I sincerely hope this comment ages well, but I doubt it will. A scenario where a majority of the retail traders in GME right now come out ahead would be surprising.
Agreed. There's a good reason why so many of these hedge funds held short positions -- $GME is a business facing significant headwinds beyond what you'd see from the pandemic and a typical P&L statement:
- Their primary product is used game sales, and the biggest players in that sector are making active moves against such sales (see: the disc-less PS5 and Xbox Series S consoles).
- Digital storefronts make purchasing new games much, much easier (and a borderline impulse purchase).
- Free-to-play multiplayer games cut Gamestop out of the customer acquisition loop. The most $GME gets is a cut of any prepaid cards, but those cards are commonplace nowadays (my local chain drugstore has an end-cap with dozens of prepaid cards of various types).
- Their primary model is to lease space in malls. With the pandemic, malls are either closed or seeing substantially less foot traffic.
- Consoles are typically a big driver of purchases, but their limited availability also limits $GME's potential. That said, that can be counterbalanced by very profitable bundles made more attractive by the limited availability of unbundled consoles.
I don't play the stock market, but even if I did, $GME wouldn't be something I'd look at in a buy-and-hold strategy.
The stock will resettle at something far lower than it is now, most people realize this. They are trying to ride this thing until the margin calls come in and a substantial number of short positions are closed. If that happens there will be blood in the water and big money for anyone able to sell during the frenzy. After that, it's everyone for themselves.
I'd agree, although if https://www.highshortinterest.com/all/ is accurate, there's 69M shares of GME short sold at the moment, which is quite a lot of money potentially to be made by people holding the shares when those short positions are settled.
Unfortunately, the hedge funds will be 100% fine and probably capitalize on this event and somehow still come out ahead. The WSB folks who started this have probably already sold out so they're fine. It's average everyday folks who bought into this robin hood (not the app) story and purchased stock at recent prices who will lose a lot of money
Yeah. Most of the firms involved will be fine. A number of retail investors who got in early on have probably made serious dough. People who bought a share or two for the lulz whatever. Others who saw this as a big opportunity to make money they otherwise had no hope of making? At least some will be bankrupt, lost the money they were saving up for a house downpayment, lost retirement savings, etc.
> The WSB folks who started this have probably already sold out so they're fine
the biggest player in /r/wallstreetbets is /u/DFV, and last I checked he had cashed out a small portion of his position. Still has like 30mill tied up in GME stock though.
Crazy story looking at his posts from 2019-now, though. At one point his GME portfolio was only worth 42k, and now it is over 40mill.
I think the sentiment will shift when people realize that some of these hedge funds invested people's pension money, or university endowments, or any other number of people's funds. WSB has promoted a cartoonish version of Wall Street where hedge funds only hold rich, evil people's money. That's not really how this works.
A lot of people are also going to be disappointed to learn that some Wall Street firms profited massively from this situation.
And finally, a lot of retail investors who were late to the party are going to lose a lot of money on this. Some of that will flow to early Redditors who got their exit timing right. Some of that will flow to hedge funds who cleverly scooped up the naive money in the chaos.
I'd go so far as to bet that journalists are already working on articles with all of these angles. They'll start to trickle out just as soon as the market euphoria wanes.
> when people realize that some of these hedge funds invested people's pension money, or university endowments, or any other number of people's funds.
What if, rather than make the sentiment shift in the direction you think it's going, it actually makes people more upset for hedge funds gambling away main street's money irresponsibly? It's almost as if those who treat other people's money as a casino shouldn't get sympathy from those other people.
I hate this sentiment so much. As if it's a bad thing that Wall Street gangster hedge funds are finally feeling the squeeze that they put on everyday working people, just because some of the money they control is pension money or university endowments. It's literally the same rationale people use to justify staying in abusive relationships. Controlling some crumbs of the great unwashed's money gives these billionaires zero moral authority to do the crap they get away with every single day. Fuck them, then fuck them again. They deserve every ounce of this and then some.
> As if it's a bad thing that Wall Street gangster hedge funds are finally feeling the squeeze
It's categorically false to suggest that Wall Street hedge funds are all suffering from this.
Some of them are making massive amounts of money on this situation. Some of that money comes at the expense of casual investors.
This idea that Redditors are siphoning money out of hedge funds is just not true for the last round of GME investors. In fact, those latest investors will probably end up funneling their losses right into hedge funds who short this on the way back down.
"Pensions and university endowments" are the "women and children" of the financial world. Everyone constantly harps on these classes of people in order to play to your emotions instead of thinking logically. The great thing about America is we allow you to make "stupid" choices. No one should care if you lose all your money by acting stupidly, doesn't matter if you're Harvard or a heroin addict. If you rely on a pension or university endowment for funding you should take up a greater interest in where that money is being invested.
The financial institutions will be fine. Meanwhile some unsophisticated investors who saw this as the financial opportunity of a lifetime will lose their shirts and their homes.
If that is possible here, there needs to be more regulation on hedge funds so they do not operate in a "heads I win, tails the US govt. bails me out" scenario.
That's the most hilarious part of it. It's a given that someone is going bankrupt big time and someone is going to want to be made whole. They will threaten the stock market until the USG bails them out.
Cascading already happened last March and the Fed bailed out the market. That backstopping has clearly helped buoy the market to new highs, while the real economy is contracting.
Something like this could trigger a cascade, but that cascade would rest solely on the people who built this bubble.
Shorting losses can be infinite. Then add in the derivatives at play. Who backs these trades? Who backs them? What gets triggered when any of these default on their contracts?
The irony of manipulating markets against market manipulators is delicious.
This will also punish over exposed players who are probably reviewing their short positions as this unfolds.
