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