Stock market drama llama: GameStop shares dramatically rise in price from some Reddit users' trading in it

[Axulus]

Yes, people who buy a very mediocre company at these prices will be self regulated out of the market since they will have vastly reduced capital after incurring the inevitable losses, and those who happen to sell to another sucker before incurring such losses will likely engage in similar stupid behavior again and not be so lucky next time. Or are you under the impression that they are all rich and can afford to keep daytrading indefinitely?

Ah yes...I remember when the market regulated itself after the housing market crashed, Everyone on Wall Street realized that bundling mortgages into complicated financial instruments like mortgage backed securities, credit default swaps, and CDOs was a terrible idea and they all stopped doing that..

I mean, why even have the Securities and Exchange Commission? Honesty is the basis of Wall Street, after all!


(that's more sarcasm)

The SEC's only legitimate purpose is to investigate and punish lies and fraud on the securities market and make sure proper legal disclosures and financial reports are released. If people want to be idiots with their own money, so be it.

Losses incurred limit/reduce your ability to participate in the markets in the future. How can it not?

 

[Ford]

Yes, people who buy a very mediocre company at these prices will be self regulated out of the market since they will have vastly reduced capital after incurring the inevitable losses, and those who happen to sell to another sucker before incurring such losses will likely engage in similar stupid behavior again and not be so lucky next time. Or are you under the impression that they are all rich and can afford to keep daytrading indefinitely?

Ah yes...I remember when the market regulated itself after the housing market crashed, Everyone on Wall Street realized that bundling mortgages into complicated financial instruments like mortgage backed securities, credit default swaps, and CDOs was a terrible idea and they all stopped doing that..

I mean, why even have the Securities and Exchange Commission? Honesty is the basis of Wall Street, after all!


(that's more sarcasm)

The SEC's only legitimate purpose is to investigate and punish lies and fraud on the securities market and make sure proper legal disclosures and financial reports are released. If people want to be idiots with their own money, so be it.

Losses incurred limit/reduce your ability to participate in the markets in the future. How can it not?

But there's no lies and fraud that won't be taken care of via self-regulation, right?

Why even bother with disclosures? Buyer beware will solve all the minor problems that might crop up in the market! I mean...remember all the bad actors that were punished by the market after the 2008 crash? They're all living in trailer parks and their banks have been run out of business...right?

 

[Axulus]

The SEC's only legitimate purpose is to investigate and punish lies and fraud on the securities market and make sure proper legal disclosures and financial reports are released. If people want to be idiots with their own money, so be it.

Losses incurred limit/reduce your ability to participate in the markets in the future. How can it not?

But there's no lies and fraud that won't be taken care of via self-regulation, right?

Why even bother with disclosures? Buyer beware will solve all the minor problems that might crop up in the market! I mean...remember all the bad actors that were punished by the market after the 2008 crash? They're all living in trailer parks and their banks have been run out of business...right?

You are engaging in red herrings. What does any of this have to do with the op or my comments? There are no lies/fraud involved with the short sellers or the lemmings buying GME that I am aware of, so what regulations are you proposing are needed here?

 

[Angry Floof]

It's fun watching greedy Wall St fucks suddenly crying about maybe we should have some regulations after all so regular people can't beat us at our own game of ruining companies and lives for profit.

 

[Axulus]

It's fun watching greedy Wall St fucks suddenly crying about maybe we should have some regulations after all so regular people can't beat us at our own game of ruining companies and lives for profit.

How were the GME short sellers ruining GameStop or ruining lives? I honestly don't care about their losses but to celebrate it as some kind of good is completely bonkers. And plenty of rich wall streeters stand to benefit from the price increase as well as plenty of the shares were owned by wealthy individuals before the rise.

 

[Ford]

..so what regulations are you proposing are needed here?

Correct me if I'm wrong, but you're making the case that there need be no regulations whatsoever. Fraud will be handled by the miracle of the free market. Who is John Galt and all that.

 

[Axulus]

..so what regulations are you proposing are needed here?

Correct me if I'm wrong, but you're making the case that there need be no regulations whatsoever. Fraud will be handled by the miracle of the free market. Who is John Galt and all that.

Wrong. I said no regulations are needed in the case of whats happening with GME and similar situations. If wall street firms want to short a stock and a bunch of redditors want to pile into such stocks, and no lies or fraud are being engaged in by either side in the specific instance, let them do what they want. If any side is being stupid in the process, losses incurred will reduce their capital and thus future ability to repeat such behavior.

Other situations may very well be different and call for SEC intervention. My only statement on the matter is that this is not one of those situations.

 

[Ford]

..so what regulations are you proposing are needed here?

Correct me if I'm wrong, but you're making the case that there need be no regulations whatsoever. Fraud will be handled by the miracle of the free market. Who is John Galt and all that.

Wrong. I said no regulations are needed in the case of whats happening with GME and similar situations. If wall street firms want to short a stock and a bunch of redditors want to pile into such stocks, and no lies or fraud are being engaged in by either side in the specific instance, let them do what they want. If any side is being stupid in the process, losses incurred will reduce their capital and thus future ability to repeat such behavior.

Other situations may very well be different and call for SEC intervention. My only statement on the matter is that this is not one of those situations.

So what regulations do you propose moving forward?

 

[Swammerdami]

How in the world is placing a big short bet on GameStop an indication of recklessness and greed that needs to be "punished"? The people who buy the stock at these prices are lemming morons and will be incurring big losses when this eventually collapses back down to $20-$30 range. At the end of the day, this isn't a very profitable company nor is it likely to be for the foreseeable future.

There doesn't need to be any regulation against this. The coming financial losses that will be incurred will force them out of the market regardless.

??? In all the amusing tweets about Wall St. hypocrisy shown in this thread there have been ZERO mentions of "punishment."

Some of these retail investors will make money; some will lose money. But none of them will do what the big mega-investors do like clockwork every few years: Ask Congress for a bail-out.

 

[Gospel]

It's fun watching greedy Wall St fucks suddenly crying about maybe we should have some regulations after all so regular people can't beat us at our own game of ruining companies and lives for profit.

How were the GME short sellers ruining GameStop or ruining lives? I honestly don't care about their losses but to celebrate it as some kind of good is completely bonkers. And plenty of rich wall streeters stand to benefit from the price increase as well as plenty of the shares were owned by wealthy individuals before the rise.

Angry Floof is specifically talking about the greedy Wall St fucks that are crying. That has nothing do with the greedy Wall St fucks that are not crying. I'm also laughing at the hypocrisy on display VIA articles and news reports. They're like a sports announcer for a tug-of-war game crying that there should only be one side pulling the rope. hahaha

 

[Jarhyn]

Simply put, shorting stocks is wrong because it deprived the owner of a stock of agency over their own consideration of value, if you accept that ownership of stock in the work of others is ethical in the first place. It subsumes the held value with the speculative one.

 

[funinspace]

Who will regulate the Regulators?

Sure Gamestop is on a wild ride, but somehow I have trouble seeing this as something out of sync with much of the equity markets.

And just how much influence in total can the Reddit crowd have compared to the world's central banks creating trillions of dollars to buy MBS, government bonds, and even stocks? And consider the cost of debt in a period where central bank rates are near or even below zero...
https://wallstreetonparade.com/2020/05/meet-the-feds-global-plunge-protection-team/

The Fed’s announced purchases of investment grade corporate bonds, junk bonds and junk bond Exchange Traded Funds (ETFs), which have set an initial goal of scooping up $750 billion in sinking paper, have yet to invest a dime; likely because the legality of those programs are still being debated.

But it’s not just the exponential growth in the Fed’s Foreign Central Bank Liquidity Swap Lines that is propping up the U.S. stock market. It’s the carefully calculated disbursement of those swap lines to foreign central banks that are already propping up the stock market through the purchase of stocks and corporate bonds.

According to the Fed’s breakdown of its swap outlays which currently total $444.89 billion, the lion’s share of $219.8 billion is with the Bank of Japan. According to the Bank of Japan’s balance sheet, as of April 30, it held $292.57 billion in Exchange Traded Funds (which include stocks); $6.5 billion in outright stock holdings; and $31.8 billion in corporate bonds. On March 16, the Bank of Japan announced that it would be dramatically increasing those asset purchases.

The second largest U.S. dollar swap line is with the European Central Bank (ECB), at $143.7 billion. The ECB announced on March 18 that it will expand its asset purchases (which include corporate bonds) by another $820 billion.

The Swiss National Bank (central bank of Switzerland) has $10 billion of the Fed’s U.S. dollar swap lines. According to its most recent filing with the Securities and Exchange Commission for the period ending March 31, 2020, the Swiss National Bank holds $94.2 billion in stocks, including billions of dollars in U.S. tech stocks like Amazon, Alphabet (parent of Google), Facebook, and Microsoft.

Norges Bank (central bank of Norway) has $5.4 billion of the Fed’s U.S. dollar swap lines. According to its March 31, 2020 SEC filing, it has a stunning $280.6 billion in stocks but exactly which stocks it owns is such a super secret that the information table (like the one filed with transparency by the Swiss National Bank and linked in the above paragraph) is filed confidentially with the SEC.

In the olden days, a PE over 20 was getting up there, and when an indices started getting over 20, it was a danger sign... Here are just a few fun ones:
Tesla (TSLA) PE is over 1700
Amazon (AMZN) is about 94
Advanced Micro Devices Inc AMD is 43
NVIDIA Corp NVDA is 84
Netflix Inc NFLX is 86
Zoom Video Communications Inc ZM is 258

 

[Swammerdami]

Simply put, shorting stocks is wrong because it deprived the owner of a stock of agency over their own consideration of value, if you accept that ownership of stock in the work of others is ethical in the first place. It subsumes the held value with the speculative one.

This makes little sense to me. Are you trying to cast the hedge-fund short-sellers as the villains in a morality play? What if roles were reversed and the big boys were long, with Joe Reddit selling short?

Anyway, loaning out one's own shares to a short-seller is, at least in principle, a voluntary action. Naked short-selling is now illegal IIUC.

 

[GenesisNemesis]

The people who buy the stock at these prices are lemming morons

It's almost like Wall Street is filled to the brim with such people.

 

[Worldtraveller]

Yes, people who buy a very mediocre company at these prices will be self regulated out of the market since they will have vastly reduced capital after incurring the inevitable losses, and those who happen to sell to another sucker before incurring such losses will likely engage in similar stupid behavior again and not be so lucky next time. Or are you under the impression that they are all rich and can afford to keep daytrading indefinitely?

Ah yes...I remember when the market regulated itself after the housing market crashed, Everyone on Wall Street realized that bundling mortgages into complicated financial instruments like mortgage backed securities, credit default swaps, and CDOs was a terrible idea and they all stopped doing that..

I mean, why even have the Securities and Exchange Commission? Honesty is the basis of Wall Street, after all!


(that's more sarcasm)

The SEC's only legitimate purpose is to investigate and punish lies and fraud on the securities market and make sure proper legal disclosures and financial reports are released. If people want to be idiots with their own money, so be it.

Losses incurred limit/reduce your ability to participate in the markets in the future. How can it not?

Except that the hedge funds in question have been violating the law since at least late last year, were reported the SEC, and the SEC did shit, so those people with the smarts to know what that meant invested in the market to force their hand, and subsequently, put at least a few of them out of business.

But your defense of hedge funds fucking over the people is noted.

 

[Worldtraveller]

..so what regulations are you proposing are needed here?

Correct me if I'm wrong, but you're making the case that there need be no regulations whatsoever. Fraud will be handled by the miracle of the free market. Who is John Galt and all that.

The regulations are already there. The fact that these companies were illegally over-leveraged (they over-shorted by 140%, which is already illegal, and were reported for it) and the SEC wasn't enforcing the law is what actually brought this on. A lot of the 'investors' from the reddit crowd are buying up the stock to hold it, knowing they'll lose most of what they put in (which is why a lot of them are only investing relatively small amounts, it's crowd funding at its best).

 

[Jarhyn]

..so what regulations are you proposing are needed here?

Correct me if I'm wrong, but you're making the case that there need be no regulations whatsoever. Fraud will be handled by the miracle of the free market. Who is John Galt and all that.

The regulations are already there. The fact that these companies were illegally over-leveraged (they over-shorted by 140%, which is already illegal, and were reported for it) and the SEC wasn't enforcing the law is what actually brought this on. A lot of the 'investors' from the reddit crowd are buying up the stock to hold it, knowing they'll lose most of what they put in (which is why a lot of them are only investing relatively small amounts, it's crowd funding at its best).

Honestly, the Reddit holders could very well swing shareholder decisions that could save the company. Should, even.

It would certainly show us all what happens when shareholders make decisions good for the company itself rather than, well, the shareholders.

 

[lpetrich]

Robinhood Stops Users From Trading GameStop Stocks, Other Reddit YOLO Picks - "With the market in chaos, even Robinhood has now turned on retail investors pumping dark-horse stocks."

According to screenshots shared on social media, on Thursday morning a notification appeared on Robinhood telling users that they could close their position on GameStop's stock but not buy any additional shares. Redditors are currently panicking, looking for ways to transfer their shares of GameStop off of Robinhood to other platforms, and are generally furious at the platform.

In a blog post, Robinhood confirmed that it has placed restrictions on several stocks due to volatility. “We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK. We also raised margin requirements for certain securities,” the blog post read.

AMC = movie-theater company, BB = BlackBerry, BBBY = Bed, Bath, & Beyond, EXPR = Express, Inc. fashion-clothes company, GME = GameStop video-game retailer, KOSS = headphone maker, NAKD = Naked Brand Group, NOK = Nokia cellphone maker

Motherboard on Twitter: "Robinhood has stopped allowing users to buy GameStop, AMC, BlackBerry, and Nokia stock. (link)" / Twitter

Motherboard on Twitter: "More than half of all Robinhood users own at least some GameStop stock.

They are now unable to freely trade it; the app is only allowing users to close out their positions. (link)" / Twitter

then
Alexandria Ocasio-Cortez on Twitter: "This is unacceptable. ..." / Twitter

Alexandria Ocasio-Cortez on Twitter: "This is unacceptable.

We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.

As a member of the Financial Services Cmte, I’d support a hearing if necessary.

Inquiries into freezes should not be limited solely to Robinhood.

This is a serious matter. Committee investigators should examine any retail services freezing stock purchases in the course of potential investigations - especially those allowing sales, but freezing purchases.

 

[Gospel]

I advise you all look into where you can bet against the stocks Marvin Capital will have to sell to cover their loss. This is not financial advice.

 

[southernhybrid]

I've been amused about this for about 2 weeks. In addition to Robinhood putting limits on these trades, yesterday, TDAmeritrade announced that they wouldn't even allow trades of Gamestock. I don't know if that's still going on today. But, all of these stocks are currently tanking. but they are way above what they were at the beginning of the year.

MSNBC interviewed an evangelical pastor this morning, who had invested 35 dollars on Gamestock. His investment was worth about 4K early this morning. He gave an excellent analogy, using a Biblical parable, where Jesus condemned the rich who had too much grain to store in their barns, but instead of sharing it with the poor, they built larger barns to store it. The guy was obviously not a conservative.

It's not the little investors who are hurting due to this behavior, as they were only investing tiny amounts of money in order to pump up these stocks. Their goal was always to hurt hedge funds etc. while making a little extra for themselves. I think it's pretty funny when small inexperienced investors are able to make a mockery of some of the biggest investors in the market.