page so that’s going to send a hoard of mindless ‘investors’ buying in. Have a read of the story when Elon tweeted use signal, referring to a messaging app, people blindly bought into signal advance, some penny stock tech firm sending its share price up 6350% in 3 days.
Musk tweeted code about gamestop and WSB as the people shorting GameStop are also shorting Tesla stock very heavily and have done so for a long time.
Edited by rodericb on Wednesday 27th January 13:04
My point is to highlight that people will pile into any old stock without the slightest bit of critical thinking. Robin Hood is facilitating options trading to people who don’t have a clue.
The SEC had to suspend trading of zoom technologies early in the pandemic because all of the dummies thinking it was linked to zoom video and pushing the stock price up 10,000%.
I am loving this story though, gme up 60% in before hours trading.
This is now where it gets dangerous.
The main target of the short squeeze already announced they had closed their position and there were some tremendous numbers being banded about regarding the cash some of their investors had piled in to avoid a bankruptcy.
Right now, unless people genuinely believe the company is worth 8 times what it was 3 weeks ago, why would you make that trade?
The main target of the short squeeze already announced they had closed their position and there were some tremendous numbers being banded about regarding the cash some of their investors had piled in to avoid a bankruptcy.
Right now, unless people genuinely believe the company is worth 8 times what it was 3 weeks ago, why would you make that trade?
emicen said:
This is now where it gets dangerous.
The main target of the short squeeze already announced they had closed their position and there were some tremendous numbers being banded about regarding the cash some of their investors had piled in to avoid a bankruptcy.
Right now, unless people genuinely believe the company is worth 8 times what it was 3 weeks ago, why would you make that trade?
It’s nothing to do with the value of the company it’s the general population v the hedge funds. 140% of the float is still short they all have to buy at some point and if nobody is selling the little man wins the hedge funds loose. The main target of the short squeeze already announced they had closed their position and there were some tremendous numbers being banded about regarding the cash some of their investors had piled in to avoid a bankruptcy.
Right now, unless people genuinely believe the company is worth 8 times what it was 3 weeks ago, why would you make that trade?
vulture1 said:
Shorting to me seems very very unethical. If you think a company isn't going to do well in the future just don't invest in it.
To "anti invest" in it short it and them publicly say this company is worth bugger all and profit from it feels very wrong.
If someone buys a stock they are of the opinion it is under-valued, why is it wrong to have the alternative view? Remember, for every buyer there is a seller, and short sellers provide some of the liquidity the buyers use to take on their positions. The short sellers also pay a fee to people who own the shares (long positions) to borrow the shares which they then sell, and so the long holders do benefit, irrespective of whether the price goes up or down. Obviously if the decline in share price is more than the income from the rent of the stock then they lose out overall, but in any given stock there will be long holders and short positions. To "anti invest" in it short it and them publicly say this company is worth bugger all and profit from it feels very wrong.
Also, activist short sellers do tend to do a lot of research into their targets, exposing corruption and mismanagement. Wirecard was bought down (from memory) by a report from a short-seller, and many other companies doing questionable or illegal activities have suffered the same fate.
vulture1 said:
Shorting to me seems very very unethical. If you think a company isn't going to do well in the future just don't invest in it.
To "anti invest" in it short it and them publicly say this company is worth bugger all and profit from it feels very wrong.
I don't get this attitude. It can act as a moderating force against promotion and pump and dumps. Why would anyone try to uncover frauds and the like if there wasn't a way to financially benefit from it.To "anti invest" in it short it and them publicly say this company is worth bugger all and profit from it feels very wrong.
A market without shorting would be like betting on the final at Wimbledon but only being allowed to choose one of the players
egomeister said:
I don't get this attitude. It can act as a moderating force against promotion and pump and dumps. Why would anyone try to uncover frauds and the like if there wasn't a way to financially benefit from it.
A market without shorting would be like betting on the final at Wimbledon but only being allowed to choose one of the players
Because stocks only go up, and if people just hodl then they go to the mooooooon. A market without shorting would be like betting on the final at Wimbledon but only being allowed to choose one of the players
Anyone can win in a market which only goes up....
Condi said:
Also, activist short sellers do tend to do a lot of research into their targets, exposing corruption and mismanagement. Wirecard was bought down (from memory) by a report from a short-seller, and many other companies doing questionable or illegal activities have suffered the same fate.
The worst thing about Wirecard was that the shorts had been at them for years but they were defended by the regulator and threatened by the company. If the regulators are at best ineffective or at worst complicit, we should be thankful that someone is doing the dirty work to expose such things.vulture1 said:
Shorting to me seems very very unethical. If you think a company isn't going to do well in the future just don't invest in it.
To "anti invest" in it short it and them publicly say this company is worth bugger all and profit from it feels very wrong.
Shorting is essential. As a very crude example, you can't short housing so when a bubble forms there is no mechanism to keep it healthy. As everyone in the West is now all too aware, excessive asset inflation isn't good. To "anti invest" in it short it and them publicly say this company is worth bugger all and profit from it feels very wrong.
A healthy market isn't shorted. Shorting in basic terms is medicine for a disease.
Like any medicine some people abuse it but it doesn't stop it from being an essential medicine.
But then buying can be just as toxic and open for abuse. This can be seen in today's markets by how easily a retail mob can be whipped up and steered to generate rapid wealth for the unscrupulous. These social media movements to 'fight shorters' tend not to just come out of the blue but be orchestrated by professional money that's already gone in and now wants their position to be smashed up.
So it's worth considering which side of the event is most damaging for retail investors? The side before the ramp when there were few retail investors involved and the company was going to die leaving them with losses or this side of the ramp where millions are now in, with huge chunks of their wealth and borrowed money and set to lose billions when it deflates and leaves behind just a handful of people who made a fortune?
It's the ramping that is unethical and that causes the most damage to retail money in the cold light of day. And most retail investors are not investors but gamblers who gamble more than they can afford through greed, become over emotional and have to have a bogeyman to blame for their actions.
egomeister said:
A market without shorting would be like betting on the final at Wimbledon but only being allowed to choose one of the players
The point some might choose to make is that a market is supposed to be a market, not a betting shop. My personal view is that derivatives are fine when used for hedging but shouldn't be used for straight betting - which IMO can distort reality. It's increasingly evident even just reading this finance forum over recent months that more and more threads are about "trading" rather than "investing". It's so much sexier trying to make a quick buck than plodding along for years in the hope of long term equity returns.
And, of course, the industry loves amateur traders because they tend to lose money hand over fist. Just as the bookies love the Grand National - thousands of punters with no idea what they're doing. Kerching, kerching, kerching!!
With "investing" everyone can win. With "trading" there must be a loss to match every gain.
rockin said:
The point some might choose to make is that a market is supposed to be a market, not a betting shop. My personal view is that derivatives are fine when used for hedging but shouldn't be used for straight betting - which IMO can distort reality.
It's increasingly evident even just reading this finance forum over recent months that more and more threads are about "trading" rather than "investing". It's so much sexier trying to make a quick buck than plodding along for years in the hope of long term equity returns.
And, of course, the industry loves amateur traders because they tend to lose money hand over fist. Just as the bookies love the Grand National - thousands of punters with no idea what they're doing. Kerching, kerching, kerching!!
With "investing" everyone can win. With "trading" there must be a loss to match every gain.
The analogy was supposed to be a parallel for asymmetry of trade rather than the nature of the transaction itself! It's increasingly evident even just reading this finance forum over recent months that more and more threads are about "trading" rather than "investing". It's so much sexier trying to make a quick buck than plodding along for years in the hope of long term equity returns.
And, of course, the industry loves amateur traders because they tend to lose money hand over fist. Just as the bookies love the Grand National - thousands of punters with no idea what they're doing. Kerching, kerching, kerching!!
With "investing" everyone can win. With "trading" there must be a loss to match every gain.
Betting isn't likely to end well over time whichever direction you are backing things to move.
rockin said:
The point some might choose to make is that a market is supposed to be a market, not a betting shop. My personal view is that derivatives are fine when used for hedging but shouldn't be used for straight betting - which IMO can distort reality.
But shorting =/= derivatives. Derivatives are options; shorting is just selling something you don't own in the hope of buying it back cheaper later. Incredibly common in the commodities and finance worlds, and (IMO) is just as valid as buying. If you buy, you think there is the likelihood of the price going up. If you short, you take the view price is going down.
Obviously you have different people, "investing" over different time horizons.
Condi said:
rockin said:
The point some might choose to make is that a market is supposed to be a market, not a betting shop. My personal view is that derivatives are fine when used for hedging but shouldn't be used for straight betting - which IMO can distort reality.
But shorting =/= derivatives. Derivatives are options; shorting is just selling something you don't own in the hope of buying it back cheaper later. Incredibly common in the commodities and finance worlds, and (IMO) is just as valid as buying. If you buy, you think there is the likelihood of the price going up. If you short, you take the view price is going down.
Obviously you have different people, "investing" over different time horizons.
rockin said:
Which doesn't make the blindest bit of difference. The concept is the same.
Unless, of course, "selling something you don't own" is perceived a normal, real world activity.
Selling something you don't own is perfectly common in any finance or trading environment. I would argue it's very common in the manufacturing and retail worlds as well. If you order something which the supplier has to buy in or make to fulfil their sale to you, they are technically short. Being short of a position is just the same as being long, only you do the same things in a different order. You buy then sell, or you sell then you buy. Unless, of course, "selling something you don't own" is perceived a normal, real world activity.
But anyway, the concept is NOT the same. Options and derivative products are far more complicated, with various different things affecting the price than just the price (value) of the underlying.
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