I saw this posted as a comment in another thread, and thought it was interesting enough to warrant its own discussion. For those who don't know, Keith Gill (Roaring Kitty on some channels, best...
I saw this posted as a comment in another thread, and thought it was interesting enough to warrant its own discussion.
For those who don't know, Keith Gill (Roaring Kitty on some channels, best known as DeepFuckingValue on Reddit) was arguably at the centre of the GameStop stock spike last month. He had been investing in and posting about it for well over a year at that point, and claims to have done so purely on the fundamentals, although he is being sued by those who suggest it was intentional manipulation.
As I said on that other thread, I'm partial to a good David and Goliath story, and he presents his case well:
I’ve been asked why I decided to share my investment ideas on social media. My
investment skills had reached a level where I felt sharing them publicly could help others. I also thought that by sharing my own ideas and accepting critiques, I would be able to identify holes in my analysis. Hedge funds and other Wall Street firms have teams of analysts working together to compile research and critique investment ideas, while individual investors have not had that advantage. Social media platforms like YouTube, Twitter, and WallStreetBets on Reddit are leveling the playing field. And in a year of quarantines and COVID, engaging with other investors on social media was a safe way to socialize. We had fun.
He closes with:
As for what happened in January, others will have to explain it. Threshold lists, order
flow, halting purchases – according to the media these all had a material impact on GameStop stock in January. Here’s the thing: I’ve had a bit of experience and even I barely understand these matters. It’s alarming how little we know about the inner-workings of the market, and I am thankful that this Committee is examining what happened. I believe an analysis of GameStop’s recent price action must start with a discussion of the exorbitant short interest in the stock, as well as an investigation into any potentially manipulative shorting practices and brokers’ reported failures to timely deliver shares and settle trades.
As for what I expect moving forward: GameStop’s stock price may have gotten a bit ahead of itself last month, but I’m as bullish as I’ve ever been on a potential turnaround. In short, I like the stock. And what’s stunning is that, as far as I can tell, the market remains oblivious to GameStop’s unique opportunity within the gaming industry.
I don't understand this. GameStop's been circling the drain for years and with the rise of digital downloads and the PS5 having a diskless version, I don't see things improving for them. 10-15...
the market remains oblivious to GameStop’s unique opportunity within the gaming industry.
I don't understand this. GameStop's been circling the drain for years and with the rise of digital downloads and the PS5 having a diskless version, I don't see things improving for them. 10-15 years from now I'd be surprised if physical media is common/preferred enough to warrant a store dedicated to selling games. To their credit they've tried to diversify with their purchase of ThinkGeek, Kongregate (browser gaming), and Impulse (PC gaming) over the years, but none of it has seemed to be enough.
And prior to this whole stock thing, GameStop was pretty well-hated among gamer communities. Being hounded for worthless preorders, terrible buy prices, and the influx of "geek" merch hasn't left many with warm/fuzzy feelings about GameStop. Or maybe I'm just out of touch, I don't know. I know I never go to GameStop unless I either absolutely have to or am near one and need to kill time.
Edit: And to be clear, I fully support what WSB did and I love this whole "sticking it to the man" business. But aside from that I really couldn't care less about GameStop. If they shut down tomorrow it would't disrupt my gaming habits at all and I wouldn't really miss anything about it.
I'm not that knowledgeable about GameStop, but I think the implication is a pivot away from their failing brick-and-mortar business model. I do know that the founder of Chewy took a large stake...
I don't understand this. GameStop's been circling the drain for years and with the rise of digital downloads and the PS5 having a diskless version, I don't see things improving for them. 10-15 years from now I'd be surprised if physical media is common/preferred enough to warrant a store dedicated to selling games. To their credit they've tried to diversify with their purchase of ThinkGeek, Kongregate (browser gaming), and Impulse (PC gaming) over the years, but none of it has seemed to be enough.
I'm not that knowledgeable about GameStop, but I think the implication is a pivot away from their failing brick-and-mortar business model. I do know that the founder of Chewy took a large stake and board seat last year, which renewed investor confidence in the company. No clue whether that'll work out long-term, but there's at least some legitimate reason (even if it's an outside chance) for GameStop share price rising on the prospect that they could turn it around.
This guy just believes. Last checked he still had millions tied up in GME stock even after an initial sell off at the high. As he says, he “likes the stock” and thinks the company can make some...
This guy just believes. Last checked he still had millions tied up in GME stock even after an initial sell off at the high.
As he says, he “likes the stock” and thinks the company can make some sort of turn-around with their new CEO and restructuring plan.
I lost about $200 when they killed the squeeze but I’m still holding just for fun.
Curious that they try to go after him. If you pile more shorts on an already waaay shorted stock, well, play stupid games, win stupid prizes. That's what you get from shorting. (I still wonder why...
Curious that they try to go after him. If you pile more shorts on an already waaay shorted stock, well, play stupid games, win stupid prizes. That's what you get from shorting. (I still wonder why short/long bets aren't being done in a horse race bet fashion: Two partners put money in a pot (held with a market provider) and they agree on a concrete condition that determines who gets it. That way, shorting doesn't affect prices and is capped in loss.
I'm also still kind of confused about the big GME fizzle. WSB recently had a post about how a lot of the shorts were basically not honored, from what I understand. Apparently, the hedge funds just didn't bother covering their positions when they should have? I don't know, can someone enlighten me?
I think they don’t do side bets because it actually would be regulated as gambling and would be illegal in most places. There is also something called a binary option that’s also a common scam and...
I think they don’t do side bets because it actually would be regulated as gambling and would be illegal in most places. There is also something called a binary option that’s also a common scam and banned in most places.
Short squeezes could be prevented if the company itself were to sell more shares. That’s good for the company because they can raise more money by selling stock at a high price. So why didn’t Gamespot do it? It turns out that their financial quarter ended January 30th and they hadn’t released financial results yet. If the company or insiders sell stock without disclosing what they know, they could get into trouble with the SEC.
They could have sold stock if they had planned it in advance and set a fixed schedule for selling stock if it reached a certain price, but nobody knew this would happen.
It turns out that there are cleverer ways for the company to profit from this if they were thinking ahead, like selling calls and puts, and Matt Levine wrote about them in Wednesday’s column. Maybe more companies will do it now, if there is meme stock potential?
If you’re really interested in this stuff, I highly recommend subscribing to Matt Levine’s column. You can get it by email for free. I route to to my RSS reader.
Short selling can be beneficial. They have an incentive to find out what’s wrong with a company and publicize it. If the rest of the market believes it, they profit, and the price of the stock...
Short selling can be beneficial. They have an incentive to find out what’s wrong with a company and publicize it. If the rest of the market believes it, they profit, and the price of the stock better reflects the worth of the company. Future buyers of the stock benefit from not buying at an inflated price.
It’s similar to the role of whistleblowers and investigative journalism. The company may not like it, but making sure the public knows about bad news can be important. People don’t blame journalists as much for spreading bad news about a company, though, because the role of journalism is better understood.
It can also effectively be gambling, but it’s not clear how to prevent that without losing the socially beneficial aspects of it.
Essentially the same thing could be done by an owner of the stock, if they’re on the lookout for bad news and sell before anyone else realizes. Then publicize what you know, and you can even buy it again if you want.
There are also good reasons why the owners of an asset might want to hedge by short selling, though it looks like it doesn’t normally apply to stocks where you could just sell the stock instead.
Ohh, I know there's value to shorting a stock in the sense that it is invaluable in getting an "eventually approximately correct" valuation of a company. But... with your losses uncapped, that's...
Ohh, I know there's value to shorting a stock in the sense that it is invaluable in getting an "eventually approximately correct" valuation of a company. But... with your losses uncapped, that's still a gamble. Or at least, it would be just as much of a gamble as a horse-race style bet.
That said, maybe I'm not quite grasping the market mechanisms of short selling quite right. Short selling being essentially a self-fulfilling prophecy / positive feedback loop seems wrong to me, but I guess it's the mechanism that actually corrects the price as a result of a lot of short interest. So you'd have to keep that intact somehow, which a simple bet doesn't. Maybe if you mandate how the money in the pot is used or deposited?
Of course you still have the betting ratio as a point of contact with the confidence in the company, but that doesn't affect the stock price.
I think uncapped losses might be fixed with hedging, by buying calls that are far enough above the current price to be cheap? I think it's best left to professionals. Or, the company could fix it...
I think uncapped losses might be fixed with hedging, by buying calls that are far enough above the current price to be cheap? I think it's best left to professionals. Or, the company could fix it just by being prepared to sell more shares if the market seems to want them. (Possibly, there could be some regulation to require that, if there were a consensus that bubbles for no good reason are bad.)
The stock market as a whole tends to go up over time, so most people should be going with the trend rather than against it. To bet on it going down, you need to have a good idea of what the bad news is and when other investors will hear about it and believe you.
Everyone is curious about what happened because it’s likely some dirty shit went down. There were a lot of reports of people getting their stock auto sold whenever it dipped and other shenanigans...
Everyone is curious about what happened because it’s likely some dirty shit went down. There were a lot of reports of people getting their stock auto sold whenever it dipped and other shenanigans like shares being lent out for sale even when you didn’t buy on margin. If true these are ways they were able to cover.
Unlikely we’ll ever see the right people go to jail for these things. They’ll pass some new laws with just the right loopholes for big firms to exploit while pushing out the little guys as they close the book saying they’ve made “new protections” for investors.
I just read the other day about a financial product offered here in Germany. For risk averse people who still want to grab them stock gains. They advertise it as "we cap your gains at 2.8%/month...
They’ll pass some new laws with just the right loopholes for big firms to exploit while pushing out the little guys as they close the book saying they’ve made “new protections” for investors.
I just read the other day about a financial product offered here in Germany. For risk averse people who still want to grab them stock gains. They advertise it as "we cap your gains at 2.8%/month (that'd be 30% per year, so quite good) but in return we cap your losses at -0% - no risk for you!". What they don't tell you is that they cap the losses on a yearly basis, but the gains on a monthly basis. Which means that e.g. this year, your strong months get capped to shit ( +20% per month is not unheard of) and then those go into your yearly average along with the weak months (-20% e.g.) and you get a fictional yearly loss that they then gracefully compensate. Even if the fund actually didn't lose value this year. That shit should be illegal. And frankly, I do believe it might be, it's just that it hasn't been challenged.
You got a link to this post, I'm curious about this point.
I'm also still kind of confused about the big GME fizzle. WSB recently had a post about how a lot of the shorts were basically not honored, from what I understand. Apparently, the hedge funds just didn't bother covering their positions when they should have?
You got a link to this post, I'm curious about this point.
So some context to start off, you have to remember Wall Street started off way before the digital era. So almost everything is running on legacy systems. We are so used to the 'instant world of...
So some context to start off, you have to remember Wall Street started off way before the digital era. So almost everything is running on legacy systems. We are so used to the 'instant world of the internet' that when things are not like that, they almost seem alien, wrong and shady.
Second Wall Street is a high trust environment. But run on the values of an 'ole boys club'. That is not to say that the trust isn't abused, misused and taken advantage of, just that if shit hits the fan you call up your lawyer and hammer out a compromise to settle things up. No one goes to jail, no one is put in physical discomfort, you just have to pay up. It is 'civilized'.
When you trade a stock, it is not instantaneous. It takes 2 days for the stock to arrive in your account. (This is the legacy systems, it is sometimes called T+2 because that is how long it takes to settle into your account). When a stock doesn't settle in that time frame, it is flagged as Failure To Deliver. This could be caused by the seller not having the shares, or the buyer not have the Cash on Hand for the purchase. This Failure to Deliver is reported to the SEC.
The report that is reference in r/wallstreetbets is a recurring FOIA request for the SEC that is published twice per month. It always has about a 15 day lag. It gives exact numbers on the 'failed to deliver' shares per day.
This next part is the leap that r/wallstreetbets is marking from 2 week old data. I do not believe it. Everything I see points to them covering and exiting the trade.
Apparently, the hedge funds just didn't bother covering their positions when they should have?
On doing research for your question, I came upon the SHO regulation
'Threshold Security List", which reported any stock where more than 0.5% of a company's total outstanding shares failed delivery for five consecutive days
I saw this posted as a comment in another thread, and thought it was interesting enough to warrant its own discussion.
For those who don't know, Keith Gill (Roaring Kitty on some channels, best known as DeepFuckingValue on Reddit) was arguably at the centre of the GameStop stock spike last month. He had been investing in and posting about it for well over a year at that point, and claims to have done so purely on the fundamentals, although he is being sued by those who suggest it was intentional manipulation.
As I said on that other thread, I'm partial to a good David and Goliath story, and he presents his case well:
He closes with:
I don't understand this. GameStop's been circling the drain for years and with the rise of digital downloads and the PS5 having a diskless version, I don't see things improving for them. 10-15 years from now I'd be surprised if physical media is common/preferred enough to warrant a store dedicated to selling games. To their credit they've tried to diversify with their purchase of ThinkGeek, Kongregate (browser gaming), and Impulse (PC gaming) over the years, but none of it has seemed to be enough.
And prior to this whole stock thing, GameStop was pretty well-hated among gamer communities. Being hounded for worthless preorders, terrible buy prices, and the influx of "geek" merch hasn't left many with warm/fuzzy feelings about GameStop. Or maybe I'm just out of touch, I don't know. I know I never go to GameStop unless I either absolutely have to or am near one and need to kill time.
Edit: And to be clear, I fully support what WSB did and I love this whole "sticking it to the man" business. But aside from that I really couldn't care less about GameStop. If they shut down tomorrow it would't disrupt my gaming habits at all and I wouldn't really miss anything about it.
I'm not that knowledgeable about GameStop, but I think the implication is a pivot away from their failing brick-and-mortar business model. I do know that the founder of Chewy took a large stake and board seat last year, which renewed investor confidence in the company. No clue whether that'll work out long-term, but there's at least some legitimate reason (even if it's an outside chance) for GameStop share price rising on the prospect that they could turn it around.
This guy just believes. Last checked he still had millions tied up in GME stock even after an initial sell off at the high.
As he says, he “likes the stock” and thinks the company can make some sort of turn-around with their new CEO and restructuring plan.
I lost about $200 when they killed the squeeze but I’m still holding just for fun.
Curious that they try to go after him. If you pile more shorts on an already waaay shorted stock, well, play stupid games, win stupid prizes. That's what you get from shorting. (I still wonder why short/long bets aren't being done in a horse race bet fashion: Two partners put money in a pot (held with a market provider) and they agree on a concrete condition that determines who gets it. That way, shorting doesn't affect prices and is capped in loss.
I'm also still kind of confused about the big GME fizzle. WSB recently had a post about how a lot of the shorts were basically not honored, from what I understand. Apparently, the hedge funds just didn't bother covering their positions when they should have? I don't know, can someone enlighten me?
I think they don’t do side bets because it actually would be regulated as gambling and would be illegal in most places. There is also something called a binary option that’s also a common scam and banned in most places.
Short squeezes could be prevented if the company itself were to sell more shares. That’s good for the company because they can raise more money by selling stock at a high price. So why didn’t Gamespot do it? It turns out that their financial quarter ended January 30th and they hadn’t released financial results yet. If the company or insiders sell stock without disclosing what they know, they could get into trouble with the SEC.
They could have sold stock if they had planned it in advance and set a fixed schedule for selling stock if it reached a certain price, but nobody knew this would happen.
It turns out that there are cleverer ways for the company to profit from this if they were thinking ahead, like selling calls and puts, and Matt Levine wrote about them in Wednesday’s column. Maybe more companies will do it now, if there is meme stock potential?
If you’re really interested in this stuff, I highly recommend subscribing to Matt Levine’s column. You can get it by email for free. I route to to my RSS reader.
Yeah right. But short selling is not gambling? Seems like the definition of gambling in financial markets needs to be fixed.
Short selling can be beneficial. They have an incentive to find out what’s wrong with a company and publicize it. If the rest of the market believes it, they profit, and the price of the stock better reflects the worth of the company. Future buyers of the stock benefit from not buying at an inflated price.
It’s similar to the role of whistleblowers and investigative journalism. The company may not like it, but making sure the public knows about bad news can be important. People don’t blame journalists as much for spreading bad news about a company, though, because the role of journalism is better understood.
It can also effectively be gambling, but it’s not clear how to prevent that without losing the socially beneficial aspects of it.
Essentially the same thing could be done by an owner of the stock, if they’re on the lookout for bad news and sell before anyone else realizes. Then publicize what you know, and you can even buy it again if you want.
There are also good reasons why the owners of an asset might want to hedge by short selling, though it looks like it doesn’t normally apply to stocks where you could just sell the stock instead.
Ohh, I know there's value to shorting a stock in the sense that it is invaluable in getting an "eventually approximately correct" valuation of a company. But... with your losses uncapped, that's still a gamble. Or at least, it would be just as much of a gamble as a horse-race style bet.
That said, maybe I'm not quite grasping the market mechanisms of short selling quite right. Short selling being essentially a self-fulfilling prophecy / positive feedback loop seems wrong to me, but I guess it's the mechanism that actually corrects the price as a result of a lot of short interest. So you'd have to keep that intact somehow, which a simple bet doesn't. Maybe if you mandate how the money in the pot is used or deposited?
Of course you still have the betting ratio as a point of contact with the confidence in the company, but that doesn't affect the stock price.
I think uncapped losses might be fixed with hedging, by buying calls that are far enough above the current price to be cheap? I think it's best left to professionals. Or, the company could fix it just by being prepared to sell more shares if the market seems to want them. (Possibly, there could be some regulation to require that, if there were a consensus that bubbles for no good reason are bad.)
The stock market as a whole tends to go up over time, so most people should be going with the trend rather than against it. To bet on it going down, you need to have a good idea of what the bad news is and when other investors will hear about it and believe you.
Everyone is curious about what happened because it’s likely some dirty shit went down. There were a lot of reports of people getting their stock auto sold whenever it dipped and other shenanigans like shares being lent out for sale even when you didn’t buy on margin. If true these are ways they were able to cover.
Unlikely we’ll ever see the right people go to jail for these things. They’ll pass some new laws with just the right loopholes for big firms to exploit while pushing out the little guys as they close the book saying they’ve made “new protections” for investors.
I just read the other day about a financial product offered here in Germany. For risk averse people who still want to grab them stock gains. They advertise it as "we cap your gains at 2.8%/month (that'd be 30% per year, so quite good) but in return we cap your losses at -0% - no risk for you!". What they don't tell you is that they cap the losses on a yearly basis, but the gains on a monthly basis. Which means that e.g. this year, your strong months get capped to shit ( +20% per month is not unheard of) and then those go into your yearly average along with the weak months (-20% e.g.) and you get a fictional yearly loss that they then gracefully compensate. Even if the fund actually didn't lose value this year. That shit should be illegal. And frankly, I do believe it might be, it's just that it hasn't been challenged.
You got a link to this post, I'm curious about this point.
Here - not sure I understood it correctly.
So some context to start off, you have to remember Wall Street started off way before the digital era. So almost everything is running on legacy systems. We are so used to the 'instant world of the internet' that when things are not like that, they almost seem alien, wrong and shady.
Second Wall Street is a high trust environment. But run on the values of an 'ole boys club'. That is not to say that the trust isn't abused, misused and taken advantage of, just that if shit hits the fan you call up your lawyer and hammer out a compromise to settle things up. No one goes to jail, no one is put in physical discomfort, you just have to pay up. It is 'civilized'.
When you trade a stock, it is not instantaneous. It takes 2 days for the stock to arrive in your account. (This is the legacy systems, it is sometimes called T+2 because that is how long it takes to settle into your account). When a stock doesn't settle in that time frame, it is flagged as Failure To Deliver. This could be caused by the seller not having the shares, or the buyer not have the Cash on Hand for the purchase. This Failure to Deliver is reported to the SEC.
The report that is reference in r/wallstreetbets is a recurring FOIA request for the SEC that is published twice per month. It always has about a 15 day lag. It gives exact numbers on the 'failed to deliver' shares per day.
This next part is the leap that r/wallstreetbets is marking from 2 week old data. I do not believe it. Everything I see points to them covering and exiting the trade.
On doing research for your question, I came upon the SHO regulation
And well $GME hasn't been on that list since 2/3/2021 (interestingly enough $AMC was never on it)
https://www.nyse.com/regulation/threshold-securities
Hell this website actually does a better job of explaining then I just did. I hope both help.
Where are the Shares?
sorry this ended up being way longer then I thought it would be
It’s amazing to me that after all this they try to blame a small private individual. It’s sick.