Thoughts on Game Stop?

On principle, I am for anything that screws hedge funds and the people who invest in them but I am open to the idea that I don't know enough about the markets to see the larger implications of this movement.

I thought about putting this thread in Finance but it seems to me that what is happening here is really more of a political action.

From a position of pretty serious ignorance, I'm finding it quite a lot of fun, though worried some people may get in over their heads and be vulnerable to losing $ they can't afford.

No sympathy for the hedge funds, that may also have been in over their heads.

A quick read on it:  https://www.theatlantic.com/ideas/archive/2021/01/why-everybody-obsessed-gamestop/617857/

As to Game Stop as an actual business/institution, and not a stock phenomenon, i am reminded by my (adult) son that GS was a great place to buy and sell back games if price matters to you:  what happens to middle school kids or people with very limited income when that resource is gone?  That question doesn't really relate to the current flap, though.

Klinker said:

I thought about putting this thread in Finance but it seems to me that what is happening here is really more of a political action.

I am all for sticking it to Wall Street, but this thing is going to make lots of little guys lose a lot of money, while impact on Hedge funds is really not that big.

You ever notice that the hedge funds never seem to hedge their risk very well?

The problem is that the rest of the market is getting hit while the short squeezes are going up. This is because the hedge funds have to sell long positions in order to cover short positions.   And it's not just the "little guys" that are playing - the big boys are in on the game too, and in order for them to buy they have to sell stocks to get cash to buy. You don't see moves like this without algo buying. Take a look at how your 401K's performed this week - most likely they were down (although January was a great month, until this past week.)  Here's a chart of what happens when funds rushed to sell longs to cover shorts. Take a look at the dates that are circled - those were gigantic declines in the market: 

cramer said:

The problem is that the rest of the market is getting hit while the short squeezes are going up. This is because the hedge funds have to sell long positions in order to cover short positions.   And it's not just the "little guys" that are playing - the big boys are in on the game too, and in order for them to buy they hade to sell stocks to get cash to buy. You don't see moves like this without algo buying. Take a look at how your 401K's performed this week - most likely they were down (although January was a great month, until this past week.)  Here's a chart of what happens when funds rushed to sell longs to cover shorts. Take a look at the dates that are circled - those were gigantic declines in the market: 

The "big guys" have other assets, or "friends" who have other assets, to tide them over when something goes seriously south.  Even those of us who haven't been playing are experiencing some of the downside of that. 

I've been following Wallstreetbets on Reddit for several months. I think there is a lot of truth in this Twitter post - it's hedge fund vs hedge fund. 

In the interest of full disclosure, I have taken small positions in some of the heavily-shorted stocks (not GME) and have sold. I have no love for hedge funds or Wall Street but I was just trying to make some money. But it has been a distraction, and I hope that things settle down soon. 

btw - The $1400 stimulus payments haven't been received yet and I wouldn't be surprised if there's a whole new wave of buying. 

What all of this illustrates is just how unfortunate it is that Biden was unwilling to appoint some one like Elizabeth Warren* to the Treasury.  Its great that Janet Yellen is a woman and she is undoubtedly better than Steve Munchkin but, at the end of the day, she's a team player for the status quo, a system where profit flows from human misery.

*I am aware that the balance in the Senate made it impossible for Warren personally to serve in the cabinet.

.

LOL

I don't see how Yellen's appointment matters with respect to this. Have you looked at the regulators chosen by Biden in addition to Yellen?

Klinker said:

What all of this illustrates is just how unfortunate it is that Biden was unwilling to appoint some one like Elizabeth Warren* to the Treasury.  Its great that Janet Yellen is a woman and she is undoubtedly better than Steve Munchkin but, at the end of the day, she's a team player for the status quo, a system where profit flows from human misery.

*I am aware that the balance in the Senate made it impossible for Warren personally to serve in the cabinet.

For example, the choice to run the SEC -

"Consumer watchdog groups are applauding President Biden's pick of Gary Gensler to run the Securities and Exchange Commission. They say that there is much to do to protect everyday Americans who invest their retirement or other savings in the market and that Gensler has proved he can get that done."
https://www.npr.org/2021/01/27/960723183/wall-street-insider-turned-tough-market-cop-bidens-pick-to-head-sec

You don't think Biden was sending a message by choosing Yellen instead of a progressive? The press certainly pegged the decision that way. Market stability....yada  yada yada

As far as Treasury secretaries go, Yellen is probably the most progressive since FDR. 

drummerboy said:

As far as Treasury secretaries go, Yellen is probably the most progressive since FDR. 

The least carnivorous fox ever chosen to guard the hen house.  Obviously, things could have been much worse but lets not allow that to obscure the fact that they could have been a hell of a lot better.

For the record, I am in no way surprised, just disappointed. Biden has always been a wholly owned property of the credit card companies and, by extension, the larger financial system.

cramer said:

btw - The $1400 stimulus payments haven't been received yet and I wouldn't be surprised if there's a whole new wave of buying. 

"According to Agati, the timing of the giant short squeezes in stocks including GameStop and AMC Entertainment through Reddit and other chat rooms is no coincidence.

“The final piece of it and not something to discount at all is really the stimulus checks,” she said. “Those rolling out the first week of January, and then the rise in options trading over the last couple of weeks [is] very, very much connected in our view.”

https://www.cnbc.com/2021/01/31/three-reasons-why-a-perfect-storm-is-hitting-the-market-.html

Klinker said:

You don't think Biden was sending a message by choosing Yellen instead of a progressive? The press certainly pegged the decision that way. Market stability....yada  yada yada

 Yellen doesn't regulate the stock market. Gensler and the SEC do. 

nohero said:

Klinker said:

You don't think Biden was sending a message by choosing Yellen instead of a progressive? The press certainly pegged the decision that way. Market stability....yada  yada yada

 Yellen doesn't regulate the stock market. Gensler and the SEC do. 

I never suggested that she did but market stability was cited repeatedly as one of the reasons for her selection. 

Klinker said:

nohero said:

Klinker said:

You don't think Biden was sending a message by choosing Yellen instead of a progressive? The press certainly pegged the decision that way. Market stability....yada  yada yada

 Yellen doesn't regulate the stock market. Gensler and the SEC do. 

I never suggested that she did but market stability was cited repeatedly as one of the reasons for her selection. 

 Is there anything wrong with that?  The huge short postion in GME and other stocks is not the responsibility of the Treasury Dept.  I'm really having a tough time understanding your objection to Yellin. She did an excellent job as head of the Federal Reserve and yes, the financial markets have a lot of confidence in her, but what's wrong with that?

eta - This is the function of the Treasury Department: 

"The Department of the Treasury operates and maintains systems that are critical to the nation's financial infrastructure, such as the production of coin and currency, the disbursement of payments to the American public, revenue collection, and the borrowing of funds necessary to run the federal government."

cramer said:

 Is there anything wrong with that?  The huge short postion in GME and other stocks is not the responsibility of the Treasury Dept.  I'm really having a tough time understanding your objection to Yellin. 

 The post should have been given to a progressive.  As long as we continue to muddle through without dealing with the core economic problems of a system that delivers 30% of the wealth in this country to the top 1% while leaving only 2% of the wealth to the bottom 50%, we are just rearranging the deck chairs on the Titanic. 

A poor metaphor, I know, since the top 1% are making money shorting the ship.

Klinker said:

cramer said:

 Is there anything wrong with that?  The huge short postion in GME and other stocks is not the responsibility of the Treasury Dept.  I'm really having a tough time understanding your objection to Yellin. 

 The post should have been given to a progressive.  As long as we continue to muddle through without dealing with the core economic problems of a system that delivers 30% of the wealth in this country to the top 1% while leaving only 2% of the wealth to the bottom 50%, we are just rearranging the deck chairs on the Titanic. 

 I posted the function of the Treasury Department above. I'll post it again. I know that you're a fan of Warren, but I think yout're allowing your distaste of Biden and his choice for Treasury Dept. Secretary to overirde the duties of Yellin and her qualifications. She has no role of duty in what is taking place in the market right now. 

"The Department of the Treasury operates and maintains systems that are critical to the nation's financial infrastructure, such as the production of coin and currency, the disbursement of payments to the American public, revenue collection, and the borrowing of funds necessary to run the federal government."

eta - And yes. i know that Yellin accepted over $800,000 in fees from Citadel, which along with Steve Cohen, bailed out Melvin Capital, which had a gigantic short postion in GameStop. 

Klinker said:

cramer said:

 Is there anything wrong with that?  The huge short postion in GME and other stocks is not the responsibility of the Treasury Dept.  I'm really having a tough time understanding your objection to Yellin. 

 The post should have been given to a progressive.  As long as we continue to muddle through without dealing with the core economic problems of a system that delivers 30% of the wealth in this country to the top 1% while leaving only 2% of the wealth to the bottom 50%, we are just rearranging the deck chairs on the Titanic. 

 Dealing with those issues is really the job of the Prez, not Treasury.

cramer said:

 I posted the function of the Treasury Department above. I'll post it again.....

I am pretty certain that you have missed my point entirely. Yellen is a symptom.

Klinker said:

 The post should have been given to a progressive.  As long as we continue to muddle through without dealing with the core economic problems of a system that delivers 30% of the wealth in this country to the top 1% while leaving only 2% of the wealth to the bottom 50%, we are just rearranging the deck chairs on the Titanic. 

Not disagreeing with the underlying motivation, but I’m curious what you think a progressive Treasury Secretary would do differently. Specifically.

drummerboy said:

 Dealing with those issues is really the job of the Prez, not Treasury.

 Honestly, I don't think anyone thought this President was going to deal with those issues. A President who was going to deal with those issues would have put a progressive at the Treasury.

jimmurphy said:

Not disagreeing with the underlying motivation, but I’m curious what you think a progressive Treasury Secretary would do differently. Specifically.

 It should be obvious that I am not a financial guy and perhaps my desire to see a progressive in the Treasury is not the solution to this particular problem but what I would like to see is a government that that is openly hostile to hedge funds, leveraged buy outs, short selling and all of the other manipulations that the 1% use to rob the people of this country and all of the countries of the fruits of their labors.

Klinker said:

 It should be obvious that I am not a financial guy and perhaps my desire to see a progressive in the Treasury is not the solution to this particular problem but what I would like to see is a government that that is openly hostile to hedge funds, leveraged buy outs, short selling and all of the other manipulations that the 1% use to rob the people of this country and all of the countries of the fruits of their labors.

 OK, I hear you. Thanks.