Reddit vs. Wall Street

[Noholesin1]

GameStop won’t be worth a damn when it loses $5 a share as it reports earnings in April. A lot of people are going to lose their shirts on this.

 

[The Big Ragu]

Sure, it's great now. But keeping the prices of these pretty close to worthless stocks high is an unsustainable exercise. The profit-taking motive alone sinks it.

I am not calling a market top. ... It's impossible, because at 2 p.m. today when the Fed finishes its meeting, for all I know Jay Powell will announce that they are expanding the bond buying program to a trillion dollars a month with dollars he is going to conjure out of thin air. ... and euphoria will ramp up again as anyone looking for a risk-free rate of return gets forced into the casino to try to make back what they are being robbed of.

What I will say, though, is that every bubble has 5 stages. After the boom, you get euphoria, which is what we are seeing right now. ... which is followed by profit taking, like you just said. ... which is followed by panic.

I'm not talking about trading. ... but if you are investor in stocks right now, whether you realize it or not, at the valuations we are at, you are betting that the Fed can keep the amount of debt in the world multiplying forever and increasing exponentially.

 

[Inky_Wretch]

I don't have the TV on, but I'm seeing tweets about how Serious Wall Street People are talking about how the SEC (not PAWWWWWL!) needs to investigate what's going with this.

 

[The Big Ragu]

Funnily enough I have been rereading "The Great Crash," J.K. Galbraith's history of the 1929 crash. One of the points he makes is that the speculation of that time was largely financed by buying on margin loans (buyer only puts up a percentage of the purchase price, borrows the rest), the interest rates on which were quite high, like 12 percent. Since as prices went up, the stocks used as collateral made the loan nut easily, every financial institution on earth was throwing money at Wall St. to get that 12 percent return. When the crash came, all that money was promptly called in and the speculators were ruined, often in the course of a morning's trading.

It's ALWAYS margin. And it's the price of money being distorted (by the Federal Reserve) that creates all of that leverage and margin.

The amount of leverage now makes the 1920s look quaint.

 

[TheSportsPredictor]

Awww, this poor guy: Michael Burry Calls GameStop Rally ‘Unnatural, Insane’

 

[The Big Ragu]

Awww, this poor guy: Michael Burry Calls GameStop Rally ‘Unnatural, Insane’

That poor guy. ... saw the housing bubble about 4, 5 years before anyone else did. If people had been listening to people like him, we could have avoided a lot of economic pain that devastated a lot of people.

 

[Inky_Wretch]

Hey @The Big Ragu am I wrong in thinking this is all the natural progression of the fundamentals being broken by the Fed?

 

[TheSportsPredictor]

That poor guy. ... saw the housing bubble about 4, 5 years before anyone else did. If people had been listening to people like him, we could have avoided a lot of economic pain that devastated a lot of people.

Yep, and made billions off it.

I don't know if he was actually going around warning people about the housing bubble back then.

I'm not saying he's wrong. Just if he's hurt by it, tough ****.

 

[The Big Ragu]

Yep, and made billions off it.

I don't know if he was actually going around warning people about the housing bubble back then.

I'm not saying he's wrong. Just if he's hurt by it, tough ****.

He wasn't short GME. He was actually long the stock as of the end of September and he's saying he is neither long nor short it now. Didn't say when he sold.

He's saying that what is happening is dangerous and insane, and is afraid that he drew attention to GameStop when he went long in 2019 (he was urging the company to buy back stock). They have cited Burry in that Reddit group as a reason to try to get people to buy the stock.

 

[DanielSimpsonDay]

I don't have the TV on, but I'm seeing tweets about how Serious Wall Street People are talking about how the SEC (not PAWWWWWL!) needs to investigate what's going with this.

 

[Inky_Wretch]

 

[The Big Ragu]

BTW, the narrative that this is hurting "serious Wall Street people" isn't quite right. This killed a couple of noted short sellers. Gabe Plotkin at Melvin Capital and Andrew Left at Citron are two -- both have said that they covered their shorts and booked their losses.

But Wall Street, by and large, has not been shorting stocks. Anyone doing that has gotten killed since the financial crisis.

Wall Street has spent the years since the financial crisis being fed free money by the Federal Reserve, and they have been making tons of money from it by running up the prices of everything without regard to valuation actually mattering. It's the same thing. Everything from high-yield debt to stocks -- all mispriced and sent higher on the back of margin that has been increasing exponentially. Look at the Fed's balance sheet. The Fed has bought trillions of dollars of debt with credit it just creates out of thn air. That debt has fueled asset price euphoria. It's really that simple.

 

[tapintoamerica]

So GameStop closed yesterday at $147.98 and opened today at $354.83? Is that some kind of after-hours growth record?

 

[Inky_Wretch]

 

[tapintoamerica]

 

[The Big Ragu]

Chamath Palihapitiya is full of ****. I'll leave it at that.

So GameStop closed yesterday at $147.98 and opened today at $354.83? Is that some kind of after-hours growth record?

It's even worse than that. This is a stock that was trading at $20, 2 weeks ago and that was with then already trying to squeeze the shorts. 9, 10 months ago, it was trading below $3.

It's a company drowning in debt and losing money. This is like buying a bucket of elephant **** for hundreds of dollars. Congrats to the people paying off student loan debt from what they've made. But at the end of the day, more people are going to get hurt badly by this than the isolated cases of people who gambled and won.

 

[Scout]

I love how these assholes are pissed that what they talk about on the golf course is now less powerful than a sub on Reddit.

 

[Scout]

Reddit is waiting for the funds to blink. They don’t believe that they have covered. They want the Redditors to sell and they still hold the shorts.

The Redditors also know how leveraged these funds are and they can only keep up this game of **** you for so long.

 

[tapintoamerica]

I have no idea about these things. Any predictions on where GameStop closes one week from today?

 

[Michael_ Gee]

Reddit is waiting for the funds to blink. They don’t believe that they have covered. They want the Redditors to sell and they still hold the shorts.

The Redditors also know how leveraged these funds are and they can only keep up this game of **** you for so long.

If they have covered and the Redditors are wrong, well, it won't be a pretty ending.