this is exactly it. people say the market is a melt up.. another bubble. but i think that's wrong.

It's like the show Billions, actual wallstreet does what wsb is doing ALL THE TIME. You make money when someone else loses money, it's simple.

Except this time, the money isn't staying in the fraternity, it's being distributed out to the common folks.

Can't have that it seems.

Common folks who get in late in the bubble will be the ones who will suffer. This populist mindset that you’re somehow sticking it to big banks or something by paying for trading is funny.

In this case they have actually a pretty interesting goal and motivation. They chose GME because it had a short ratio of 138%. Basically, big hedge funds were betting on the downfall and demise of this stock excessively.

What WSB daytraders are trying to do is to bleed out these hedge funds by buying in and holding. The stock doesn't even have to increase and the damage to the big hedge funds is already happening, see the situation that Melvin Capital is in. To those who participate it is a david vs. goliath situation.

The thing is, what they are trying to do is not that dumb and actually quite interesting, but they won't get anywhere by remaining "civil". They need this to spread and be on the frontpage of Reddit constantly. Negative or positive press helps, because more regular people want to participate if they hear about it.

I think that this will go down in history. Constant timeouts, organised selling at certain intervals, unnatural spikes, we've yet to hear about the shady stuff that keeps this stock from surging even faster considering the current "virality".

It's not zero-sum. Central banks are printing money. People put their gov checks into ETFs. Sure, eventually there'll be a reckoning.

Melvin Capital just got bailed out.

And anyone who bought shares at peak yesterday is up 50% today - those who bought _any_ Call option are up much, much more

I can assure you that most folks on wall street (speaking about most of the multi-manager hedge funds specifically) have significantly tighter risk limits than anyone on WSB. Frequently drawdowns of even 5-10% can get your sized reduce or get you fired. The YOLO attitude that WSB has is closer to the film "the wolf of wall street" than what actually happens.

While Billions is one of the more realistic shows about finance, it is far from accurate enough to be compared to real life.

So if everyone in Wall Street have significantly tighter risk can you explain the risk linked to the short position taken by Melvin Capital on GME? How many "Wall Street" were burned by taking high bet that went wrong going around their internal audit?

Oh yeah? Risk limits so tight that one of largest hedge funds needed a 2.75 billion bailout to cover their losses on a single short position? https://www.wsj.com/articles/citadel-point72-to-invest-2-75-...

There's a significant difference in the willingness to enact change between the Legislative branch and the Executive branch.

Where Congress (legislative branch) has been unwilling to pass any new regulations upon social media, the SEC (executive branch) is going to shut down these sorts of forums when they become disruptive.

Having worked in this field, while the SEC can sometimes be slow to act, the fact that it made the front page of the WSJ, it is only a matter of time before that hammer comes down.

...and Reddit isn't going to fight for this form (or any form) of Free Speech.

I mean it's just a small forum, can they really have the same amount of influence on the market than a hedge fund or a market maker? What does the SEC care about a bunch of trolls on the internet?

Coordinating with the goal of market manipulation (basically buy/sell/short/pump-and-dump/etc cartels or other) is illegal as far as I know. Hence why the guys who made a lot of money on the negative oil trades are staying very quiet.

That's not really true. So long as stock indexes generally move up, everyone can make money. The battle is over who makes more and more quickly. I'm a passive investor just plowing savings in index funds and making like 12% a year. All the mechanics of day trading vs working for a bank are pretty similar, but the difference is scale. And the ability to hedge bets.

Indices are going up because people are putting money into the market(s), and governments (legislatures and central banks) are printing money in order to prevent market collapse, because that'd mean liquidation events, meaning every mark-to-market asset will suddenly worth nothing, every company will become toxic overnight, banks will (have to) stop funding companies, companies will cut costs (fire everybody, stop every kind of project/investment/capex), and everyone will try to sell things to make cash to pay back debt, which can start a deflation spiral.

The asset bubble is an unintended consequence, it's the "lesser evil". But it's again the rich get richer.

Exactly right. It’s all fun and games until the wrong firm loses big enough then the SEC hammer will come down.

>until the wrong firm loses big enough

Revolving door doing what it does best.

Psychology has always been part of the market, and this event can be explained by Soros' theory of reflexivity - that the stock market leads the fundementals, not the other way around. Once you forgo the efficient market hypothesis (and it's never been more obvious how incorrect this is), this event makes more sense. Same as Tesla, momentum is a psychological event lead by a positive feedback loop.

why do you need to forgo the efficient market hypothesis? The market as a whole takes into account the psychology of people as well, because peole participating in the market do so.

There's nothing efficient or concrete about psychology.

Not a single person who believed in the efficient market hypothesis ever made a lot of money.

I think this is more like beanie babies all over again. Except now that its easier to trade its happening in stocks.

Populism of a companies stock doesnt really change the performance of that company. GME will implode eventually and the newest suckers or WSB will be left holding the bag.

You're not quite getting what I'm saying. A bubble like beanie babies and dutch tulips is still a logical consequence of seeking financial gain. A bubble is a game of chicken. It is about knowing when to jump off. This is a new phenomena. It is no longer about just making the bull thesis or the bear thesis. It is now persuasive to make the "this will fuck over a hedge fund manager" thesis. We need to add an entirely new animal to the metaphor.

Strong vote for this new animal being Badger. Bull vs Bear vs Badger

I dont understand why you consider this to be a different phenomena than a bubble.

Its still a bubble, people are still doing it for financial gain. Its just marketed as "doing this will screw hedge fund managers" to generate more hype.

Its not a new phenomena, its just a new marketing strategy.

Traders urging others to "hold the line" and to not sell is new marketing, and if everyone believes in it, why isn't it new phenomenon?

https://twitter.com/HenryEnglert/status/1353773947804917760/...

It sounds like new regulation before we begin 'pricing it in'

But I love the thoughts and agree with the analysis

"Drain the swamp" == "this will fuck over a hedge fund manager".

This is silly. If there was no possibility for financial gain, nobody would be investing in GME.

No, I have friends who have put thousands on the line who are happy to lose it if it bankrupts Melvin Capital.

Your friends are lying through their teeth.

Do you honestly believe these people aren't motivated by profit, when they are clearly entering long positions with the intention of driving up GME's price? It's straight up doublespeak.

A $1000 ticket to punch a 0.1% right in the balls is a worthy trade for many. People donate to political parties just to fuck the other party.

Except its not just a $1000 ticket to punch a 0.1%. They also believe the ticket will be worth $10,000 afterwards.

Are you speaking for yourself or-?

I threw in 1k with the hope that it will cost some billionaires a lot of money. I'm ready to lose it. Shorts already lost 100+ billion this month.

You fell for the marketing. Billionaires were on both sides. The bulk of the damage is done to uneducated vulnerable retail investors.

So now you're out $1000. You contributed to a scheme which ironically was a net loss for retail. If this were really not about making a profit, you'd see people donating their gains or buying shares for other people, and nobody would be cashing out. Are you still in the trade? What are you going to do with your gain/loss?

If you look at WSB's posts though, it's nothing like beanie babies. People don't think this is going to go on forever. Posts where people lost a ton routinely make it to the top.

If anything, WSB celebrates the crazy volatility that can occur with the stocks of interest, and with it the chance to either win big or lose big.

Now, r/bitcoin on the other hand...

Except that valuations alone can be decisive in shaping the fate of companies

// What does this mean for GameStop? Because of traders’ bullish sentiment, a previously failing company is now in the position where it can leverage the overnight increase in value to make real, substantive changes to its business. GameStop can pay off debt through the issuance of new shares or make strategic acquisitions using its newly-valuable shares. [9] A struggling company could become solid simply not because of a change in the underlying business, but because investors decided it should be more valuable. //

Yeah it opens up options, but the likelihood of a turn around is still low IMO. Its the same decision makers as before.

The difference is that our economy wasn't held together by beanie babies. A stock market crash has very wide ranging effects, not only to bankers but also retirees, blue collar workers, homeowners, new graduates and basically everyone else.

> A stock market crash has very wide ranging effects, not only to bankers but also retirees, blue collar workers, homeowners, new graduates and basically everyone else.

only has such an effect if those people who invested in the stock market has more than their risk tolerance invested.

Then what do you invest in? P/E ratios are astronimical across the board. It's been 85 years since Keynes wrote about his beauty contest. I think he might be right.

WSB are the old stock forums / discussion boards on steroids. Back in the day, people used to pump stocks on these smaller discussion boards. Difference is, WSB has 10^6 more members. And everyone can trade via Robinhood these days.

In fact, Citadel Securities has gained a lot money from the $GME event.

Citadel Securities pays tens of millions of dollars for Robinhood order flow.

Is Citadel really making a lot of money from the GME squeeze?

I know they rebate Robinhood for order flow (I've even commented about it [1]), but I thought events like this were hard for MM firms to capitalize on because of the unpredictable nature of the price action and the high cost of hedging (there are no shorts available, how do you even delta hedge in that situation?).

Am I missing something?

[1] https://news.ycombinator.com/item?id=25217794

It's very hard to miss the most actively traded option of the day.

Citadel is a market maker on the nyse... They can naked short GME.

I'm up 180% over the year. Peanuts compared to the WSB people, but I got there with my own intuition. I'm looking into food and entertainment for my next picks. I think the populace will need them over the next year before a general return to the before times mid 2022. We'll see.

> general return to the before times mid 2022

But will this happen? Massive inflation post-Covid isn't really that far fetched. I think there will be no return to the beforeworld.

Every action has an equal and opposite reaction. While the Covid deaths have been incredibly tragic, the 330 of 333 million Americans that survive, and that's assuming the virus and it's variants take 2.5 million more lives before its done with us, will be eager for a return to normalcy, if not outright partying like it's 1999. The play I tried to make last night and wasn't able to get filled today, Bloomin Brands, owner of Outback Steakhouse and other mainstream restaurants that can survive this down turn no matter how long it lasts, is up 1400% since I under bid on that strike and expiry date at 2am this morning. I'm not saying your prediction is guaranteed wrong, but I'm willing to bet against it, and 86% of my call picks are green at the moment, whatever the probability of that might be. The only one that isn't, China Unicom (CHU), essentially got delisted by executive order because the last administration didn't want Americans being able to invest in firms with ties to China's military, such as the largest provider of cell phone service for 1.4 billion people. The pandemic has been an incredible tragedy for so many human beings. I'm trying to position myself to be able to do something about it when the next one comes, which it inevitably will, as the universe trends towards entropy. But I won't be able to do it without capital, so it's worth the risk. Worst case scenario, I'm still a one man consulting shop serving the firms that keep the water running. Barring that, I guess we're hunting and gathering again, and I'm pretty good with a bow. Hopefully it doesn't come to that, and we can all look back at these present days like one of many possible filters we managed to survive on our way to colonizing the stars. That's the future I'd rather plan for, anyway. Albeit while hedging my bets.

Is it worthwhile to buy long-term calls and puts then? Like 6-9 months out?

LEAPS(Long Term Equity Anticipation Securities) calls, 1-2 years out in something too important to fail at a current all time low that the big shorters are ganged-up against is the value bet to look for. My 1/20/23 $3 AMC LEAPS calls that I've been accumulating since the pandemic struck long before wall street bets took notice are up 227% today as of 10 seconds ago for the day, and 822% overall. Granted, I'm benefiting from the commotion going on, but I'm holding until the end, because I believe in the long term fundamentals of AMC and hope to be positioned to exercise rather than sell by the time expiry arrives. (Edit: wording.)

If this helps anyone: I bought options for Palantir because whats his face is a vampire. I will continue my vampire based trading ~~strategy~~ gambling, so all CEO better start stealing blood from teenagers if they want my money.

I bet on housing because betting against housing is betting that politicians will stop catering to homeowners for the benefit of wider productivity and social mobility. I'm willing to incorporate your vampire take into my greater bastard theory.

Of course knowledgeable players are factoring in populism. Why do think Robintrack was shut down for example?

i think it’s just cheap rationalizations and emotional involvement in the trade. they are pretending melvin capital is the root of all evil.

just like they harassed andrew left and attacked his family just for him saying he disagrees with the stock