Stock Market

Don't Freak Out About GameStop

The market isn't broken—it's working.

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The price of GameStop's stock has been sent soaring by rocket emojis in the Reddit forum r/wallstreetbets. The rally has captured the attention of the world, including regulators and the White House. At the market's close on January 28, GameStop shares were worth about $198, up about 400 percent from a week ago, but down from their meteoric height of over $400. Everyone from Bernie Sanders to Jon Stewart is saying that this is evidence that Wall Street is broken or rigged. What's really going on?

Stocks go up and down all the time. Why is the GameStop rally different?

A lot of Wall Street hedge fund money was tied up in betting that GameStop, which has suffered as consumers increasingly make purchases online, would continue to decline. 

There are a number of ways to bet against a company's success, but a popular strategy is to "short sell." The mechanics of a short sale are a bit complicated: A trader doesn't actually own the stock, but "borrows" it for a specified amount of time and then sells it when either the agreed-upon price is reached or the time period expires. But this is risky. A short sale executed without a hedge could expose a trader to unlimited losses.  

The underlying risk in short sales is what retail investors turned into an opportunity. Unlike traditional stock rallies, GameStop's rise (and the rise of other stocks caught up in the moment, like AMC) grew from the actions of individual retail investors who have recently gained greater market access through the availability of low-cost trading apps. 

Because retail traders are not a monolith, it's often difficult to discern their exact motivation. Some hypothesize that GameStop's rise began by identifying an undervalued stock. Others hypothesize that retail traders were exercising their muscle, seeing how much they could move the market. And others, in what is becoming the dominant narrative, hypothesize that traders identified GameStop specifically to target Wall Street's short positions. 

Regardless of the motivation, by executing trades in GameStop, these retail investors created what is known as a "short squeeze," where the fast-rising price of the stock caused the holders of short positions to buy the stock in order to limit their losses—pushing the stock price even higher, creating a type of feedback loop. This left a number of hedge funds high and dry, possibly causing billions in losses

Because a lot of the trading was in options, there was also a "gamma squeeze," which created another feedback loop. Market makers who sell call options (bets that the stock price will rise) often buy some underlying stock to hedge their exposure, pushing the price up even further.

As more investors jumped on the bandwagon, whether retail or institutional, the price continued to soar to new heights. GameStop's price has stabilized some on Thursday after online trading platforms limited investors' abilities to open new trading positions. 

So what's the problem?

There may be no problem at all. Markets and bubbles go together. The Dutch tulip craze of the 1600s is just one example of the time-honored tradition of bubbles. 

Retail traders riding the rally would tend to agree that there's no problem. For Main Street, this is a success story, albeit one that may have a sad ending for those taking losses when the stock price inevitably descends. It illustrates the power of retail investors and sends a shot across the bow of Wall Street, who often calls them "dumb money." 

Wall Street, on the other hand, is shaken. Short selling is a textbook trading strategy. Indeed, despite those who argue it is morally unacceptable to bet against a company's success, short selling generally improves market efficiency by helping to guide price discovery and capital allocation. Although it's not unusual for short sellers to lose big, few would have predicted a short squeeze coming from retail traders. 

Given the attention GameStop trading has received, regulators undoubtedly will try to ascertain whether there are any legal problems. The most common question is whether the retail traders manipulated the market. They seem to have acted with some degree of concert to change the stock's price. But that's not the definition of illegal market manipulation. In fact, most of us hope others will follow suit when we buy a stock, pushing the price higher. There are even legitimate investment strategies aimed at helping to push the stock in your favor. 

For there to be illegal market manipulation, there generally needs to be some sort of fraud or deception. But here, little suggests that investors were being misled. The online forum was refreshingly (if vulgarly) transparent. Making a market manipulation case here may prove to be challenging.

Does this prove markets are broken?

There's no shortage of criticism about the current situation. While Wall Street searches for solutions to protect its own bets from what it views as the unpredictable "retail horde," retail traders decry online trading platforms' decisions to halt trading as being in cahoots with the hedge funds. But it's not a stretch to see GameStop as part of the normal functioning of markets. The brokerages' decisions to limit trading reportedly stemmed from requirements imposed by parts of the market infrastructure, which left brokerages scrambling to find the capital to keep trading open. When viewed through the lens of the extensive regulation of brokerages' financial operations, a trading halt is not a surprising outcome.

The fact that GameStop is now trading far above fair estimates of the company's value is not an incontrovertible sign that the market is broken. Stock prices move in and out of alignment all the time. It's likely that GameStop is due for a correction, but some stocks (like Tesla) have remained overvalued, according to conventional metrics, for extended periods. 

With the huge trading volume and increase in value, it's easy to forget that GameStop remains a very small part of the market as a whole. GameStop's trading is an extreme example, but standing alone—or even with the few other stocks that have been driven up during this time—it is not enough to show that the theories underlying market operation have failed.

Do we need new regulations?

A viral story like this may catch attention, but newsworthy headlines themselves do not justify new regulations. Easy access to the markets for retail investors is a good thing. It allows those traditionally left out, like the young or those with modest savings, to find opportunities to grow their wealth. While the GameStop trading is not what anyone would suggest as a prudent path to building long-term wealth, the expanded market access opportunities that helped fuel this rally are exactly those that we should be excited to support for retail investors.

NEXT: Justice Department Rescinds Trump-Era Memo Ordering Prosecutors To Seek Harshest Sentences

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  1. Hi we’re Libertarians, this piece is entirely superfluous.

    1. I’m thinking the target audience for this article isn’t really other libertarians, but everyone else who actually are freaking out about GameStop.

      1. Gentry liberals and the political aristocracy would be the only ones. Everyone else, from Sanders and AOC all the way over to Cruz, Trump and Hawley, are laughing their asses off.

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      2. You don’t say?

      3. I think the target audience is people who are libertarian at heart but who don’t understand short sells or other derivatives and need to be loaded up with arguments against the authoritarian impulses of others.

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        1. Invest in Gamestop

    3. We all know the endgame here will be a big new left-wing regulation package.

  2. Like elizabeth Warren? Who wrote this

    https://www.warren.senate.gov/newsroom/press-releases/new-this-am-warren-calls-on-the-sec-to-address-stock-market-gamesmanship-amid-volatile-gamestop-trades

    Or should we talk about Yellin who took in millions from hedge funds the last 2 years who won’t recuse?

    Or the billionaire Biden supporters going on CNBC saying how wrong the non elite day traders were.

    1. Maybe ask Nancy…

      https://mobile.twitter.com/CBSNews/status/1354831385538797570

      And then ask her about her $1 million tesla buy a day before Joe’s EO on electric cars.

      1. Fuck that bitch.

      2. Remember too when the senators got their coronavirus briefings before the public and sold off millions of dollars in stocks before the crash last year, and faced no consequences and no regulation?

        I wish that the “insurrection” they’re all lying about, actually was an insurrection.
        America currently has the worst political class in its entire history.

    2. BDS.

      He’s got it bad.

      1. It’s not BDS, it is more general Democrat Derangement Syndrome.

        Actually in Jesse’s case, it’s years of whataboutism that has rotted the critical thinking centers of his brain.

        1. Dude exposed his ignorance on this topic badly last night. It wasn’t even me who immediately contradicted his typical baseless and ignorant assertion: https://reason.com/2021/01/28/biden-debuts-massive-new-climate-bureaucracy/#comment-8729602

          Read the whole thread to see how dumb he is. Really just clear as day he has no idea what he is talking about, but he won’t let that stop him.

          1. Lol. That morning the articles were new user sign-ups stopped robinhood dumbfuck.

            How dumb are you?

            Way to defend the democrats though buddy!

            1. Where is your shame? You are still wrong and doubling down.

              “We continuously monitor the markets and make changes where necessary,” Robinhood said in a company blog post. “In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK. We also raised margin requirements for certain securities.”

              https://abcnews.go.com/amp/Business/robinhood-abruptly-restricts-transactions-gamestop-stock/story?id=75537922

              Let me know if you need anything else explained to you.

              1. Robinhood’s in deep shit. https://www.zerohedge.com/markets/robinhood-caps-maximum-holdings-36-stocks-just-one-share

                I’ve not heard of this before from a brokerage on such a wide spread of equities. Problems with a market-maker or syndicate on one or a few? Sure. Temporary trading halts are a thing.

                Something like this? Insolvency in 3,2,1.

                I hope Vladimir starts blabbing about the pressure he got put under to stop the hedges’ bleeding… Let’s see if a clearinghouse gets taken out too.

                1. That they had to tap credit lines (per CNBC) is a very, very poor thing for Robinhood.

                  1. I guess we’re going to see whether SIPC is more like FIDC, or PBGC.

                    Yay.

                    Them going tits-up is one thing; a bunch of Hedge Funds (and hope to God their investors are at least Ralston-qualified) is entirely another. The exposure numbers I’d heard in passing from this batch of way-out-of-pocket shorts exposure was something like 70 billion USD.

                    Fuck it; call it COVID relief. Money printer’s still BRRRRing.

                    1. You mean the FDIC, yes? FIDC is an instrument in Brazil, not a corporation.

        2. I like how hypocrites have banded together to call their hypocrisy being demonstrated to them as whataboutism.

          Here is the difference jeff… I denounced violence both times. You didn’t. See dummy?

      2. Lol. God damn biden cultists. Can’t admit their guy is terrible.

      3. By the way…. the two targets were Warren and Pelosi shit for brains.

    3. Amidst all the faux concern for “The Workers” and the “Little People” against the big, bad hedge-fund managers who “treat the stock market like a casino,” the money shot:

      “These shifts also raise questions about broader instabilities in the market and financial system, as “[n]o one knows how this ends” and “the intense activity could eventually prompt a wider sell-off in the market by forcing hedge funds on the losing side of these trades to sell parts of their portfolios to raise cash to cover their losses.”

      The one actual gesture towards “holding the hedge funds accountable” is demanding that the SEC find out “To what extent did large investors, such as hedge funds like Melvin Capital Management, and their short positions impact the fluctuation of GameStop’s share prices? Did any of these practices violate existing securities laws?”

      Since they clearly wanted the share prices to go down, the answer to this question will have a nice, empirical “none,” since even if they tried, they clearly failed.

      The rest of it can be summed up as “to what extent is peasant-access to stock tips on Reddit endangering the ‘financial system’ and what can we do to stop it?”

    4. You don’t give a shit about corrupt politicians, you just give a shit about corrupt Democrats.

      Trump was the most corrupt human to ever live, perhaps, and you did nothing but lick his taint.

      1. You don’t give a shit about corrupt politicians, you just give a shit about corrupt Democrats Republicans

        So he’s the no goatee universe version of you?

        1. The only thing I want for Christmas is a world in which I can be mad at Democrats too.

          Leftists love nothing more than to be mad at Democrats.

          But they’re the only force in the known universe standing in the way of literally Hitler. I don’t know what you want me to do.

          1. But you hate Christmas. You even called the iconic Rockefeller plaza tree an “embarrassment”.

          2. Literally Hitler. You had me going. Nice spoof

            1. I mean literally potentially worse than Hitler. You think I need to think real hard about things on the gamble that Trump is too stupid to be Hitler?

              Fine, I’m strongly concerned about stupid literally Hitler literally infecting the White House with his presence again. So strongly that you’d have to be one corrupt fucking Democrat for me to give the slightest shit about anything other than the political optics of it.

              And besides that, Democrats have had to be damn near spotless in their conduct this entire time Republicans have been wallowing in racist shit and lies and celebrating maximum hedonism in their cult leaders. Dems had to be good. Fox News would see them shitcanned faster than you can say “blue dress” or “tan suit” or “oh my god her emails” if they weren’t. Every corrupt Democrat becomes Anthony Wiener. Every corrupt Republican gets a promotion for a job well done.

              1. You think I need to think real hard about things on the gamble that Trump is too stupid to be Hitler?

                You don’t show much evidence about thinking all that hard about much, really. Which is rather ironic considering how much you like to flaunt your supposed education.

                1. Somebody gave him a certificate; nobody said anything about learning to think.

                2. What’s ironic is how much more like our ape ancestors the religious conservatives behave.

                  I was raised to value education, not hit it with sticks.

                  1. I was raised to value education

                    To bad they only taught you its value and didn’t bother actually educating you. You’ve said some remarkably ahistorical and scientifically illiterate things here over the last few years.
                    Even those Xtian monkeys you want to kill so badly could probably teach you a thing or two.

      2. For people like Jesse, yeah that’s pretty much the case.

        Corrupt Democrats get the hellfire and damnation speech.

        Corrupt Republicans get the excuses and the whataboutisms.

      3. The most corrupt ever? Ever? In the entire history of mankind, you think Trump is the most corrupt person to ever live? And you get all hurt and insulted when people call you stupid.

    5. Reason should just get it over with and hire Paul Krugman to do market and economic commentary.

      Nothing to see here. Now can we move onto the SALT deduction cap lift.

  3. short selling generally improves market efficiency by helping to guide price discovery and capital allocation.

    In theory.

    In practice hedge fund managers short a stock then use their connections to drive the market to their positions. This is the exact same as what reddit did. Just with institutions.

    1. In practice it would work if the damned gub’ment didn’t keep bailing out favorites all the time. In practice it would work if losers were allowed to lose.

      “Oh so sad, you lost all your clients’ money surfing Reddit. Here’s a billion dollars to make up for it. Screw your clients they get nothing. See you at the next fundraiser.”

    2. Jesse spent 5 minutes googling “short selling” now he’s gonna give a lecture.

      You are completely wrong, moron.

      Go look up “naked short selling” and “shares short/total float” to start to get a hint.

      1. God damn stolen Valor. Once again youre more concerned trying to get points (and failing) instead of being angry at those who are fucking you over. Nice principles buddy.

        1. You should consider a restraining order. DOL’s gotten to the point of creepy.

        2. I will prove who I am to a neutral 3rd (soldiermedic comes to mind). You will leave this message board forever when that 3rd confirms I am who I say I am. If for some reason that 3rd reports I am not who I say I am, then I will leave forever.

          We can also add any $$ amount you wish to the wager.

          Prove me wrong, slanderous coward.

          1. You’re so full of shit.
            You were also full of shit here:

            De Oppresso Liber
            January.19.2021 at 8:07 pm

            R Mac, are you stupid? Or just disingenuous? Mother is on my do not reply list since she went full anti-Semite.

            We both know I have never said anything remotely antisemitic or racist, you lying fuck. I want an apology.

            1. And apparently I’m supposed to know you’re an anti semite too!

          2. You’re sick in the head DOL.

      2. And explain how im wrong buddy. What was wrong. Please. Details.

        1. Yes, how is Jesse wrong DOL? I’m curious.

          1. He’s not.

        2. Too dumb to look up the terms I provided and figure it out? Not surprising.

          naked short selling increases available volume artificially and moves the market to their bets, not “connections”. Reddit isn’t doing that. Reddit noticed that the amount of shares sold short exceeded total number of shares and induced a short squeeze.

          Let me know if you need anything else explained to you.

  4. “Don’t Freak Out About GameStop”

    Ok.

    Also, the era of headlines that double as mothers-in-law is awful so far.

    1. The headlines that really piss me off are when they say that “We” have to do something.

  5. The market is working so well they had to shut it down, but only for a select group of people that grew a bit too big for their britches.

    1. #bringbackyouroldsockpuppetRabbiHarveyWeinstein

    2. Exactly. We should cheer the reddit group. What we should be angry about is how the hedge funds weilded power to shut them down for doing the same shit they do every day.

      1. Right. This article doesn’t even go into that aspect of things. My account wouldn’t let me buy stocks that were on the “highly shorted list”. I already own one of those stocks, and I received a message that I couldn’t buy anymore on margin.

        1. Not buying stocks != not buying stocks on margin

  6. If it’s not broken yet then the hedge fund managers will collude with bureaucrats and politicians to break it in the coming weeks.

    But let’s not kid ourselves, the market most certainly is broken already, and the hedge fund managers will collude with bureaucrats and politicians to break it even further.

    1. If only dangerous misinformation had been reined in on Reddit, this seditious behavior of violent amateur investors could’ve been prevented.

      1. Colluding to make unapproved profits in the markets by the little people is a big TOS violation.

  7. The brouhaha in a nutshell:

    1) Trolls post lulz on Reddit
    2) Traders go “Hey, there are trolls, follow their advice!”
    3) Elizabeth Warren goes full Josh Hawley and want to regulate trading at the same time she blames Reddit for it unhindered free speech

    Okay, the number two is the weird one. No one has explained to my satisfaction why a subreddit caused all this. Do like traders really use Reddit as a market guide? Really? If so they deserve to lose their shorts, and their clients deserve the slap to their accounts.

    And number three really does smell of Josh Hawley. Let’s all pile on the public forum for having insufficient moderation. Gosh, wouldn’t it be great if gub’ment regulated what people could post on public forums? It’s like Warren and Hawley are wearing each other’s underthings.

      1. Thanks for the link.

        #2 sounds pretty simple to me. Some trading algorithms were triggered by the unusual stock activity. I’ve never written any code for anything related to stock trading, but I have written “similar” things, and there are always surprised in what things can happen. I mean … the big traders are all automated for speed, right, the guys that shave milliseconds and microseconds with expensive shorter cables, and reacting automatically saves the slowdown of human intervention.

        1. On old boss of mine make a steady and sizable income via a stock market app he wrote. Rather than getting paid a fee he specified a tiny fraction of a penny for every transaction. The app was all about speed, plus efficient UI to get the trades into the speedy pipeline faster.

          But no special algorithms. Even at that date a couple decades ago it was generally known that algorithms would screw you and your million closest neighbors sideways.

    1. My hunch is that the redditors got the ball rolling on the short squeeze, then everyone else saw what was happening and piled on. I too really doubt it was just the redditors who sent the stock to $400/share or whatever.

    2. Which step is the one where hedge funds cleverly decided to short more shares than actually existed? I also missed the step where retail brokerages colluded to prevent additional purchases of the affected stock. Or where Robinhood decided to close out some of its customers’ positions in that stock, without permission of those customers, and at prices near the low for that day’s trading.

      This is a really big deal. People have gotten short squeezed before, and got filleted for it. Not helped out.

      It’s like if, at the climax of “Trading Places,” the Board of Trade did turn those machines back on, and let the Duke Brothers weasel out of their position. And then had the cops arrest Billy Ray and Louis.

      1. Great analogy.

        1. Ate you sure you understood it? Because above you didnt seem to understand how hedge funds take positions and try to drive towards them for profit. Sure you understand?

          1. Trying to cover up the several times you’ve been proven (with sources) to be talking out of your ass in just the last 24 hours?

            Makes sense. I would be mortified if I were you. Talk less, listen more, dum dum.

    3. But your buddy dol seems to be okay with Warren’s actions. No concerns at all.

      1. And you seem to be okay with murdering penguins with cyanide.

        1. Murdering penguins is more defensible than cheering the imprisonment of people for posting memes, you gimp. Your reckoning is coming, motherfucker. You created a world in which you will not survive.

      2. > your buddy dol

        Dol? Who’s Dol? Do you mean Bob Dole? Sorry, I voted for Harry Brown, although Jack Kemp did peak my interest during the primaries. I would have voted for him if he were on the top of the ticket. I still would, even dead he would have been better than both Biden or Trump (and Jo for that matter).

    4. “1) Trolls post lulz on Reddit”

      Is that anything like “moron embarrassed himself trying to act superior”? because you seem to be quite the expert there.

  8. Turns out that Block Yomomma’s Fed chairperson (and now Sleepy Joe’s Treasury secretary) Janet Yellen made $7.2 million in speeches to hedge funds and other Wall Street firms.

    Boy, it it good to run the printing press and be in the revolving door or government and finance or what?? But considering how much the Fed has done for the Street over the last dozen plus years, one could argue she’s selling herself as a relatively cheap whore.

    1. Why is untold grift and shameless economic fuckery OK if you’re a Republican?

      I’d sell speeches too if I could make millions of dollars. Wouldn’t you?

      1. You’re not required to whine about every bad Democrat story you know?

        1. I am if I want to make quota.

          1. The first honest thing he has said here yet.

        2. Krugscum really doesn’t want anyone bringing this up, because he loves that bitch.

      2. “Why is untold grift and shameless economic fuckery OK if you’re a Republican?”

        Bidens’s a D, shitstain.

  9. I actually made some progress with a progressive youngster yesterday, who was complaining about not being able to buy AMC and GameStop–after a conversation we had weeks ago about how glad he was that Parler was toast.

    He started explaining that he thought the brokerages cracking down on GameStop was different because what they were doing was in fear of the SEC, the Fed, the Treasury, etc. coming after them if they didn’t do x, y, and z . . .

    Once we started talking about Parler getting shut down, he agreed that it was more or less the same kind of thing.

    All that being said, the last thing the hedge funds want is the Biden administration coming in and fixing this situation by limiting the amount of leverage they can use when they short something. And with that being said, just because hedge funds should be free to use whatever leverage they want to short whatever they want doesn’t mean it’s okay for them to threaten to call the feds to force the issue with the brokerages.

    The hedge funds certainly aren’t above using the government to make them whole on their short trades under the guise of financial “stability”. That’s what TARP was all about. Lehman and Bear went the way of the Dodo bird because they bought a ton of subprime mortgages for pennies on the dollar–with tons of leverage.

    The best thing that could have happened in that situation was to let them go bust. If the risk of going bust isn’t enough of an incentive to avoid risk, nothing is, and the people who are best able to suffer those losses in our economy are the people who willingly put their investment dollars in the hedge fund to take that risk.

    1. There are specific laws about market manipulation that broker’s and market makers must adhere to. Those laws were broken. Specifically regarding naked short selling and price fixing.

      There is no analogous law for twitter/parler hosting.

      1. Legislation is just words favoring cronies. It has no more relation to what is good or proper or right than the ingredients on a mustard bottle read upside down.

        1. I like that analogy.

        2. We can try dictatorship instead as long as you put me in charge.

          1. But that would just be a tatorship.

            1. I promise it would be fun for a little while, for some of you.

              1. Being Dicless is fun? I bow to your personal experience

            2. Tatorships are yummy, but I need low salt tatorships.

      2. “There are specific laws about market manipulation that broker’s and market makers must adhere to. Those laws were broken. Specifically regarding naked short selling and price fixing.

        Which laws are you referring to and how were they broken?

        “There is no analogous law for twitter/parler hosting.”

        If Google deplatformed Parler from its app store: 1) because they have an antitrust suit pending against them, 2) because the Democrats have repeatedly threatened to break their company up if they don’t crack down on what amounts to conservative speech, and 3) because the Democrats took control of both the White House and the Senate?

        Then, yes, that would be directly analogous to the brokerages refusing to let people pump up the price of GameStop for fear that the regulators will intervene and crack down on the new wave of brokerages. And Rashida Talib, AoC, and the progressive protesters screaming for the SEC to intervene are being total hypocrites in that respect if they also supported the deplatforming of Parler.

        And there’s no way the SEC, the Treasury, and the Fed are on the side of the Talib, AoC, and progressive protesters, and if brokerages like RobinHood aren’t afraid of the Feds coming after them, they’re stupid.

        Within the last two months, RobinHood has been fined $65 million by the SEC and accused by the State of Massachusetts of running what amounts to a gambling platform.

        https://en.wikipedia.org/wiki/Robinhood_(company)#Controversies

        1. DOL is kinda dumb.

          1. There are a lot of people around here making absurd pronouncements–as if saying something makes it true.

            Regardless, the laws weren’t the analogy. The analogy was Google cracking down on Parler and RobinHood cracking down on GameStop buyers.

            1. Molly Godiva has pronounced so many absurdities about the Capitol riots–as if they were true–I started wondering if she was a parody account.

              1. Molly, chemjeff, DOL, WK, Brandy, and the like are all cut from the same cloth of leftists that believe their feels are substitutes for reality, and justifications for authority, and if you disagree … well, they feel you should probably be punished.

            2. And that’s where your analogy failed. Because there are specific laws about price fixing and naked short selling that were violated. The concept of a free market with price discovery was also violated. With twitter/parler, the libertarian case for property rights and free association and the inherent violation of the nap that Congress with positive rights aligns against parler and your argument.

              1. Comes with, not congress.

                Also, no laws were violated in the case of parler losing their hosting.

              2. There’s nothing wrong with my “analogy”.

                “There are specific laws about market manipulation that broker’s and market makers must adhere to. Those laws were broken. Specifically regarding naked short selling and price fixing.”

                Which laws are you referring to, and how did the brokers violate them?

              3. “And that’s where your analogy failed”

                Google deplatforming an app for fear of government is like a brokerage refusing to sell a stock for fear of government, and if you don’t think so, the reason you failed is because you’re stupid.

            3. On the top of that food chain is TD/Schwab blocking ALL trades.

        2. Oh good heavens. Isn’t just a little too convenient that in Ken’s mind, Team Blue is to blame for everything?

          Google drops Parler from its app store. It can’t be because Parler broke Google’s rules for being in its app store. It can’t be because Google doesn’t want to face possible legal exposure for being an unwitting part of the Jan. 6 insurrection. Oh no, it was because those damn Democrats are forcing Google to do their bidding. There’s no direct evidence for this of course, but that’s what we are expected to assume anyway.

          Robinhood temporarily stops trading of GameStop stocks. It can’t be because Robinhood doesn’t actually have the money to cover all of those calls for an extremely volatile stock and wants to limit its own risk. No no, it’s because those damn Democrats are forcing Robinhood to do their bidding. There’s no direct evidence for this of course, but that’s what we are expected to assume anyway.

          So we are now to drop any reasonable inspection of facts and evidence, and jump immediately to the conspiratorial thinking in which, in the end, the bad guys are always Team Blue.

          Are the Democrats to blame for the weather too?

          This is about as bad as, during the Age of Trump, the TDS-afflicted individuals blamed Trump for everything.

          This is why you’re just a Team Red cultist now, Ken. Your sloppy, motivated reasoning is just shilling for Team Red rather than an analysis based on facts and reason.

          Just like yesterday, when you were upset that Biden was stopping arms sales to Saudi Arabia – because he was undoing something that Trump was doing, but dressed up as some fake concern that “oh no it would mean more American wars in the Middle East”. No it wouldn’t – unless, of course, those dastardly Democrats have a diabolical plan all along to invade Syria! Once again, Team Blue are the bad guys!

          And look, Team Blue isn’t full of saints, they have a lot of terrible ideas. But can we at least discuss the facts behind these things, instead of immediately jumping to the conspiratorial garbage?

          1. “It can’t be because Robinhood doesn’t actually have the money to cover all of those calls for an extremely volatile stock and wants to limit its own risk.”

            With this statement alone it is clear you don’t know dick about securities.

            1. I keep asking them to explain what’s illegal and why, and they keep going after the brokerages like they have no idea what they’re talking about. Meanwhile, no, they couldn’t tell you the difference between a short squeeze and a naked short, and they certainly aren’t knowledgeable enough to explain why a naked short should be illegal or question whether it should be illegal.

              The idea that ChemJeff, Tony, Shrike and others are professional idiots makes more sense than anything they say about anything. The other week, ChemJeff was both telling us that’s been libertarian for so long that he voted for Harvey Browne, and in the same thread made it clear that he didn’t know libertarian oppose social security or why.

              To maintain that level of stupidity either requires genuine stupidity or for someone to pay them to be stupid. I don’t know which one it is, but the idea of some socialist authoritarian spending his or her money making the left look as stupid as ChenJeff, Tony, and Shrike is highly amusing for all sorts of reasons. It’s also possible that they’re both paid to be stupid and genuinely stupid.

              If you want to fill the internet with stupid posts, why not hire genuine idiots?

        3. Now that Democrats are in total control of policy, the people can stop worrying about the next way in which their president will make war on them. Another biological attack? What about an armed insurrection? Too on the nose? What do you think Trump would have gotten to in another four whole years? The only way you can’t understand why you failed is if you do yourself the disservice of consuming masturbatory Newsmax trash instead of facts.

          Isn’t it amazing how a little clarity brings out good old-fashioned paying attention to the real systemic problems, like socialism for the powerful, capitalism for everyone else? That system you’ve been holding pompoms for your entire life.

          1. Does anybody understand what this shit is supposed to mean or how it relates to what I wrote?

            1. Only Ken would take the side of Robinhood in this thing. I would admire the hardcore libertarian ubergeekiness of it all if I didn’t know it was simple, sad tribal politics, complete with some brown women boogiemen. Would that you were but an Ayn Rand fanboy jerking off to dreams of being the next Martin Shkreli. You had to go all-in for the orange assclown cult though.

              1. That doesn’t really mean anything either.

                1. I swear 75% of Tony’s posts come from a random-prog-phrase generator.

                  1. They don’t seem to care if they make sense. They just want to be part of the discussion or something.

                    There’s no embarrassment or shame for spouting nonsense either. It’s like nonsense is their principle, and they’re standing by it.

                    1. Tony is a paid commenter. Like White Knight, Buttplug and Sqrlsy, his job is to derail conversation that goes in the wrong direction politically. That’s why they lie so much and try and divert. A low quality post is just as good as a high quality one if it stops discourse.
                      The technical term for what they’re doing is called “shitposting”.

                    2. It’s hard to believe that somebody would pay them to make the left look so stupid and ignorant.

                    3. They’re professional idiots?!

                      That actually makes a lot of sense.

      3. Dol thinks contract law is fake. Lol.

  10. There is a problem with this situation, and it’s not “illegal market manipulation.” The problem is the new rules some brokerages have put in place to prevent retail investors from buying more shares, and in some places to force them to sell shares they already own. That midstream rule change amounts to the brokerages cheating their customers, and is already the subject of some big class-action lawsuits which the plaintiffs deserve to win. It is simply illegitimate for either the government or a brokerage to change the rules in a way that stops some investors’ profits just to protect other investors, especially when the ones being protected went so far out on a limb that they really deserve the beating they’re getting. One broker sold short 140% as many GME shares as there are in existence — at $3 per share! That’s asking to be raped!

  11. This is a rather tepid take on the whole thing. Sometimes the reaction to an event is much more significant than the event itself. That a hedge fund made a risky bet and a bunch of people essentially crowdsourced a way to make money off the risky bet isn’t a sign of anything. The massive meltdown around it, though, shows:

    1. There is still a great deal of populist anger simmering out there which is aimed squarely at the people who haven’t suffered during the last 12 months. A lot of people jumped on this just for the chance to screw over a couple billionaires even if they lost money themselves.

    2. The way the usually suspects are rallying around protecting the billionaires (while claiming to do it for ‘our own good’) is supporting claims that the system is not only rigged, it will confiscate any winning if you manage to figure out the game.

    3. The whole thing breaks across parties, despite attempts to tie it to ‘Trumpism’ and, no kidding, White Supremacism. Although, media is working overtime on that memo so it could end up being attributed to Nazis by the time the dust settles.

    1. This is the most multi-partisan, uniting instance that we’ve had in years. This is like a little 9/11, in that regard.

      Everyone can love to hate on fat cat, rent seeking, government connected, ivy league assholes getting their comeuppance.

      1. Someone on Twitter said that the only two events to unite everyone over the last year were this and the Epstein “suicide”.

        1. Forgot about that one. Fuckin A.

          1. Watch your language, dipshit.

  12. done. boo hedgers.

    1. Sooner or later, everyone gets punched in the face. The hedgies just found that out.

  13. Pigs get slaughtered.

    1. Pigs get fat.

      Hogs get slaughtered!

      1. So do unicorns.

  14. Being the lame capitalism cheerleaders sure leaves you guys uninvited to all the fun parties, huh?

    1. Get bent.

      1. I actually feel a little sorry for you today. It’s almost as pathetic as the Bernie bros on any other day, but I assume you people take showers. Showers are always cool.

        1. Piss off, bathhouse bugchaser.

  15. newsworthy headlines themselves do not justify new regulations

    You’ve never met a politician, have you? Newsworthy headlines are the only justification for new regulations. If you’re not going to get any newsworthy headlines out of it, what’s the point?

  16. TL;DR. Meh! I haven’t freaked out about video games since Galaga, Dig-Dug, and Dragon’s Lair!

  17. The problem is the reaction that Big Tech has had to protect Wall Street – banning discords and subreddits where this was organized, the apps now only allowing user to sell these stocks, not buy

    It just shows that it’s rigged in favor of Wall Street. Whenever they make money, it comes from the backs of workers or by forcing companies to go out of business. But when they lose money, they either get bailed out or protected by other big business.

    Hedge funds make huge amounts of money by literally doing nothing to create wealth, they just leech it.

  18. Every month I am earning online more than $8650 by doing a very simply online job from my home. By doing this in my part time I was able to save enough to buy me a new car in just a few months. This is so freaking easy that everyone should try it… Start making some dollars online today by following instructions on this website…….. USA ONLINE JOBS

  19. Clinton gets no jail time because Comey says she didn’t intend to commit crime despite acknowledging that she held classified info on private server.

    FBI guy who altered email to frame carter page gets probation and 100 dollar fine.

    Twitter suspends NYP for reporting actual news, isn’t dropped by google or amazon despite hosting actual fascists and terrorists that call for violence.

    Amazon says mail in ballots are not secure for union votes.

    FBI arrests man for memes, railroads Omar mateen’s wife with a fake confession, investigates a noose at nascar but takes no action against lunatics who set up autonomous zones and shoot at “trespassers”

    Man who killed grandmas by boatloads receives Emmy and accolades.

    CHEMJEFF – “there is no deception or double standards onteam blue you guys should hate team red just as much”

  20. To the extent what the stock market is supposed to is provide information on the presumed long term viability of a company’s business model, then the market is temporarily broken with regards to GameSpot. Its stock price movement has little to do with the company itself, but more to do with the clashing agendas of the hedge funds and the redditor traders. These types of games cannot go on permanently and will self correct, but this is not how the market should work ideally.

    1. Looks to me like the market is working exactly as it should. Assessing a company for investment involves a lot of different factors:
      – profitability and similar financial measures
      – growth rates and attendant cash flow
      – vision / mission / long term objectives
      – the market that is being grown into (big, small, how much the company can get)
      – AND the share price / company market cap
      (and more of course)

      In this case, some of the information about the long term viability of the company is that some hedge funds have tried to sell every share the company has issued, AND a whole pile more (more total shares than have ever been issued by the company – a lot more).

      And now those hedge funds are finding that they can’t buy those shares back for (so far) anything.

      The market is taking the available information, and digest itself some hedge funds this time. And doing it out in the open where their abuses might just lead to some better market regulation.

      The primary improvement is the “uptick rule”. https://www.investopedia.com/terms/u/uptickrule.asp

      Pretty sure when it was created in the ’30s, it was in reaction to abuses by short sellers of the 20s and 30s. But we got rid of it in 2007, to the short sellers delight (that are using it to drive prices down – not the short sellers that are taking a position equivalent to you and I when we buy shares). Easy solution – reinstate the uptick rule for all companies, all the time. The short sellers that are doing the research and genuinely find a company that is doing fraudulent accounting, or who’s business is falling apart – they still have a place in the market and will still fill the role that is always trotted out by short sellers.

      What we’ll see disappear are the short sellers that use short sales, and naked shorting, to manipulate share prices downwards. With the uptick rule, they’ll be able to hold the share price flat.

  21. My takeaway from this situation is that publicly-traded companies should have a sizable pool of treasury shares to sell so they can benefit from a short squeeze if this happens.

    Gamestop could have done quite well if they were ready and able to move quickly when the opportunity presented itself.

    -jcr

  22. All I know is that Schwab/TD Amer was down, THE ENTIRE SITE, for around and hour or so on the 27th and the 28th. I assume that some law firms are looking at class actions on Schwab.

    The site was not blocking certain trades. The site was blocking all trades.

  23. until I looked at the check of $7869 .READ MORE

  24. In this article you have accurately described how short selling works for retail investors (must borrow shares prior to selling them short). This mechanism can’t create new shares and put them into circulation.

    The problem for the hedge funds around Gamestop is that they’ve been using market makers access to “naked shorting” to create, for want of a better term, counterfeit shares. These are new shares in circulation purchased by somebody but never issued by the company. For the intended purpose (market makers creating and destroying these shares rapidly as they provide liquidity) these are a valuable source of liquidity in the market.

    The problem for the hedge funds is that they’re not using naked shorts for market liquidity – they’re using it to generate significant new supply in the hope and expectation that the lower price that comes with significant new supply will enable them to buy back at less than what they sold.

    The more specific problem the hedge funds are having is that those manufactured shares aren’t being sold back to them. The FUD and every other trick in their playbook isn’t working this time.

    The ultimate bad problem for a naked short is that it’s a truly unlimited loss position. Those shares sold at $3 can go up to $30, $300, $3000, $30,000, … With the short sellers “helping out” (unwillingly) as they get margin calls that force their own but-to-close, due to no longer having enough value left in their accounts.

    Of course the shorts wanted the company to go bankrupt so that the $3 short sale never needs to be repurchased at all. What they’ve gotten is a large lump of owners that have caught themselves a whale and aren’t letting go. Three cheers for the whale catchers!

    1. These are sage posts. Please stick around. We don’t get many knowledgeable contributors in these comments.

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