Gamestop: Whistle Blower from Hedge Fund tells all.
rogertex
Texas
At $40, Wall Street Hedge Funds decided Gamestop is worth only $20 and announced they will Short Sell this stock. Gamestop did not go to $20 as expected. Instead landed above $300. Hedge funds facing billions in losses and calling on lawmakers to shut down people who bought this stock.
Melvin Capital top trader tells all in this short video
https://www.youtube.com/watch?v=KcGID8_i…
PS: consult doc first if you have a heart condition.
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Is this like LeBron and the current Lakers roaster trying to sue the lowly Cleveland Cavaliers if they ended up beating them in the finals since they had a worse roster and lower salary?
A year ago Gamestop was trading at under $4 per share. There's a reason for that, having mostly to do with the company's fundamentals. Hedge funds saw it run up to over $20 in about 10 months and understandably shorted it given how divorced the stock valuation became from the company's actual performance.
What happened with Gamestop is simply a massively successful pump and dump scheme using a popular online chat forum. It's value is so absurdly divorced from the company's earnings that many of the people holding the bag when this thing collapses - and it will - will not just be the hedge funds, but also ordinary people who bought in at peak prices that they will never recover. The markets are just not supposed to function like this and there will be consequences when the dust settles.
I have always looked at stocks as a long term investment where I plan to make a profit several years down the road instead of trying to time out specific trends. I stick to the basics and keep a diversified portfolio where if one sector of the economy is hurting there is usually another thriving to make up for.
Sure anytime you invest in stocks it is a little bit of a gamble but when you base your trades on the basics like P/E Ratio, Debt-to-Equity Ratio, Free Cash Flow and
Nothing new under the sun.
And you statement, "Definition of value is subjective dude, get over it", used in the context of Gamestop, was one of the goofiest things I've ever seen posted on this board. Yes value is subjective, but it almost always tethered to what someone believes the company could earn in the future, even if those expectations are unrealistic.
This OTOH was a complete shit show that will have long lasting consequences. This was a massive market manipulation scheme to enrich a few at the expense of many others. How many people do you really think are going to be able to realize those paper gains once the pile out starts? This thing is going to crash fast and many of the later individual investors are going to be left devastated.
One of the important functions that short selling serves is to counter-balance market euphoria when a stock's price divorces from fundamentals. Yet one of numerous consequences of this reddit nonsense will be to have a chilling effect on this important function, at least until regulators get involved and put more controls around this, which you had better believe is coming.
Of course fundamentals matter and they don't get "thrown out the window" just because a particular company is heavily shorted. Indeed that shorting activity is precisely BECAUSE there has already been a perceived breakdown between the market price and the company's future prospects. What happened with GME was a breakdown of any rational pricing mechanism. Why that matters, notwithstanding your nonsensical "power to the people" rants, is that the entire market depends upon it in order to objectively evaluate the risk vs. potential returns of investment.
And when I say "the entire market" I mean not only hedge fund managers, but also mutual funds (many of which are held by small investors saving for retirement), pension funds and other vehicles holding the savings of smaller investors. Contrary to your thinking, hedge fund managers are actually only a small portion of the overall marketplace, even if they play an outsized role with certain riskier investments.
GME was an extreme example of ultimate market dysfunction and there will be wide ranging consequences. When the dust settles, far fewer of these Robinhood investors are actually going to turn a realized profit than they seem to believe. It will be the much smaller number of early investors/rabble rousers who turn the most profit. Nobody believes that this was completely organic. The relative few who were behind stoking the hysteria, no doubt in some coordinated fashion, will eventually be found, especially after several stories about small investors and retirement funds getting burned start to circulate.
See what's happening right now? I always love the moment when the pump and dump sits on the dagger's edge before the complete collapse. It's already down over $100 from the Friday close and the only reason it hasn't tanked further is that the trading volume is really low right now. It is in that special waiting period with a combination of: (1) a few straggling suckers still stupid enough to be buying shares from the few lucky enough to still be able to exit; and (2) many who are holding on with an impending sense of doom and just enough desperation to believe that this thing could still pay off for them, especially the multitude of suckers who bought this north of $350.
In other words, we are now on the precipice before the complete collapse. Give it another day or so for most of these idiots to finally realize that they're on a downward slide and stuck with something that nobody want to buy anymore and this will become a full on rout slowed only by temporary market triggers.
Behind these Rick posts is a straw man that everyone involved in this are individuals who are putting a significant amount of money down to strike it rich. Sure somewhere in the masses that is happening. But what is completely being ignored is there are plenty more who are putting money in for the LULZ and this type of spending isn’t investing and wasn’t intended to be for them—it’s entertainment. And it was a consumer purchase that fit within their budgets no problemo.
Now one can argue that is stupid thing to be entertained. But hey, there are people who argue that strip club visits are stupid too. 😁
P.S. I know this topic hasn’t been brought up at all, but if anybody is wondering—no this Reddit group isn’t trying to short squeeze silver. This weird mismatch between published media and what is actually on the subreddit has been one of the best part of following all this the past few days. 🚀🚀🚀🚀🚀 Also, I have no money in any of this and have no emotional investment of anything that happens.
He did indeed make contradictory statements and his justifications for nothing "wrong" happening were (IMHO) misguided.
You can also be sure that plenty of those people who piled into this thing were putting money at risk that they didn't have. It happens every time in pump and dump schemes. There are certain personality types - the same people who scratch lottery tickets - who can't stand the notion of missing out on a big shot.
Soon enough we'll be hearing more stories about how so many people got hurt by jumping into this frenzy and a lot less ignorant populist nonsense like this:
𝕀 𝔸𝔹𝕊𝕆𝕃𝕌𝕋𝔼𝕃𝕐 ℍ𝔸𝕋𝔼 𝕋ℍ𝔼 𝔹𝕆𝕆𝕄𝔼ℝ 𝕄𝔼ℕ𝕋𝔸𝕃𝕀𝕋𝕐 𝕋ℍ𝕀ℕ𝕂𝕀ℕ𝔾 𝕋ℍ𝔸𝕋 𝔽𝕌ℕ𝔻𝕊 𝔸ℝ𝔼 𝕌ℕ𝔻𝔼𝔽𝔼𝔸𝕋𝔸𝔹𝕃𝔼 𝕆ℝ 𝕋ℍ𝔸𝕋 𝕋ℍ𝔼𝕐 𝔸ℝ𝔼 𝔸𝕃𝕎𝔸𝕐𝕊 𝕃𝕆𝔾𝕀ℂ𝔸𝕃 𝔸ℕ𝔻 𝕊𝕄𝔸ℝ𝕋 (𝕓𝕖𝕔𝕒𝕦𝕤𝕖 𝕪𝕠𝕦 𝕜𝕟𝕠𝕨, 𝕥𝕙𝕖𝕪 𝕨𝕖𝕒𝕣 𝕤𝕦𝕚𝕥𝕤 𝕒𝕟𝕕 𝕗𝕒𝕟𝕔𝕪 𝕟𝕒𝕞𝕖𝕤 "𝔼𝕩𝕖𝕔𝕦𝕥𝕚𝕧𝕖 𝕚𝕟𝕧𝕖𝕤𝕥𝕞𝕖𝕟𝕥 𝕠𝕗𝕗𝕚𝕔𝕖𝕣" 𝕒𝕟𝕕 𝕤𝕦𝕔𝕙, 𝕨𝕙𝕠 𝕔𝕒𝕟 𝕒𝕣𝕘𝕦𝕖 𝕨𝕚𝕥𝕙 𝕥𝕙𝕒𝕥). 𝕆𝕣 𝕥𝕙𝕒𝕥 𝕥𝕙𝕖𝕪 𝕨𝕚𝕝𝕝 𝕒𝕝𝕨𝕒𝕪𝕤 𝕓𝕖 𝕙𝕠𝕨 𝕥𝕙𝕖 𝕞𝕒𝕣𝕜𝕖𝕥 𝕚𝕤 𝕠𝕣𝕘𝕒𝕟𝕚𝕫𝕖𝕕. 𝕀𝕥 𝕞𝕦𝕤𝕥 𝕓𝕖 𝕝𝕖𝕒𝕣𝕟𝕖𝕕 𝕙𝕖𝕝𝕡𝕝𝕖𝕤𝕤𝕟𝕖𝕤𝕤 𝕗𝕠𝕣 𝕡𝕖𝕠𝕡𝕝𝕖 𝕨𝕙𝕠'𝕧𝕖 𝕝𝕠𝕤𝕥 𝕞𝕠𝕟𝕖𝕪 𝕒𝕟𝕕 𝕨𝕚𝕤𝕙𝕗𝕦𝕝 𝕥𝕙𝕚𝕟𝕜𝕚𝕟𝕘 𝕗𝕠𝕣 𝕡𝕖𝕠𝕡𝕝𝕖 𝕨𝕙𝕠'𝕧𝕖 𝕞𝕒𝕕𝕖 𝕞𝕠𝕟𝕖𝕪 𝕨𝕚𝕥𝕙 𝕥𝕙𝕖𝕞. 𝕋𝕙𝕖𝕪 𝕕𝕠𝕟'𝕥 𝕣𝕖𝕒𝕝𝕝𝕪 𝕜𝕟𝕠𝕨 𝕞𝕠𝕣𝕖 𝕥𝕙𝕒𝕟 𝕒𝕟𝕪𝕠𝕟𝕖 𝕖𝕝𝕤𝕖 𝕕𝕦𝕕𝕖.
GME is below 200 in after hours. It feels like the momentum peaked on Friday. I bet you the shorts can stall and will eventually cover at a modest loss ($40-80 per share)
But even yesterday, the dumb money was holding and even buying more at close to $300, egged on by a bunch of morons who were circulating a false narrative of expiring call options requiring actual securities delivery today, lmao. 8 million of these yahoos and nobody on that site seems to understand how these mechanics actually work.
The squeeze was over on Friday. By then any hedge fund that was going to capitulate did so. Why? Because these short positions mark-to-market daily, meaning that at the end of each trading day hedge funds have to post collateral equal to those unrealized losses. So if a hedge fund manager shorted 1,000,000 million shares @ $20 and the stock price skyrocketed to $350 on any close of business, it would already have given the broker $330 million in collateral. The reason that many hedge fund managers capitulated is simply because some literally did not have the liquidity to ride it out and others weren't willing to take the risk that things would get even worse. Contrary to popular belief, many of these hedge funds are working with $1 billion or less.
Oh, and as far as those remaining short positions, do these morons actually believe that the hedge funds now still shorting this are the same ones who were shorting it for $20 last week? So now the new hedge fund investments at these inflated prices are going to reap huge windfalls as they ride the dumb money back down.
The only people who made out on this, besides the hedge fund who came in and shorted at the height of the frenzy, are the smaller percentage of early investors, some of whom no doubt orchestrated this hysteria and then exited long before today. When this all gets unpacked over the next several months, there will no doubt be bad actors behind this who got rich convincing other small investors to go broke. Expect the SEC and the DOJ to eventually find them.
The actual situation is concerning. The name of the stock is apt - as some folks think this is a game, but it is not. I’m sure the Reddit guy who got this moving is full of himself - thinking about his market moving power. But, there are folks who lost lots of money - and possibly their retirement money - and they may have already been in a dangerous position due to the pandemic. Those folks should have adjusted their asset allocation, I agree. It’s simply not the little guys versus the wealthy traders - it has a negative effect on a broader set of people.
I don’t think we need more unrest in the country right now. That’s all.
Day trading has been a concern of mine for over 20 years. The concern is that folks who are true gamblers have crossed over to become traders. That’s not good. I know of heavily quantitative analysts who have many degrees in mathematics - who moved from trading to gambling - and have done well in both areas. But it’s dangerous - and for many folks without the intellect - it’s moving from one addiction to another. This may throw gas on a small fire - and it could cause a real issue.
Yet there are still plenty of morons on wallstreetbets who actually still believe that the squeeze is still in play, though honestly I don't believe that all of them are genuine. Though now that optimism is becoming mixed with foreboding and dread as the people who bought it at $300+ are now starting to share their concerns. Oops.
When this all shakes out, it will definitely be discovered that there were some disingenuous bad actors promoting the stock and claiming to be buying more while they were actually selling. That is classic pump and dump and they will be found, regardless of what some knucklehead lawyer posts on a youtube video. Intentional market manipulation IS a violation of federal securities laws and intent can be derived from actions that run contrary to public statements.
To WSB: The hedge fund managers who were not caught in your squeeze, but instead shorted the shit out of this thing at $250+, thank you.
So too do the company insiders who ran the stock price into the ground in the first place. This was like a gift from heaven for these incompetent fucks, who were able to get rich by cashing their shares out at prices they no doubt never thought they'd see. Sometimes it really is better to be lucky than to be good.
When this all shakes out, we'll learn that this was not really a transfer from the rich to the poor, but rather a transfer from one set of rich people to another, with maybe a few early retail investors catching some scraps along the way. Of course some of those early investors orchestrated this to begin with, so they'll eventually cough those gains up to the Treasury once they are found and enforced against.
ROTFLMAO.
If he is still holding, I'm still holding 🚀🚀🚀🚀🚀🚀🚀🚀🚀
If he is still holding, I'm still holding! 🚀🚀🚀
And here's a Hitler rant on Gamestop shorting from the movie Downfall: https://www.youtube.com/watch?v=R8JX005M…
Lol @Decline. Downfall reinterpretations are great.
Here is one movie re-imagining that I thought was amusing:
https://www.reddit.com/r/wallstreetbets/…