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Friday, Mar 19, 2021 - 18:54 SGT
Posted By: Gilbert

Back Into The Fray

Another month and a half of the GME saga seems a good time to delve back into it, so here goes:

The Kitty That Roared

"I don't know how to remove it... I'm here live. I'm not a cat."

- pretty sus lawyer pleading his un-catness

For those who have tuned out of the coverage, GME's stock price had fallen back down to about US$50 and lingered there for the best part of a month, no doubt to a chorus of "I told you so's" from the more-traditional investing set. There would, however, be a so-called "gamma swarm" second surge for the meme stonk towards the end of Feburary - further boosted by new leadership - that briefly took its price back to US$300 levels, before dipping back to the current US$200-odd.

But let's rewind to where we left off in early February. Then, the Youtuber/wsb-er known as Roaring Kitty/DeepF**kingValue had been hauled before the U.S. House of Representatives' Committee on Financial Services, where he had to too disavow his cattiness, while having to deal with class action lawsuits from disgruntled speculators burnt by the initial short squeeze. In contrast, the CEO of the disgraced Robinhood platform would receive prepping from a former SEC commissioner in his hearing (though they're getting hit on the lawsuit front too), with the U.S. Treasury Secretary going out of her way to obtain an ethics waiver to get involved. As it stands, r/wallstreetbets' favourite kitty appears to have gotten off otherwise (and still liked the stock at US$45), but the financial establishment seems to have taken this as a cue to whip up additional regulations, such that stock prices deviating from fundamentals ain't happening again.

Mr. Ham: He's a cat. Don't trust him.

Me: ...hamster, that was just some fun. And cats aren't even all bad, that's just bigotry on your part; you lot should interact more with each other, like in a recent series of adorable cutouts that's gone on display here:

Here you go
(Source: instagram.com)

Mr. Ham: ...he's packing his lunch.

Me: You don't always have to think the worst of others, let's ask the neighbourhood cat for his opinion.

Mr. Cat: He's packing his lunch.

Mr. Ham: See?!

Me: This is not helpful.

The Two Narratives

"They're not angry about the crimes being committed, they're angry about who they are being committed by."

- Glenn Greenwald

Returning to money business, there have been two major and divided strands of discourse that's been come across online. The first, generally held by career pundits and the sort of woke commentator that's been against crypto since its inception, is that the entire GameStop debacle had been a run-of-the-mill pump and dump fraud, perpetuated by conniving ringleaders misrepresenting themselves to naive young'uns with a flimsy cover story of "getting back at The Man" (which, granted, they have been rather more successful at than any number of SJW-style street protests and occupations, by all accounts)

In this telling, the short sellers getting ripped apart are "the only sheriff in town in a rigged market", and that the squeeze was a premeditated, predatory take-down of a cornered and defenseless counterparty (on Forbes), with it also contributing to radicalization and recruitment by far-right extremists on Telegram (on Newsweek). Moreover, such irresponsible mob investing will lead to financial crisis (on SCMP) and tank the broader stock market... not that pushing the price works anyway, so you shouldn't even try (on Bloomberg), and the powers that be are right to clamp down on affected counters as needed, at their express and sole discretion.

The r/wallstreetbets and associates view, then, is that the above talk is basically demoralizing psy-ops from the elite and their corporate media mouthpieces, towards convincing the public (or its retard segment, anyway) to fold or redirect their attentions to other assets such as silver, when the hedgies are actually still vulnerable and on the ropes; indeed, the hedge funds are possibly digging themselves further into illegality on their naked short positions - as suggested by the huge outstanding number of failure-to-delivers - of which the oh-so-upright SEC had never enforced much of before the plebians started to win. Extending Greenwald's soundbite, the GameStop fiasco is class-based, and ultimately about preserving an exclusivity in committing financial crimes.

In support of this stand, there have been reports that the hedgies and brokers were in cahoots, and that without the sudden buying restrictions, the squeeze would have exploded into the thousands of dollars, indeed very possibly rippling deleveraging and destruction across Wall Street bottom lines - which was the entire point anyhow. Therefore, r/wallstreetbets retards should continue to be united in diamond-handing their GME stock and buying more, and not fall prey to FUD tactics.

What's Good For The Goose

"Yeah, I think you mean that you've secured a net short position yourselves. So you're free to mark my swaps accurately for once because it's now in your interest to do so."

- Michael Burry, The Big Short
[N.B. Also laid off tweeting for now, after a visit from the SEC]

Having heard both sides of the argument thus far, one has to reaffirm that it is likely true that there is an element of coordinated pumping being demonstrated here, and that some poor small-time punters will get dumped on and exit at a loss. That much is about as certain in investing, as any fact can be. Yes, to a pretty large extent, the GameStop squeeze is probably more a manifestation of a hyper-rational strategy designed to exploit short positions, than due to any true conviction on the long-term underlying value of the near-defunct retailer.

The key realization, I think, is this: in your usual short-selling hit job that's been going on forever, I gather that it's by and large the little guy who loses out too, anyway. What tends to happen, is that some hedge fund or bontique shop puts out research on how some stock is overvalued. This establishes casus belli, and the funds then borrow shares to short-sell, driving the stock's price down. Now, it isn't that this maneuver always works - the epic Herbalife wrangle being one counterexample - but it seemingly usually does. And when that happens, your man in the street is left holding the bag after the dump-without-the-pump, but in this case he deserves it because he was slow to read and react to market conditions, it's a cruel and competitive world out there, and better luck next time!

Of course, there's then no way to establish the counterfactual on whether the stock would have crashed without a shiver of hungry and well-capitalized sharks targeting it. Sure, reams of pages on why the stock deserves it have been written up, but let's get real - for the below-par stocks on the market, you could probably train up an underemployed English major to crib together a convincing litany of excuses, from a bunch of existing reports. And for the above-average counters, well, there's always reversion to the mean, if you're of a mind to. I think there's little point in disguising that the outcome of short battles generally hinges more on which side possesses more cash and conviction, than any intrinsic property of the stock itself.

Continuing, it appears entirely legal - and indeed, likely - that a dozen hedge fund head honchos can gather on a golf course or yacht somewhere, and conspire on collectively shorting some stock; heck, Bezos or Soros or Chanos - or whoever one's least-favourite billionaire is - can wake up on the wrong side of bed, and unilaterally decide to tank some stock for funsies and profit. And then you have the guys on shows like CNBC's Mad Money, podcasts like the more-sedate Planet Money, and basically any number of self-styled gurus publishing their recommendations for all and sundry to consider on podcasts and mainstream news websites. All entirely fair game, despite one never being quite sure of whether these fellas are shilling their own book.

If one accepts all that, then the question goes: it appears that you can have one or six or twelve people confer privately, and decide to short-sell a stock together; why then is one hundred thousand individuals engaging in public on an open forum, considered market manipulation instead? Where were the apologists bleating about those poor "cornered and defenseless counterparties", when it was Joe Public on the block?

WSB Going Stronk

If you haven't realized, "retard" is an anagram of "trader".

And for good reason.

- Secrets of r/wallstreetbets

Overview of the GameStop situation thus far

The lovable retards ain't going anywhere just yet, and let's just say that however much the stuffy intellectual elites might like to imagine otherwise, tens of thousands of smooth-brained apes wielding the financial equivalent of AK-47s (loud, cheap, practically indestructible) can overwhelm the best-laid of theories. The validity of the flood of self-reassuring analyses on r/wallstreetbets about how the squeeze is still on - and the biggest one is yet to be - is largely immaterial. What really matters is that there are enough diamond-handed retards, and given that the stock remains very liked even in Asia and Singapore, there appears plenty of fuel left to burn for this rocket. I mean, is it that hard to believe that retail investors - or even just a subset of them - can collectively warp the market?

At least one quant fund has seen fit to acknowledge meme power in their targeted recruitment of r/wallstreetbets stars, and the subreddit's latest fashion is fittingly a tribute to Harambe, the top meme of 2016 - possibly the best vintage year thus far bar none. It started with the adoption of a gorilla or two, and soon expanded to a hedgehog, a sloth, a rhino, an elephant and even a humpback whale, because you know how it is when you go to the store without a shopping list and well, one thing leads to another. That made well over a quarter million bucks and 3,500 gorillas adopted in six days, so... apes indeed stronk together, I guess.

But not the cats, by edict of Mr. Ham

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