@gundato: There are generally regulations about who can invest in hedge funds and the funds themselves have rules requiring proof of certain assets and minimum investment levels. The way that Gramma Milly loses money is if her pension fund or some mutual fund she's in is also invested in the hedge fund, but hopefully it's just a relatively small part of their portfolio.

Hedge funds are inherently supposed to be risky and regulations exist to try to help regular investors from getting hosed by them.

People in this thread who think that calls for regulations are all about screwing the little guy don't understand that there are good regulations and bad regulations. A good regulatory outcome would not be one that prevents retail investors from buying stock. It would be one that regulates the size of a short position by an institutional investor (in other words regulate the hedge fund, not the retail guys) or one that requires disclosure of your positions when you encourage people to buy stocks like this (we don't actually know who is driving this and if you look at who actually owns a lot of Gamestop stock it's companies like Blackrock and other big funds, who are making potentially huge returns here.)

@flagro: The endgame of a pump and dump is always the dump.

The original end game was just a short squeeze, where the short seller has to cover their position by buying your stock and that's how you close out your position, but at this point I think Melvin has covered so eventually people are going to sell and this thing is going to fall back to somewhere like where it was before.

There's a saying "The stock market can stay irrational longer than you can stay solvent" which means that this kind of thing can last longer than you'd think if all the buyers remain enthusiastic but eventually people will want to close their positions and they will run out of suckers and the stock will revert. At that point someone is going to make billions on a new short position but it's almost impossible to time these things.

@gundato: Again, I feel like most of what I've seen beyond glib shit is "this is the broken system we have been talking about!" What would you prefer here? Business as usual? It's entirely possible people will lose a lot of money on this as innocent bystanders but then,.....that happens all the time anyway?

Can I also just say, regardless of its history (or maybe because of it who knows) I really hate the term pump and dump.

@fantasticasm89 I hope you had a reasonable stop-loss set up.

@bigsocrates: Thanks for the explanation. What makes this more confusing for me is how detached it seems from reality, since none of it is really about the position of GameStop and doesn't benefit them either seemingly, but 2021 is a few years too late to be surprised by irrationality, I suppose.

Fuck capitalism fuck the stock market let it all burn.

@flagro: You can read about the Dutch tulip bubble if you really want to read about how long prices have deviated from intrinsic value in the market.

This could benefit Gamestop in a number of ways depending on how long it lasts (seems to be ending now) and what Gamestop did to capitalize on it, but it could also hurt Gamestop in other ways. It will be hard to know once the dust has cleared.

But yes this has nothing to do with the actual value of the company (though it sort of started that way) and this kind of thing happens from time to time, and never ends well.

I will say that Robinhood and Ameritrade ending trading without warning is an ugly way to close this out and will likely have other ugly ramifications. It's going to make people even angrier and lead to more issues. I am for regulation but regulation is different from quick unilateral actions that screw people over.

@jacksmedulla : no but I got diamond hands

@fantasticasm89: Genuine question, what’s your endgame for this? People keep making references to diamond hands and holding the stock, but the endpoint to all this is selling high. So when is that? What is the exit strategy?

The ironic (and sad) thing is that hedge funds which invest late are going to come out of this with exorbitant profits.

@bigsocrates: Grandma Milly might be a small percentage of that but that could be a very large percentage of her life. Optimally whoever is handling her 401k and IRA and all that other fun stuff are also diversifying and she won't lose much and Vanguard or whatever will just set those hedge funds to very low priority in their super portfolios. But it gets back to not being comfortable with cheering on something that will disproportionately hurt "the little people". Because Stock Trader Craig might lose his job but he already has a shit ton of money saved up and might just not buy a new car this year.

And yeah, full agree on there being good and bad regulation that could come out of this. It just gets frustrating how many people just want to froth at the mouth and spew some slogans they heard on a youtube rather than consider how what they are cheering for might actually be hurting them or people they care about while benefiting the exact people they thought they were against.

Buy low, sell high.

Don't buy now.

@gundato: It does depend on Grandma Milly's asset distribution and hopefully her fund manager has diversified or (even better) she's in an index fund and none of this even affects her.

One of the regulations I'd propose would be to further limit how much of any retirement fund can go into hedge funds and especially how much can go into any one hedge fund. Hedge funds are mostly scams. They don't beat the market and they don't even do what their name says, because when the market falls most hedge funds go with them. They are not something that pension funds should be in, and there are other, better, countercyclical investments.

The narrative on what's going on here is all messed up in many corners of the Internet. They don't understand the long or even short term implications here. Yes, some smaller fish are going to make some money at the expense of some bigger fish, but there will be a lot of collateral damage and ultimately a lot of the people who think they're on the winning side won't be after the dust settles.

The problem of the Wall Street Casino isn't going to be solved by the investment equivalent of card counting.

@navster15 wait for GME to file to release more stock for sale which will end the squeeze.

I think a lot of people are missing the point here, the end goal of this "artificial bubble" is not to make money, or to stick it to the man, or for an underdog story it's basically about 2 things: 1. flexing on and laughing at whiny billionaires and 2. highlighting bad regulation and that when anyone bend/break the rules, anarchy reigns.

As a whole I feel a little guilty reading about all of this. I don't participate in the stock market in an active way, but I do save towards my retirement in Canada using a TFSA and RRSP, and I'm invested in Mutual Funds which are basically managed portfolios of stocks for most regular folks. I don't come from/have excessive money but I guess you could call me "middle class" rather than "working class" meaning that I have the income necessary to save for retirement someday possibly. This means I technically participate in the stock market as it exists and I dislike how it all works but I also can't retire someday without compound interest. I guess there's no ethical saving under capitalism just like there's no ethical consumption under capitalism.

@zacyzacy: That may be how you perceive it now but that's not how it started. It started as a value buy to make money (thinking that Gamestop was undervalued and had a new, better, board coming in) and then became what is called a short squeeze, before a bunch of people turned it into a weird half crusade half get rich quick scheme.

If you think people aren't in this to make money you are very wrong. And the people who are in it for some sort of weird moral stance better hope they can afford to lose that money.

If you want to stop hedge fund shenanigans you are much better off volunteering for Bernie Sanders or Elizabeth Warren than doing Wall Street Bets stuff.

I feel like if the media wanted to call attention to this as a problem they could find at least one guest that doesn’t have the aura of a Captain Planet villain.

@brendan: Don't feel bad. Every adult who wants to be able to retire in the US basically has to participate in this too. Or, like, star in the next Avengers movie, I guess. Participating in a broken system doesn't make you complicate to the broken system, especially if it's intrinsic to your survival. I'd rather not use banks, drive a car, count on stock brokers, or consume dairy products. But I have a job and like ice cream. At the end of the day it's about mitigating the impact you have on the bringing of the Apocalypse, not crucifying yourself for trying to find a little peace, and not blaming yourself for the system you were born into.

Honestly, the more the financial sector kicks and screams over this, the more sympathetic I am to WallStreetBets. Like seriously, you have this clown on CNBC saying, "this is just a way of attacking wealthy people" like what?

That plus the shutdown of the clearing houses for Robinhood and Ameritrade for GME stock really highlights how these guys can change the rules whenever they want. It may be a get rich quick scheme, WallStreetBets may be a cesspool of r***** slurs, but they have my fucking blessing at this point.

One of these billionaires literally went on CNBC and during his interview attacked people for collecting unemployment and the stimulus during a pandemic. It's pretty hard to feel anything resembling sympathy for any of these people given how badly they've messed up the world multiple times now.

When your profits depend on hoping companies crumble and people lose their jobs so a stock price can go down, you are nothing better than a leech. Triply so during a pandemic when millions upon millions of people are suffering and struggling.

That's all these predatory people in the financial industry are: leeches.

I don't think you need to feel sympathy for the horrible hedge funders to see the problem with what Wallstreetbets is doing (and who they are as a subreddit.) There are some situations with no good guys. Frankly the appropriate regulations would hurt the hedge funders more than the little guys.

The media talking to a bunch of horrible Wall Street jerkoffs is definitely not helping this situation or its fallout, but media companies don't want regulation of their own stocks so they reach out to the owners' buddies instead of economists or securities law experts.

@ben_h: Maybe I'm naive, but I'm hoping a plurality of these people come to understand just how powerful collective action/bargaining can be...

This was fun to watch. My only issue are the many brokerages blocking buy orders for the hot stocks, that's some hot bullshit just for the sake of letting the big institutions correct their messes in the meantime. Everyone should have the right to maybe lose all their money on horrible stock purchases.

If anything though, this all just highlights the shit section of the stock market, options trading. It was a fucking mistake to have that legalized on such a grand level back in the 70s. Options trading is essentially the horserace betting equivalent of the investing world, I see no problem in those hedgefunds getting blindsided by internet assholes.

This has been my reaction to the issue thusfar.

But Robinhood automatically selling people's stocks is a whole another level of fucked up if that happens to be true. The way everything and everyone is bending over backwards to help out Wallstreet and hedge funds, when nobody gave a shit about the insider trading from congresspeople last year is just completely fucking appalling.

@retris: they're liquidating stocks because of margin calls. Those particular customers have bought stocks with borrowed money.

If it turns out they're forcing a close on stocks purchased in the money? Done forever.

Yeah. the "RH is selling my stocks" seems MASSIVELY fucked up and straight up illegal (versus just putting a halt on trading which is "normal" in cases of extreme volatility) but I would need to actually see some legit writeups. A friend already pointed out that a lot of people might have just forgotten what they set their auto-sell threshold to be, for example.

I know a buddy of mine put in like a couple hundred yesterday and was just straight refunded this morning.

Eat the rich

The enemy of your enemy isn't your friend. They're your rival.

I think the comparison to trying to defeat a casino by counting cards is apt here, and not just because the initial motivation is selfish. Because now the casino is calling in its bouncers to escort people from the premises. The response from a corporate media empire beholden to the rich and Robinhood et al. garners no sympathy, but it's to be expected when you zoom out and look at how everything moves. There's basically a black hole where the regulation should be, so of course the money is going to take matters into its own hands. This entire scenario and its consequences will likely be over and done before the first pen-stroke of any legislation that addresses this source of inequality in any meaningful way.

But none of this crowdfunded shorting solves the initial problem people are claiming to highlight. This fiasco has definitely brought awareness to the issue, but it was never going to be an effective solution in and of itself, if that's what anyone was expecting just because one hedge fund got owned. Look at the Dow Jones and tell me if the rich are even going to flinch as a result of this. It's not like (the people behind) these hedge funds are monolithic. They're pissed because they're greedy, not because they're hurt.

If you come at the king, you better not miss, because that only gives them the opportunity to learn and adapt. If this becomes a game of "who can throw the most money", one side is going to run out of ammo much more quickly than the other. Which is why everything about this situation screams of some already rich person(s) finding yet another way to fleece poor people by manipulating and exploiting their emotions and idealism. That's pretty much the only card in their deck.

For all the reasons I mentioned above, I don't think a mob of redditors is necessarily better for society than traditional Wall Street ghouls, but holy hell, the Wall Street ghouls really are awful. (Edit: fixed the link)

“This fair share is a bullshit concept! It’s a way of attacking wealthy people! I think it’s inappropriate!"

Tom Butch, the president of TD Ameritrade Retail, just sent an email to let investors know that he's very sorry about any issues in this "unprecedented" week

This whole thing reminds me that it feels like it’s been quite a while since the era of loose decentralized bands of internet degenerates being a thorn in the side of corporate America. I remember the mid to late 2000s, when channers/anons got it in their heads to just really irritate the fuck out of the Church of Scientology both with DDoS stuff and IRL protests and several other actions. My understanding is a lot of the figures in that movement ultimately were brought up on charges or otherwise discouraged from continuing, and those communities turned even more sharply towards nihilism.

The r/wallstreetbets thing is obviously more of a “bunch of traders who are acting together to increase their personal finances” thing, but it’s still interesting to see a resurgence in collective internet action ostensibly “for the lulz” back in the news. Maybe I’m just out of the loop and it never fully stopped.

@bigsocrates: First let me say your posts have been very informative here and I appreciate them since I really don't know dick about any of this! Having said that, who would be an example of a non jerkoff from wall street? Does one exist? I mean, I'm sure one does just based upon the law of averages, but who is notable from wall street for being a good dude?

@sethmode: It depends what you mean by "non-jerkoff" and "from Wall Street." Certainly there have been people who have made a lot of money on Wall Street and can come off as human and relatable in a TV interview and not just shriek about how the 'little people' are rebelling against their betters. There are also plenty of people who have made money on Wall Street and gotten into philanthropy or other important and useful pursuits.

There are also plenty of people who are experts on securities and are non-jerkoffs. There are SEC lawyers and people from other regulatory agencies and academics and journalists etc... There are lots of people who have the expertise and knowledge to comment about what's going on who wouldn't even be talking about their own money because they make their money from practicing law or teaching or writing about securities rather than trading.

So while I definitely think you could find some actual Wall Street types who could talk about this issue in a way that would be much less gross, if I were in charge of a media outlet I wouldn't even want to talk to a trader. I would want to talk to a regulator who can explain why these kinds of bubbles are bad and how some of what Wall Street Bets has done is likely illegal and for good reason. Or an academic who studies stock bubbles and these kinds of securities activities.

@bigsocrates: Appreciate the response but I'm somehow more tired now than I ever was, ever.

@sethmode: This situation and especially Wall Street in general are pretty frickin' exhausting.

You can't make much of a good faith argument for the status quo. The status quo is broken in a lot of ways. But it's always possible to take a bad situation and make it worse. If someone has liver cancer and you just start stabbing at their liver with a knife it's possible you'll get the cancer but there will be some other undesirable effects.

The US financial system is very sick, but inflating specific stocks to astronomical levels in order to punish specific hedge funds isn't going to cure anything, and it's going to have major collateral effects.

Of course the people doing this don't actually want to cure anything. They want to make money. They've made a bunch of money off the hedge fund but they're still at it and anyone thinking of joining the frenzy should ask who they are trying to make money off of now.

@bisonhero: Yeah...

You kind of hit the nail on the head with "it never stopped". It just stopped being targets you felt "deserved it" and became, you know, parents of dead children and politicians who care about anyone who isn't a white christian male.

Which is why it is hard for me to get super excited on a lot of this. The end result is either that "wall street" makes a net gain or they get a bailout with our tax money. A bunch of people are going to be left beggared the same way they are every time cryptocurrency becomes a thing again. And with everyone saying "Wow, a bunch of people rose up to fight for our rights through the power of the lulz" I just think of January 6th. I like the target (if not the organizers) of this one but... we've been down this road. A lot.

If you're going to roll the dice on this, use your house money (or money you could afford to lose).

Those wall street guys have always had utter contempt for video gamers. Can only imagine what they think of us now. Whenever I read the comment section about video game news in the Wall Street Journal there's always a post by someone making fun of lazy, poor video gamers who live in their parents basement. Oh, and they also throw in how they have 3 girlfriends and a portfolio the size of the Empire State building and that they have a life and don't have time or desire to play video games.

@bigsocrates: I agree that what the stock market allows, and what WallStreetBets has done is real suspect, but how is it any different from when hedge fund types have "idea dinners" and coordinate their buying/selling?

It should all be illegal, but for the time being -- what WallStreetBets has done is perfectly legal. In a "letter of the law, not spirit of the law" way, but that's what the entire industry has been acting on for decades now. Notice it's only when Reddit starts doing it that people start throwing up alarms...

@lapsariangiraff: I never said it was illegal (though some parts of it may be, especially now that it's no longer a value buy or a short squeeze). I said that it was dangerous and should be regulated.

I also said that the regulations should focus on controlling the hedge funds more than the individual investors, because what set this off was the over shorting of the stock and the overconcentration of Melvin's position.

My point is not whether what Wallstreetbets is doing is or is not within the letter of the law. That's for the relevant regulators to figure out and potentially litigate. My point is that it's not a good thing and that regulations should be promulgated to keep it from catching on before people really get hurt.

@bigsocrates My bad, totally agree with you there.

I was thrown by "what WallStreetBets has done is likely illegal." :P

@lapsariangiraff: I said "some" of what Wall Streets Bets has done is likely illegal. The part I was referring to is how people are now egging eachother on to hold the stock and saying that if you hold it it won't fall and they all have diamond hands etc...

This is almost certainly being done at least in part by people who are selling the stock (and urging others to hold to keep the price high) and almost certainly involves knowingly making false representations by at least some of the people.

I wasn't clear on what parts I was talking about and I also think that it's difficult to define "Wall Street Bets" as an entity because it's a distributed group of individuals, but I would be very surprised if there wasn't at least some fraud and illegal pump and dump stuff going on at this point.

@bigsocrates: The nebulous nature of WallStreetBets as a subreddit with now six million subs definitely makes any group intent difficult to define outside of its immediate impact.

The most cynical take is that this could be like Gamer Gate, where the bad faith actors are covered by a lot of unwitting dupes who spend their whole time saying "but I'm not like those guys, this is actually about ethics in journalism/sticking it to hedge funds. DIAMOND HANDS!"

That being said, I think it's a little condescending to use the "regulate before people get hurt" argument. It implies that the people involved are dupes being led astray and they need guidance... y'know, the same argument brought forward by every CNBC broadcast lately. To my knowledge, no one is putting their life savings in this thing, no one thinks a place called WallStreet "Bets" is a 100% certainty. People are knowingly taking a risk, the never-ending DIAMOND HANDS ROCKET TO THE MOON PAPA ELON HOLD THE LINE memes are just a response to the fact that hedge funds have still not backed out of their short positions.

To summarize/articulate my position a bit more clearly, because I'm pretty sure this could devolve into "but I said" back and forth:

The stock market is horrible. The value of a stock has been unmoored from the company's actual value for ages. I think this is just an example of Reddit utilizing the same shitty tactics professional investors have used before. And while I agree that it should all be illegal, and we are in total agreement that regulators should crack down more on the hedge funds, I think that such regulation and overhauls in the stock market is a bit of a utopian ask, or at the very least, a longer term ask than can deal with what's happening right now. We see this with how the clearing houses closed yesterday. Regulators are not going to defend retail investors, and curb hedge funds' risks. They're going to bail out hedge funds when they needlessly expose themselves to massive risk, and tsk tsk the people who called them out on it while saying, "but it's for your safety, you know!" And since stock market regulation is a historically uphill battle that will take a long time, I am A-Okay with the internet bleeding these leeches dry for the time being.

@bigsocrates ain't no paper-handed cowards. there's no volume in the trades going on, meaning it's the brokerages trying to keep the price down so they don't lose all $16B . this is collective bargaining, plain and simple, and the emperor is still not wearing any clothes.

@lapsariangiraff: You may think that the people participating in "Wall Street Bets" know they are gambling and are protecting themselves accordingly, but these kinds of things always suck in unsophisticated people, especially when the news starts reporting the gargantuan gains and you have a bunch of people going to the subreddit and first learning how to trade on margin and what options are etc... Even if the ringleaders urge responsibility you end up with a bunch of people behaving irresponsibly. In point of fact everyone is behaving irresponsibly because they've bid the price up, knowingly, way more than the company is actually worth. Nobody thinks that this has anything to do with Gamestop's fundamentals anymore (which they originally did because this whole thing started in part because people were bullish on the new board of directors.)

I don't have an inherent issue with Reddit using investors shitty tactics against them except that they are inevitably going to suck in unsophisticated individuals who believe the memes and don't understand the game and are going to end up seriously screwed by it. It's bad enough when hedge funds do it to eachother (and it should be illegal) but at least when it blows up in a hedge fund's face there are regulations about who can invest that are designed to protect people. I guarantee you there are hundreds of people who have put their house payments into futures to ride this bubble, and there may be more than that. It's going to be a big ol' mess when it pops.

As for regulations taking time...they do. They're not going to resolve this particular incident but they can prevent future examples.

As for regulations and regulators favoring the rich established players...they mostly do but they don't have to. That's why I named Liz Warren and Bernie Sanders as politicians who will actually do something about the underlying problems if they get sufficient power. Warren in particular has both the expertise and the desire to meaningfully regulate against the big guys, as she showed at the CFPB.

There are good regulatory responses and bad regulatory responses, and any regulatory response will take time. What's politically feasible right now is a matter of speculation. But none of that changes the fact that what is happening is going to damage a lot of people's lives in meaningful ways. Not because hedge funds lost money but because a lot of regular investors will inevitably go down with the ship.

That's why I'm not happy about what's going on right now and why I don't like the framing that this is a bunch of small guys taking on the big guys.

It's also wrong because the ultimate winners here will inevitably be big financial institutions just like the hedge funds, which have long positions in Gamestop and are going to rake in a bunch of reddit cash in exchange for stock that will be all but worthless in a few weeks. So it's really a question of which major villain ends up winning in the end.

@bigsocrates: Time will tell as to the fallout for this, for sure.

If this does result in meaningfully reining in Wall Street, I'm all for it, but... I sincerely doubt it, given how little regulation came after the much larger bubble popping in '08. Fingers... crossed?

@lapsariangiraff: I'm not super hopeful based on the current political situation. Many other more pressing priorities, very slim Democratic majority, and Biden is famously cozy with the financial industry (I generally like him but that's a knock against him.)

But what's likely to happen and what should happen aren't necessarily closely related.

My main reason for not liking this situation is, again, that I predict a lot of people are going to get sucked into a bubble and lose a ton of money. I don't care about the hedge fund (though there are probably some pension funds invested in it that I do care about) and if it ends up being that the hedge fund is screwed in favor of the retail investors and that's it, then fine, that's a good outcome. I just don't think that's what's going to happen.