[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?