Tag: GameStop

Let the GameStop Games Begin!

Mary Pat Campbell
Let the GameStop Games Begin!

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Excerpt:

That chart ends at yesterday’s close. Things have been even more crazy overnight, with the price hitting $500/share. There have been gyrations caused by the shutdown of the chatrooms and some retail platforms stopping trading in this and other heavily shorted stocks. But the fundamental dynamic in play now–shorts slitting their own throats in panicked buying to cover–means that attempts to constrain the long herd will not have a lasting impact.

The short interest that had to (and has to) be covered is huge–short interest in GME was 140 percent of outstanding shares–and a larger share of the float. (How can there be more shorts than shares? The same share can be borrowed and lent multiple times!) The effects of the short covering are seen not only in the price, but in the stratospheric cost of borrowing shares. Earlier this week it was about 30 percent–juice loan territory. Now it is at 100 percent.

In many respects, this is reminiscent of some of the more storied episodes in Wall Street history, or more recently the 2008 VW corner which punished shorts severely. But there is a major difference. In some of the earlier episodes (including major corners of shorts in railroad stocks in the 19th century, or battles between shorts and stock pools in the 1920s, or the VW case), there was a single dominant long squeezing the overextended shorts. Here, it seems that the driving force is a relatively large group of small longs, acting with a common purpose.

Author(s): Craig Pirrong

Publication Date: 28 January 2021

Publication Site: Streetwise Professor

The Insiders’ Game

Mary Pat Campbell

Link: https://www.persuasion.community/p/the-insiders-game

Excerpt:

First, the digital distribution platform Discord banned the WallStreetBets account after the close Wednesday for “hate speech, glorifying violence, and spreading misinformation.” (For a moment, it looked like Reddit had also banned the group, but they resisted pressure to do so.) If the quoted justification sounds familiar, it’s nearly identical to the one given by Google, Apple, and Amazon for deplatforming Parler just three weeks earlier. Echoing Amazon, Discord said it had sent the group repeated warnings about objectionable content before deciding, on that day of all days, to shut them down. 

Meanwhile, WallStreetBets investors were locked out of their trading accounts by online brokers such as Robinhood on Thursday morning. Based on new collateral requirements that it says were imposed by an industry consortium, Robinhood forbade its users from buying GameStop and other stocks that WallStreetBets had identified as short squeeze opportunities. Users were allowed only to “close their positions”—in other words, to sell to the shorts desperate to buy. When angry users registered their disapproval by leaving over 100,000 one-star reviews of the Robinhood app in the Google Play Store, Google deleted them. 

Author(s): David Sacks

Publication Date: 1 February 2021

Publication Site: Persuasion

The Fatuous Uproar About Robinhood and GameStop

Mary Pat Campbell
The Fatuous Uproar About Robinhood and GameStop

Excerpt:

First, the spectacle of the Senate wasting its time, in the middle of a pandemic, on some trading junkies maybe having not made as much money as they felt entitled to, is pathetic. It shows how warped the priorities of our putative elites are. This is secondary market trading in one bloody stock. Secondary market trading is societally unproductive (more on that shortly) and should be discouraged by increasing transaction costs (this is one of the big reasons to push for a financial transactions tax, not for revenue purposes, although that’s a nice side bennie, but to shrink the financial casinos).

The company is unimportant. The parties on both sides are competitors in a beauty contest between Cinderella’s ugly sisters: clueless new gen day traders versus clumsy shorts, many of whom look inept at the basic survival requirement of managing trading risk. And as we’ll address in due course, the real bad guy, the SEC for promoting such a socially unproductive market, has yet to receive the criticism it deserves. It’s simply bizarre that cheap market liquidity is being treated as some sort of right.

The focus has been the traders on Robinhood, a free trading platform, although some of the bigger low-cost services also had some trading halts in GameStop. These punters are surprised that a free service might not give them the best, or any execution in a bad market? Did they not work out that they were the product and having their order flow to Citadel might not be a great position to put themselves in?1 Or as Financial Times reader AM put it:

Author(s): Yves Smith

Publication Date: 29 January 2021

Publication Site: naked capitalism

Is the GameStop Saga Really an Army of Investing “Davids” vs Hedge Fund “Goliaths”?

Mary Pat Campbell

Link: https://legalinsurrection.com/2021/02/is-the-gamestop-saga-really-an-army-of-investing-davids-vs-hedge-fund-goliaths/

Excerpt:

Understandably, many Americans would like to push back against Wall Street and enjoy fiscal karma. I know I am and tempted to purchase one share.

However, there are likely to be real market consequences for participating in this “short squeeze.”

Author: Leslie Eastman

Publication Date: 1 February 2021

Publication Site: Legal Insurrection

Your Regulator Overseers

Mary Pat Campbell

Link: http://pointsandfigures.com/2021/01/31/your-regulator-overseers/

Excerpt:

As you know, Congress oversees the bureaucracy.  It’s agencies, the unelected bureaucrats that make a lot of the regulations that affect our lives.  Colloquially, you might know this as a part of The Deep State.  The Senate Banking Committee and the House Financial Services Committee oversee the Securities and Exchange Commission (SEC).

The GameStop saga has laid a lot of things bare.  But one thing that needs pointing out is that most of the people on those committees have no clue how the entire financial system as it pertains to exchanges and markets works.  I am not impugning the personal characters of the Senators and House members on the committees.  In 99.9% of the cases they are decent and intelligent people. What I am saying is most of them have no clue when it comes to understanding the industry they are charged with overseeing.   It is rare when you find an elected official that really and truly understands.  Not rare like a four leaf clover rare. Rare like seeing a tiger in the wild rare.

I am not talking about trading markets either as plenty of elected congresspeople seem to know how a brokerage account works. I am talking about understanding the mechanics and plumbing, and truly understanding.

Author(s): Jeffrey Carter

Publication Date: 31 January 2021

Publication Site: Points and Figures

The Crazy World of Stonks Explained

Mary Pat Campbell
The Crazy World of Stonks Explained

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Gamestop’s stock has been on a wild roller coaster ride, rising by roughly 640% from the start of last week to its peak. After Robinhood and other brokers initializing trading restrictions due to the heightened market activity, the stock has since fallen more than 80% to $90 per share.

But the stock’s volatile price action doesn’t come close to telling the story of how this market frenzy began on the Reddit community r/wallstreetbets, the hedge funds that suffered when GameStop share price rose dramatically, and why Robinhood halted trading last week.

Author(s): Niccolo Conte

Publication Date: 2 February 2021

Publication Site: Visual Capitalist

MassMutual Under Investigation Over ‘Roaring Kitty’

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2021/02/04/state-regulator-probing-roaring-kitty-massmutual/

Excerpt:

Massachusetts’ top securities regulator, William Galvin, is looking into the actions of Keith Patrick Gill, the former MassMutual broker who played a key role in the trading frenzy surrounding video game retailer GameStop and other stock last week.

Gill is the person behind the Roaring Kitty YouTube streams that, combined with a string of posts by Reddit user DeepF***ingValue, drove a sudden increase in GameStop stock trading, slamming hedge funds that had bet against the struggling retailer.

“I can confirm our Securities Division sent an inquiry to MassMutual last Friday asking about Mr. Gill’s status,” a spokesperson for Galvin told ThinkAdvisor on Thursday.

Author(s): Jeff Berman

Publication Date: 4 February 2021

Publication Site: Think Advisor

NY pension fund sold off nearly 600K shares of GameStop in last 10 months

Mary Pat Campbell

Link: https://www.lohud.com/story/money/business/2021/01/28/gamestop-ny-state-pension-fund-sold-off-600-k-shares-last-10-months/4283205001/

Excerpt:

New York’s state retirement fund sold off nearly 600,000 shares of video game retailer GameStop since March, leaving it with about 53,000 shares when Reddit-frequenting investors sent its price skyrocketing this week.

After closing out 2020 at a share price nearing $18.85, GameStop closed on Wednesday at a price per share in excess of $347.50 before dropping to around $240 per share as of mid-Thursday.

…..

New York’s Common Retirement Fund, the third-largest public pension system in the country, had owned 647,000 shares at the end of March when the stock was worth $3.50, state records show.

But by Wednesday, the state pension fund owned just 52,900 shares, according to the state Comptroller’s Office, which manages the retirement system. That means the fund sold off more than 590,000 shares at some point in the last 10 months.

Author(s): Mario Marroquin

Publication Date: 31 January 2021

Publication Site: lohud

GameStop Frenzy Is Tough Call for Regulators Focused on Transparency

Mary Pat Campbell

Link: https://www.wsj.com/articles/gamestop-frenzy-is-tough-call-for-regulators-focused-on-transparency-11612693802

Excerpt:

One reason regulators might be stymied is a lack of political will to limit trading by small investors. When Robinhood temporarily blocked its customers from trading GameStop shares during the frenzy, a cry went up about market access. The big losses those little guys inflicted on some hedge funds by bidding up the stock was seen as a democratization of the market. Any effort to derail that could be criticized as protection for Wall Street.

“Most people believe that middle-class people, working people, should be able to take their chances on the stock market,” Rep. Maxine Waters (D., Calif.), who leads the House Financial Services Committee, said in an interview.

The consensus among regulators so far is that the episode didn’t expose major problems with the market’s plumbing. The Treasury Department said Thursday that regulators believe the market’s “core infrastructure was resilient.” The department said the SEC is reviewing “whether trading practices are consistent with investor protection and fair and efficient markets,” and is expected to release a report on the factors that influenced it.

Author(s): Paul Kiernan and Dave Michaels

Publication Date: 7 February 2021

Publication Site: Wall Street Journal

“This is for you, Dad”: Interview with an Anonymous GameStop Investor

Mary Pat Campbell

Link: https://taibbi.substack.com/p/this-is-for-you-dad-interview-with

Excerpt:

Since 2008, the tendency among mainstream commentators has been to shrug off reverberations from the crash that force their way into news, usually on the grounds that the millions who lost homes, careers, marriages, lifetimes of savings, health, and in thousands of cases, their lives, are not truly poor or “working class,” or are only “relatively low-wealth,” as New York magazine recently put it. In the case of GameStop, there’s been a parade of stories describing investors as dupes, dummies, financial Trumpists, irresponsible gamblers, even crooks, their trade pegged as almost everything but what on some level it surely was and is, an echo of a suppressed national disaster.

Was GameStop “recreational” investing gone haywire, or a climax to a story building for a generation? Here’s one person’s answer:

SP: I grew up watching my parents struggle with money. Money was discussed all the time. They fought all the time. The older I got, the more I felt I had to do anything to keep my own kids from going through the same thing.

My parents worried in different ways. With my mother, I regularly knew how much money was in her checking account because she would stress-yell the amount whenever I asked for anything. It was really difficult for her.

My dad was the opposite. He wanted you to think he had money, but you were looking around and thinking, “I’m pretty sure we don’t.” Because I don’t have a bed, and my brother is sleeping on a couch. So if you’ve got it, maybe we should use it, I don’t know. So they were different in that regard.

Author(s): Matt Taibbi

Publication Date: 6 February 2021

Publication Site: TK News

GameStop stock crashed, but Reddit still wants to send it to the moon. How and what’s next

Mary Pat Campbell

Link: https://www.cnet.com/personal-finance/gamestop-stock-crashed-but-reddit-still-wants-to-send-it-to-the-moon-how-and-whats-next/

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When people in the Reddit community r/WallStreetBets began pushing up GameStop’s share price, establishment investors started losing billions and billions of dollars. Since then, GameStop’s shares have been swinging wildly, going from about $17 at the start of the year to $483 last week and then to $90 by the close of Monday’s trading. Shares rose slightly on Tuesday to close at $92.41, which is still down more than 80% from their highs last week.

Author(s): Ian Sherr

Publication Date: 4 February 2021

Publication Site: Cnet

Yellen meets with regulators over GameStop volatility, vows to protect investors

Mary Pat Campbell

Link: https://www.marketwatch.com/story/yellen-meets-with-regulators-over-gamestop-volatility-vows-to-protect-investors-11612480534

Excerpt:

Treasury Secretary Janet Yellen convened a meeting with the nation’s top regulators Thursday, who are continuing to review whether recent volatility in popular, so-called meme stocks, and brokers’ responses to it, “are consistent with investor protection and fair and efficient markets,” according to a Treasury Department statement.

Yellen met with the heads of the Securities and Exchange Commission, Federal Reserve Board, Federal Reserve Bank of New York and Commodity Futures Trading Commission to discuss the functioning of financial markets and practices of both investors and brokers in recent weeks.

“The regulators believe the core infrastructure was resilient during high volatility and heavy trading volume, and agree on the importance of the SEC releasing a timely study of the events,” according to the statement. “Secretary Yellen believes it is imperative to uphold the integrity of these markets and ensure investor protection.”

Author(s): Chris Matthews

Publication Date: 4 February 2021

Publication Site: Marketwatch