Friday, 29 January 2021

WallsStreetBets - Suckers gambit!

 What a week, sorry for my lack of posting, have in a tiny way been getting involved and making enough money for a couple of decent takeaways. 

Getting involved in what you ask?

Well, in the most 2021 story yet, Trumpism came to the US markets and just like in politics, make a big splash before getting punched. Maybe he story is not quite finished, but this week has seen the top and blow-off. 

What happened? Well, a canny bunch of retail investors saw that in the US to stocks #GME, #AMC, were being shorted over 100% (hedge funds selling shares, buying them, then selling them again to create double short positions). The retail group started going long, 'to fight the hedgies' A meme developed, thousands of retail investors (now led on by very easy access to the market from phone apps like Reddit), joined in and the Hedge funds were in trouble. The price was rocketing by 100's of percent and they were short. So they had to buy too and the share exploded up over 500% and more. 

Of course, the hedgies then started complain to the regulator, but also the trading apps were in trouble, they did not have the cash collateral to clear their trades (takes 3 days for the 'instant' retail deposits to clear for them). So they limited buying, this, together with hedge funds clearing their shorts at a big loss, meant the buying pressure started falling and so down to earth came #GME.

Then yesterday one of the 'leaders' - WallStreetbets - a nicely anonymous twitter handle to go with the current zeitgeist, started pushing a little known crypto currency- Dogecoin. This promptly went up 800% but has also fallen back already. 

Rampers and irrational booms are not unusual, the dotcom bubble many will remember and also, strangely, the frenzied period in 2009 are the market bottom of the Great Recession. Now lots of people are sat at home, with unused disposable income and gameified trading apps - it is a recipe for fun and the huxters to let rip. Of course if also exposes the Hedge Funds et al who are at the same game, but to me, that is hardly new information. However, for some millennials, that idea they are not investing but trying to take down hedge funds has a moral appeal - very smart move by the huxters, it has worked a treat. 

I guess they have a few more pump and dumps in them and it will be over...

20 comments:

Anonymous said...

Creating a false market, or what?

I'm no friend of hedgies, but -

Anonymous said...

Just as false as the over 100% sell pressure hedgies put on companies

Unknown said...

You sound like an idiot. Trying to put politics into the market.

Bulldawg Blawger said...

You shouldn't write about things that you clearly have no idea about. Are you shitting your pants right now? The GME phenomena and the Doge coin event are two completely separate movements and there is no person with a handle of Wallstreetbets. WSB is a subreddit with nearly 6 million members and started the GME movement. The Doge coin movement was started by a completely separate subreddit. Why am I wasting time on you?

Anonymous said...

You really failed your DD on this post, friend. Reddit is not a stock trading app. The WallStreetBets twitter handle doesn't officially represent the r/wallstreetbets community, it's actually run by a huckster that used to be part of that community but was kicked out. Try to get a better handle on the situation before analysis, rather than parroting what you read on business news sites.

Thud said...

All good fun and the democratic party donors are going to be demanding heads! I shall stick with my get rich slow strategy as its worked fine these last 20 or 30 years.The odd fun punt on blockchain, gold etc is interesting but akin to my annual bet on the national, fun but of no real financial consequence.

Matt said...

Despite some inaccuracies, this looks a reasonable summation of what occurred. For those making pedantic points, would you care to comment on what (in the round) is wrong with this post?

iOpener said...

The Trump Derangement Syndrome is still strong in this one.

@Matt:
1. He posted too early. The Robin Hood brokerage was forced to allow ongoing trading in GME which is no longer fallen to earth, but at 333.06 as I type this. i.e. Up $US120 or so overnight.

2. He ignored the almost certain illegality of the brokerages who stopped their customers from buying shares in GME et al. even though the buyers had sufficient margin on deposit.

3. He ignored the long term damage to the reputations of the brokerage houses which refused legal and properly funded buy orders, including the chief villain, Robin Hood, but also my brokerage TD-Ameritrade, which I no longer trust and from which I am looking for a place to move my investments. My investments are small, just less than $3M US, but I expect millions of us small fry are made nervous and running away.

Don Cox said...

It's all gambling, and it will end in tears. Only the casino owner makes a profit.

Don Cox

dearieme said...

All of life is gambling, Don, and life does indeed end with tears.

Anonymous said...

And I see Google zapped 100,000 negative reviews of Robinhood from furious customers. Turns out Robinhood's real business is selling the retail client behaviour data to hedge funds, who'da thunk it?

Anonymous said...

So there's a hard border in Northern Ireland again! Good luck to the Gardai with that.

https://www.irishnews.com/news/healthcarenews/2021/01/29/news/eu-invokes-article-16-introducing-controls-on-vaccine-exports-to-northern-ireland-2203719/

I presume that means our lorries don't have to worry about checks and paperwork any more and NI supermarket shelves will be fully stocked again.

This is all escalating quickly.

CityUnslicker said...

I have been trading crazy bubbles, winning and losing a lot longer than some these commentators have been alive. We’ll see next week, I AM retail, I don’t want people to lose. There is money to be made trading, but the bubble will burst and the casino will win. Always does.

Anonymous said...

Aaaand ..the EU caves inside six hours! I guess when the Irish government, Sinn Fein, the Opposition, AND the DUP say it's a bad idea...

I wonder if the Irish tea-sock pointed out gently that his police and customs might not be ultra-keen on the enforcement side.

Makes oi larf when you think how sacrosanct the soft border was in the Brexit negotiations.

How it started

https://www.theguardian.com/world/2020/mar/14/coronavirus-vaccine-delays-brexit-ema-expensive

The UK faces having to wait longer and pay more to acquire a coronavirus vaccine because it has left the EU, health experts and international legal experts warn today. In an article published today on the Guardian website, the academics and lawyers say Boris Johnson’s determination to “go it alone”, free of EU regulation, after Brexit means the UK will probably have to join other non-EU countries in a queue to acquire the vaccine after EU member states have had it, and on less-favourable terms.

Trust the experts!

How it's going

https://www.theguardian.com/society/2021/jan/29/we-had-to-go-it-alone-how-the-uk-got-ahead-in-the-covid-vaccine-race

"With Brexit looming, the UK drew huge criticism for declining to join EU schemes to purchase PPE and ventilators. There was also growing pressure to join a joint EU procurement plan for vaccines, and to put aside the Brexit rhetoric. But Brussels’ demands were eye-watering: the UK, unlike EU member states, would not be able to take part in the governance of the scheme, including the steering group or the negotiating team. Britain would have no say in what vaccines to procure, at what price or in what quantity, and for what delivery schedule. There would be no side-deals possible. British officials were not convinced. “We had to go it alone,” said a UK source. “There was nothing there for us.” By the time a special UK vaccine taskforce was created in April, the seeds of a successful strategy had been sown."

Nick Drew said...

Thanks, anon, for documenting that March Graun article!

Anonymous said...

Among the interesting facts in the Guardian climb-down is the fact that the UK invested more money in no-guarantee vax work and production facilites than the entire EU did.

Anonymous said...

ND - the Paper Of Record alerted me to it.

https://www.dailymail.co.uk/news/article-9203435/GUY-ADAMS-UK-built-vaccine-triumph-Tory-haters-called-anti-EU-plot.html

Matt said...

Interesting take on Gamestop - https://marketsweekly.ghost.io/what-happened-with-gamestop/

Sobers said...

"I have been trading crazy bubbles, winning and losing a lot longer than some these commentators have been alive. We’ll see next week, I AM retail, I don’t want people to lose. There is money to be made trading, but the bubble will burst and the casino will win. Always does."

Is not the point (or at least one of the points) of the GME affair that the buyers of the stock were not motivated by making money? They knew they would probably lose whatever they 'invested' but considered it worth it to bring down a hedge fund (or funds).

Its missing the point entirely to consider what these guys were doing as being motivated by making money. Some maybe hoped to ride the beast and jump off at the right point with a profit, but the underlying sentiment seems to me to be a rabid animosity to the hedge funds (and Wall Street in general).

And as such I doubt they will go away. A gaggle of people all trying to make money in the same way will soon disperse into other avenues for money making, whereas a gaggle of people all united in a political aim will continue even if stymied at first.

APL said...

"Reddit is not a stock trading app. "

Yea, that was odd.

And now it looks like RobbingHood is being taken out back to the woodshed. For a company that claimed it was 'for the little man', but breached its contractual obligations to its clients at the first opportunity, it couldn't have happened to a better company.

Melvin Capital seems to have pissed $4bn against the wall, too.

Well deserved for a miserable bunch of asset strippers.