OT - Robinhood, Gamestop and Wall Street
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  1. #1
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    Default OT - Robinhood, Gamestop and Wall Street

    For those that haven't seen, the app Robinhood allows free stock trades. Basic orders, options, whatever you want at no cost. This brought in a new wave of investors because it was easy to gamble without worrying about commissions, etc. Well within the last few months the folks on the Reddit page WallStreetBets (WSB) noticed that certain hedge funds were shorting the stock of failing companies in large quantity.

    The largest in this case was Gamestop (GME), the big fund managers shorted the stock so far that there were shorts on 140% of the total available volume. Upon recognizing this, WSB put together a grass roots short squeeze and drove the price through the roof. GME was $4 a year ago, it spike nearly $500 in the last couple days.

    Funds lost billions over night, in one instance it lost nearly 900mil in a day.

    Today this all came to a head, you the public are no longer able to trade this stock under the normal SEC rules. Wall Street called in some favors and put a hold on it causing tha value to plummet. It's still way over valued, but they knowingly manipulated the market to protect themselves.

    I think this is pure bullshit.

    What does PM think about this?

    Link to better explanation- Robinhood Users Are Furious Over Its Stock-Trading Clampdown

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    Just another point of evidence that the fat cats leverage their resources to multiply their own wealth at the cost of us peons, without allowing losses due to the risks that the rest of us are forced to subject ourselves to.

    This is a reminder that they are not entirely immune to that, and their efforts to cover their own assets are glaringly obvious.

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    I have a different take on this, the rise in stock prices of these various troubled companies was driven by social media and inexperienced or naive individual investors. These investors were buying stock not because they understood what they were buying but purely on the basis that because it went up yesterday, it'll go up today. This was an investment bubble, similar to Tulip mania - Wikipedia. In an orderly stock market, one wants to avoid such bubbles as they tend to cause collateral damage to the markets when they collapse (and they ALWAYS collapse). And the folks that will get hurt are the same individual investors that were chasing profits without understanding the risks they are taking.

    The argument that somehow some fat cat professional investors were rescued misses the point here. A lot of hedge funds were wiped by this event. The reason the retail stock brokerages started limiting trades was because the trading on these stocks was completely devoid of any relationship with the underlying value of the companies and thus a bubble that if left going would have hurt a lot more people than did get hurt.

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    Quote Originally Posted by drcoelho View Post
    The reason the retail stock brokerages started limiting trades was because the trading on these stocks was completely devoid of any relationship with the underlying value of the companies ...
    If they stopped trading for that reason all you could buy would be Skippy peanut butter. None of the biggest stocks in the market are worth as much as a pile of dog shit and this has been true since Netscape. (Did they ever actually make a nickel, even ?)

    It's pretty obvious that if you are a Member of the Club, you can mess with the market to your heart's content. But if you are a little guy, fuck off and die. And leave your cash behind, thank you very much.

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    from all i'm reading, its gonna get even worse for the hedge funds tomorrow. i hope it does, i hope the whole system fucking burns.

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    Put your qualifications up front in this one guys.
    How many of you directly participate in the markets and how long have been doing so.

    This is a simple event that most don’t understand.
    A group of traders colluded to distort the price in a vulnerable stock.
    It happens all the time.
    I have watched it in real time happen for years and have held shares in companies where it has occurred.

    It is technically illegal.
    It is a market distortion.

    Brokerage houses have for years stopped trading in securities which have these distorted market moves to protect market function.
    The markets all right now have robust circuit breakers in place to reduce market volatility and they work.
    You might have noticed how many times they were employed this last year.

    Make absolutely no mistake- the Reddit traders launched a denial of service attack against these stocks which created these market distortions.

    Fair play to get caught in a short squeeze?
    Perhaps but how will you feel when they launch a bear raid and try to run stops through major corporations held in our retirement funds.

    From my perspective it is odd to watch this event unfold.
    All the “I’m shocked- shocked I tell you”.

    Well where has everyone been.
    Idiots pull this crap all the time and so far as I can tell have been doing it forever.

    Post #3 pretty much nailed it.

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    Quote Originally Posted by Trboatworks View Post
    A group of traders colluded to distort the price in a vulnerable stock.
    It happens all the time.
    Absolutely correct and that's the point, but you stopped before the conclusion. When Goldman-Sachs does this they hoover up everyone's money, or if they fuck up the Fed prints money to cover their losses, then five years later they pay a miniscule fine that doesn't even come out of their own pockets. There is no way they can lose.

    When a bunch of kids in mum's basement do this, kaBAM ! Down comes the portcullis.

    The point is, the market itself is a fraud. It's rigged. This just illustrates that, graphically.

    Good for the goose, not so good for the gander, eh ?

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    If you are trading stocks under the assumption that their value is directly tied to the companies profitability or well being, you are in for a serious burn. Commodities are even worse

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    Quote Originally Posted by empwoer View Post
    i hope the whole system fucking burns.
    Well from where I am sitting I don’t think you are the only one.
    The problem is you are just one guy who thinks that’s a good thing.

    This particular distortion in the markets stinks of agency with an agenda to weaponize parts of market participation to weaken the markets.
    In the same way the Bitcoin idiots are in a way undermining faith in currency.

    It stinks.
    I hope I am exaggerating but it stinks.

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    Quote Originally Posted by EmanuelGoldstein View Post
    Absolutely correct and that's the point, but you stopped before the conclusion. When Goldman-Sachs does this they hoover up everyone's money, or if they fuck up the Fed prints money to cover their losses, then five years later they pay a miniscule fine that doesn't even come out of their own pockets. There is no way they can lose.

    When a bunch of kids in mum's basement do this, kaBAM ! Down comes the portcullis.

    The point is, the market itself is a fraud. It's rigged. This just illustrates that, graphically.

    Good for the goose, not so good for the gander, eh ?

    You do understand what collusion is don’t you?

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    Quote Originally Posted by Trboatworks View Post
    Price awarded by markets are a derivative of intrinsic value vs perceived value.
    Exactly. And the kids buying Gamestop perceived a valuable opportunity. They were rewarded handsomely, smart move !

    When Goldman does this, it's a-okay. Why do you think it's dishonorable for anyone else to play the same game ?

    You do understand what collusion is don’t you?
    I certainly do ! It's one of the prime aspects of the stock market, has been for decades !

    If you didn't care enough to crush it when the market crashed the entire world's economy, why would you care so much now ?

    I'm with emp, if they can't/won't make the thing honest, then burn it to the ground.

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    “ If you didn't care enough to crush it when the market crashed the entire world's economy, why would you care so much now ?

    I'm with emp, if they can't/won't make the thing honest, then burn it to the ground.”

    You are not being honest.

    Again- do you know what collusion is?

    And I missed it- when exactly did “the market crashed the whole world’s economy”

    I think I missed that.

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    If the move was illegal then why should lawbreakers be paid? If it is legal then someone should pay up. Robinhood did not say these guys were not going to earn. They said the cost and legal requirements for them to conduct business legally was compromised and so they deemed to stop the bleed. Time will tell.

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    Quote Originally Posted by Trboatworks View Post
    Again- do you know what collusion is?
    Well, here's one example of the inherent honesty of the market. This one is called "insider trading" but it's similar to collusion - when David Perdue and Kelly Loeffler and others got a private briefing from the NSA that the virus would be a major problem, so they sold millions of dollars worth of stock the next morning. Just a coincidence, I'm sure. Of course it was thoroughly investigated and the perpetrators punished severely.

    Ironically, it wasn't even necessary, since the head of the Fed told the street shortly after that no matter what, he had the presses ready. No way they were going to lose. Party on, guys !

    But I am sure this was just an isolated anomoly. I guess collusion would be more like Moody's giving fraudulent ratings to the triple-garbage offerings from Goldman-Sachs, so they could cooperate to rip people off for billions of dollars. Moody's and Goldman paid heavily for that, of course.

    Or Arthur Anderson working together with Enron to rip off the public for hundreds of millions. Probably billions, if you factor in the overpriced electricity that California is still paying. Kenny-boy Lay had his bolthole arranged but got sick before the Shrub could get him out, as I remember it.

    Given a few minutes' search, I'm sure we could find more examples.

    And I missed it- when exactly did “the market crashed the whole world’s economy”

    I think I missed that.
    That would be about 2006 - 2009, with tremors before and aftershocks after. CDO's, etc. Remember those ? Brooksley Born, for one, made an attempt to stop that but Mr Rubin, Mr Summers, Mr Greenspan and Mr Clinton over-rode her objections, because people are honest and it would not be in the market's best interest to engage in devious practices. And of course she was just being a silly menopausal woman, an impediment to the free markets, as we saw later on. Can't put females in positions of authority, they get hysterical too easily. Needs an experienced man's firm guiding hand to really fuck stuff up.

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    We've come a long (and sad) way since the time when markets were a way for worthy companies to raise funds, improve their products and services, and see long-term investors rewarded. And, yeah, this sort of betting is pretty much rigged against the small guy. We're getting to see hypocrisy in action from all those "value creators" normally skimming money out of the real economy.

    Not just on Wall St. Used to be sports were something most of us did for the enjoyment. Then we watched sports, by highly skilled (and highly paid) pros. Then we had fantasy sports to bet on the pros playing games -- and manage to imagine that a sport as well. Wouldn't be surprised if we soon have the sports betting equivalent of derivatives - second order couch potatoes betting on fantasy sports betters?

    Same sad state in much of the "reality" entertainment world - a hundred channels where we could watch people who are famous mainly because our watching them makes them famous. Talent pretty much optional.

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    Quote Originally Posted by EmanuelGoldstein View Post
    If they stopped trading for that reason all you could buy would be Skippy peanut butter. None of the biggest stocks in the market are worth as much as a pile of dog shit and this has been true since Netscape. (Did they ever actually make a nickel, even ?)

    It's pretty obvious that if you are a Member of the Club, you can mess with the market to your heart's content. But if you are a little guy, fuck off and die. And leave your cash behind, thank you very much.
    You fundamentally don't understand the stock market and how it works. It is not run by "Members of the Club"....it is a free market system with buy and sell orders. Prices are determined by the willingness of buyers to pay a given price, and sellers willingness to accept a given offer. Generally speaking, most companies stock prices will over the long run reflect the underlying value of the company as driven by revenue/profits/growth/competitive environment/etc....

    There are of course anomolies, e.g. Tesla, etc...but over time these valuations do normalize.

    If you were smart, you would have put your money into broad based stock market indexes, and over the past 10 years you would have had approx 13 percent compounded growth in the value of your money. But since you only buy peanut butter, you probably put your cash in your mattress and have been losing 2 percent per year due to inflation on your assets. Really, anyone can invest in the markets. But as previously stated, the retail stock brokerages have a responsibility to protect their clientele as they have with the GameStop situation, as anyone buying this stock doesn't understand why they are doing so and is buying on emotion and will (and have gotten) burned.

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    There seems to be a lot of mistrust and negativesome regarding the stock markets. A few points:

    - the stock market is integral to the health of the worldwide economic system. It is the primary basis that businesses use to raise money to grow. Without the stock market, the world economy would collapse. EVERY single important company on the planet has benefited from access to the capital that the stock market provides. Companies cannot grow and cannot create new products without capital.
    - Yes, there are bad guys out there that do all sorts of nefarious things like insider trading, boosting a stock after they purchase, etc....that is what the SEC is for, to provide some level of protection against regular investors....SEC is not perfect, but generally things work reasonably well
    - Yes, there are stock bubbles whereby folks buy based on emotions versus understanding why they might or might not want to own a company, and these bubbles come and go, and ALWAYS end in crash and burn. The Fed, the SEC, stock brokerages, banks and investment banks all try to control these bubbles from causing collateral damage beyond the bubble itself...there have been many crisis managed by these various players to keep things running smoothly....GameStop is just a tiny little blip of a bubble that is ironing itself currently.
    - I DO have personal knowledge and experience with the inner workings of the stock market (multiple IPOs, direct access to market makers, etc) and I can tell you that it is not a rigged system, it is the most raw simple capitalistic system there is: BUYERs and SELLERS choosing how to price stock....and some really smart people looking at each stock very carefully trying to predict where a given company will go...keep growing, profits increasing, profits dropping, going bankrupt, etc....that is the risk component of investing, predicting the future....but the stock market REWARDS folks for taking this future oriented risk with better returns than you'll get from other alternative investments that don't have the same risk.
    - IF you are an individual investor, you should follow the advice of Warren Buffet (arguably the best investor of this past century) and just buy broad based index funds and just sit on your money. For USA based stocks, Warren indicates that you'll get USA GDP plus inflation, e.g about 6-8 percent on average over the long run. Very simple idea....companies grow with GDP, add inflation, and you get the predicted value of stocks. As stated previously, stock prices over the long run are driven by the underlying value of the companies.

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    Perhaps someone versed in the markets can explain how some of these funds can short with 170% of the stock they controll.....looks to me to be a fraud comitted by leeches,and condoned by the NYSE.

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    Quote Originally Posted by drcoelho View Post
    it is the most raw simple capitalistic system there is: BUYERs and SELLERS choosing how to price stock....
    Pure capitalism until some of the buyers are willing to pay "too much". We can't allow those damn buyers to pay what they want when Big Important People would get hurt !

    It's fine and dandy when little people get fleeced, but we can't let that happen to hedge funds.

    Who was it that was president of the New York Stock Exchange, ran a giant Ponzi scheme and finally went to jail ? The only mistake he made was fleecing people who had power.

    Stock market is a fraud. Has been for ages. It's probably also the single largest contributor to the collapse of American society.

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    I wonder how many investors would be there if they couldn't sell the stock they bought for a year or two (and lets imagine there is no way to circumvent this rule), and had to wait for the company they own now to pay out dividends (if they decide to)

    right now this is one big pyramid scheme, where the big profiteers simply control the growth for it not to go out of hand and collapse the whole thing when the investors realize the real risks, and this rogue organization that leeched money out of the system endangered the whole scheme, so it has to go


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