Investors Annonymous

This article helped me understand how it hurts wall street the most. It was sorta what I was thinking theoretically but the article helped organize my abstract thoughts on the situation.
https://www.vice.com/en/article/pkdvgy/send-this-to-anyone-who-wants-to-know-wtf-is-up-with-gamestop-stock

I cannot believe these Redditors are destroying our perfectly rational economy. Why would they do such a thing?!

They’re changing the rules in real time because the wealthy didn’t like the tables turned on them.

I am actually really pissed off about this now. They've shut down the Discord channels and now the main trading platforms are preventing users from purchasing additional shares (they can only sell), which is artificially driving down the stock price and literally forcing small shareholders to sell their assets to powerful hedge funds and investment firms. None of these people have done anything wrong. They were not the ones who decided to set loose monetary policy designed to basically eliminate speculative risk from financial markets in order to prevent a wave of corporate bankruptcies. They don't have that power! Nor had they spent the last forty years advocating for the elimination of private pensions so that low- and middle-income families became increasingly reliant on capital markets to finance their own retirements. These people are literally responding as rational market actors to the fucking incentives provided to them by the ruling class. It is not their fault that they are cool enough to understand that financial markets are structurally rigged against them and to use their collective power to temporarily shift the balance of power for once.

This is truly an outrage. I hope this radicalizes the people involved.

BGwaves wrote:This article helped me understand how it hurts wall street the most.

Where did you get that from the article?

Vice wrote:And even if some hedge funds are getting bodied by retail investors, the massive funds such as Fidelity and Blackrock that own tens of millions of GameStop shares are probably just as happy.

Most of the retail investors will also lose. There will be a few dudes at the top of that pile that come away with a lot of money, but most people will lose some small amount of money. That's how this works.

WP64 wrote:This is truly an outrage. I hope this radicalizes the people involved.

Wouldn't be surprised if their main response is anti-semitism.

chrondog wrote:

WP64 wrote:This is truly an outrage. I hope this radicalizes the people involved.

Wouldn't be surprised if their main response is anti-semitism.

Why would this be the response rather than more coordinated efforts to fuck with hedge funds and Wall Street heavyweights?

Nick wrote:

chrondog wrote:

WP64 wrote:This is truly an outrage. I hope this radicalizes the people involved.

Wouldn't be surprised if their main response is anti-semitism.

Why would this be the response rather than more coordinated efforts to fuck with hedge funds and Wall Street heavyweights?

4chan style forums are better known for bigotry than for successfully coordinated efforts to do worthwhile things?

FTR I’m the least “radicalized” person around, but basically agree 100% with everything WP wrote. This is total bullshit and billionaires doing stock market magic to make more fake money during a pandemic and economic downturn, while keeping everybody else down... well, those motherfuckers deserve to eat all the shit.

Shares in the GameStop video game company at the centre of small investors’ gathering assault on Wall Street at one stage plunged 60%, after the amateur trading platform Robinhood barred users from investing in stocks including GameStop’s.

Pre-market trading had suggested prices would dip, after the stock more than doubled in value on Wednesday. But shares in GameStop defied predictions initially, with an early surge taking the market value of the company beyond $30bn (£22bn), nearly 100 times what it was worth in August last year.

But after Robinhood, a key conduit for small investors, barred investors from buying any more shares in eight companies including GameStop on Thursday, the meteoric rise fizzled out, leading to big falls as the day went on.

Did the company behind this app make this decision on their own?

Seems like that would be very bad for their future success and defeat the purpose of their entire existence??

chrondog wrote:

WP64 wrote:This is truly an outrage. I hope this radicalizes the people involved.

Wouldn't be surprised if their main response is anti-semitism.

Nor would I, unfortunately, but I also don't think we should assume these things are somehow inevitable. The point Ned makes about 4chan and other online communities though is really accurate and sobering.

chrondog wrote:

BGwaves wrote:This article helped me understand how it hurts wall street the most.

Where did you get that from the article?

‘Sometimes, however, short sellers lose. This happens when they bet on a stock price to go down, but it goes up instead. The important thing to remember here is that there is theoretically no limit to how much money a short seller can lose. This is because if a short seller shorts a stock at $20, the stock price can continue to go up and the short seller must, at some point, buy that stock to close its position and fulfill its side of the bargain. If I short one stock at $20 and the price of that stock goes to $1 million, I still at some point have to buy that share to close the deal. In this case I would lose $999,980.‘

I posted that before they blocked the buying but I think this summarizes how shorting can hurt wallstreet.

Ned Braden wrote:

Nick wrote:

chrondog wrote:

WP64 wrote:This is truly an outrage. I hope this radicalizes the people involved.

Wouldn't be surprised if their main response is anti-semitism.

Why would this be the response rather than more coordinated efforts to fuck with hedge funds and Wall Street heavyweights?

4chan style forums are better known for bigotry than for successfully coordinated efforts to do worthwhile things?

The government and financial institutions will start figuring out how to counter these efforts, freeze peoples' assets, jail someone for the chilling effect, and overall beat these traders into submission.

With the government and big business colluding against them, Reddit will have no other suitable option than to label that effort part of the Soros/Zionist conspiracy.

chrondog wrote:

The government and financial institutions will start figuring out how to counter these efforts, freeze peoples' assets, jail someone for the chilling effect, and overall beat these traders into submission.

Short squeezes have happened time and time again, just usually it isn't so public and swift. I don't think the reaction is going to be that crazy. This "event" hardly effected anyone, including most hedge funds, investment banks, pension funds, mutual funds, individual investors, etc.

Short focused hedge funds that didn't properly hedge got beat by a market stampede, got an injection of capital, and are almost certainly already short these meme stocks again. Gamestop fell 40% today, they're going to make most of their money back.

The world hasn't changed, people just needed a news story to latch onto and turning into david v. goliath is fun.

Also, any retail investor now can take a "short" position on a stock by buying a Put option. Its actually a less risky way to basically accomplish the same thing these hedge funds were doing.

Also the main reason that r/wallstreetbets got really into Gamestop is because Michael Burry's hedge fund bought a significant amount of shares. The same guy that made a few hundred million by shorting the American housing market.

He's a good guy though right? Cause this time he did the same thing as the little guy.

Also also, I am a retail investor, I use Robinhood, I was holding Nokia call options during this which ended up being one of the Meme Stocks, I missed out on a large profit due to the app lagging and not filling my order (because order flow is sold to hedge funds and the prices were moving so fast, my price was "bad" once it actually went through).

I was then the next day incentivized to sell because I could not buy, nor could the many Robinhood users in that same stock.

So I am not coming out to defend the hedge funds and Robinhood and all that. This whole mess impacted me directly too, I'll prob jump on a class action against Robinhood. But Robinhood is free - it is the Facebook of stock trading. The customer is the product.

This story just got wrapped up in the modern news cycle and no one will give a shit about this in a month. Nor should they.

C-poots wrote:This story just got wrapped up in the modern news cycle and no one will give a shit about this in a month. Nor should they.

I am sympathetic to your critique of the convenient media narrative that drove this story but I couldn't be more opposed to this last sentiment, especially the last sentence. Whether or not people care about this in the coming weeks or months will depend upon how it is politicized. Look at South Korea, for example, which is an advanced capitalist economy. There has been a yearlong ban on short trading in their capital markets because the speculative behavior of hedge fund managers was politicized. Popular outrage at the outgrowth of these speculative financial industries has forced all of the major candidates in the upcoming Seoul mayoral election to commit to extending that ban (side note: I am not actually sure why these regulatory financial decisions are within the jurisdiction of the mayor, but whatever).

The assumed purpose of public stock markets is to provide companies with a conduit for generating investment capital to grow their business. In the Keynesian and liberal framework, these markets are also a tool for managing class conflict by integrating the middle and working classes within the interests of the ownership class. The postwar boom in private pension markets and the incentives for private homeownership accomplished exactly that.

The financialization of the national political economy has transformed these public capital markets into the professional domain of private equity funds, hedge fund managers, and large multinational investment banks. Obviously, they all have a vested interest in maintaining a regulatory environment that enables them to use the necessary tools to manage their investment risk and extract an even greater profit margin. You might have the technical know-how as a retail investor to use these tools to manage your own investment risks and benefit your personal finances but the vast majority of retail investors do not. At the end of the day, this regulatory environment was created by Wall Street for their own material benefit.

I think it is pretty unlikely that these regulations are politicized enough that you see a nationwide ban on the shorting of publicly traded stocks, but that is something that hypothetically could happen. More important though, we should be politicizing these capital markets because our ability to actually fight for a state-led green industrial revolution that will enable us to break from our carbon-based political economy is going to be reliant upon our ability to generate patient, long-term capital investment.

C-poots wrote:

chrondog wrote:

The government and financial institutions will start figuring out how to counter these efforts, freeze peoples' assets, jail someone for the chilling effect, and overall beat these traders into submission.

Short squeezes have happened time and time again, just usually it isn't so public and swift. I don't think the reaction is going to be that crazy. This "event" hardly effected anyone, including most hedge funds, investment banks, pension funds, mutual funds, individual investors, etc.

Short focused hedge funds that didn't properly hedge got beat by a market stampede, got an injection of capital, and are almost certainly already short these meme stocks again. Gamestop fell 40% today, they're going to make most of their money back.

The world hasn't changed, people just needed a news story to latch onto and turning into david v. goliath is fun.

Appreciate the perspective. One of the main dangers is allowing this reckless behavior that you said "hardly effected anyone" is that it spirals into something that tanks markets, destroys the retirement funds of regular people (which are invested in this market), and ends up in a massive government bailout like 2008. If the market can't benefit regular people, why do we allow unregulated reckless behavior that can tank the economy?

WP64 wrote:

C-poots wrote:This story just got wrapped up in the modern news cycle and no one will give a shit about this in a month. Nor should they.

I am sympathetic to your critique of the convenient media narrative that drove this story but I couldn't be more opposed to this last sentiment, especially the last sentence. Whether or not people care about this in the coming weeks or months will depend upon how it is politicized. Look at South Korea, for example, which is an advanced capitalist economy. There has been a yearlong ban on short trading in their capital markets because the speculative behavior of hedge fund managers was politicized. Popular outrage at the outgrowth of these speculative financial industries has forced all of the major candidates in the upcoming Seoul mayoral election to commit to extending that ban (side note: I am not actually sure why these regulatory financial decisions are within the jurisdiction of the mayor, but whatever).

More than half of South Koreans live in the Seoul Metro area and presumably everyone in the finance industry, so I could understand the Mayor of Seoul being a particularly powerful position.

WP64 wrote:The assumed purpose of public stock markets is to provide companies with a conduit for generating investment capital to grow their business. In the Keynesian and liberal framework, these markets are also a tool for managing class conflict by integrating the middle and working classes within the interests of the ownership class. The postwar boom in private pension markets and the incentives for private homeownership accomplished exactly that.

The main thing that has changed is that taxation has not kept up with the profits in the stock market. If we went back to 80-90% rates for everything, we could reinvest that in the social safety net and easily house/feed/care for every American.

WP64 wrote:You might have the technical know-how as a retail investor to use these tools to manage your own investment risks and benefit your personal finances but the vast majority of retail investors do not. At the end of the day, this regulatory environment was created by Wall Street for their own material benefit.

Why are retail investors not expected to keep knowledgable about the very system they're invested in? Most people are invested in the stock market through some intermediary like a mutual fund or a wealth management arm of a large bank. They have their money being managed through their 401k or IRA account. These too are Wall Street.

My personal belief is that if a person has the initiative to actively manage their portfolio, they should understand that there are technical factors that need to be learned. Otherwise, the old system of "Buy & Hold" has not yet failed so long as you, the investor, are holding for a long period of time.

I'm not saying there aren't issues with the way the market as a whole often incentives short term profit/revenue growth over long term sustainable growth, but I just wanted to respond to that specific point in your post.

chrondog wrote:

Appreciate the perspective. One of the main dangers is allowing this reckless behavior that you said "hardly effected anyone" is that it spirals into something that tanks markets, destroys the retirement funds of regular people (which are invested in this market), and ends up in a massive government bailout like 2008. If the market can't benefit regular people, why do we allow unregulated reckless behavior that can tank the economy?

What's interesting again about 2008 is an almost opposite situation was happening. Short sellers were the ones signaling the issues that other investors and banks were taking, in that those companies were using exorbitant leverage on assets not worth anywhere near what they were selling for.

Gamestop was fueled by retail investors, many of whom were buying on the highest amount of margin they could obtain, who wanted to purchase shares in a company with extremely limited future prospects, declining sales, and a lack of profits, in order to "stick it" to Short-focused hedge funds. The fact that the short position was over 100% is an issue, yes, but there are no other stocks with a +1b market cap (probably lower threshold actually) and all short interest on a public company is also public information so anyone with the interest can see ahead of time what they're betting against.


The risk of a single-asset-focused short bubble popping and it tanking markets is super extremely unlikely because there is almost no correlation between the asset in question and the market at large.

The main thing that has changed is that taxation has not kept up with the profits in the stock market. If we went back to 80-90% rates for everything, we could reinvest that in the social safety net and easily house/feed/care for every American.

I agree the capital gains rates should be much higher for short term trades (where most of my profits are made) but I also believe those 80% - 90% rates would disincentivize retail investment even further as most would want the tax protection an investment vehicle like a 401k, IRA, or Hedge Fund would provide and we would then be leaving the market even more in the hands of Wall Street.

Hedge Funds need to be taxed like individuals.

chrondog wrote:

The main thing that has changed is that taxation has not kept up with the profits in the stock market. If we went back to 80-90% rates for everything, we could reinvest that in the social safety net and easily house/feed/care for every American.

C-poots wrote:I agree the capital gains rates should be much higher for short term trades (where most of my profits are made) but I also believe those 80% - 90% rates would disincentivize retail investment even further as most would want the tax protection an investment vehicle like a 401k, IRA, or Hedge Fund would provide and we would then be leaving the market even more in the hands of Wall Street.

Hedge Funds need to be taxed like individuals.

Obviously, I agree with Chrono, but I also really don't think we can expect to ever return to those tax rates without fundamentally challenging the legal and institutional order created and upheld by the capitalist state. The problem is not greed, nor is the system being rigged against middle-income or working-class Americans. The system is working to its intended end. We cannot just think about inequality as a moral problem that necessitates regulatory solutions. Capital is more than just a storehouse of value and wealth, it is also a factor of production. Any re-distribution of wealth will necessarily destabilize the system of capital formation and accumulation, which is the catalyzing motor force of our human economies.

In periods of extended economic growth (like the period of post-war reconstruction), it is possible to balance these competing interests and have a more humane social and political settlement. It is in the interests of the ownership class to invest in human capital (public education) to increase labor productivity, develop a robust middle class (a vibrant home market for commodity consumption), etc. These are also effective tools for subsuming the national body politic under the moral direction and leadership of the capitalist class, which can thereby develop a monopoly control over the organs of state power. When the post-war growth regime inevitably exhausted itself and the rate of profit was threatened, there was a capitalist counter-offensive on the underlying social settlement, which included a corporate regulation of the economy and a tactical retrenchment of the state from its role as the provisioner of certain basic social rights. That is basically where we find ourselves now.

I am probably rambling and just rehashing old information. The point that I am trying to make, though, is that the left needs to start developing an actual theory of transformational change, which requires us to start thinking programmatically about what socialism would actually mean and how to build up capacities within the existing capitalist state to achieve our desired ends. We cannot simply rely on naive models of revolutionary rupture (crude Leninism). Capital has so fundamentally reshaped human economies that a clean break would literally trigger mass starvation, especially in the Global South. At the same time, we cannot rely on naive social democratic reformism that does not challenge institutional power but simply makes moral or ethical appeals.

These are really hard questions and I don't really know why I am spending the time to say all of this right now on an Internet message board...

Is it still possible to get wealthy from crypto currency or did I miss that train?

Maybe too late for cryptocurrency specifically, but there will likely be lots of other applications of blockchain, NFTs, etc. that will be profitable (whether in the short term or longer term). Beyond my expertise though, I just find it interesting.

Lots of ETF talk on the previous page in this thread. Are folks still into that as an investment mode? Looking to move some more money into them and appreciate any recommendations.