Reddit r/WSB bankrupts Hedge Fund using Robinhood

[lludwig]

I'm going to assume you don't call it "dumb money" when you make successful trades.

I can give a number of examples where I did very well because of dumb money.

The best example in my case is made over 1700% gains on stock options from my former employer Commerce One (CMRC). Look up the history for an interesting dot-com story.

That was dumb money and hit the lottery, but realized it was just that.

Many of my former Commerce One friends weren't so lucky. Not only did many have phantom stock gains and owed taxes on gains that were underwater but many held their stock till it went to zero.

They lost everything.

 

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[MJ DeMarco]

So let's say you share your reasoning behind your fully backtested, mathematically based trades with a group of people (a flashmob if you will) - at what point does the money become stupid?

Fair question...

But why on earth would I do that?

That is, unless I wanted to manipulate the trade and use the mob to my advantage?

If I told the mob my strategy, suddenly those option prices get bid up (or down depending on long/short) and I lose the edge.

If I wanted to manipulate the trade, I'd make it -- then I'd hit the message board and pump it up, playing the other side it ... the classic pump and dump. If I bought a stock, then it pays to use the mob to bid it up.

That said, I'm also talking about options since that is my bread-n-butter, I rarely buy long stock unless for dividend purposes -- so there is a bit of apples/oranges divergence there.

at what point does the money become stupid?

Anytime you trade because "X, Y, and Z" said so, because ultimately, those people have already made the trade and likely based it on yesterday's mathematical conditions.

I've been guilty of it many times in the past (we've all been dumb money at some point!) which is why I tend to stay off stock message boards.

Now I trade purely based on current mathematical conditions. And it has served me wonderfully because it has stripped out the emotion, the commentary, the biases, the memories, the opinion, and the noise.

Math never lies, people do.

 

[AFMKelvin]

Yet you are on a forum about making money...interesting.

Some things in life money can't buy, like waking up to the fact that the markets are manipulated.

Are we saying that wall street can choose which companies go bust and which ones don't?

Yes, apparently that's what has been happening all along. People like me and those in WSB just noticed this fact. When you read the headlines about thousands of people that were laid off and lost their pensions funds it wasn't natural. Most likely it was wall street shorting those stocks to kill the company.

That's how markets work. So I don't get how some selective hedge funds shorting a company is nefarious by itself.

Because when things don't go their way they cry foul and big daddy government gets involved and they get "bailed out" with taxpayers money.

 

[MJ DeMarco]

Oh, so now they want a hearing?

LOL. Politicians and Wall Street are two leaves on the same branch.

GMAFB.

https://twitter.com/i/web/status/1354881250922819585

View: https://twitter.com/SenSherrodBrown/status/1354881250922819585?s=20


Don't be fooled ... this is to protect Wall Street, not to help us poor retail traders.

The government is not on your side.

And this will be used to usher in NEW RULES that only hurt us small traders and make markets less accessible, especially for new traders like those on WSB.

Ugh.

 

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[ljean]

Most likely it was wall street shorting those stocks to kill the company.

This is a ridiculous statement, name one example.

 

[AFMKelvin]

This is a ridiculous statement, name one example.

Gamestop. Melvin Capital has been on mainstream media TV, radio, twitter and newspaper telling everyone that Gamestop stock will be worthless. That's why they were so confident that shorting Gamestop 140% would work. They had the mainstream media and all their hedge fund buddies pushing for Gamestop to go under.

 

[ljean]

The only thing that can make gamestop go under is their irrelevant business model.

 

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[Mike Stoian]

Gamestop. Melvin Capital has been on mainstream media TV, radio, twitter and newspaper telling everyone that Gamestop stock will be worthless. That's why they were so confident that shorting Gamestop 140% would work. They had the mainstream media and all their hedge fund buddies pushing for Gamestop to go under.

Exactly this. In this case 140% of all shares the company had were shorted. More than there are on the market. WTF?
They've similar before with Volkswagen I think?

 

[lludwig]

Some things in life money can't buy, like waking up to the fact that the markets are manipulated.

This is nothing new and you are stating what should be for at least this forum an obvious fact.

Because when things don't go their way they cry foul and big daddy government gets involved and they get "bailed out" with taxpayers money.

I'm not for that either. Companies must be allowed to fail, but we too far gone with government involvement with the markets. So people are expected to go to the government and beg for a handout.

We must navigate in this corrupt and imperfect world. It just is and don't fret over.

You lead a much happier life. Government corruption existed before you and certainly will exist after you.

 

[lludwig]

Gamestop. Melvin Capital has been on mainstream media TV, radio, twitter and newspaper telling everyone that Gamestop stock will be worthless. That's why they were so confident that shorting Gamestop 140% would work. They had the mainstream media and all their hedge fund buddies pushing for Gamestop to go under.

This is nothing new and it's called talking their book.

Warren Buffett has been doing this for years. Every public investor, hedge fund manager gets on CNBC and does this.

You are legally allowed to do this and must disclose ownership.

Why wouldn't Melvin Capital do it? Oh because they are those evil hedge funds meanies who are shorting a stock I like. How dare they short a stock and force them to fire their employees and liquidate their shitty business.

Again the 140% short is ATM pure hearsay that Melvin is in fact doing it. If you have evidence on Melvin is doing the naked short selling I want to see it.

You are conflating two parts of the story.

Melvin shorting a stock - FACT. Melvin is doing it and if you have a problem with it then you have larger issues with understanding markets.

Melvin naked short selling - NO IDEA. Other than what some guy said on Reddit. I get all my investment advice from Reddit... oh wait!

If in fact, they are doing it I would then love to see the SEC throw the book at them on that. Otherwise, this statement is purely conjecture without evidence we don't have access to. Though some reports question if that 140% number is even calculated accurately and might not be in fact oversubscribed.

 

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[Guest-5ty5s4]

Robinhood is a joke, anyone who trades on it deserves to be the punchline.

As I wrote way back in 2009, when dumb money shows up, the end of the cycle is near.

And wow, dumb money is everywhere.

I'm with @lludwig -- these folks have no idea what they're doing and they think this is monopoly money. Worse, they think the market always goes up because that's all they've witnessed in their short 20 years of life.

HODL! The market always goes up! (Just like real estate!)

They might as well be juggling lit plasma torches.

It won't end well.



I already thought the collusion was common knowledge.

If you poke the bear, don't expect the bear to go into hibernation.

Even Warren Buffett seems to be under the impression that stocks always go up.

Japan's stock market hasn't recovered since the 1980's...

 

[Kak]

Clown World Finance | Mises Institute

The recent blowup of GameStop shares has revealed, if anyone was still doubting, that the center of clown world is not Washington, DC, nor Silicon Valley—but

mises.org

 

[BellaPippin]

The only thing that can make gamestop go under is their irrelevant business model.

I don't know what they are doing that they don't go into say, high end gaming computers along with the consoles, for example. It's like they are surviving on Pikachu plushies.

 

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[PapaGang]

Now I trade purely based on current mathematical conditions. And it has served me wonderfully because it has stripped out the emotion, the commentary, the biases, the memories, the opinion, and the noise.

Listenin to MJ now, dumped my GME stock and bought Blockbuster!



Wait, maybe he meant... ?

 

[PapaGang]

Even Warren Buffett seems to be under the impression that stocks always go up.

Japan's stock market still hasn't gotten back up to the 1980's...

That's because back in the day he bought dollars for dimes. Not so much anymore.

 

[MJ DeMarco]

Well hey, would you look at that, they got AOC and Ted Cruz to agree.



Via

GameStop, Market Distortions, and Manipulations | Mises Institute

With a sound money, none of these distortions would have been possible: the limitations of the currency itself would have forced an unwinding of excessive risk

mises.org

 

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[csalvato]

what a F*cking shit show...now what do I do with my BTC holdings on robinhood that aren’t protected at all

I guess I’m glad that 95% of my BTC is in my own cold storage, but I have some on robinhood and I think the company is going under lolzzz

 

[lludwig]

what a f*cking shit show...now what do I do with my BTC holdings on robinhood that aren’t protected at all

I guess I’m glad that 95% of my BTC is in my own cold storage, but I have some on robinhood and I think the company is going under lolzzz

Why would have any money with them??? Honest question. I wouldn't trust them with a $1 of my assets.

They've repeatedly shown you cannot trust your assets to be secured and effective trades.

 

[lludwig]

To Melvin Capital: you stand for everything that I hated during that time. You're a firm who makes money off of exploiting a company and manipulating markets and media to your advantage. Your continued existence is a sharp reminder that the ones in charge of so much hardship during the '08 crisis were not punished. And your blatant disregard for the law, made obvious months ago through your (for the Melvin lawyers out there: alleged) illegal naked short selling and more recently your obscene market manipulation after hours shows that you haven't learned a single thing since '08.

Too bad Melvin Capital was formed in 2014.

Melvin Capital - Wikipedia

en.wikipedia.org

Yea I trust some guy on Reddit and their investment guidance to be sound. Can't even research to know the company didn't exist in 2008. How are they then responsible for '08? By proximity, it appears because they are hedge fund traders.

It's just bizarre.

 

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[PapaGang]

@MJ DeMarco you know when you get AOC and Cruz to agree on something, you F*Kd up.

 

[csalvato]

Why would have any money with them??? Honest question. I wouldn't trust them with a $1 of my assets.

They've repeatedly shown you cannot trust your assets to be secured and effective trades.

At the beginning of the pandemic I put some money in there to play around and it exploded. Was just keeping it in there until STG kick in in a few months

most of my investments are not on RH but the sum that has grown there is not insignificant

 

[James Fake]

<-- Edit Out -->

Theres also restrictions placed on how high you can place your sell orders now. I smell a liquidity crisis brewing....

Important Note: Tomorrow will be a battle; ONLY buy if it dips, if it begins running, leave it alone like its none of your business unless you hate money lol. You DO NOT want to get on the wrong side of the fence if this thing does begin to really squeeze which would climax more towards Tues/Weds of next week.

 

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[csalvato]

Theres also restrictions placed on how high you can place your sell orders now. I smell a liquidity crisis brewing....

They are also scrambling for cash, reaching out to many banks for liquidity.

They are also having "trouble" liquidating crypto positions....which to mean indicates they are only holding a fractional amount and can't cover all the withdrawals.

 

[James Fake]

Also, I’d watch overall markets as well on Tues/Weds. Market makers will need to liquidate positions from other sources to make up that liquidity. It really depends on how tomm goes because we got to see how supply/demand behaves in a day of “free” market unlike today.

Notice the hedge guys being completely silent today? When they are loud; they are already in their positions. When they are silent; they are busy moving positions. Robinhood also tapped into huge “just in case” credit lines.

Believe only what they do, not what they say.

On A Random Note: I consider myself experienced Dumb money lol. I really do. Not that I chase or gamble, but if I believe with conviction on something in early adoption stage; my risk adversity goes out the window lol. So there’s that disclaimer lol

 

[csalvato]

It really depends on how tomm goes because we got to see how supply/demand behaves in a day of “free” market unlike today.

Tomorrow will hardly be free market.

WSB reddit still going bonkers to hold and buy GME, but RH is only allowing limited buys, and many exchanges are still restricting.

Anyone who wants to move off of them will have a 3 day settlement period + 1-5+ day waiting period to move funds out of their brokerage and into another.

We probably won't see something that resemble unrestricted trading for a week or more.

 

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[Andrewjgong]

Browsing the WSB subreddit really stinks of scammers.

It reminds me a lot of the "merching clans" from old Runescape. IYKYK

Basically they'd pick a random item in the game and say it was going to go up in value (for no apparent reason) - the "clan leaders" would already have bought thousands of this item, they would just run a pump & dump. The prices do rise, but it's because of the people being duped, not much else.

The short squeeze is a real thing, but overall the reddit sub is a bunch of people scamming each other.

By the time you start asking "why is this guy still holding all his positions when he has so much unrealized profit" it will be too late and they'll be outta there. Lol

edit: I guess "pump & dump" is a foreign concept here.

Never in a million years would I meet someone else on this forum to quote such a small phase that happened during Runescape almost 10 years ago.

 

[TheCj]

I find this whole Gamestop topic fascinating.



If I understand the basic math, the investment company has to buy back 140% of Gamestop shares by a certain date. With the number of Gamestop shares being just under 70 million, would mean buying back about 100 million shares. The investment company got into this position around $10-$20? with the stock dropping $10 they would have banked $1 billion. If the investment company got out when the shares were at $300 a piece they would be down about $30 billion to buy back all the shares. If the value shot up to $1000 they would be down over $100 billion??

Would another large investment company dump money into this? It seems like it would be a no brainer, if this investment company has to buy back more than all the shares by a certain date.

Looking at how trading for this stock is being stopped to cause the price to drop to the benefit of the investment company, It does look like this investment company got caught out.

 

[BizyDad]

Holding naked shorts is not only illegal but also stupid

This is true in investing... and surfing. Heck, this is just solid all around life advice right here.

 

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[BizyDad]

If you poke the bear, don't expect the bear to go into hibernation.

I will use this line many more times in my life.

When you read the headlines about thousands of people that were laid off and lost their pensions funds it wasn't natural. Most likely it was wall street shorting those stocks to kill the company.

??

"Most likely" it was poor management decisions. Poor management kills way way more jobs and pension funds than hedge funds do. That's facts.

Besides, hedge funds don't get rich shorting stocks of well-run companies.

 

[csalvato]

Besides, hedge funds don't get rich shorting stocks of well-run companies.

Sure they do. They shorted Tesla for years