Screw the shorts per wallstreetbets and CNBC went apoplectic this morning. I've always believed kids with computers were dangerous and today proved that.

In a way it was funny and in a way it was spooky. Can't wait to read about this tomorrow.

I was a little taken back by Charles, usually calm demeanor. He hit some high spots for certain.

Aliceinbubbleland said:

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Screw the shorts per wallstreetbets and CNBC went apoplectic this morning. I've always believed kids with computers were dangerous and today proved that.

In a way it was funny and in a way it was spooky. Can't wait to read about this tomorrow.

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What exactly happened? I don't so the stock market so I am a bit confused.

I can't exactly decide how to interpret these actions. In a way, I can't really find where any market fundamentals have been violated.

As far as I know, the scenario plays thus:
GameStop is a video game sales company dealing mostly in traditional "brick and mortar" stores. Their big move is buying and reselling used games. With most video game sales now being done online, and the software exchanged digitally, their market stands to dwindle. Dwindle it has, along with profits, of course.

This put the stock into a depressed state. Bankruptcies have been mentioned. Accordingly, seemingly hidden money, like hedge funds have "shorted" the stock. In brief, a "short" means you think the price of the stock will fall. To do this, you find someone willing to lend you stock that you don't own. Essentially, you "sell" that stock at today's price. You "buy" later when you think the price is at its lowest. Thus, you put back the borrowed stock and reap the profit.

A Reddit forum called WallStreetBets or thereabouts concluded that GameStop wasn't going to just die. The new PlayStation5 launch, etc, could easily provide them with a cash infusion for at least a little while. They started buying the stock. The price went up. As more readers of WallStreetBets saw what was happening, they got in on it too. The price continued to rise.

The risky side of shorting a stock is that, at some point, you have to replace the stock you "sold" but didn't own. Not every joker can short a stock. The brokerage house has to be comfortable letting you sell a borrowed stock - knowing you'll be good for the replacement, win or lose. This trust has its limits. As the hedge funds that shorted the stocks reached their limits of this trust, the writing was on the wall - they're going to have to buy the stock at a grossly inflated price whether they wanted to or not.

The WallStreetBets guys realized this. Even more money came racing in. By this time, the story was general knowledge. The stock had gone from 2.80 a share to over 500. Those in early were looking at hundreds of millions of dollars of profit. Conversely, those who shorted were looking at commensurate losses.

Acting on undisclosed or otherwise non-general knowledge to profit from the market is illegal. Deliberately spreading false information to cause a market manipulation is likewise illegal. Here, though, it seems a non-traditional thought process just happened to run into a perfect storm of those awaiting a mundane return on an investment. I can't see how this scenario would repeat on a generic security. Really, it seems that the short-sellers took an uninformed, too risky stand and got blasted for their complacency.

Thanks.

Fad prolly knows more than I do but I thought a Musk tweet caused the GameStop stocks to rocket.

Musk got caught up when he tweeted about a replacement for Facebook's "WhatsApp" messenger application. When WhatsApp rolled out new terms and conditions that undermined privacy concerns, he asked for users to abandon WhatsApp for a different messaging app called "Signal".

Investors tried to cash in on this. They bought up stock in a small company called "Signal Advance Technologies". This is a small company that's around 10 years old, has never turned a profit, and makes, well stuff that propagates signals. Not the right "Signal" at all. The stock went from around 0.80 to over 120.00. Even after everyone was told that it wasn't the right company, it still settled around 27.00.

I have angry concerns over the casino-like nature of these markets. Between algorithms and news cycles, we're more predicting the group activity rather than fostering innovation. The feed-forward nature of some algorithms seems to ensure that those with the cash to get on the train will always accelerate away from those who can't. Eventually, you form a bifurcated economy with predictably poor results.

For the record, I'm a big proponent of the actual "Signal" messaging app.

A person known as wallstreetbets went on Reddit and recommended people buy shares of nearly worthless stocks that were heavily shorted. Hedge funds had shorted the stocks, heavily, in the names he recommended like Game Stop, AMC Entertainment, American Airlines, and others like Bed Bath and Beyond.

People followed his advice and ran stocks up two and three hundred percent causing massive losses to Hedge Funds and trading platforms like Robinhood.

The real irony is all the suits came out blasting the on line traders as paying no attention to fundamental analysis of markets. Well, guess what and I quote.

Quote:

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Even Nancy Pelosi, when asked about "manipulation" and "what's going on on Wall Street right now," said 'we'll all be reviewing it' as if it were the business of congress to worry about a bunch of day traders cashing in for once.

The only thing "dangerous" about a gang of Reddit investors blowing up hedge funds is that some of us reading about it might die of laughter. That bit about investigating this as a "pump and dump scheme" to push prices away from their "fundamental value" is particularly hilarious. What does the Washington Post think the entire stock market is, in the bailout age?

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Janet Yellen made over $4 million in fees, mostly from Hedge Funds like Citadel yet no one cares?

https://www.foxnews.com/politics/yellen-robinhood-citadel-gamestop-speaking-fees

Realistically, this is likely the type of analysis we should see in the market. Hedge funds, due to their nature, don't have to reveal their trading schemes in "real time" (normally, if you're making a big market move, you're obligated to declare it in regulatory filings). Ordinarily, a hedge fund would simply not disclose their short positions. Several funds wanted options (a "put" call), and those were disclosed.

WallStreeBets really did nothing more than notice that the short positions added up to several times the company's total worth. That means they'd have to sell all the stock 3 times over to get the value needed for their short call. This obviously can't be done. When those short bets were cashed in, someone was going to have to buy high. Not having sufficient stock available to cover these positions creates a "short squeeze", that is, traders will be forced to buy stocks at increasingly higher prices to replace the stock they borrowed for their short. Instead of "buy low, sell high", they'll "sell medium, buy extremely high".

The hedge fund managers got lazy and copied each other's short bets like they usually do. They didn't do their analysis. They thought surely someone else would take the loss. If it were possible to punish more sloppy traders like this, perhaps the market would rein itself in.

It's be denounced in the media as an "insurrection" by average joes.

Don't look now but the media is trying to tie WSB to Alt Right, racists, and homophobes. Imagine that.

AMC is going through the roof too this coming week. 86% shorted and they need to start closing come Monday. Friday, AMC closed just above $13 (Shorts needed it to drop to just below $9 to even break even).

Check out these shorts. This coming week is going to be an absolute blood bath unless we see more manipulation. https://www.marketbeat.com/stocks/NYSE/AMC/short-interest/