Look, I think this whole GME thing is stupid: but following the price is also stupid. I guess if its your first bubble, this is exciting stuff, but these things come crashing down eventually.
Hertz is a better saga to follow, since that saga is almost done. I don't know if any news on GME has come out recently, but nothing is quite as final as bankruptcy court (in the case of Hertz).
If you look at the timescales at which stocks meme / move, its on the order of years. Decades even, in the case of Enron and literal scams like Madoff. GME isn't even a scam, its just the market doing its thing.
For Hertz, it entered meme status AFTER it started bankruptcy proceedings last year. Those proceedings are still not over yet. It just goes to show how long things take in the world of finance.
The daily ups and downs are largely noise. Try not to be distracted by them.
I'm certain the GME bubble will burst at some point. I am almost as certain that when this inevitably happens, those who lost their money will blame hedge funds, short sellers, Wall street, elites, the system, etc. instead of looking into the mirror.
Enron and Madoff are examples of what "some time" means.
Yeah, all bubbles / ponzi schemes run out of money eventually. But 17 years (Madoff) is longer than most people's radar. If you decide to go short, you gotta be right not only in the direction of the stock, but also in the timing of it.
Timing is everything. Unfortunately, timing is also the most random.
The old "the market can stay irrational longer than you can stay solvent" adage still holds true. But I would be surprised if this particular bubble lasts as long as Madoff's, since the facts are available for everyone to see, unlike Madoff's case.
At what point do you throw your hands in the air and say that "the market can stay irrational longer than you can stay solvent" means "the market is irrational, mostly smoke and mirrors." Stocks seem to have little more intrinsic value than bitcoin over a long enough period as to make the difference silly. It's all speculation/gambling, not investment, as far as I can tell.
Are you still getting a quarterly dividend at 3.25% APY from KO? (Coke)
I think that KO stock you have might still be valued, and probably valued well. Just stay away from the stupid memes, and you'll find plenty of value.
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Does the stock O still have a good dividend? Does O still follow the general trends of real-estate as expected? (Ex: O's assets are mostly houses in residential areas. O largely goes up when the housing market is good, and goes down when the housing market is bad).
As such, O provides you with a low-cost way to expose yourself to the real-estate market without having to invest 6-figures to do so. That's plenty of value right there. Short-selling O, or buying call/put options on O can similarly provide more sophisticated financial instruments against the housing market.
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I don't know what your expectations of the stock market are. But... a quarterly dividend from my dividend stocks + exposure to hard to enter markets are the main jobs of it for me. And I think its pretty good at both.
There's more and more people who believe in this kind of nihilism that since there's corruption and bubbles in the real economy that it is entirely fiction.
And that is giving rise to things like this crazy pumping of GME for the lulz.
The trend seems to be that a larger fraction of people have complete disillusionment with all our institutions to the point where nothing matters.
That also seems incredibly dangerous to me. By believing that institutions are meaningless and beyond reform that could lead to a much larger systemic collapse in institutions / values / etc.
It's all at such a distant level of abstraction. Money doesn't represent gold, it represents an intangible set of contracts and rights and regulations and coordination. Stocks don't represent investment in a project or dividends coming in, just a hypothetical ability for somebody to potentially buy control of a company that nobody will ever do. Your wage doesn't represent the value you create. Your engagement ring's cost doesn't reflect anything other than a collective craziness and manipulated supply weirdness, kinda. Your job is at least 50% bullshit (or scrolling around HN/fb/reddit). The number of hours you "work" isn't what you (should) need to subsist.
There's too much of our lives that's as distanced and separated from fundamentals as GME.
I think there is a difference between nihilism towards our society or existence and the feeling that the stock market is crap. The latter does not necessitate towards the former.
I think the feeling that the stock market is crap is completely rational for the working public. And hoping for the destruction of it is normal given that the normal person has experienced nothing good coming from it; in fact the normal person sees the stock market as something that the rich use to get richer.
Believing that the stock market is crap has nothing to do with our institutions beyond wall street† so it doesn’t necessitate towards this dangerous nihilism that you are so afraid of. In the current discord I see two avenues for this despair.
1. Susceptibility towards populism and fascism. This includes trumpism, and is indeed worrying. Minorities are blamed for all the inequalities even though this stems from wall street and the stock market being crap... (don’t ask me, I don’t understand the logic either).
2. Susceptibility towards socialism. The collapse of wall street is viewed as a favorable outcome in the current class war. The suffering of the Bourgeois is victory to be celebrated.
† Well perhaps tangentially the institutions which favors wall street; such as the white house; but that despair translates more to “we should improve our democracy somwhat” rather then “we should abolish democracy”.
The Tesla Nevada Gigafactory, and all the jobs it entails, would not exist without the ability for the stock-market to raise billions of dollars.
The banks were willing to offer Tesla ~$1.3 Billion IIRC, but the cost of the factory would be $5 Billion total. Furthermore, wages would have to be paid during the "rampup" period.
I'd say "having a job at all" is a major advantage to the working public. All TSLA / Elon had to do was issue a secondary offering with a bit of hype to the public investors, and they shoved $Billions into the company, allowing it to expand.
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You need to work on building cars for months, or even years, before a factory churns a profit. Where do you get the money for that? Well, the Stock Market is absolutely full of people who are willing to risk money (for the promises of more money).
If you have a better plan for where a company can raise ~$4 Billion or so, please explain.
Not to long ago the government participated in big expensive projects like these. In the great depression nobody wanted to issue loans to big projects like these and nobody wanted to buy stocks to fund them either. What happened was not that new jobs didn’t get created, but that big expensive factories were build by the state.
Note also that building a big factory to produce electric cars is exactly the kind of thing that the green new deal is advocating for. And this falls neatly into avenue of despair nr. 2: susceptibility towards socialism. As a taxpayer and a worker I would much rather want to see the profits of a big expensive factory—which the company it self cannot afford to build—go back to the state—or even better, to the workers; as opposed to faceless shareholders—or worse, to billionaires like Elon Musk.
> Not to long ago the government participated in big expensive projects like these.
The Stock Market has been participating on these expensive projects since the 1500s Dutch Traders swapped stocks so that one shipwreck could be supported by many traders. You needed tons of money to fill a Treasure Ship, that treasure ship left for India with common / cheap European goods, filled up with expensive spices, and came back.
The idea of selling stock to raise money is literally older than our government.
You assert that the Stock Market offers nothing. But in practice, and what has been true since the 1500s, is that the Stock Market:
1. Provides initial funding for large, risky projects.
2. These projects (and jobs), such as the sailing jobs associated with those 1500s Treasure ships, would not exist without investment from a large number of investors.
3. The rewards (such as the Treasure Ship successfully returning from India) offers exponential growth. $100 investment becomes $200. Or $200 initial investment becomes $400, due to the difference in prices between Europe and India. As such, all investors of all classes who can afford a share can benefit. (Ex: A millionare may offer $100k, but a billionaire may offer $100 million. Both are awarded by proportion of the initial investment).
4. The value of the shares change based on information. If you hear that the Treasure Ship has sunk, the value is zero. If you hear that the Treasure Ship has made successful stops in Madagascar, India, or is nearly home, the value of those shares increases (less chance of failure, since its almost done with the trip). To fairly trade the shares innately means changing the value of the shares as various information comes in.
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So my point is multi-fold.
1. Exponential growth isn't really from the Stock Market per se, but from the opportunities that arise from pooling money together.
2. The Stock Market makes those trades possible.
3. There are other ways to make such investments (such as US Government). But its not very clear that the government should be the one solely responsible for these sorts of risky behaviors. For better or worse, people understand the risks on the Stock Market (ex: if the Treasure Ship sinks, the value of that stock loses everything). If a Government-sponsored ship sinks, that's a huge loss for the Government. These sorts of risks are almost better handled by private citizens: the risk-takers, the Entrepreneurs, rather than stable governments or workers.
4. It is natural for the value of shares to change.
> You assert that the Stock Market offers nothing.
I never said that, I said it was crap. Things that are crap can still offer things of value, they just do so in a crappy way. Global capitalism is a prime example of that.
I did say—in a different thread—that to a worker, the stock market offers nothing of value. I still stand by that. To a worker the shareholder-board of director relationship is such that it monopolizes job opportunities. The average worker has no choice but to hand over the fruit of their labor to shareholders and hope that their union will successfully negotiate a better wage—or worse hope they are allowed to unionize.
As to your example of the Dutch treasure ships, we don’t live in a Mercantile world any more. We now have insurance companies which offers insurance on ventures like these. And if the risk is to great, the Dutch traders could ask their government to insure them to a point (and in return pay higher parts of their profits in taxes).
There are more questions that arise when you bring this mercantile example to the modern setting: How are the Dutch traders the once that are making the millions off of this scheme? I would want to ask how much are the farmers growing and drying the spice making from this? Perhaps they deserve more. Perhaps the farmers should band together and use a more favorable distributor that offers them a fair share of the profits, rather then relying on these shady colonialists. Maybe the profits being made up in Holland shouldn’t be going there in the first place. Maybe we should standardize shipping such that distributors could rely on a global trade network, say by buying a container at a freight that departs from Bangkok and heads towards Rotterdam every 2 weeks. Then maybe the Dutch treasure ships won’t be needed at all, and their old unfair business model can rot along with their falling stock prices and their aging ships.
> I did say—in a different thread—that to a worker, the stock market offers nothing of value.
The ship-hands of the hypothetical 16th century Treasure Ship, what job would they have if investors didn't give them a ship to work on?
> I would want to ask how much are the farmers growing and drying the spice making from this?
Well, without Europeans to consume those spices, I presume they'd also be out of the job. Because they were growing those spices hoping that someone would come by and trade with them. That's why India was exporting spices: because they had far more / excesses of spices, while Europeans were importing spices (they couldn't grow those spices in Europe).
The trade, and Treasure Ship, in fact benefited everyone.
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> Maybe we should standardize shipping such that distributors could rely on a global trade network, say by buying a container at a freight that departs from Bangkok and heads towards Rotterdam every 2 weeks.
Those ships and trading networks cost money. How will you build those networks?
Answer: raise money, then with that money, buy ships. You can't just magically assume ships appear from nothingness. Someone has to make those, someone has to be the risk-taker to assume the risk when disasters (ex: hurricane sinks treasure ship) happens.
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Lets take another example: Solar Panels. How do you expect for solar panels to be deployed? The Stock Market is really good at that: tons of solar panel companies got literal billions of dollars so that Solar Panels could be bought, and they hope for a slow-and-steady profit over the next 20 years (or whatever the lifespan of solar panels is).
This is true for solar panel manufacturers, utility solar panel deployers, as well as solar-panel installers. All of them got large investments from the modern stock market. Sure, the US Government put down a few incentives, but the stock market created the possibility.
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How about this. Try to build a 20MW Solar Panel array. Maybe not "really build it", but really try to think through the steps of how you'd raise money and actually build the darn thing.
And no magic thinking. You can't just imagine that money / resources pop out of no where. If you get money, tell me where you get the money from, and why they'd give it to you. If you say the government will do it, explain how easy it will be to make a law to increase taxes so that the government has the funds to take on the project. (Maybe you have some special legal scheme that you think everyone would agree too. I dunno, I can't think of anything on that front. I'd probably have the government tap into the Bond market honestly...)
I think you underestimate the efficacy and resourcefulness of the private enterprise. People are usually rewarded (a lot) when they find new markets, and in the modern economy, they do. There is no reason to expect they would stop doing that if we would abolish the stock market.
I’m sure that the majority of all businesses are able to fund their own ventures (including solar panel manufacturers), if they don’t have the savings, there are also loans, government (and community) support, etc. I think your overestimate of the value (or rather the necessity) of the stock market stems from big, expensive, and risky ventures. Perhaps you are right and those would suffer if the stock market would suddenly collapse on it self.
However like I said previously, I think you underestimate the resourcefulness of the private enterprise. In a world where there are no stocks, and a company wants to venture in a risky and expensive project, that nobody wants to loan for (not even the government) perhaps they would find a way to scale down the project, start earning profits (or demonstrate how the profits will come as the project is scaled up). Perhaps some loan agency will specialize in large risky loans (at a higher price), and perhaps we will (god forbids) re-invent the stock market.
If I am wrong and I overestimate the resourcefulness of the private enterprise. Then the government can always kick in and fund the deployment of those solar panels. After all we do need them, and there is no risk for the government (well the risk is the other direction of letting those solar panels go undeployed and risk a runaway climate disaster; hence the green new deal).
By revenue, we have to drop down all the way to #25: Bank of America ($113 Billion/year) before we find public companies close to the size of private ones.
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In fact, most private companies seek to go public. So that those private-shares can be "Cashed out" on the public market. Private companies do not have access to a market: you cannot leave your seat of ownership very easily.
In contrast: public companies trade their ownership ("shares") millions of times a day on the public stock market. Its extremely easy to become an owner... or to leave your seat of power. As such, as large private companies's owners grow old (and eventually die), their successors naturally transition to public ownership models.
As such, figures such as Bill Gates, can easily leave their seat as owner of Microsoft and move on with their life, doing something else. All Bill Gates had to do was sell his shares.
There's a difference between thinking that the stock market has a lot of crap in it, and feeling like the stock market is 100% crap -- so YOLO into GME and bitcoin.
The latter opinion is, honestly, the kind of attitude that I think is going to lead directly to fascism.
Lots of people thinking "nothing matters anymore".
I don't know why people call Madoff's scheme or Enron bubbles. People acted quite rationally given they believed these companies were not completely fabricating their accounting.
Once it was found out what they were doing, the market acted rationally again, but dumping their value to zero.
Ah yeah, the guy who moved the entire stock market and beat the hedge funds with only $50k invested, despite GME stock trading volumes in billions of dollars per day. /s
If someone seriously thinks that DFV (or the entirety of WSB, for that matter) would even physically be able to notably move a ticker such as GME, then I don't have much to say to them, because this is completely inane. With some penny stocks that have almost no trading volume? Sure, technically possible. But with something like GME, it is quite not that simple.
For a solid frame of reference, the entire holdings of GME that DFV had after the gigantic pump were about $50mil, one of the largest retail traders by far. Institutional traders? They did individual GME trades in volumes of $700mil+ each on a daily basis. Not $700mil+ for all institutional investors combined, but individually. Cannot be bothered to find a citation for it now, but iirc institutional investors also held about 75-80% of all outstanding GME shares throughout the entire pump.
Someone claimed that during the week when it first went crazy, that retail traders were actually net sellers, according to, I forget, maybe numbers from Citadel?
Just because you cannot see the mastermind doesn't mean that there isn't someone pulling strings. And the Madoff scam wasn't a single person. There were lots of naïve participants/benefiters enjoying the profits of that scam. In that sense it is a parallel to gamestop: A small cadre of people influencing things, and lots of little people participating in what they should reasonably understand to be a pyramid. The situation has Fyre written all over it..
>> GME isn't even a scam, its just the market doing its thing.
Short-term scams do exist. Identifying and leveraging a potential squeeze situation is standard market behavior, but taking to twitter to rally the masses into a stock is really just a confidence trick. Pump and dump is a real thing.
GME is... very much a bubble. But its not a scam because there's a nugget of truth here still.
GME's board of directors is planning to transform the company from a mall-based retailer into an online distributor of games. This will require money, and... well... a high-stock price will allow GME to make a secondary offering to fund the development of a new webpage, that will become the cornerstone of this new online-distributor business.
This isn't exactly a venture I'd put my money on. But hey, some people clearly are willing to play the game. (Whether they know what's going on is another question)
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Just because there's a bunch of dumbasses throwing money at this doesn't necessarily mean its a scam. Don't get me wrong, I think they're all wasting their money (so I'm going to stay away from it). But you know what? If it works out for them, good for them! I honestly am rooting for them to be successful.
I mean, really, think about the chances here. They look low, but are they as low as say... Star Citizen actually getting released? From a video-game perspective, the long-shot chance of Gamestop becoming an online powerhouse is probably more likely than Star Citizen ever coming out (or insert any other dumb kickstarter idea in here)
The categorization of scam is interesting in this context. Why isn’t gamestop considered a scam? Why is Enron? From the point of view of a worker which gets their profits diluted in dividends payed to shareholders, the very existence of a stock market very much looks like a scam.
Another interesting aspect is various cryptocurrencies (or—as per recent discussion—NFTs).
I guess whatever the establishment is uncomfortable with will be labelled as scam. Perhaps future will look at GameStop as a scam. But from my point of view, trading in stocks is always a scam.
> From the point of view of a worker which gets their profits diluted in dividends payed to shareholders
I hate Tesla, but their IPOs and SPOs are a great example of what the stock market offers, and why a dividend (or other reward) is necessary.
Without raising $5 Billion from investors back in 2014, Tesla wouldn't have had the money to build their Nevada Gigafactory.
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Banks offer loans, which depend on interest rates. Shareholders don't want money, they want a share of the future profits. As such, the "promise" you make to a shareholder is more flexible, longer-looking, a better deal for most people involved.
If you can't make money this year, or next year, or 5 years from now... shareholders are forward looking enough to still give you money. As long as that share they received truly benefits 5, 10, 15, or 20 years from now.
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Owning a right to future profits and a vote for the board-of-directors is a powerful thing. Shareholders become one of the owners of the company, with all the rights associated with that.
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So. Lets timetravel back to 2014. Tesla needs money. It wants public money: willing to give you a piece of ownership (aka: future dividends and a vote for the board-of-directors). It promises to use that money to build a Gigafactory in Nevada.
Today: we now have a company, and set of shareholders, who BOTH benefit from the situation. That's the magic of the stockmarket. It turns out that the "promise of future profits + voting rights" is a powerful item to trade.
This still doesn’t make things look less like a scam. An anecdote of where the scheme worked for some people in the past is a very common thing for a scammer to tell future victims in order to persuade them into the scam.
Example: [Person A] was a single parent living paycheck to paycheck, then they started selling [pyramid product X] and now they’re sending their kids through collage on the profits alone.
Shareholders not making money is akin to saying that pyramid scammers don’t make money, off course they do... Otherwise they wouldn’t be spending their time and energy doing this. Every dollar you earn by doing nothing is a dollar made by someone else they didn’t get.
There's no payoff for a pyramid scheme. They just pile money somewhere, without actually doing anything with it. A pyramid scheme is literally the "Wicked and Evil" 3rd servant from the parable of the talents. They waste the huge pile of money by burying it and not really making it work for their masters.
The expectation of the Stock Market is to do something with the money. For Amazon, the IPO allowed them to buy servers. For Google, same thing: tons of computers cost tons of money. For Tesla, they bought a Nevada Factory.
The money disappeared into a Factory, and then the Factory made money later (which is then used to increase the value of shares and make everyone who participated richer).
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This is allowed in part, because it works. It makes society stronger. It rewards risk-takers who would otherwise do nothing with their money. It provides thinkers with money and capital when they need it most. If the scheme doesn't work out, the investors lose, but they're still happy that they got to partake in the experiment.
Stocks are the original "Kickstarter". And I argue that they're far more fair than kickstarter. Owning a vote for the board-of-directors + a share of the promised dividend is worth a hell of a lot more than stupid keychains.
> There's no payoff for a pyramid scheme. They just pile money somewhere, without actually doing anything with it.
Agreed, the stock market is not a pyramid scheme. I only used pyramid scheme as an example for a scammer’s rhetoric. However it still looks like a scam to me (albeit not as bad of a scam as the average pyramid scheme is).
Having worked for a company which increased in share prices exponentially while I worked there on minimum wage, I cannot agree with the statement that the shareholder/worker relationship made “everyone who participated richer”. The average worker certainly didn’t. The only people that got richer were the shareholders (and perhaps some contractors). I experienced this exponential growth as a scam. The value of my work was being extracted into rich people’s pockets.
See the stock market might look to an outsider as an arrangement where everyone benefits, but to a worker it always looks like a scam. Especially when you consider an alternate arrangement where the shareholder returns control of the profits of the company back to the workers after they’ve made up the money they gave originally to the business plus some fees and interest. The very fact that the shareholders keep control even after they’ve made their fare share of the profits, multiple times over, is what makes this look like a scam in the eyes of the workers.
Exponential growth is promised to investors, to entice investors into giving money to a company.
Sometimes, shares and options are offered to workers (very common in SV), but honestly I'd probably take the cash most of the time. The promise of future money is best left for rich folk who can afford to lose that pile of money.
For workers like me (and probably you), the cash deal is better. If you disagree, feel free to work for a myriad of startups who are offering stock instead of cash.
But yeah, its an option. Not an option I'd personally bet on... but if you really wanted to be rewarded in shares instead of money, the opportunity for that is all over the place.
> From the point of view of a worker which gets their profits diluted in dividends payed to shareholders, the very existence of a stock market very much looks like a scam.
Only if the worker doesn't understand that the initial sale of stock raised the money that let the company buy the tools that the worker uses to make the profits. Getting that money without paying dividends looks like a scam where the stock owners are the suckers.
>> the initial sale of stock raised the money that let the company buy the tools
Maybe in the movies. Modern IPOs rarely work that way. Some companies take the money and do things, but the norm is that IPO money goes to existing shareholders (founder et al) and the company continues as before. If the money is enough, the founders disappear into ultra-rich-person nirvana, or go on to found other projects, and the new shareholder-elected board heads the company.
A modern shareholder could not care less about future profits. All they care about is deltas on future stock price, whether the price moves up or down. Their profits come when they hand their shared to someone else. Whether the company turns any profits is beside the point.
To me this looks like predatory lending. I.e. selling stocks in order to raise money to get means of production is for all intents and purposes the same as getting a loan which you are never allowed to pay back, and your lenders will continue to collect interests, tied to your profits, indefinitely.
Its not a loan though. If you fail to make money from your venture, you don't owe the "lender" anything. So you remove the risk to you (you can't owe someone $1 million without any way to pay it). The tradeoff is that you sacrifice some of the upside.
This still looks like a scam though. A predatory lender which never accepts paying down the capital, but assumes risks where some of their clients might not turn a profit and therefor is a net loss, will simply raise the interest (or—in the case of an investor—the share of the profits) from the profitable clients to counter the loss. This is exactly the behavior of shareholders, and to my eyes it still very much looks like a scam.
The shareholders don't set the amount of the dividends. That is, in your analogy, the lender doesn't get to raise the interest rate. That kind of blows up your analogy.
But by all means, tell us again how it looks like a scam. Maybe we'll start to agree with you if you repeat it a couple more times.
> The shareholders don't set the amount of the dividends
True, the board of directors decide to pay the shareholders dividends. But in a hierarchical company to a worker, this board looks like a part of the scam. The relationship between a well paid board of directors (whom seemingly to a worker contributes nothing of value) and shareholders looks awfully convenient (one might even say conspiratory), and especially so if the board of directors are voted in by the shareholders.
> But by all means, tell us again how it looks like a scam
Sure. This whole thing looks like a stinky scam to me. And now knowing the relationship between the board of directors and shareholders of an average publicly traded company, even more so. Now it looks like a conspiracy as well.
> I guess if its your first bubble, this is exciting stuff, but these things come crashing down eventually.
Portraying gamespot's case as a bubble is either ignorant or disingenuous. It's a game of chickens between hedge funds using glaringly obvious market manipulation to drive their shorts and retail investors who spotted how the hedge fund's overplayed their hand.
> Hertz is a better saga (...)
Hertz has zero to do or in common with gamespot's saga. Hedge funds cornered themselves by shorting over 100% of gamespot's stock, and thus forcing themselves to buy over 100% of gamespot's stock back for whatever the market will be asking to be able to deliver on their contracts. Hertz was a company already in bankruptcy.
The bubble is/was at both ends. I honestly have to agree that it was undervalued at the time that the original GME posts were made, but it's also very overvalued right now.
GameStop has limited immunity from the problem other brick-and-mortars are facing: console games purchased through digital content delivery platforms cannot be transferred to friends, where-as games that are purchased at GameStop typically can be. There's also hardware to be purchased and other goodies. GameStop is not intrinsically doomed to failure, if they proactively differentiate from digital content delivery.
That being said, it's highly doubtful that GameStop will outpace digital content delivery platforms (like Steam/PSN/XBox Live/etc.), unless they build their own.
In my opinion, they do potentially have a sustainable 8-9 figure market cap. This bubble is going to pop, just as much as the squeeze had to happen.
GameStop is not just competing with digital content and delivery, they are also competing against established all-in-one stores like Carrefour and Fnac, that typically carries everything GameStop (currently) carries plus more.
If they can make themselves different enough to give people a reason to buy their PS5 at GameStop instead of at Carrefour, remains to be seen.
That whole GME thing is not stupid... institutions are holding 106% of GME stocks... not sure how much non-institutions are holding. What is stupid is what the government is allowing institutions to do.
Holding 106% can be perfectly rational, it happens just because shorts create a loan.
Suppose we have a company and an institution has analyzed the books and knows is worth $10/share, shares are currently trading at $5. Suppose this is an unusually small company and there are only 100 shares outstanding total. Institution buys them all up since it's such a good deal.
Along comes Citadel who decides the company is going bankrupt and decides to sell the company short. Borrows 50 shares from the institution's broker and puts them up on the market. Now the institution sees that 50 more shares are available again at $5. Still the institution knows they are worth $10/share.. it's completely rational to purchase those shares and increase the holding to 150 shares even if the official shares outstanding is only 100 shares. Institution can sell all 150 for $10 a share assuming they are eventually right about the validation and Citadel will be the one that needs to make up the difference.
First time might have been retail traders but this is all about big whales. Shorts are pinned - all shorts must cover. Writing this off as a retail pump and dump is ignorance.
The noise is precisely why people are distracted. A lot of people would love to get rich by buying low and selling high within that noise. The more noise there is, the more opportunities there are.
That's gambling, not investing, but people love gambling. As with gambling, the house always wins, but some people come out ahead anyway. Like lottery winners, that makes people dream.
In this case there may even have been some house disadvantage: too much pessimism by investors not only made opportunities for legitimate investing wins, but the quirks of the rules left them open to having to materialize losses. Any such advantage to investors is long since gone, but it amplifies the lotto excitement.
It's just frustrating to see otherwise reasonable people start tossing out crazy conspiracy theories about the Day of the Short Squeeze when GME will go to infinity and we'll take all the hedge funds' money. I can't even escape from it by staying off social media, because a quarter of my friends are in on it. I'm a lot less troubled than I was the first time around because there doesn't seem to be any severe systemic risk, but I still really wish I could figure out how to convince people to knock it off.
For most people, this is a gambling thing. For them, its not much different than spending $100 or $500 on blackjack and slots.
Its entertainment to them. Sure, some of us are trying to do work (aka: properly price things, determine which companies deserve our money, etc. etc.), and these events are distracting...
But if its just a bubble, I don't think there's much harm in letting it run its course. Let them gamble, as long as no sharks swim by to illegally try to extract money from their fun.
Of course, if someone in particular you know has a gambling problem (and might lose their life savings), that's a different story.
Yeah, I agree with all of that - it doesn't seem like there's any huge number of people putting their life savings into it. I'm just vaguely annoyed by gambling in general and don't like when I have to hear about it all the time.
Maybe rather than seeing GME as a crazy event that even made your "reasonable" friends non-reasonable, could it be that you thought they were more reasonable than they actually were?
Look, I think this whole GME thing is stupid: but following the price is also stupid. I guess if its your first bubble, this is exciting stuff, but these things come crashing down eventually.
Hertz is a better saga to follow, since that saga is almost done. I don't know if any news on GME has come out recently, but nothing is quite as final as bankruptcy court (in the case of Hertz).
If you look at the timescales at which stocks meme / move, its on the order of years. Decades even, in the case of Enron and literal scams like Madoff. GME isn't even a scam, its just the market doing its thing.
For Hertz, it entered meme status AFTER it started bankruptcy proceedings last year. Those proceedings are still not over yet. It just goes to show how long things take in the world of finance.
The daily ups and downs are largely noise. Try not to be distracted by them.