The problem for GME is that it will crash regardless if there's stock market crash or not. When a market crash happens you're much better off holding value stocks of solid companies.

As of mr. DFV, I'm sure he'd like to close his position at the current price. But my guess is that he prefers to hold for his reputation. Since he already guaranteed more money than he would ever need, it's not a bad decision. The other option is that he believes it's going climb even more, which is possible. But don't assume people hold for any reason other than making money. Once the squeeze is over it will fall like dominoes.

> But don't assume people hold for any reason other than making money

This is true for every market participant, the fun situation here is that the short squeezers know that what they are doing is risky, but they don't care, because it's fun to take risks, and anyways they have better chances than buying lottery or going to casino.

That's what makes it an infinite short. Short makes complete sense every dollar it goes up it makes more sense. Timing it is one hell of a dice roll.

Why do you think a crash of GME would cause a full blown crash of the stock market?

I don't think that.

You replied to a comment discussing making use of GME as an insurance against a market crash related to this possible short squeeze.

If the market doesn't crash then GME can go to $0, as it won't be needed for the insurance purpose anymore.

Still waiting for TSLA to fall.

GME is absolutely going to crash and everyone knows it. There was a mod post just today reminding everyone to be ready. The stock is worth $10-20 on it's merits and that's where it will land. We just don't know when. The chance of this as a contagion that brings down indexes seems very unlikely.

When everyone is convinced X is going to happen, it tends to not happen, or at least not in the way it is expected by the consensus.

People said Tesla would crash when Tesla doubled a year ago from $200 to $400, and then to $900, etc., and then it did a 5-1 split, etc. Yes it did crash 20% in August, but from a price that was so high that it was still considerably higher than it was last year when the pundits were warning of a bubble.

Few foresaw the S&P 500 would surge 70% off the lows from Covid and make new highs later that year. The pundit consensus what that that it would be a bad, deep, long bear market.

Same for the post-Covid tech boom, which few foresaw too.

GME is not crashing as everyone is expected it to, even with Robinhood restricting buys. It is up huge today. I think this has a lot more to run, IMHO. More shorts will get squeezed out next week.

Like Tesla, GME may not really end badly at all and just keep going up and up.

I own some GME and not worried. Yeah, it is not that much of my total net worth, but I have found that heeding warnings of bubbles usually just means selling too soon.

If GME does crash, there will be no systemic risk or anything like that. It will be an isolated event.

Completely different. Tesla soared on its positive outlook. They have strong sales and have managed to maintain an insurmountable lead in the EV market. Their surge is due to enthusiasm for their business. Gamestop was clinging to life a few months. The rally from $4 to $15 was optimism about their leadership. The rally from $15 to $350 was 100% due to the short squeeze. And the squeeze will most definitely play out and be over pretty soon.

Is your money where your mouth is? Opinions are cheap and if I've learned something in my career as a trader, it's that anything can happen

“Merits”

The stock is worth what people think it’s worth. If people keep buying and holding, then it is worth what it is worth.

That might be true in the short term, but can you point to the stock of a company has continued to lose money over decades still maintained a very high stock price?

I think this whole episode might cause the next market sell-off:

(1) fund degrossing as the initial driver - already happening

(2) everyone is being reminded of 99/00 mania

(3) uncertain regulatory environment surrounding trading

(4) worries of systemic risks created by bubble

GME going higher is likely to trigger it more than it dropping off right now

I think there's also evidence that the "short bubble" might be more widespread than we think. I'm not entirely convinced that Melvin was able to unwind their 50mln short position and drive the short interest down on Ortex (they're the best thing we've got in terms of guessing how much true short interest there is, because exchanges only report once or twice a month on a week or more delay) by covering. Equally likely in my mind is that Citadel bought Melvin's book thinking that it had a better plan than unwinding the short just yet. Instead, "hide" the short someplace that Ortex isn't looking and that the exchanges won't report on for another 3 weeks. That would be their order flow with a company they are in a unique position with - Robinhood - where lots of the buy orders are coming from. If you were Citadel and a little unscrupulous, you could immediately route every sell order on RH to the market but keep the buy orders for yourself. This positions you as short to Robinhood users, and you get to send those sold shares back to the book you bought from Melvin to unwind that short. So, the short does still exist, but now it's not visible to outside brokers. Outside brokers, when Ortex calls them up, will say, no no, Melvin covered a bunch today and short interest actually went down! So Ortex publishes a lower SI number. But, that short didn't actually just disappear. Either Citadel, or Robinhood, now are short to their customers.

Are there other companies that have "hidden" short interest in this way? Are some of the big unexplained market moves in companies without short interest some of these "hidden" shorts unwinding before everyone finds out?

>Equally likely in my mind is that Citadel bought Melvin's book thinking that it had a better plan than unwinding the short just yet. Instead, "hide" the short someplace that Ortex isn't looking and that the exchanges won't report on for another 3 weeks. That would be their order flow with a company they are in a unique position with - Robinhood - where lots of the buy orders are coming from. If you were Citadel and a little unscrupulous, you could immediately route every sell order on RH to the market but keep the buy orders for yourself. This positions you as short to Robinhood users, and you get to send those sold shares back to the book you bought from Melvin to unwind that short. So, the short does still exist, but now it's not visible to outside brokers. Outside brokers, when Ortex calls them up, will say, no no, Melvin covered a bunch today and short interest actually went down!

Is that legal? Manipulating report agencies to manipulate the value of a stock?

There are multiple Congressmembers interested in this situation. That could be a very dangerous game.

Probably a little bit illegal (like, hundreds of dollars of fines per millions of dollars of infringement) and this is pure speculation.

But as I understand it, the Market Makers like Citadel are only required to be market neutral in terms of their statistical exposure at the end of the day, and don't need to report their long/short position. On the other hand, brokers aren't required to be delta neutral, but do report their long/short position. You can probably hide a lot of these shorts in this baby. I guess this also doesn't count short interest that's in bespoke one-off derivatives that hedge funds and investment banks trade between themselves.

Also, nobody has to tell Ortex what their short interest is. The only true numbers we can sort of trust are the twice monthly delayed reports. Ortex is just a third party service provider that goes around calling brokerages and doing some stats on the market to see how they think the short interest has changed.

So, I can see it being pretty low risk even if you do get caught.

I think (with very low probability, but it is an explanation) this could also be why we're seeing random 100% spikes in unrelated stocks that claim to have approximately 0% short interest. Some hedge fund somewhere is in some sort of hidden short, getting margin called, or nervous, or just de-risking and getting out of an off the books short trade, causing a mini short squeeze. There are a couple companies with suspicious pops this week, and I'd be on the lookout for more of this activity on Monday. Could just be people getting out of high volatility positions though, or freeing up capital for other things. But that would be selling pressure, not buying. So, -\?/-

And now that we have a much more full picture of exactly what has been going on with the numbers of Failures to Deliver (since December), and better understanding of hedging strategies and income generating strategies (selling covered calls, buying protective calls with cash reserved for exercise), it appears that there isn't really any fraud here, no evidence of widespread naked shorting, no evidence of rolling of naked shorts in danger of hitting failure to deliver limits (which the SEC actually does actively pursue enforcement of and considers to be sham transactions).

My key takeaways here are that there was probably a little fraud (maybe someone found a bug in some broker that let them do some sort of infinite shares glitch), maybe a little rolling of shorts (but not by anyone big), and probably a lot of writing of covered calls by the likes of Fidelity and Blackrock as a way to get income generation while at the same time acting as a limit sell order (albeit one that you can't take down). Coupled with some early botched PR and celebrity pumping etc, and even my own speculation, this feels almost Q-like in it's explosive growth and conspiracy-theory oriented thinking.

After everything I've seen this week I think I actually have the highest faith I've had in a long time in our financial system.

All we need to wait for now is the shoeshine boy's tip and it'll be time to get out! See https://seekingalpha.com/instablog/661124-brijwanth/73895-hi... for a humorous variation on that classic theme.

> (1) fund degrossing as the initial driver - already happening

I saw a tweet that I cannot find right now, unfortunately. It showed that de-grossing M-W of this week was nearly at the same level as March of 2020.

What is fund degrossing?

Long short funds having to sell longs to cover losses on their shorts

Thanks!

GME is worth what a few dozen billion at its current valuation? How would that impact SPX, DJIA, etc.

It's at like $25B last I looked. The market cap of the S&P is $36T. The NYSE manages about $25T. So this is like 0.1%.

If short squeeze happens[0], the shorts will have to buy the shares back at whatever the price will be. If they go bankrupt the responsibility passes to the brokers and further upstream.

Of course it might not happen.

[0] https://news.ycombinator.com/item?id=25945253

> Well if a stock market crash triggered by this is realistic (which I agree is), doesn't it make sense to hold a bit of GME for insurance

What is the reasoning here? Are you under the impression GME wouldn't crash right alongside the market? This isn't BTC or gold we're talking about. It's just another stock.

Presumably the crash would occur after the GME price skyrockets and shorts (and then their brokers and clearing houses) go broke trying to close the short positions.

The insurance pays up if they buy your share.

Do you have another idea how it could end?

It could end by simply crashing without shorts going broke. There's not much reason to believe a larger short squeeze is forthcoming.

Why would that crash the entire stock market?

The theory I've seen is that there could be hidden systemic risks here. If GME tanks suddenly, there's some possibility that traders bailing out of their trades will take down Robinhood (who doesn't seem to be very healthy right now), and a major broker collapsing is never gonna be great for the market.

I share your skepticism that it would actually happen this way, but it seems at least somewhat plausible.

Robinhood are tiny on the brokerage stage. Important to retail, barely matter otherwise. That’s my understanding at least

That seems consistent with what I've read recently. Good news.

It's got nothing to do with Robinhood. If a hedge decides to cover the short so they don't have to admit defeat and go bankrupt, then the entire market goes down because they'll end up selling thousands of unrelated shares for their cover.

You've fallen victim to some common misinformation that's spreading. Multiple hedge funds have already been able to cover their shorts, and there's not much reason to believe this will change.

Not an endorsement but this was retweeted by Kai Ryssdal: https://twitter.com/TheStalwart/status/1355531873896824834

> Are you under the impression GME wouldn't crash right alongside the market?

Well ... yeah. Today it hasn't.

We all know why it hasn't. Do you really believe it will last forever? or even 6 months from now? People are trying to make money. Once the momentum slows down the big sell off will start and nobody would be able to stop it. Not DFV or even the biggest troll of all, mr. Elon Musk.

Forever is a long time. No, I do not believe it will last forever, or even six months.

I do believe it will last at least one more week, though, yeah. And I'm putting money where my mouth is.

The best part in all of this is that you're free to short it if you disagree. See where that leads you.

So you basically agree with me. You still wrote your last paragraph. That is because you're invested emotionally in this.

Never shorted a stock in my life. Not going to start now. I cannot predict when this will stop. Nither can you. What currently holds everything together is the unknown. People don't know who, when, and how the shorter s are going to close their positions. Once things will clear out I predict it's gonna be the beginning of the end.

Just to be clear. I don't think it will crash to nothing any time soon. It will keep trading much higher than what it was pre this saga. When I say crash I mean down around 70-80% from its current value of $330.

> if a stock market crash triggered by this is realistic

Honestly, I don't think it is and there would be more media attention if it was. The firms that are shorting GME only have something like $50 billion AUM. Lehman Bros was around $600 billion and was a lot more integral to the markets. The only real issue would be a lack of liquidity, which isn't going to cause a crash alone.

That seems like sound logic to me. GME has been a vortex this week sucking up value from the rest of the market. Seems smart for the next few days/week at least until we learn otherwise.

You can always place limit sell orders

Limit sell orders with this kind of volatility is not as safe as you might think. Just because you set a sell limit does not mean your trades will execute at that price.

A limit sell order guarantees the limit price or better. A Stop Loss triggers a market order (at any price available) once crossed to the downside.

Yes it does mean that, by definition

This isn't really the place for financial advice. Matt Levine does publish a newsletter that attempts to unpack the GameStop Reddit mania situation and what it means for the retail investors piling on.