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John Galt

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This will likely forever change how hedge funds go about shorting stocks. Unless the feds come to their rescue, which I’d peg at greater than 50%. Janet Yellen was paid $800k in speaking fees by the hedge funds backing this. Who is she going to look out for?
 

John Galt

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I wonder who Yellen's interests will be aligned with? The main street investors?

Yellen Earned $7.2 Million In Speaking Fees Over Last Two Years (forbes.com)


Janet Yellen, President-elect Joe Biden’s nominee for treasury secretary, has earned more than $7 million in speaking fees from banks and large companies since leaving the Federal Reserve in 2018, a record that will force Yellen to seek permission before working at Treasury with some of Wall Street’s largest financial institutions.

Yellen earned around $7.26 million from dozens of speaking engagements in 2019 and 2020, according to a disclosure form submitted by Biden’s transition team this week and posted by the Office of Government Ethics Thursday night.
The former Federal Reserve chair’s clients included Citi (which paid for at least nine speeches in 2019 and 2020), Goldman Sachs, Credit Suisse, Deloitte, Salesforce and several other Wall Street banks and large corporations.

Yellen has also earned $350,000 in consulting and speaking fees from Magellan Financial Group, an Australia-based asset management company, though she doesn’t hold any equity in the firm and says she’ll resign from her consulting post there if she’s confirmed as treasury secretary.
Biden’s transition team did not respond to a request for comment.
 

saintpaulguy

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This will likely forever change how hedge funds go about shorting stocks. Unless the feds come to their rescue, which I’d peg at greater than 50%. Janet Yellen was paid $800k in speaking fees by the hedge funds backing this. Who is she going to look out for?
Naked short selling is already against the rules. There weren’t enough shares to cover.
 

MplsGopher

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For a "different" perspective, seems like an interesting take! https://www.cnbc.com/2021/01/28/her...-to-say-about-wall-streets-short-squeeze.html

What about other aspects of behavioral finance? Seems that a lot of people are engaged in the Gambler’s Fallacy — betting that this is never going to end.

There is an underappreciation of the fact that the stock can go south very quickly when there are no buyers. But no one is thinking that now. They just love watching it go up.

What about the fundamentals? There is certainly nothing to suggest GameStop is worth $300.

Nobody has been saying GameStop is a great stock, they are just systematically looking at stocks with high short interest and trying to screw hedge funds. They are not fighting over fundamentals. This started out as, let’s screw the hedge funds, but this has gone beyond that. Once the stock started going way up, it attracted momentum traders and the FOMO crowd.

Will this GameStop episode be viewed as an important moment historically? Will this correspond with a peak in risk appetite?

I don’t think this is a macro thing. I don’t think this says something grand about the investing climate. What it does indicate is that the boom-bust cycle has gotten greatly compressed. They bubble up and then bubble down very quickly. Everyone gets tunnel vision, and then they unwind.

Some of the people in the Reddit chat rooms seem to think this is the start of something revolutionary. Is it? Many are openly ridiculing fundamental analysis and saying it’s all about flow. Are they right? Is fundamental analysis being replaced by something else ... flow analysis?

In the short term, flow will win, and the internet/social media plus the pandemic means a wide array of internet-coordinated DIY [do it yourself] investors with zero frictions can cause short-term bubbles and squeezes better than ever before. But this is just like increasing the clock speed of your computer: The same thing is happening, it’s just happening faster.

What should the average investor who is not all caught up in this be doing?

Recognize that these networks want to bring you in. Be thoughtful before you open a web page. They want to make you feel you belong. Be aware your attention is a scarce resource. It’s called “selective attention” — choosing what you pay attention to.
 

Pompous Elitist

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This will likely forever change how hedge funds go about shorting stocks. Unless the feds come to their rescue, which I’d peg at greater than 50%. Janet Yellen was paid $800k in speaking fees by the hedge funds backing this. Who is she going to look out for?
I don’t follow this as closely as I used to for pandemic-related reasons but if the level of systemic risk and intertwining of finances is anywhere near what it’s historically been (let’s focus on the last 40-50 years punctuated by certain events in the 80s, 90s, 00s that some here are well aware of) and I have every reason to believe that’s the case then regulators and politicians will rescue and/otherwise protect entities that if allowed to fail could precipitate a national/international financial crisis. The too big to fail phenomenon. I don’t think that’s been solved and there has always been little motivation to solve it. The grift goes on.
 

MplsGopher

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I don’t follow this as closely as I used to for pandemic-related reasons but if the level of systemic risk and intertwining of finances is anywhere near what it’s historically been (let’s focus on the last 40-50 years punctuated by certain events in the 80s, 90s, 00s that some here are well aware of) and I have every reason to believe that’s the case then regulators and politicians will rescue and/otherwise protect entities that if allowed to fail could precipitate a national/international financial crisis. The too big to fail phenomenon. I don’t think that’s been solved and there has always been little motivation to solve it. The grift goes on.
At some level, you can always say things like: almost all money is almost always flowing around, no matter which accounts it is technically claimed to belong to at any one time.

The only true disaster in the world is the sudden halting of this flow.


These types of arguments are however, of course, completely divorced from any notion of inequality and fairness.
 

Pompous Elitist

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At some level, you can always say things like: almost all money is almost always flowing around, no matter which accounts it is technically claimed to belong to at any one time.

The only true disaster in the world is the sudden halting of this flow.


These types of arguments are however, of course, completely divorced from any notion of inequality and fairness.
I think some of the low level speculators in this episode have a chance to make some money, and the rest will get their a$$es handed to them. Same as it ever was. I’m not commenting on the regulatory aspects of the episode we witnessed last week and going forward. Very interesting.
 

MplsGopher

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I think the low level speculators in this episode have a chance to make some money, and the rest will get their a$$es handed to them.
Except the last folks holding the bag in the Ponzi scheme. They are going to get screwed when they can't sell the stock at anywhere near what they paid, as the price rockets downwards at probably an even greater rate than it went upwards, once the gamma squeeze falls apart.
 

LesBolstad

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Precious metals are the next Gamestop.
I'll be jumping into the silver short squeeze fray tomorrow. The price of silver has been artificially depressed for decades now.
 

Pompous Elitist

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Except the last folks holding the bag in the Ponzi scheme. They are going to get screwed when they can't sell the stock at anywhere near what they paid, as the price rockets downwards at probably an even greater rate than it went upwards, once the gamma squeeze falls apart.
Well, that’s the game. The “Wall Street” guys will be fine come what may - they already have their money and are insulated from negative blowback. To my knowledge (correct me if wrong) financial execs gambling on absurd bets without proper disclosure of risk in the 00s - with other peoples money - didn‘t really need to worry about frog walks. Who could have known/I’m with stupid legal defense has proven to be very effective to sympathetic regulators and district attorneys...

Speculation is nothing new. This is just an interesting new twist. I’d like to think systemic risk isn’t at stake with coordinated masses of 18-21 year old guys blowing their $600 checks (or in theory similar machinations from state players). We couldn’t possibly be that stupid, right?
 

TruthSeeker

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Well, that’s the game. The “Wall Street” guys will be fine come what may - they already have their money and are insulated from negative blowback. To my knowledge (correct me if wrong) financial execs gambling on absurd bets without proper disclosure of risk in the 00s - with other peoples money - didn‘t really need to worry about frog walks. Who could have known/I’m with stupid legal defense has proven to be very effective to sympathetic regulators and district attorneys...

Speculation is nothing new. This is just an interesting new twist. I’d like to think systemic risk isn’t at stake with coordinated masses of 18-21 year old guys blowing their $600 checks (or in theory similar machinations from state players). We couldn’t possibly be that stupid, right?
They call themselves apes and autists for a reason.
 

Pompous Elitist

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In times of trouble....WWGD? How can we blow ever more fantastic bubbles and misallocations. Greenspan, later in his career famous for his interventionist put, earlier on in 1966 had slightly different views with a paper title Gold and Economic Freedom pinning blame on the Fed for enabling the Great Depression

“The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom.”
 

John Galt

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In times of trouble....WWGD? How can we blow ever more fantastic bubbles and misallocations. Greenspan, later in his career famous for his interventionist put, earlier on in 1966 had slightly different views with a paper title Gold and Economic Freedom pinning blame on the Fed for enabling the Great Depression

“The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom.”
This is in essence what we’re seeing. The Fed is trying to cause inflation in the real economy. They aren’t. Instead the inflation is being seen in asset prices. Stocks, bonds and real estate are all at or near record highs. We even saw this with the first stimulus package. Most people didn’t need the money, so the savings rate skyrocketed.
 

Pompous Elitist

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This is in essence what we’re seeing. The Fed is trying to cause inflation in the real economy. They aren’t. Instead the inflation is being seen in asset prices. Stocks, bonds and real estate are all at or near record highs. We even saw this with the first stimulus package. Most people didn’t need the money, so the savings rate skyrocketed.
Red pill/white rabbit stuff when looked at, but in a year and age of distraction by infinitely less complex COVID, a divisive presidential election, and myriad mostly manufactured wedge political issues its lost in the shuffle. Great party, man.
 

howeda7

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The Redditors decided to hit up LODE today. Glad I already had some. Bought at $1.05. Sold at $3.23. Missed the $4 peak, but oh well.
 

FormerFatOL

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Game (Stop) over. Hopefully a bunch of retail investors cashed out on the way up before the crash or bought puts a few days ago.
 

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And here comes the part where most people lose their money because they were told to have diamond hands and that the spike to $490 wasn't the squeeze.
 

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Game (Stop) over. Hopefully a bunch of retail investors cashed out on the way up before the crash or bought puts a few days ago.
This is where the shorts double down and recoup all their money.
 

Section2

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Game (Stop) over. Hopefully a bunch of retail investors cashed out on the way up before the crash or bought puts a few days ago.
Once the short interest collapsed, it was over.
 

Spoofin

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This is where the shorts double down and recoup all their money.
The "shorts" that were going to "lose billions" with this play simply won't. I suspect they were smart enough to buy long on the way up and then short again on the way down to cover most (if not more) of those losses.
 

MplsGopher

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Game (Stop) over. Hopefully a bunch of retail investors cashed out on the way up before the crash or bought puts a few days ago.
How low will it go, and how much money will the hedge funds end up making anyway on their shorts?
 

MplsGopher

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The Redditors decided to hit up LODE today. Glad I already had some. Bought at $1.05. Sold at $3.23. Missed the $4 peak, but oh well.
So are they still trying to stick it to hedge funds, at least ostensibly? Or is it just a full blown daily Ponzi scheme at this point?
 

howeda7

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So are they still trying to stick it to hedge funds, at least ostensibly? Or is it just a full blown daily Ponzi scheme at this point?
I'm not sure in LODE's case. It was a legitimately undervalued stock at $1.05 and unlike Game Stop actually makes a profit. But why they chose yesterday to pump it, I do not know. I just cashed out and said thank you. It's back down 38% today.
 

Wally

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The "shorts" that were going to "lose billions" with this play simply won't. I suspect they were smart enough to buy long on the way up and then short again on the way down to cover most (if not more) of those losses.
If you are short, first you have to cover your short before you can go long. That covering is what drove much of the insane rally. They could reshort it again tho. But the real big winners were the hedgefunds on the sidelines who then shorted the hell out of the rally.
 

MplsGopher

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If you are short, first you have to cover your short before you can go long.
All that means is, if you owe 1M shares, then you buy another 1M while you're at it, for example. Right?
 

Wally

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All that means is, if you owe 1M shares, then you buy another 1M while you're at it, for example. Right?
Yea your short 1M shares, well you buy 1M shares to cover and now the stock price has doubled due to the buying, are you then going to buy 1M long shares at this new vastly overinflated price? At that point you woukd be multiplying your losses.

The shorts get forced to cover because they need to have a certain amount of reserve capitial to guarantee their short position with whoever they borrow the shares from. When stock skyrockets they fall out of compliance.

This can make systemic risk in the markets because these shorts then have to sell their other long positions to raise the needed capital.
 

MplsGopher

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are you then going to buy 1M long shares at this new vastly overinflated price?
If you think the price is going to keep going up for a bit, why not? Then you can do a new short when you think it's near the top.

Granted, it's never that easy to guess the right time, or we'd all be rich.
 
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