An article yesterday regarding GameStop shares surging 1,700%.
And another article today.
I did not know whether to post under “What A Difference A Day Makes” or “Fools Rush In Where Angels Fear To Tread”.
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Some fun opinion pieces on the topic https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthew-s-levine
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Could Tesla be next?
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The shorters have apparently taken a huge haircut. That was the original intent by the Reddit bunch.
Now those who piled in are taking a huge haircut as the share price collapses.
As usual, a very few will make big money on speculative gambling, and the majority will lose.
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A couple of interesting articles regarding GameStop and other shares.
To me, it looks like the 2000 Dot.Com tech wreck bubble will be happening once again.
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Another article about share trading.
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Today’s exciting episode.
Supposedly, capital markets are where socially accumulated wealth is supplied to those in need of funds for some productive or useful purposes, such business growth, to pay for governments services or to lend to people as for example in mortgages. This purpose has been largely distorted to allow trade speculations that are nothing more than a roulette gamble, normally play with other peoples’ money. It creates huge inefficiencies and waste of wealth, like this short squeeze – not the first time it happens. Those that get hurt are the ‘poor’ shorters caught in the squeeze, and the gamblers caught in the feeding frenzy of ever-increasing prizes. It couldn’t happen to nicer people. 
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It looks like the speculators have found a “silver” lining.
So long as they don’t end up like the Hunt brothers.
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Maybe that is the size of it.
The “activists” are basically using their government handout money for the “entertainment” of trolling the short sellers. The latter are the “professionals”, who should know what they are doing.
In my view, the losers are most of the people who piled into GameStop when it started to surge. Some of them would have been algorithmic traders.
They are all consenting adults.
All except the professionals are using their own money.
I don’t see a (metaphorical) fiasco here though.
My suspicion is that the short sellers are more likely to be right than wrong about the true value of GameStop, and many of the people who bought in as it surged will make a loss.
However someone can make some serious coin e.g. the guy who put $700,000 into GameStop last year, before all this commotion, and that investment has appreciated to be worth US$47 million. Retirement time? 
That raises the tricky prospect that a person could manipulate the “activists” for his or her own personal gain. This would then be like a classic “pump and dump” scam, which could be illegal.
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It would be interesting if the same could happen in Australia as it may be seen as market manipulation by ASIC. It could be seen as a form of ‘painting the tape’. If it was, then ASIC would likely take action.
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We did in Australia some time ago have a supposed share market guru (I won’t mention his name, he is now dead), who published a regular subscription share guide to his avid followers. Trouble was that when he talked up shares in a company, and the price went up, he sold his holdings. When he talked down a company, the price went down and he bought in.
Blatant market manipulation.
He got caught out insider trading in Qantas and went to jail.
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Oh dear. GME down 31.5% at close today. That should wipe the smirks off quite a few faces.
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Only 31.5%?
Now that’s a haircut.
The ABC said about the US share market.
Short sellers saw paper gains of $US3.4 billion during Tuesday’s session, according to S3 Partners. Year-to-date realised and unrealised losses for shorts recently stood at $9.2 billion.
Should anyone be concerned?
The US Stock Market daily trades US$100’s billions. (Notional Value)
They are into the 5th week of the year. US$9.2B might look like a lot compared to an Aussie lotto win. Compared to doing business in the USA it’s more like loose change. Especially for a nation that can splash more than US$14B on 2020 election campaigning.
The GameStop fiasco was a combination of two factors: (a) short shocking and (b) herd mentality behaviour.
The herd mentality was evident recently when Elon Musk twitted “Use Signal” referring to a replacement for WhatsUp. The herd that follows the ‘guru’ thought he was recommending shares in the little-known medical device firm Signal Advance. So, they invested in what they didn’t know, sending the Signal Advance shares from US$0.60 on 5 Jan 2021 to a high of $US70.85 six days later. They are now trading at US$3.94 meaning that some people still believe they have some value. (https://www.marketwatch.com/story/why-an-elon-musk-tweet-led-to-a-5-675-surge-in-health-care-stock-signal-advance-11610400141?siteid=yhoof2)
In financial markets, herd investors follow what they perceive other investors are doing rather than following their own analysis. Herd instinct has a history of starting large, unfounded market rallies and sell-offs that are often based on a lack of fundamental support to justify either. It tends to happen in bubble markets.
Add to that the speculative shorting of ‘savvy’ investing funds caught in the swirl of herd investment: These funds lost about US$19 billion. (https://www.businessinsider.com.au/short-sellers-sitting-on-19-billion-of-losses-on-gamestop-data-shows-2021-1?r=US&IR=T)
This is how distorted Wall Street is – and our markets too. It makes one a bit queasy. 
On paper? The real losses per the linked news item, are yet to be realised. I’d take it as a lotto win any day.
Overall, Ortex estimated that short-sellers were on track for losses of around $US19.04 billion as of Friday, with the GameStop share price up 78% to around $US345 by just before 11am ET.
The losses are yet to be realised, however, and are estimates based on data provided by lenders, brokers and dealers.
In my humble opinion they are real losses. I’m saying this because some of the funds involved needed to raise capital to cover their losses, for example Melvin Capital.
Given the T3 rule, most trades would have been settled and money would have changed hands by now.
See the articles in Vanity Fair, Forbes and the New York Times.
But, on the other hand, you may be absolutely right that it is a ‘paper’ loss: After all, what is the value of one dollar since Nixon abandoned Bretton Woods?
I was gobsmacked by your comment about how much was spent in the 2020 Presidential election. To think that when I was young – many moons ago – a million dollars was almost inconceivable.
Good luck with Lotto!
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The stock market and further views that it is not a level playing field, but one that has risks for regulators, financial markets and traders.
One opinion from the news item.
‘Likely to end in Tears - While the Reddit rebellion wants to cause disruption, they risk creating chaos, and that could hurt all the players in this risky game of financial chicken.’
For those curious about short selling there are norms and there are exceptions!
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Forget GameStop. Better get your money in on Dogecoin.
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