GME is a fundamentally broken company. I think if you want to call Melvin Capital et. al. stupid, it should be for being so short a market awash in central bank cash. But GME itself wasn’t a bad company to bet against.
As for paying for it, these guys are largely playing with house money. Sure, there’s some pain, but Plotkin (Melvin Capital) has made hundreds of millions of dollars a year over the past several years, owns a minority stake in an NBA team, etc. Cohen (Point72) is worth $15 billion.
These are hedge funds, not prop trading firms, so there’s outside money being lost here.
The thing to remember in the markets is that bulls make money, bears make money and pigs get slaughtered. You can take a big hit on a long or short position and come back if you’re not greedy. Just look at Bill Ackman.
If the RH/WSB crowd really wants to stick it to the man, they’re going after the wrong people. This is a Pyrrhic victory. The real villains of the modern markets are the central banks.
Thats what I wanted to say. Its fundamentally sound to short GME. It’s not the first time hedge funds too the risk of shorting a company that is likely to go bankrupt and loss. AA in 2003 and Ford in 2008 comes into mind.
well… a lot of these people were going to take a bath holding this thing (the reddit had talk of holding to $500-$5000), and Robinhood wasn’t preventing people from cashing out, so it’s preventing poor people from spending $300+ on a stock that is maybe worth $10, as a flyer. I’m not sure where the line should be drawn to protect people from themselves (if at all), but this doesn’t seem like a screw the poor people story.
Margin debt is at/near an all-time high and I’m sure more than a few of the WSB punters are using margin so it’s not just a matter of protecting people from themselves. There’s real risk here.
You can’t protect stupid people from themselves. The ones who take the trouble to learn about investing will do OK. The ones who don’t will of course get fried in the end. It’s obvious where GameStop is going in the not-too-distant future. Crazy shit tends to happen in late-stage bubbles. Nothing ever changes.
Many screenshots of commentators on the Reddit WSB forum are filtering out into the Internet.
The theme is they don’t give a fuq if they lose money doing this.
They just want to hurt those hedge funds who’ve been doing naked shorts for years.
Go look up VW share prices a few years ago.
A horrendous short-squeeze happened on it.
Gamestop will look like VW, but where the top is, no one knows.
I’m with you, in general. But there’s stupid, then there’s really, really, really stupid, and Robinhood doesn’t want to end up with another high profile young dude lost all his money and killed himself story. Yes, it happens elsewhere, but they already have a reputation for having a lot of clients being very, very stupid…
I don’t think you are understanding my comment. When you use margin, it’s not just your money at stake. Your broker is giving you a loan with which you are using to leverage your position. Therefore, your broker has exposure to your trade and needs to manage their risk accordingly.
It’s not so much about the PR. It’s about the fact that all of this craziness isn’t just happening in cash accounts. The brokers have margin exposure.
“Risk Management” is a department in all brokerage houses.
If the broker wants to lend money, that is their firm’s decision on risk management. They have their own models.
If the broker blows up, that is their own fault and their models.
Wall Street brokers have learned zero since 2008.
Look, I’m not making any value judgments here. I was just pointing out, in response to another poster, that the brokers aren’t simply taking action altruistically to protect their retail customers from themselves. They’re taking action to protect their businesses.
So yeah, restricting trades in these securities is part of their risk management response. Capisce?
I agree with you there but that’s the whole premise of their business. Any kid can trade options with no experience. They didn’t care when the kids were losing money before, I don’t think they should care now but that’s just me
