Second, the narrative that Reddit drove the short squeeze is mostly a lie that has been repeated over and over again both because it's cute and because people want to believe they have significant power. In reality, many institutions also saw this coming, and when they saw the WallStreetBets subreddit getting ready to pump (yes they watch Reddit), they also piled on. They've mostly done it quietly so as to not disturb the convenient narrative that this is a David vs Goliath story, but really this was driven by big money. It's just a nice side effect that a lot of early retail investors have made a lot of money as well.
And yes, it is absolutely true that the end result of this will be retail investors getting slaughtered. Especially because of all the hype on WallStreetBets and elsewhere, there is a LOT of dumb money in the market who have no exit plan, and their lunch will get eaten when the large institutions exit at the top and trigger a GME free fall.
https://news.ycombinator.com/item?id=25970538
That said, both are poor responses to the righteous anger that people feel, and one of the comments on the first article gets it right:
> The tone is that of Jeb Bush lecturing Republicans on why they need to elect an establishment, responsible republican. In and of itself it might be true, but it not only falls on deaf ears, it actually reinforces why people were inclined not to do so in the first place.
It has been interesting to watch the WSB narrative shift over time. It's a real-time experiment that optimizes for the best messaging to convince casual Redditors to put their money into stocks in ways that benefit earlier WSB members.
At this point, they've convinced a lot of people that buying $GME at obviously inflated prices and never selling it is somehow an altruistic move to take down all of Wall Street that might also make them so rich they can retire early. Of course, it should be obvious that no one is going to get rich by never selling the stock, but that message gets buried among the memes.
It was fun to watch at first, but now it's just sad to watch so many people pour real money into something that won't generate the outcome they've been promised.
Also, vast majority of WSB users (at least up to the last few days) are buying GME not to profit (according to their own words).
And all these events obviously will leave a large mark on stock market and probably introduce some new regulations which is a good thing.
But also, the subreddit is trying to weaponize anger against Wall Street for the 2008 crisis into a generalized anger against all hedge funds and investment firms, regardless of whether these firms are actually guilty of anything. Melvin Capital didn't exist until 2014, but it doesn't matter. They're automatically guilty because they're a hedge fund. People on WSB are telling stories about how their families suffered in 2008 and therefore they are never going to sell their GME stock.
WSB mods are deleting posts advising against holding GME. There is a pretty concerted effort on the subreddit to get people to buy more GME and to hold. And the people that do so are going to be the ones holding the bag when the bubble ends.
If you're cynical, you might wonder if redditors are the "mark", and some of these posters are intentionally trying to screw them out of their money. Regardless, the idea that this specifically hurts the people that caused the financial crisis is unsubstantiated.
Anyone can take out a short position. It's only marginally more complicated than buying a stock. Plenty of retail investors are taking short positions, too.
More importantly, the idea that short interest only goes down is a mistake. Anyone, retail or institutional, can close out a short position and re-open a new short position at a higher price. Total short interest remains unchanged, even though earlier shorts have been closed out.
This reminds me of a poker analogy: if you sit at a table and do not recognize the idiot at the table, it's you
On the surface, yes, but they've also been fed a lot of misinformation about how they're more likely to get rich than to lose it all. They think the odds are stacked in their favor, but that's definitely not true for the late entrants.
> Also, vast majority of WSB users (at least up to the last few days) are buying GME not to profit (according to their own words).
WSB isn't a democratic subreddit. They will downvote or remove any posts or comments that don't support the pump. They upvote any post or comment that encourages people to buy stocks they own.
It's a pump group. They gain financially by pumping the stock. They'll gladly upvote any narrative that encourages more people to pump the stock.
> And all these events obviously will leave a large mark on stock market and probably introduce some new regulations which is a good thing.
This topic keeps coming up, and I keep asking people: What regulations do you want? Or expect? Specifically, what regulations would help here?
If anything, we're going to see more regulations on retail investors after we see how vulnerable they are to falling for mass pump-and-dump schemes with the widespread availability of margin accounts.
WSB had millions of people join the subreddit in the past week (~5m). If each held an average of 5 shares, that'd be 25m shares. There are only 69.75M shares outstanding.
https://finance.yahoo.com/quote/GME/key-statistics?p=GME
There are 46.89M shares in float (i.e. are readily available).
On January 15 2021 61.78M shares were shorted. This is matched here:
https://shortsqueeze.com/?symbol=GME&submit=Short+Quote%E2%8...
At that point WSB started piling on and millions of shares went into call options and / or were purchased - by retail investors OR people who frequented WSB.
Remember, hedge fund managers and what not also visit and contribute to WSB. There is absolutely no reason to assume a given institution isn't also in on this (and effectively collaborating).
Anyway, how much of it is institutional? I'm unsure, honestly doesn't matter.
By January 15 the float started being purchased and prices were rising. The short sellers started losing money and the hedge funds holding short positions likely expected things to reverse course, as a quick pump-and-dump.
That didn't happen. All the remaining float was then bought up by millions of retail investors; raising prices. Sure some of the hedge funds also sold during this point, but retail inexplicably kept buying (keeping prices high).
They also aren't going to sell for anything less than $1000+ and IT IS NOT ABOUT THE MONEY. Some may never sell:
https://www.reddit.com/r/wallstreetbets/comments/l6omry/an_o...
What does this mean? The short sellers double down hoping to wait it out.
Does this work? Maybe. After robinhood forced the sell off, we're going to see peoples transferred funds hit monday and tuesday. This is a middle finger to the hedge funds to these people. We're going to see the price go up... idk ho much, I'm guessing thousands.
People will surely sell, but if retail continues to hold (or buy at $200), the short sellers are still suck spending billions on interest and will eventually pay out. Sellers have little reason to sell for anything less than $10,000 or something crazy.
Now, did the short sellers get out? I'm not sure, but given how much everyone is freaking out - I am not so sure. I know "hedge fund bros". My bet is they are still holding or doubling down and it's about to get real very fast.
Not sure about exact pricing, but maybe they even profited: The volatility on puts has risen to insane levels.
It's fun to watch but quite sad at the same time
Where does this paternalistic attitude come from? Do you go an lecture people throwing money at the craps tables?
People on WSB certainly know this is no different than gambling. There is a reason loss porn is a thing. The entire sub mocks the seriousness of “real investors” who have big accounts and pretend they are gambling by reading a blog about the number they pick on the roulette wheel.
I could be in my most empathic state after a heavy acid trip and still wonder where this unnecessary paternalistic attitude comes from
what do you guys want to happen, another paragraph added on page 73 of the regulatory disclaimers?
I don't know how realistic that is, but the message is certainly powerful.
That means you’re there to gamble. You can’t waltz in expecting 1000% returns in a few days and pretend you’re not gambling.
But there's about 5 million new people subscribed to that sub in the last couple weeks, and I don't believe they all know holding GME is gambling.
Even on WSB the posts are very much about it being a batte that has a potential of being lost. There is no pretense of GME being an investment that only goes up or that GME is some up and coming company.
As far as I'm concerned, folks on this board who haven't at least once spent critical money for a passion are completely out of touch with the everyday realities of working class life.
Amen to that!
day trading has always had -EV :)
some benefit (Vanguard Group, SIG, Semvest Mgmt, MUST Asset Mgmt, BlackRock, Fideility Investments, Dimensional Fund Advisors, Maverick Capital) also Micheal Burry as well
it is more of a message for that - the power of the commoners can take down a few elites.
for some, it is to be part of the history
I think plenty of people recognize that it is a bubble, but they are planning on offloading to the bigger fools.
I think most people are just trying to make money and a bubble is a great way to make money. Until it isn't.
What %? And what's a good source to verify that number?
It seems like a few short-selling banks will take a beating, more banks will make a killing, and a lot of Redditors are going to die on the cross of “diamond hands.”
I don’t really know anything about the stock market though. This is interesting enough to watch from the sidelines.