GameStop and guerrilla investing

offog

LE
From my very uneducated seat this looks a lot like what Elon Musk did a number of years ago. I can't recall if he got a fine or not. I know he was told he was a naughty boy and don't do it again.
 
He has not had a lot of work to do over the last year as the company he works for (IT related) have been working from home and had a lot of time on his hands. He has done rather well dipping into the market on a very small scale.

When he told me how much he had made over the last year I was impressed and his mother was terrified that he had a gambling habit.

For my birthday he sent me an expensive fruit cake through the post. When I heard how much he made I said "you cheapskate. You got £X and only got me one cake, wait till next year then you'll suffer",

I have reached the age now when a large bar of chocolate and a nice fruit cake are more than enough.

Good for him! A big profit like that will do his bank ballance and mental health good.
He also has bragging rights with his old man, which is priceless! :)
 
From my very uneducated seat this looks a lot like what Elon Musk did a number of years ago. I can't recall if he got a fine or not. I know he was told he was a naughty boy and don't do it again.

He is involved in this one too. He is one of the celeb cheerleaders (and probably made ton of cash on it).
 
Just watched this and it all makes sense now.


Not bad, but it is more complex than that. Given the sheer volume of trades and market price of GameStop it is having a negative impact on the clearing houses, which is a reason given why Robinhoodand WeBull restricted trading.
 
This whole saga has opened up a big can of worms. Market manipulation is a big no no and can lead to prison and big fines.

However who is manipulating who?
This is indeed the crux, the Reddit "degenerates" (as they call themselves) are being accused of stock manipulation and to a certain degree that is correct but how is that any different from the hedgies announcing very publicly they are shorting a stock? That is also stock manipulation.

There does seem to be a certain degree of double standards at play, in that it's only OK when the big boys do it. Robinhood does not come out of it well, claiming to be the little investor's friend, when the crunch came it turned out it was siding with its real customers, the big funds to whom it was selling its small investor data (although that perhaps is an over-simplification).
 
This is indeed the crux, the Reddit "degenerates" (as they call themselves) are being accused of stock manipulation and to a certain degree that is correct but how is that any different from the hedgies announcing very publicly they are shorting a stock? That is also stock manipulation.

There does seem to be a certain degree of double standards at play, in that it's only OK when the big boys do it. Robinhood does not come out of it well, claiming to be the little investor's friend, when the crunch came it turned out it was siding with its real customers, the big funds to whom it was selling its small investor data (although that perhaps is an over-simplification).

This is where it gets complex for RobinHood and WeBull. Their business model is not designed to deal with anomalies like GameStop.
From what I have heard this morning the upfront cost from the clearing houses has increased (1-2% to 100%). This is why some platforms could not trade it, there just was not enough capital to front the costs while the deals processed (normally take 2-3 days).
 

happyuk

War Hero
Some very unhappy bunnies at Melvin Capital because of this GameStop caper.


What an unpleasant, cooped-up hellhole that office looks like. I take it these are all "essential" workers?
 
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happyuk

War Hero
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Ayatollah

Old-Salt
I have always disagreed with shorting a stock, Brokers will deny it but I believe shorting is manipulation and creating problems not only for investors but the company. they really don't care what company it is or if their actions create unemployment and bankruptcy so long as they make money by shorting, I think it should be illegal although many disagree and claim it is healthy for the markets.
Brokerages and traders are fighting back by restricting the number of shares or options you can buy, in order to stop large numbers of shares being sold and them losing Billions of Dollars by having to cover their losses. Not only on Gamestop but the following companies are slated for restriction of purchase, Traders and brokers are running scared.

From Ameritrade news.
The warning published on my Ameritrade accounts.

Market Volatility
In the interest of helping to mitigate risk, we have put restrictions in place on certain securities. Restrictions may include actions like increasing margin requirements or limiting certain types of transactions in the current market conditions. For the latest list of impacted stocks, visit tdameritrade.com/restricted.

A news article released after the markets closed on Friday 27th.

Robinhood Expands Trading Restrictions To 50 Stocks, Including GameStop, General Motors, Starbucks, Several SPACs​

5:52 pm ET January 29, 2021 (Benzinga) Print
Robinhood added additional restrictions to trades on its platform late Friday.

The restrictions include the ability to only buy one share of GameStop Corp (NYSE: GME), one of the hottest stocks this week and one that has led to a major short squeeze.

See also: Robinhood Alternatives

Robinhood also placed restrictions on Thursday that halted the buying of certain stocks.

The list of stocks that now have limited restrictions has climbed to 50, according to CNBC. Here is a look at the 50 stocks with restrictions on Robinhood and the current limit on the number of shares and options you can purchase.

  • American Airlines Group Inc (NASDAQ: AAL): 1 share, 10 options
  • Aurora Cannabis (NYSE: ACB): 1 share, standard limits
  • First Majestic Silver Corp (NYSE: AG): 1 share, standard limits
  • AMC Entertainment (NYSE: AMC): 1 share, 10 options
  • Advanced Micro Devices Inc (NASDAQ: AMD): 1 share, standard limits
  • BlackBerry Ltd (NYSE: BB): 1 share, 10 options
  • Bed Bath & Beyond Inc (NASDAQ: BBBY): 1 share, 10 options
  • BYD Co (OTC: BYDDY): 1 share
  • Beyond Meat (NASDAQ: BYND): 1 share, standard limits
  • Churchill Capital Corp IV (NYSE: CCIV): 1 share, standard limits
  • Clover Health (NASDAQ: CLOV) 1 share, standard limits
  • Curis (NASDAQ: CRIS): 1 share, standard limits
  • Castor Maritime Inc (NASDAQ: CTRM): 5 shares
  • Express Inc (NYSE: EXPR): 5 shares, 10 options
  • EZGO Technologies (NASDAQ: EZGO): 5 share
  • General Motors Corporation (NYSE: GM): 1 share, standard limits
  • GameStop Corp: 1 share, 5 options
  • Gran Tierra Energy (NYSE: GTE): 5 share, standard limits
  • Hims & Hers Health (NYSE: HIMS): 1 share, standard limits
  • Inovio Pharmaceuticals Inc (NASDAQ: INO): 1 share, standard limits
  • Social Capital Hedosophia Holdings Corp V (NYSE: IPOE): 1 share, standard limits
  • Social Capital Hedosophia Holdings Corp VI (NYSE: IPOF): 1 share, standard limits
  • Jaguar Health Inc (NASDAQ: JAGX): 5 share, standard limits
  • Koss Corp (NASDAQ: KOSS): 1 share
  • Lianluo Smart (NASDAQ: LLIT): 5 share
  • Moderna Inc (NASDAQ: MRNA): 1 share, standard limits
  • Naked Brands Group (NASDAQ: NAKD): 5 shares
  • The9 Ltd (NASDAQ: NCTY): 1 share
  • Nokia Oyj (NYSE: NOK): 5 shares, 10 options
  • Novavax Inc (NASDAQ: NVAX): 1 share, standard limits
  • Opendoor Technologies Inc (NASDAQ: OPEN): 1 share, standard limits
  • Rocket Companies Inc (NYSE: RKT): 1 share, standard limits
  • RLX Technology (NYSE: RLX): 1 share, standard limits
  • Rolls-Royce Holdings (OTC: RYCEY): 5 shares, standard limits
  • Starbucks Corp (NASDAQ: SBUX): 1 share, standard limits
  • Shoals Technologies Group (NASDAQ: SHLS): 1 share
  • Siebert Financial Corp (NASDAQ: SIEB): 1 share, standard limits
  • iShares Silver Trust (NYSE: SLV): 1 share, standard limits
  • Sundial Growers Inc (NASDAQ: SNDL): 5 shares, 10 options
  • Direxion Daily Semiconductor Bull 3x Shares (NYSE: SOXL): 1 share, standard limits
  • Sorrento Therapeutics Inc (NASDAQ: SRNE): 1 share, standard limits
  • Star Peak Energy Transition Corp (NYSE: STPK): 1 share, standard limits
  • Tengasco (NYSE: TGC): 5 shares
  • Tian Ruixiang Holdings (NASDAQ: TIRX): 1 share
  • Tootsie Roll Industries (NYSE: TR): 1 share, 10 options
  • Trivago (NASDAQ: TRVG): 55 shares, 10 options
  • Workhorse Group (NASDAQ: WKHS): 1 share, standard limits
  • Qualtrics International (NASDAQ: XM): 1 share, standard limits
  • Zomedica Corp (NYSE: ZOM): 5 shares
Why It’s Important: The list includes many of the high-flying popular among retail traders. Today’s list puts restrictions on several blue chip stocks for the first time, with stocks like General Motors and Starbucks having purchase limits.

SPACs are also among the stocks restricted by Robinhood, including some completed SPAC merger companies, SPACs with pending deals and SPACs searching for targets hit by the restrictions.

Disclosure: Author is long shares of CCIV, NAKD, SNDL.

Related Link: Robinhood CEO On Trading Halts: 'We Made The Correct Decision'
 


I doubt this will cause a total collapse of the system, it will give a few hedge funds who are heavy into short selling a bloody noise and cost them tens of billions, maybe even a few hundred billion when this is all done and dusted.

I think this has caused disruption in the markets not a collapse, but this is only limited to shorted stock. Shorted stock is only a small part of the over all market.

The disruption is in part on the short squeeze pumping up of the prices, but more importantly the use of trading apps.

The use of trading apps like RobinHood and WeBull allow the retail investor to be more agile. On the 27th Jan 120k people down loaded RobinHood app alone, this puts pressure in RH to find capital to cover clearing house costs (as discussed above).

Putting restrictions on stock on some platforms will see retail investors switch to better capitalised platforms. It also causes the stock to be more desirable. Basic supply and demand. Exactly like Rolex sports model watches at the moment.

Short squeezes aren't new, but this whole GME anomaly has made them more popular to an untapped market of retail investors.
How big the new untapped market is anyone's guess, and it might bring billions of dollars to the short squeeze market. Good news for retail investors who like a quick profit AND fund managers who already have invested heavily because they already in the short squeeze action.

GME will level off eventually, but what will happen to the untapped market if new retail investors? Will they stick around now that they have tasted the sweetness of profit?
Will we see "Short Squeeze Funds" being created by mainstream investment companies to sell to this emerging market? ;)
 
An interesting story is emerging from the US regarding a "David and Goliath" battle between individual investors and the hedge funds.

To summarise there is a movement on Reddit and around such investment vehicles as Robinhood (bit of a clue in the name) to buy up shares in companies that the big investors have shorted, until such times as the investment funds are squeezed and they pull out of their short bets, with as big a loss as possible. It has come to a head with GameStop, a mall-based vendor that the big firms said was dead in the water and due to be finished off but whose stock price through massive investment by, for the want of a better term guerrilla investors, has suddenly soared leaving a couple of hedge funds nursing sore heads.

On the surface it all seems so heart-warming (at least in the way it is reported in the non-financial media) with the little guys standing up to Wall Street and giving the hedge funds a bloody nose and if the story ended there it would make a nice movie. But even the most novice of investor would ask the question, what next? So now the hedgies have pulled out GameStop is, apparently, the darling of the market, but nothing about the business fundamentals has changed. The Reddit forum is full of small investors crowing about how they have made enough money to pay for their college education. Good luck to them, I salute their shrewdness but that clearly means they intend to cash in, sell the stocks, so what happens to GameStock's price then?

My investments (such as they are) are in property and a modest pension pot so I am not personally into trading in stocks but I am aware that many people, especially during lockdown, are piling into day trading and the like. This story, presented in terms of ethical investing, strikes me as incredibly risky and just as prone to bubbles and severe market correction as any other form of market manipulation.

What do others think? Is anyone here involved in this sort of activist investing? How has it worked out for you? Are you comfortable taking long-term positions in this sort of strategy?


How GameStop found itself at the center of a groundbreaking battle between Wall Street and small investors

your pension pot is funded by the likes of these traders

it is noble of this movement but as you allude to... if they are a bad bet and the business model hasn’t changed they are still a bad bet (just now it costs you more)

shorts are morally wrong imho
 
your pension pot is funded by the likes of these traders

it is noble of this movement but as you allude to... if they are a bad bet and the business model hasn’t changed they are still a bad bet (just now it costs you more)

shorts are morally wrong imho

Different countries have different regulations for short selling and pension funds, but I did see this story a few days ago which made me smile.

 
your pension pot is funded by the likes of these traders

it is noble of this movement but as you allude to... if they are a bad bet and the business model hasn’t changed they are still a bad bet (just now it costs you more)

shorts are morally wrong imho
I would be very annoyed if my pension pot (such as it is) was linked to short selling by hedgies as I have been signed up for the most boring, risk-averse, widows and orphans type pension since the 1990s. And the modest gains it has made over the years confirms that, I'll probably be able to draw down enough to buy a small apartment outside the Dublin commuter belt when it falls due, well outside the belt.
 

happyuk

War Hero
I'm pretty certain many will not be selling GME, they want the hedge funds to feel this pain.

Many of the reddit nerds playing this game won't care about losing. Many have taken back their initial investment but not the profits, and are leaving the balance for the sole purpose of harming "Shorty"

The following "Get Shorty" tweet from @elonmusk on the 29th reads:
"Here come the shorty apologists
Give them no respect
Get Shorty"


I'd love to know if Elon dropped some money into GME. I wouldn't be surprised. Does anyone know?
 

happyuk

War Hero
your pension pot is funded by the likes of these traders

it is noble of this movement but as you allude to... if they are a bad bet and the business model hasn’t changed they are still a bad bet (just now it costs you more)

shorts are morally wrong imho

My pension pot simply tracks the FTSE All-Share and the S&P 500 as a 50:50 split. 10 years ago or so when online servicing became available to me I simply logged in and made it so. Got rid of actively managed funds which charge absurd fees for questionable results for a boring computer program that simply divvies it up for me. When you stop and think about it, how can the market beat itself?

No trading, no hedge funds, no "experts", just boring index funds that automatically track these indexes for for virtually no fees.
 
My pension pot simply tracks the FTSE All-Share and the S&P 500 as a 50:50 split. 10 years ago or so when online servicing became available to me I simply logged in and made it so. Got rid of actively managed funds which charge absurd fees for questionable results for a boring computer program that simply divvies it up for me. When you stop and think about it, how can the market beat itself?

No trading, no hedge funds, no "experts", just boring index funds that automatically track these indexes for for virtually no fees.

Pretty similar to my pension setup, but I have a hand full of stocks I am holding long too.
That said, I sold my S&P500 holdings on Tuesday and will buy back in once this all calms down.
 

happyuk

War Hero
Pretty similar to my pension setup, but I have a hand full of stocks I am holding long too.
That said, I sold my S&P500 holdings on Tuesday and will buy back in once this all calms down.

Great minds thinking alike lol. I very recently re-pointed mine to an 80:20 split in favour of the FTSE all-share. I'd previously held the 50:50 split for the past 10 years and it's seemed to do OK.

My rationale was that at this time of writing the ratio of market capitalisation versus GDP (the so-called Buffett Indicator) deems the US market to be "significantly overvalued":

Buffett Indicator: The percent of total market cap relative to Gross National Product?

While the UK market is considered to be "modestly undervalued":

Buffett Indicator: UK Stock Market Valuations and Expected Future Returns

As pointed by Warren Buffett, the percentage of total market cap (TMC) relative to the US GNP is "probably the best single measure of where valuations stand at any given moment.". I like it because it's just really simple, no knowledge or constant buying/selling or complicated trading patterns needed, it just answers the question am I paying too much for stocks.
 
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Over the last few years my most stable growth has been S&P500 (22% gains) and UK 250 funds (16ish% gains), and some gold mining shares.

My basic plan is to have X amount of my SIPP as medium risk investments and any profit is moved into S&S500 and UK 250 acc funds. Not very sexy, but I find it enjoyable.
 
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