[briefcomment]

I'm pretty sure bringing up fundamentals is intentional FUD. Nobody is investing in any of these because of fundamentals. It's the public vs hedge funds and GME et al is the battlefield.

The more people take part and have strong hands, the more the losses will be democratized, on the way to the real desired outcome against naked shorting hedge funds. I don't mind losing a couple hundred bucks investment for this.

[jakelazaroff]

I get furious whenever I hear the talking heads say “fundamentals”, as if 140% of the stock being held in short positions makes sense.

It’s a credentialist argument. Whatever we say the stock is worth is fundamentally correct, and if you disagree, well, you’re just an unsophisticated investor who shouldn’t be allowed to participate in the market.

[drewcon]

I don't think it's credentialist. It's not short for no reason. Even a layman can piece together GS business model doesn't have much life left and so the stock ought to have downward pressure. Hedge funds are pursing that strategy. You may disagree but it's a rational argument with a rational arbitrage. They may be wrong, but such as life.

On the other hand, WSB is basically saying, "So what? We don't care about the argument, we don't care about the true value here, we're just exploiting a market dynamic (probably illegally), and collectively interfering with the ability of hte market to price this efficiently, and we just want the number on the price to move so we can cash out."

The history of financial markets is littered with the bodies of unsophisticated investors participating for non-fundamental reasons. Tulips, .com, real estate bubble. Every mania in history follows this pattern of being driven more by the emotion and inertia of the game vs. the underlying fundamentals, this looks no different to me.

[jakelazaroff]

You don't take a position based on a company's business model, you do it based on whether you think a stock will go up or down. That's it. Business model is one signal, as is the current stock price.

Hedge funds took short positions because in their model, given GameStop's business and whatever other factors, the stock was due to drop. That's valid, but it's no more valid than the WSB model that the price would skyrocket because overexposed hedge funds would be forced to close their short positions. What is the fundamental argument that GME was overpriced at $20?

Also, "unsophisticated investors" are not the only ones participating for non-fundamental reasons. When Citadel pays for order flow from Robinhood and then gets out in front of those trades, they're not trading based on fundamentals, they're trading based on momentum. Is that not also interfering with the ability of the market to price GME efficiently?

[selimthegrim]

I mean binary options are called a scam for a reason...

[gajotron]

If 140% of the market cap is sold short, it means the longs own 280% of the market cap - that makes no 'sense' either.

[jakelazaroff]

I only have a casual knowledge of this so sorry if these are dumb questions — doesn't it mean the longs own 240% (original 100% + 140% short sold)? Also, isn't it the case that the longs will own >100% if there are any short positions?

[tosser0001]

I'm sure there is some core set of people that want to "stick it to Wall Street" but the vast majority are probably just along for the ride.

The irony is, once this stock finally comes crashing down, it will be the small retail investors losing a lot of money, and a different set of Wall Street investors will be the ones reaping the reward.

[briefcomment]

Probably. Those small retail investors should be responsible for their actions though right? This is obviously a highly risky trade, and it takes just a couple minutes to see that's the case.

[bilbo0s]

It’s not really public v hedge funds, because the vast majority of both of them will be on the losing side. The reality is that market makers are probably gonna be the only winners here.

[briefcomment]

If this is successful, hedge funds will suffer, some retail investors will make a huge return, and some other retail investors will suffer losses at the end, much more than otherwise would have. Obviously not ideal, but no situation is perfect. The losses to the retail investors can be minimized if more join in and they take smaller positions on average.

How do market makers get outsized benefits from this? I'm uninformed.

[jakelazaroff]

Here’s a good explanation: https://twitter.com/toxic/status/1353890766800621569?s=21

TL;DR Citadel sees Robinhood order flow and can get in front of it, and also bought a chunk of Melvin on the cheap when they got squeezed out of their short position.