Agree that this is not a simple David vs Goliath and there is institutional money on both sides.
Wholeheartedly disagree that this is not benefiting many many average people who have not had an opportunity like this ever before in their lives. This is transferring life changing money to a lot of people in a historic way.
Also your tone of this being “absurd” reads as condescending to the retail investor.
You want to aim at anyone aim at the hedge funds that were illegally short over 140% more shares than were ever issued and have continued to double down on that.
as i said, "I'm happy for anyone who made the trades, took some profit, and is taking a breather." Genuinely happy for them. I don't think that will be the vast, vast majority.
This outlook requires both a pretty dim and a pretty unempathetic view of the average retail investor. Granted, not everyone who's gotten involved in $GME fully understands the risks they're taking, or the likelihood of the trade working out in their favor; but this article also makes no mention of the ways in which apps like Robinhood *explicitly encourage* risky investing through gamification and letting retail investors trade on margin. Nor does it mention the crushing student debt, persistently low wages, soaring cost of insurance, etc., that might make taking a risk on a hot stock seem appealing. The ratio of hand-wringing about "financial market primacy" to curiosity about the structural conditions that could have led so many people to make bets that you find irresponsible is quite high.
The tone is that of Jeb Bush lecturing Republicans on why they need to elect an establishment, responsible republican. In and of itself it might be true, but it not only falls on deaf ears, it actually reinforces why people were inclined not to do so in the first place.
How many of these people are going to actually pull their cash out of this at the right time though? These is a lot of volatility and a lot of people probably just doubled down (some people I know) thinking this rocket ship is gonna double their cash again. When this goes bust there’s gonna be more life changing bankruptcy than people paying off their student loans.
I'm trying to figure out the order of operations here. At which point do you think Big $ got involved significantly? I'm confused, as I've done some reading of old blogs and it seems like an open secret on the Street even in the summer (if not earlier) that Gamestop was undervalued, heavily shorted, Burry was invested, new console cycle was coming, etc...
Appreciate your thoughtful insight and agree this is not just retail investors, Institutions are on both sides of the trade.
Question on your comment about this having real consequences on GME employees could lose their jobs. Maybe I am too much of a simpleton to understand this but I don't see how this is the case. Simplistically long ago when GME went public it sold shares to the market and raised capital. It's not like they continually issue more stock continually and raise more capital. So if the the stock was sleeping forever at say $10 and a bunch of people buy and sell at these crazy prices of 5, 10, 20 times the typical price how does that impact the employees? To me the only way they arr impacted is based on actual operating expenses and lack of revenues if they were upside down and losing money at the retail locations. So please elaborate if you read this, genuinely interested in your take.
Your market cap can affect a bunch of things like the rate (and amount) at which you get working capital from banks, or say if you're planning an M&A and thinking of paying in stock, I am sure there are other things.
But still, if anything in theory the current valuation would help those situations so when the price drops back to where it was and it will, the actual business is no better or worst than before. So still fail to see how this is bad for employees, I'd say they are still not impacted.
I enjoyed this article and appreciate the perspective - especially knowing that there's no way large institutions aren't capitalizing on this phenomenon - that was clear from the get-go. Please elaborate on how it's Jim Bell's job to catch the falling knife and exactly how Gamestop employees could lose their jobs as a result of this. Their jobs would have already been in jeopardy simply due to Gamestop's retail market dynamics, and that hasn't changed. People don't decide to walk into Gamestop and conduct business based on the company's share price.
i hear you on this, but i don't get how the company/employees will be damaged. they'll be able to do an at the market offering at let's say $100, and raise more money than they could have ever imagined, and pivot to whatever e-commerce idea Cohen has. win win right (except the shorts)?
Question for Ranjan: Why not strictly enforce an uptick rule. I know some type of rule was re-instituted in 2010 but I don't know the mechanics of it. Are there any other rules that you would put in place to make the market more stable?
I'm interested in controls/reform topic, too. Stipulated that we don't want an emerging type wild west market... What regulations would change that?
I was a long time gme investor who sold a few weeks before the crazy, and I was a bit angry considering how such outsized shorting may have been hurting me for so long before that. Ban naked shorting? Neat real-time disclosure of short interest?
All of these things can be true simultaneously about gme:
- 'the man' can lose (melvin)
- 'the man' can win (blackrock)
- retail traders are gambling for profit
- retail traders are doing this to stick it to the man
- may cause regulators to mis-regulate, causing harm to retail investors
- may cause regulators to actually crack down on market manipulators of all stripes (esp. given your point re: Gensler/Chopra)
Titling this 'it's not what we think' then saying this is bad for mom and pop strikes me as a bit one-sided.
Not having a go at you, you're obviously very financially sophisticated and love your articles, but I'd urge you to read through the original wsb DD post on this back when the stock was $10 if you haven't already. Most of wsb outwardly admits GME makes no fundamental sense over $70/per at best. For every wealthy day trader on wsb, there's 50 dudes buying 1 or 2 shares and throwing up chicken nugget emojis, not losing their retirement accounts. (lottery / casinos / sports gambling are probably much better targets of investment advisor ire if we're trying to 'save the masses from themselves')
I don't think the point is that Mom and Pop investors could lose here - that's very true - I think the takeaway here is that this is the first time, really, where at least SOME mom and pop investors had a chance to win on a market cornering (as opposed to, historically, only the G. Geckos). Will be very interesting to see how this is legislated.
Can anyone explain why trading platforms can/should restrict non margin/ non option trades? If some one has 10,000 to gamble with, where is the precedent for the platform to dictate which trades, and at what volume it could be traded at?
Well Silver Lake just made a $100M+ exit from AMC convertible bonds. And what happens if GameStop's CFO announces on Monday morning that he is issuing 10 million new shares at the "bargain" price of $200?
This is thoughtful and interesting but it definitely isn't necessary to imply that anyone who misunderstood this story at first is somehow recklessly ignorant. I feel like you're yelling at me and I had nothing to do with this at all
for some reason, my mind turns to the collapse of Albania in 1997 resulting from scads of "ordinary citizens" chasing the easy money scheme that shortly thereafter became known as the pyramid. "Populli (English: People) was created on July 16, 1996 and was extended in the same area as the Xhaferri. Its President was Bashkim Driza the former State Security agent. He worked deeply with the Albanian opposition parties and financed their campaigns and newsletters. During the riots of 1997, he left with a U.S. helicopter."
I wonder why no one is looking more closely at Musks other game - the Tesla/Bitcoin one, especially after disappointing Tesla results this week! Could this be considered an insider trade? Either way, that South African boykie is having a lot of fun!
Was waiting for this and it delivered. Great stuff as always, Ranjan.
Agree that this is not a simple David vs Goliath and there is institutional money on both sides.
Wholeheartedly disagree that this is not benefiting many many average people who have not had an opportunity like this ever before in their lives. This is transferring life changing money to a lot of people in a historic way.
Also your tone of this being “absurd” reads as condescending to the retail investor.
You want to aim at anyone aim at the hedge funds that were illegally short over 140% more shares than were ever issued and have continued to double down on that.
as i said, "I'm happy for anyone who made the trades, took some profit, and is taking a breather." Genuinely happy for them. I don't think that will be the vast, vast majority.
This outlook requires both a pretty dim and a pretty unempathetic view of the average retail investor. Granted, not everyone who's gotten involved in $GME fully understands the risks they're taking, or the likelihood of the trade working out in their favor; but this article also makes no mention of the ways in which apps like Robinhood *explicitly encourage* risky investing through gamification and letting retail investors trade on margin. Nor does it mention the crushing student debt, persistently low wages, soaring cost of insurance, etc., that might make taking a risk on a hot stock seem appealing. The ratio of hand-wringing about "financial market primacy" to curiosity about the structural conditions that could have led so many people to make bets that you find irresponsible is quite high.
The tone is that of Jeb Bush lecturing Republicans on why they need to elect an establishment, responsible republican. In and of itself it might be true, but it not only falls on deaf ears, it actually reinforces why people were inclined not to do so in the first place.
How many of these people are going to actually pull their cash out of this at the right time though? These is a lot of volatility and a lot of people probably just doubled down (some people I know) thinking this rocket ship is gonna double their cash again. When this goes bust there’s gonna be more life changing bankruptcy than people paying off their student loans.
I'm trying to figure out the order of operations here. At which point do you think Big $ got involved significantly? I'm confused, as I've done some reading of old blogs and it seems like an open secret on the Street even in the summer (if not earlier) that Gamestop was undervalued, heavily shorted, Burry was invested, new console cycle was coming, etc...
Appreciate your thoughtful insight and agree this is not just retail investors, Institutions are on both sides of the trade.
Question on your comment about this having real consequences on GME employees could lose their jobs. Maybe I am too much of a simpleton to understand this but I don't see how this is the case. Simplistically long ago when GME went public it sold shares to the market and raised capital. It's not like they continually issue more stock continually and raise more capital. So if the the stock was sleeping forever at say $10 and a bunch of people buy and sell at these crazy prices of 5, 10, 20 times the typical price how does that impact the employees? To me the only way they arr impacted is based on actual operating expenses and lack of revenues if they were upside down and losing money at the retail locations. So please elaborate if you read this, genuinely interested in your take.
Wish I had read the comments before posting mine. I don't get this part either.
Your market cap can affect a bunch of things like the rate (and amount) at which you get working capital from banks, or say if you're planning an M&A and thinking of paying in stock, I am sure there are other things.
But still, if anything in theory the current valuation would help those situations so when the price drops back to where it was and it will, the actual business is no better or worst than before. So still fail to see how this is bad for employees, I'd say they are still not impacted.
> here's a story about me and the Vietnamese Dong
I think I'll skip that one.
I enjoyed this article and appreciate the perspective - especially knowing that there's no way large institutions aren't capitalizing on this phenomenon - that was clear from the get-go. Please elaborate on how it's Jim Bell's job to catch the falling knife and exactly how Gamestop employees could lose their jobs as a result of this. Their jobs would have already been in jeopardy simply due to Gamestop's retail market dynamics, and that hasn't changed. People don't decide to walk into Gamestop and conduct business based on the company's share price.
i hear you on this, but i don't get how the company/employees will be damaged. they'll be able to do an at the market offering at let's say $100, and raise more money than they could have ever imagined, and pivot to whatever e-commerce idea Cohen has. win win right (except the shorts)?
Question for Ranjan: Why not strictly enforce an uptick rule. I know some type of rule was re-instituted in 2010 but I don't know the mechanics of it. Are there any other rules that you would put in place to make the market more stable?
I'm interested in controls/reform topic, too. Stipulated that we don't want an emerging type wild west market... What regulations would change that?
I was a long time gme investor who sold a few weeks before the crazy, and I was a bit angry considering how such outsized shorting may have been hurting me for so long before that. Ban naked shorting? Neat real-time disclosure of short interest?
All of these things can be true simultaneously about gme:
- 'the man' can lose (melvin)
- 'the man' can win (blackrock)
- retail traders are gambling for profit
- retail traders are doing this to stick it to the man
- may cause regulators to mis-regulate, causing harm to retail investors
- may cause regulators to actually crack down on market manipulators of all stripes (esp. given your point re: Gensler/Chopra)
Titling this 'it's not what we think' then saying this is bad for mom and pop strikes me as a bit one-sided.
Not having a go at you, you're obviously very financially sophisticated and love your articles, but I'd urge you to read through the original wsb DD post on this back when the stock was $10 if you haven't already. Most of wsb outwardly admits GME makes no fundamental sense over $70/per at best. For every wealthy day trader on wsb, there's 50 dudes buying 1 or 2 shares and throwing up chicken nugget emojis, not losing their retirement accounts. (lottery / casinos / sports gambling are probably much better targets of investment advisor ire if we're trying to 'save the masses from themselves')
I don't think the point is that Mom and Pop investors could lose here - that's very true - I think the takeaway here is that this is the first time, really, where at least SOME mom and pop investors had a chance to win on a market cornering (as opposed to, historically, only the G. Geckos). Will be very interesting to see how this is legislated.
Can anyone explain why trading platforms can/should restrict non margin/ non option trades? If some one has 10,000 to gamble with, where is the precedent for the platform to dictate which trades, and at what volume it could be traded at?
Well Silver Lake just made a $100M+ exit from AMC convertible bonds. And what happens if GameStop's CFO announces on Monday morning that he is issuing 10 million new shares at the "bargain" price of $200?
This is thoughtful and interesting but it definitely isn't necessary to imply that anyone who misunderstood this story at first is somehow recklessly ignorant. I feel like you're yelling at me and I had nothing to do with this at all
for some reason, my mind turns to the collapse of Albania in 1997 resulting from scads of "ordinary citizens" chasing the easy money scheme that shortly thereafter became known as the pyramid. "Populli (English: People) was created on July 16, 1996 and was extended in the same area as the Xhaferri. Its President was Bashkim Driza the former State Security agent. He worked deeply with the Albanian opposition parties and financed their campaigns and newsletters. During the riots of 1997, he left with a U.S. helicopter."
A. Proofread before publishing.
B. Lots of awkward and sometimes incorrect English usage here - "themself"?
C. Unfortunate that you chose to jazz this up with Millennialese instead of explaining straightforwardly to those who wish to understand.
I wonder why no one is looking more closely at Musks other game - the Tesla/Bitcoin one, especially after disappointing Tesla results this week! Could this be considered an insider trade? Either way, that South African boykie is having a lot of fun!
Thanks for a great perspective.