The GameStop stock fiasco transparently shows you who runs things

The quoted WSB post expressly says "Corner the market." I'm no lawyer but I'm pretty sure cornering the market counts as manipulation and is illegal. Moreover, planning it out with other colluders sounds like conspiracy.

Cornering the market is bad because the cornerer can literally ask any price. Short sellers (and options writers) are contractually obligated to buy shares, but they can't pay infinity to the cornerer so they go bankrupt. Yay the WSB crowd put the evildoers out of business!

But wait, the short sellers owe people money (technically shares). They had borrowed the shares from someone, and that someone will not get the shares back. Same with options writers: if the buyer exercises the option then the writer has to provide the shares, which cost infinity. So the options writer goes bankrupt and the buyer doesn't get his shares. The call option he bought is actually worth nothing.

In reality a clearinghouse protects the longs from counterparty risk (don't get me started on brokers). But clearinghouses do not have infinite money to pay them off, which is what is required for a stock whose price is infinity. So the clearinghouse goes under or, more likely, Federal regulators step in. But the Feds can't buy a stock at $infinity either. So they say sorry, you option buyers and stock lenders are out of luck. So a bunch of people with stock or options worth infinity dollars suddenly have zero.

Now that all the short sellers and options market makers are gone, some brokers have gone under and the Feds have backstopped the clearinghouse, and a bunch of the longs are left with zero, we still have some longs who own a bunch of infinitely-valued stock. The contractual buyers are gone, and nobody can afford the stock. You can't eat a stock, or buy a car with it. So the selling begins. The price collapses back towards some sane estimate of discounted future cash flows.

The point is that cornering a market is bad for the financial system, so brokers, clearinghouses, and regulators will (and should) try to stop it. I'm sure some of you will say f*** the financial system, and all I can say is enjoy trying to barter with the neanderthals in the cave next door.

Robber-hood changed their mind and will allow some trading of GME

clown world out there wrote:

So what happens next?

These redditors turn to crypto? They are already pushing dogecoin today. Will Bitcoin and all these cryptos eventually be regulated too? They’re entirely speculative and not backed by anything.

MSM has no idea what they are talking about. Let the little man win.

Ghost of Disco Gary wrote:

Janet Yellen’s first act as treasury secretary was to obliterate the little guy, simply because her hedge fund masters on Wall St demanded it. She's corrupt to the core.

She can hardly talk. Too old for the job. WH has nothing to say about this short squeeze, little guys dream.

Options Trader wrote:

Robber-hood changed their mind and will allow some trading of GME

Apparently they got (and needed) a big cash infusion from their investors, probably as margin collateral to the clearinghouse.

Please Stop hijacking the thread with your endless bickering.

And others too. It's annoying

gdm wrote:

The quoted WSB post expressly says "Corner the market." I'm no lawyer but I'm pretty sure cornering the market counts as manipulation and is illegal. Moreover, planning it out with other colluders sounds like conspiracy.

Cornering the market is bad because the cornerer can literally ask any price. Short sellers (and options writers) are contractually obligated to buy shares, but they can't pay infinity to the cornerer so they go bankrupt. Yay the WSB crowd put the evildoers out of business!

As usual WSB has no idea what they're talking about.

Cornering the market only involves buying things that are for sell. As long as people willingly sell to you then there's nothing wrong with it and it's used from time to time to force takeovers or become a sole market maker. The most important aspect of a corner is keeping your identity as a sole buyer a complete secret long enough to become the sole market maker. Once people discover a sole buyer is driving demand then the opposite can happen and the seller can start setting ask prices ridiculously high. If the buyer wants to complete the corner then he has to buy, otherwise he's left with a bunch of overpriced baggage and half-filled corner which does nothing. The price subsequently drops after it's revealed the corner attempt failed and our buyer in this case is completely ruined and probably owes a bank a lot of money.

I should add that an important result of being the sole majority share holder after a successful corner means that short sellers have to come to you to buy shares to fulfill settlement. If they can find other sources to buy from other than you, then you're screwed.

So basically a small number of people on reddit want to screw over a small number of people at hedge funds, which in turn creates significant instability for the whole market, which provides steady returns for X times more passive investors over the long- term and generates much more wealth for more people that a band of redditers? Yea, that doesn't seem like the best plan for the economy as a whole. Trying to screw over "the elite" basically screws over everyone in the market.

sub sub elite local hobby jogger wrote:

So basically a small number of people on reddit want to screw over a small number of people at hedge funds, which in turn creates significant instability for the whole market, which provides steady returns for X times more passive investors over the long- term and generates much more wealth for more people that a band of redditers? Yea, that doesn't seem like the best plan for the economy as a whole. Trying to screw over "the elite" basically screws over everyone in the market.

They aren't creating instability for the whole market which operates on the scale of many trillions each day. In my opinion, they aren't even creating instability for GME. Evey thing they're doing and all their narratives are entirely post-hoc explanations for what appears to be a couple of hedge funds taking advantage of some other hedge funds' over-leveraged positions.

I have no idea how this will end up but there's a lot of people with several billion dollars who seem determined now to bankrupt GameStop just to prove a point.

Feel bad for all the billionaires :( lol jk

Anyways MJ is in this crazyness.

https://basketballforever.com/2021/01/28/michael-jordan-caught-in-middle-of-gamestop-trading-war-2

sub sub elite local hobby jogger wrote:

So basically a small number of people on reddit want to screw over a small number of people at hedge funds, which in turn creates significant instability for the whole market, which provides steady returns for X times more passive investors over the long- term and generates much more wealth for more people that a band of redditers? Yea, that doesn't seem like the best plan for the economy as a whole. Trying to screw over "the elite" basically screws over everyone in the market.

This. Losing your social security or pension to own the suits is a bad play. I am not a fan of these Wall Street and Wacker Drive, but these hedge funds are controlling a lot of the middle class money.

No Man, No wrote:

This. Losing your social security or pension to own the suits is a bad play. I am not a fan of these Wall Street and Wacker Drive, but these hedge funds are controlling a lot of the middle class money.

Maybe it's time to get rid of these Hedge funds for good.

Gordon Gekko wrote:

No Man, No wrote:

This. Losing your social security or pension to own the suits is a bad play. I am not a fan of these Wall Street and Wacker Drive, but these hedge funds are controlling a lot of the middle class money.

Maybe it's time to get rid of these Hedge funds for good.

Citadel needs to be broken up. Same with big tech. Biden’s Presidency is only going to exacerbate this wealth concentration problem, which has been going on for about a decade now. Higher corporate taxes that Biden promised isn’t a fix. Taxing people who make $400k a year isn’t a fix.

We’re a corporate oligarchy and it’s starting to erode us from the inside. The 98% are tired of the 2% having all the power. Money has the power and it owns our elected officials, on both sides

No Man, No wrote:

sub sub elite local hobby jogger wrote:

So basically a small number of people on reddit want to screw over a small number of people at hedge funds, which in turn creates significant instability for the whole market, which provides steady returns for X times more passive investors over the long- term and generates much more wealth for more people that a band of redditers? Yea, that doesn't seem like the best plan for the economy as a whole. Trying to screw over "the elite" basically screws over everyone in the market.

This. Losing your social security or pension to own the suits is a bad play. I am not a fan of these Wall Street and Wacker Drive, but these hedge funds are controlling a lot of the middle class money.

Isn't the point to demonstrate we place a lot of importance on and are greatly affected by stock prices which increasingly appears to be paper thin and have no basis to reality? The realization to many how their investments grow might lead to significant pressure for hedge funds to stop certain practices.

Options Trader wrote:

Ghost of Disco Gary wrote:

Janet Yellen’s first act as treasury secretary was to obliterate the little guy, simply because her hedge fund masters on Wall St demanded it. She's corrupt to the core.

She can hardly talk. Too old for the job.

Perfect fit for Biden!

Interesting take. GameStop probably would eventually disappear due to the retail apocalypse, but this is just giving a glimmer of hope and then leading to a hard and fast fall.

The "big selloff" of hedge funds to cover their losses appears to have moved the market less than 1% this morning. The wallstreetbets bros were talking about not selling and taking the stock over $1000 today, but doesn't appear that will be happening. I mean the hedge funds will just adjust and move on, they have way more tools and capital. Meanwhile, the reddit bros encouraged a bunch of late entrants to blow a bunch of money on this stock after most of the gains have occurred. People are buying in at these levels are going to get completely burned.

15_50 wrote:

seattle prattle wrote:

This.

One can invest responsibly or one can gamble, or anything between the two.

I happen to advocate the accepted principal of first taking care of funds set aside for savings, then responsible long term investing, and lastly, after those are satisfied, a small portion for more speculative ventures, which you might call gambling if you prefer.

I hope everyone has been exposed to some fundamental ideas about managing their finances, and if they haven't, they really should.

They have convinced you that you are investing responsibly which is why you disagree. Plain and simple it is a zero sum game .... if you make money someone is losing money... that is not investing... it's gambling.

It is absolutely astonishing how ignorant you are about the stock market. Here are some clues for you:

1) Owning shares of stock means that you own fractions of companies. Companies are in the business of making money. As a result, owning shares generally makes the shareholder money over the long term.

2) Stocks are up somewhere on the order of 700,000% since 1926 when solid records first became available. That's nearly a century of returns and approaching the 1M % return level. People comparing it to Ponzi schemes and claiming that a dollar gained by one investor is a dollar lost by another are going to have a hell of a time explaining MILLION PERCENT RETURNS OVER A CENTURY.

3) On this thread, Seattle Prattle and Racket know what they are talking about. Others, not so much.