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This Week in Games - What Is Even Going On


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NeverConvex
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Joined: 08 Jun 2013
Posts: 2267
PostPosted: Sun Jan 31, 2021 7:34 pm Reply with quote
zrnzle500 wrote:
It’s funny as hell until the bubble pops, and someone is left holding the bag, and experience tells us that probably won’t be Wall Street (at least not most of it).


Normally I'm inclined to this kind of skepticism as well, but it seems pretty clear that there's been a net transfer of wealth from Wall Street to Main Street folks during the GME debacle. The (naked and otherwise) short-sellers are near-universally Wall Street traders, and their large losses not-quite-directly-but-close-to-it feed back into purchases of stock (to meet the short-selling requirements) currently held in large part by "Main Street" investors from Reddit and such.

Despite this apparent net transfer of wealth from Wall Street to Main Street in this particular case, there is still a "pyramid scheme"-esque quality to the WSB/Main Street side of things. A small number of people will make out very well in exchange for a large number of people sacrificing a few hundred or thousand dollars "for the cause". I also think you're correct, in that there is evidence of other Wall Street firms (i.e., those not caught in the short-squeeze directly) moving to participate in taking advantage of the situation.

Quote:
I have little sympathy for Wall Street firms, but these stock prices, and the implied valuation, are divorced from the reality of what’s happening with the company (and other companies favored by WallStreetBets), and that’s not sustainable


I agree with this entirely, but bubbles have been generated in stock and other assets for years(/centuries -- as long as there's been investment in widely traded assets through a common currency as a possibility, really; tulip mania and what not). Even now, we're almost certainly in a market-wide bubble --- GDP and the stock market departed from one another several years ago, fueled by a much larger money supply created from interventions to combat COVID-19's negative economic effects. Maybe more importantly, even in this incident, there were bizarre economic phenomena present before the WSB betting, with naked shorts leading to a situation where more shorts had actually been purchased than even exist in stock on GME (although arguably that's not the same thing as GME being artificially undervalued; still, it is strange, to say the least, and makes transparent that naked shorts are at best only a price-discovery mechanism, at worst an unrestrained gambling tool). While I think it's reasonable to point out that GME and related stocks have obviously departed comically from fundamentals, it's important to be careful of not pretending this is an isolated incident in that regard. This is just remarkable in that the short squeeze was performed in a decentralized way through people without large assets, organized in a public forum.

zrznle500 wrote:
It is out of my area of expertise as to whether that bubble popping just takes out those involved in the skirmish, or if it sets off a larger chain of events that brings down more than that


I think the mechanisms for this to become a wider crash are rather limited; unlike with financial or housing prices, GME isn't a stock that's really relevant to most economic sectors. Its price flying up and crashing back down is a much more localized bubble with respect to fundamentals (versus, say, something like the "Great Recession" of 2007-2009, in which banks used various derivatives to make large bets mostly based on housing asset prices; and, banks being fundamental to loans that drive growth economy-wide, thus linked a drop in housing prices to a market-wide crash). The only way I could see this affecting markets more widely is by calling attention to what careful observers should already know: that we're in a historic stock market bubble right now, and have been for several years, in most countries in the world, but particularly in the US.

zrznle500 wrote:
I do wonder if this leaves GameStop worse off after this situation plays out, with investors keeping a wide berth from them to avoid the roller coaster if the memes start up again, especially those institutional investors responsible for making sure their customers’ 401(k)s or endowments don’t evaporate.


Investors would have to be very shy of GME for this to be a net loss for them, I think, considering about $600 million in what was debt for GME was converted to stock as a pretty direct result of the price increases. That's a lot of debt to suddenly be relieved of.
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nobahn
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Joined: 14 Dec 2006
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PostPosted: Mon Feb 01, 2021 8:23 pm Reply with quote
There are any number of lessons to be (re)learned from this escapade; here's the easiest lesson to remember:
There is a reason why Wall Street is synonymous with crony capitalism.

EDIT:
isthesqueezesquoze wrote:
Public Service Announcement

This is not a game. The people who originated this meme like to have fun with stupid stock bets, we like to pretend we're monkeys throwing darts, but though we enjoy talking like idiots, we actually do know the difference between delta and theta. We understand what role a clearinghouse performs. We were playing GME weeks ago, at $10-$50, as it became clear that DFV was actually right. We put in money we could afford to lose, because we knew we were speculating on a potential short squeeze.

If these statements don't describe you - if you don't know options greeks, if you don't understand how the market works, and especially if you are gambling with money that would cause you problems if you didn't have it anymore - then pull your head out of your ass, return to the real world with your real obligations and expenses, and don't increase your exposure any more. There's an emotional high in gambling, especially when you're doing it with lots of other euphoric people. Don't let it screw up your life.

This is not an epic crusade to get retribution on the financial sector for its reckless greed and the damage it's done to people's lives. It's just a stock play, undertaken to make money off of some hedge funds who got caught in an overexposed position. The financial industry as a whole does not care. This is just a blip on its radar.

(h/t: Marketplace)
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Snomaster1
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Joined: 31 Aug 2011
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PostPosted: Fri Feb 05, 2021 1:59 am Reply with quote
I've been hearing a lot about this on the news,recently. Here's a summary of what I got. A bunch of amateur investors on Reddit did some financial tricks that the hedge funds did and beat them at their own game. They did it through an investment app called Robin Hood. As you can guess,the hedge fund people weren't happy about it so they exerted pressure on the app and Reddit to make sure that the people who did were punished and many people felt that was a bit unfair.
I remember hearing that someone say that the Robin Hood app should have it's name changed to Sheriff of Nottingham because they bucked under the pressure of these people. It doesn't really matter that much to me because I don't really understand a lot of this stuff but I do understand the sentiment behind it. A lot of people don't like the practices of these hedge fund managers so it's understandable for many to side with the Reddit investors.

For the most part,much of the media sided with the hedge fund managers,which will make them less popular than they already are. And,as I said before,I don't understand a lot of this so I can't really give an expert opinion on this anyway. But,a lot of people are sympathetic to the amateurs on Reddit,so that's how things stand. I don't really have an opinion on this anyway,so what can you do?
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nobahn
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Joined: 14 Dec 2006
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PostPosted: Fri Feb 05, 2021 9:56 pm Reply with quote
There's been a development.

https://isthesqueezesquoze.com/ has a link to this fascinating read at https://wherearetheshares.com/ concerning a significant number of securities/brokers who are not delivering GameStop shares that have been paid for -- AKA "Failure to Deliver (FTD)".
It's well worth your time; there's also an informative video that graphically explains how bad actors are gaming this system. This is Wall Street after all; where Crony Capitalism was invented.
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Austawrence



Joined: 11 Sep 2020
Posts: 7
Location: England London
PostPosted: Mon Mar 01, 2021 11:25 am Reply with quote
I totally agree with Gundam0084. I mean, in case Sega would actually make this mistake and give the sonic role to Ben, it would just crash the ballance between the film and game universe. I really liked how the "amateur" investors from reddit actually broke the hedge funds game. I mean, after they actually did that, you cannot call them simple amateurs. Taking it back to the video games, have ever thought to Buy rocket league items?! As I someone told me, their prices are getting pumped day by day. So you could actually trade them and make tons of cash.[url][/url]
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