The power elite always get what they want. Right now there appear to be curbs on GME and AMC buy orders for TD Ameritrade and Schwab customers.
If you have to pull strings with your drinking buddy from Dartmouth to blow up a bunch of propertyless zoomers in order to prevent a margin call on the account you've leveraged to buy your house in the Hamptons, then that's what you're going to do.
Mainly because they're playing with their own money, while the hedgefunds are playing with House's Money.
Yes indeed. Ameritrade won't even let me exercise the calls I already own. It's ridiculous.
It isn't a bank run to be blocked for the sake of society, this is just a bunch of rich people paying the price for risking too much... Boils my blood so deeply.
The hardest part of gambling is not coming up with the big winning bet -- it's getting whatever counterparty to pay you once you've won. It's always been this way, in sports, in horses, and on Wall Street. People come up with all sorts of reasons to not pay you and you have to shape your strategy around this.
Aaron Brown talks about how being a successful gambler is not about a few high-stakes wins, or a super-consistent record. It's about winning the right fraction of bets, so that nobody suspects you're a winner.
Perhaps ironically, one of the central characters of that story, Michael Burry, is none too pleased at the current situation: https://www.bnnbloomberg.ca/michael-burry-calls-gamestop-ral...
EDIT: The Big Short, of course, not Moneyball.
Isn't that the truth. I know crypto is hated on here but just as an anecdote, I've traded on a lot of exchanges in the last few years and I almost wince whenever I make a really great trade that 5 or 10x's because as sure as the day is long inside of an hour my account will get frozen and I'll have to submit documentation, answer a bunch of questions, or whatever else to get my account unfrozen and access to the funds. It's almost like they're saying thanks for your business and we don't mind you getting lucky but don't get too lucky.
They are going to call the Reddit CEO and have wsb shut down under the threat of SEC enforcement actions.
Looks like the wsb discord is down.
IMHO why the fuck is shorting legal to begin with. Short insurance should be mandatory for short trading.
Obviously false: https://secsearch.sec.gov/search/docs?utf8=%E2%9C%93&affilia...
> 4chan and several other sites...
Scale dictates enforcement priorities, obviously. Like a lot of people, they don't deal with issues until they are large and impact the market. They are ABSOLUTELY going to intervene here. First with some immediate action, and later they'll craft a new rule to guide social media on stock advice being not allowed on their platforms (IMO).
> why the f** is shorting legal
Short selling rewards investors who believe that certain stocks are overvalued or that the company is covering up fraud. They helped bring Lehman Brothers down, as well as Enron, Wirecard, etc... In those instances, the shorts were instrumental in reverting stocks down to correct (sometimes zero) prices. Without them, bubbles would rise higher and poop much bigger. That sort of volatility destroys liquidity and confidence in the market.
> Short insurance should be mandatory for short trading.
There are naked short limits already, but yeah, this issue with GameStop should have those rules re-evaluated, because they obviously didn't work in this case.
Please don't fix this, it's perfect.
I wouldn't be so certain about this at all. Matt Levine has a good take on it: https://www.bloomberg.com/news/newsletters/2021-01-26/will-w...
What about Section 230?
I know the IRS is different from the SEC, Apples to Oranges. But like you said, they've neglected insider trading; it's probably for very similar reasons, because those being investigated just have too much power to take down. I'm sure the SEC will hammer these easy targets on WSB well before they even dare touch the Big Boys.
[1]https://www.nytimes.com/2019/05/03/sunday-review/tax-rich-ir...
[2]https://www.propublica.org/article/earned-income-tax-credit-...
There are many [1].
[1] https://secsearch.sec.gov/search/docs?utf8=%E2%9C%93&affilia...
> January 2016 through the end of the SEC fiscal year on September 30, 2017
If you look at the followup data, you can see both administrations are similar...
https://www.law.nyu.edu/sites/default/files/Fig3-SEEDNov2020...
...and then if you actually read my above link, you'd see numerous Insider Trading prosecutions (which was the original false claim made above).
source: https://www.npr.org/2020/08/14/901862355/under-trump-sec-enf...
So, I think Robinhood needs to get some competitors, who charge $1-2 per month, while enforcing data privacy.
This all feels like a classic Black Swan at work, and I guess the main question is if you believe that the long term expected return justifies such risky short sells.
[1]: https://www.jacobinmag.com/2021/01/trading-app-robinhood-inv...
The more they short sell, the more this can be pulled off again and again.
Which is good IMO, I'd be happy in a market where short selling and negativity in general just isn't a thing. If you aren't optimistic about a company just stay out.
I'm struggling to even understand what a market with "no negativity" means. We want to evaluate firms with a critical eye. If they are mis-valued, that serves no one.
Just imagine basically... every single other market. The price of goods at Walmart is not based on your bet on supply and demand.
If there are more buyers than sellers, the price goes up. If there are more sellers than buyers, the price goes down. If a business wants to raise money by issuing new shares, supply and demand will dictate the price.
The market doesn't need uninvested third parties sitting outside the ring gambling on the supply and demand outcome in order to set a price.
However, we live in this hyper-securitized world, where every part of the economic fabric has bets for and against, with insurance, leverage and information asymmetry baked in.
The only way to "discover" price is to provide instruments that provide "gravity" for both upward and downward price movements. The lack of supply on it's own is not enough, especially when malicious actors are pushing on the supply and demand levers.
This is a specious argument. You literally could go out, borrow your friend's crate of 10,000 bananas, sell them on the open market, then wait for the price of bananas to crash, and then buy them back (maybe even the same crate!) and give them back to your friend, plus whatever the banana margin costs. Effectively, if you were to do this at scale, you would directly be influencing the price of goods at Walmart. Mechanically, this isn't how it works, and I don't think there are banana futures and options, but thinking that all derivatives activity is speculation is simply naïve.
On the GameStop excitement, all I have to say is...
"Apes, together.. strong."
Sometimes bad things happen, but you can be sure we'd have none of the niceties of modern society without a derivatives-based economy.
Immediate cash just has a ceiling for what it's capable of supporting.
To anyone in the working population it must seem like an instrument designed to keep the pressure on and not serve general society or those providing actual tangible things of value to the market, like goods and (non-financial) services.
I actually tend to agree but it's pointless to battle the market's cold logic (which often does make sense to me from what little I know) or existing power structures.
Solutions/counterforces need to come from society and civil institutions. If those are weak, gotta fix that first and the market would depict a more equitable society without prejudice. It's the same old rich vs poor repainted with complicated terminology and systems, really.
Another thing to improve would be transparency and education about what's going on in finance like with personal accounts of people working there for instance, making it less of a stranger and showing some of its internal logic and the things it does well or not so much.
Hard disagree here. Sometimes mis-valuing firms serves a LOT of people. There are many firms who could create value if only they had more capital to work with. As an example, it's very possible that a company hard hit by COVID could recover if they got fresh capital and used it to explore new business models that are quarantine-friendly. I'm all for kicking out non-believers from being involved in their equities in any way.
You can't short sell most early stage startups. If you don't believe in them you just don't invest in them. It's that simple.
As for companies who do bad things, like laundering money or misusing funds, we don't need to short their stock, we need to take them to court and get them punished.
You know which firms are really mis-valued? Hedge funds. They sit in armchairs in high rises on Wall Street and do nothing for me.
They are running to the ground company that may survive with a fresh injection of capital, and destroying company that suddenly cannot raise more capital or have no more collateral for a loan.
Moreover they are this hedge fund are manipulating information to the level of a troll farm. I was a shareholder of AMD when they where starting to release the Zen architecture. Every other week, they were sending report of "problems" with the new architecture, or even basic feature behaving normally. Hedging is ok, but betting as they do is not. And when they get burned I celebrate!
Those don’t need to be misvalued to get capital, they just need to be properly valued.
In fact if they cannot get the capital it’s because of misvaluation! And other misvalued firms that will destroy value get that capital instead.
I'm not sure the world would have been a worse place for it to have been profitable to point out the failings of say, Theranos.
And the unlimited downside means that shorting startups that are merely unlikely to succeed wouldn't be worth the effort.
Shorting public companies that can survive COVID perfectly well by raising additional funds would be a terrible strategy too: their ability to raise funds won't really be dependent on their share price (they'll be raising debt funding instead) but every time they find a lender the share price will rebound.
Scams can be uncovered by CUSTOMERS and plenty of other people than short sellers, and I don't think overvalued equities is actually a problem. Many times overvalued equities leads to faster adoption of EVs and solar and better GPUs and other nice things, which are more important to my personal life than maintaining the sanctity of capitalism.
The irony here is that you believe the market is a mockery which most of the time it isnt but at times it can be irrational. This is clearly one of those times....as an investment professional.....I look at this and see the irrationality of the price which is not underpinned by cash flow or a fair valuation close to the price...which is called fundamental investing and not trading like what is happening here.
Were people in the financial services worried about retail investors when Melvin was shorting GME into the ground at $5 a share? Intentional manipulation to quickly bankrupt a company. How about with the 2000s derivatives bubble?
The only thing they are worried about is that they are getting the shitty other side of the game they made for the first time.
Some people with in a group who hold a view does not mean the entire group holds that view.
In this game, I believe retail investors feel like they are winning now but ultimately many will lose money when the price comes down. In my view the price is not sustainable....
obviously its not sustainable, we are entering a short squeeze. But capping at $4 a share shouldn't have been either, I think $60-$80 is a really reasonable assessment, it will spike, and rightly so, as the too greedy naked short sellers get screwed over and forced to cover their positions
On GME, I have read r/WSB and the most of the posts/comments are emotional in terms of reasoning. When I’ve lost money investing it has been because I made decisions based on emotions. Often I wanted something to be true and I wasn’t able to face up to reality.
I believe short selling has a place in the market if done correctly. Don’t get me wrong, I’m against market manipulation. the buying or selling of shares by rational parties allows for true price/value discovery. My fear for WSB retail investors is that they are not rational and eventually the price of GME will come crashing down to a more realistic level in line with its future prospects and cash flow/earnings yield.
Under all the WSB bravado, I believe there is greed in that they all want to make big bucks. In that sense they are no different to the hedge funds. It’s really many small greedy fish vs a few large greedy fish....who will win? .... I’d rather avoid this fight and play a game where I’m more confident of winning.
They they don’t give a single fuck about retail investors.
(Outside of PR initiatives of course)
Yeah, I agree. I should have worded it more like that.
After that, if people hang around, sure they'll likely lose money if they bought at the top, but until those big positions close, there's money to be made.
The main takeaway from this incident is that margin-call-constrained short selling is even more dangerous than previously understood.
Yea, it does seem largely priced in, but perhaps not completely. If share price is $60 in 1 year, the ROI on that contract would be 9% -- so slightly better than what you'd reasonably expect an index fund to return. A $60 share price is higher than GME's all-time high prior this fiasco.
It is not a trade I would make.
Pretty sure that was about a century ago and resulted in the Great Depression.
I don't think the solution to the crock that has been going on is to "do it back". Setting one or two hedge funds back a year or so, or even to close completely, isn't going to do anything resembling justice.
It starts to look more and more like just more pigs rolling around in the mud together, if you ask me (saying nothing of the collateral damage along the way).
A fine sight better than 1789
High Frequency trading is actually GOOD for retail investors because it reduces spreads and increases liquidity.
A "law" that allows you a merely pay a fine isn't a law, its a revenue-generating procedure.
Murder is illegal. You can't pay $500,000 to the authorities and then go on about your business.
For a law to have any weight, you have to be inconvenienced regardless of your financial status.
This is not a logical sentence. They are obviously getting fined because it's illegal. The traders involved are also terminated, fyi.
All banks are required to submit automated reports on Front Running detection algorithms daily to the regulators. Every trade is evaluated by the compliance systems.
If you think the fines are not big enough or that the algorithms are missing things, then make that more logical argument.
Stay away from hyperbole because it discredits you.
With crimes like these, it is nearly definitional.
It is trivial to put a price on the value of an action like this; if the fine for the action is less than it grosses, it is just a tax.
And not just the actions regulators catch, but the others too.
do { new Crimes() } while ( fine(Crimes.detected) < profit(Crimes.all) )It's illegal by definition. But since they can pay a fine for a net gain, you can say that they legally profit from doing something illegal.
Obviously. Do you think the SEC is full of morons?
The $3 billion in fines Wells Fargo paid versus the multiple billions it made from 2002-2015. The bank has almost $2 trillion in assets as of 2020.
> Do you think the SEC is full of morons?
No, worse. Cowards. Entirely too many see the SEC as a pathway to a high-paying job on Wall Street. You learn the ins and outs of compliance and go from a GS-8 - GS-13 making $70,000 - $150,000 a year, to making $1 million a year helping these banks, hedge funds, and other investors sidestep regulations by the most narrow of line-toeing.
This had ZERO to do with Front Running.
The whole thing is rigged.
Front Running is when you receive an order from a large client and you yourself trade in the same stock before them, and then sell the stock to them, or allow the spread to narrow and pocket the difference.
High frequency trading is not front running unless it illegally takes data from the client trading desk - which would be both obvious and highly illegal.
It's only referred that may by people who have no idea what they're talking about.
Front running isn't about "beating" anyone to anything. It's about stealing non-public information about an actor's intent to trade and using it to make trades before that information becomes public, and specifically before that trade executes. It's the theft bit which is the reason it's illegal.
What HFT firms are doing is simply rushing to execute as fast as possible on generally available information. They're not acting on information that's not legally available to everyone else, because that would be illegal misuse of that information. This sort of thing is pretty easy to detect, and the SEC comes down pretty hard on it.
In my eyes those hedge funds never did anything good for humanity, and I too am loving every minute of this and how some of the big money is being siphoned into the hands of people that actually need it more.
This is such hilariously clueless nonsense, the fact that it's expressed with such smug confidence and upvoted to the top of the thread is really emblematic of HN's complete ignorance of any topic outside of programming.
When retail volume goes up there a plenty of "professionals" (brokerages, market makers) that make a killing off executing the retail flow. I assure you the industry is loving the fact that everyone and their cat is FOMOing into trying to day-trade on Robinhood. If you really want to stick it to Wall Street put all your money into a low-fee index fund.
It’s because of their sincere concern for retail, obviously.
But seriously, what did the White House and SEC do?
It's called 15USC78i "Manipulation of security prices" [1]. It is unlawful to transact just for the purpose of forcing others to transact. Going through a fund's 13F filings, and deliberately driving up the prices of put options they sold should fall squarely into that area. And there are more than enough posts on reddit of people stating that this is exactly what they are doing. At the scale this is happening now, there is no doubt that there are going to be legal repercussions.
Also - what do you think short sellers like Citron do all the time. Put out fake reports about companies to make money off their short positions.
The sentiment on the trade is eff those short sellers and their sketchy tactics.
There are entire threads and Discord channels dedicated to coordinating this. It will be extremely difficult to convince a court that there is no coordination or market manipulation, especially when there are people who are spelling that fact out. And reddit have all of their IP addresses.
> Also - what do you think short sellers like Citron do all the time. Put out fake reports about companies to make money off their short positions.
If you can prove that those allegations are indeed fake, then they can be held liable for that. But Citron's influence stems from the fact that they have published a large number of reports that were indeed correct, e.g. Valiant.
> The sentiment on the trade is eff those short sellers and their sketchy tactics.
What sketchy tactics? Expressing their view that a company like Gamestop is not worth very much on account of their outdated business model that relies on physical retail in a sector that has been going fully digital for the last 15 years?
[0]: too complicated to get into here, but basically my interpretation of the law is that you need to be making trades that you intend to cancel or revert immediately in order for it to apply to you, and what these traders are doing is instead speculating on the price going up and hoping to cause the shorts to liquidate their positions, thus further driving the price up. Not spoofing to create fake demand.
Reddit has stayed true to their word of maintaining the old design, and it's free of the dark patterns in the redesign. Go to https://old.reddit.com/register and just leave the email field blank or if you use the pop-up menu (the thing you get when you click login/register in the top right of the old design), you can click skip on the first screen where it just asks you for your email.
Reddit complies with FBI requests to hand over account data.
So while, yeah fun to stick it to the wealthy elite, I feel the law of unintended consequences is going to rear it's head much like crash of the housing market in 2007.
I think it's deeper. if they get forced by a margin call to purchase stock people that shorted without a lend will quickly come under scrutiny from sec, which will be quite interested to know which broker(s) allowed to reach this ridiculous float volume without securing the shares
they're not just covering their losses, whose whom will remain with uncovered short can get fines and or jail time.
The result is that the company doesn't need to give a damn about long-term stability, they can focus on short-term gains for a carousel of owners that each demands a quick return and cash out. As a bonus, the 401k system forces the government to bow to the whim of the stock market because every citizen is now clinging for dear life onto the same mechanism the owning class use to grow their hoards.
It's a win-win-win for the rich:
* they don't need to pay retirees
* they can squeeze more money out of companies at the expense of customers, workers, future owners, and the environment
* they can get leverage over the entire society by credibly threatening the lives of millions of retirees dependent on their table scraps
And in the rare event that that happens, pensions in the US are required to hold pension insurance, which continues to pay benefits when a pension loses income and their coffers run dry.
My grandpa is still getting pension checks of around 40k/yr from the Pullman Car Company, which went bankrupt in 1968. Pensions are, very literally, guaranteed retirement income.
Yes, they can.
> In a bankrupcy, pension funds get first dibs on all company assets, before lenders, shareholders, or any other interested party.
No, they aren't; funds already in the pension fund are separate and can't be taken in bankruptcy; wages owed have the kind of high priority claim you reference, but earned pension obligations do not. A bill was put forward in Congress in 2019 to alter this for Chapter 11 bankruptcies (to eliminate the “strategic bankruptcy to cut pension contributions” practice that explored the fact that it is not true), but died.
Plans are typically terminated by a Chapter 7 bankruptcy, and can be terminated or modified in a Chapter 11.
> And in the rare event that that happens, pensions in the US are required to hold pension insurance, which continues to pay benefits when a pension loses income and their coffers run dry.
Aside from the fact that the PBGC multiemployer fund is itself underfunded, PBGC has an age-based maximum benefit guarantee, which will often be significantly lower than what a pensioner would have been entitled to under their original pension plan:
https://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum...
> Pensions are, very literally, guaranteed retirement income.
That's a nice thought, but it's not nearly as true as you make it out to be.
The same can be the case for 401(k)s and similar systems. And I say that living in Sweden where the majority of my pension will consist of funds that I can manage myself the split, so I should believe in this system for my own sake.
How do you think the recession happened? It wasn't retail investors gambling on the housing market.
The gravedigger always has a job, and it's plenty honest. No need to direct misdirect your ire at the killer towards the gravedigger for the existence of the corpse.
If Wall St can gamble and cause a global financial crisis, I see no reason why "retail" traders can't fuck around on Robinhood and cause some meme stocks to explode.
I think what is really going on here is that the "professionals" are bothered that the "idiots on WSB" are making a mockery of the market. Make no mistake, the market is already a mockery, what's happening now is that the public is finding out.