r/WallStreetBets and $GME

Political discussion here. Any reasonable opinion is welcome, but due to the sensitive nature of the topic area, please be nice and respectful to others. No flaming or trolling, please. And please keep political commentary out of the other board areas and confine it to this area. Thanks!
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Indy
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Re: r/WallStreetBets and $GME

Post by Indy » Tue Feb 02, 2021 12:01 pm

Nodack wrote:
Tue Feb 02, 2021 11:35 am
I am not sure how all this works. I get that Robinhood is a site where little guys can buy and sell stocks. Reddit is just a chat place sort of like this isn’t it? What is interesting to me is that an investing group on Reddit figured out that they could pool their resources and become a major player and were able to screw over people betting on Gamestop to fail by propping up the price of Gamestop by buying a bunch of shares in a group effort. This is pretty significant and probably sends chills down some investment companies.
But that is exactly what large firms do all the time.

And yes, reddit is basically a message board. But the WSB subreddit supposedly has 6M 'users'--I know that isn't the right term, because not all of them are active. If 10% are active amateur traders, and they decided to chip in $2500 on GME stock, they had enough to buy the entire company back when this started.

power to the people

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Re: r/WallStreetBets and $GME

Post by Mori Chu » Tue Feb 02, 2021 12:24 pm

I find the whole Reddit / GameStop thing interesting but not likely to produce any longterm effect on the markets. I feel like people rush to the story because people love get-rich-quick schemes and they love sticking it to "the man," in this case greedy rich hedge fund managers. And sure, some of these Reddit folks made some handsome earnings on pumping this stock and then dumping the shares. But overall this isn't a viable long-term strategy for destabilizing or disrupting markets. It only works on a select few stocks that are overly shorted by hedge funds, and the hedge funds themselves can act to shortcut this behavior by reducing their shorting of such stocks. Also, given the power advantages they have over the market, HFT server latency, data they purchase, relationships with vendors like Robinhood, etc., they can simply lean on the situation until it is back in their favor. Yes, one or two guys lost millions of dollars on this GameStop thing. But the system isn't going to come crashing down. This isn't a revolution; it's a distraction.

I do think that the whole situation reinforces my view that the stock market is pretty silly, and that buying individual stocks is essentially just gambling. The value of these stocks doesn't really relate to the value of the company or the promise of its future; it's just a bunch of people buying and selling and watching numbers go up and down every day. The creation and destruction of wealth simply based on human behavior and herd mentality. I believe in the stock market in aggregate, such as investing in mutual funds and watching them grow over time. But I think that day-trading and trying to find stocks to "flip" in this way is a losing battle.

I hope this whole GameStop thing doesn't lead to a bunch of average Joes getting hooked on day-trading and then losing lots of money gambling on further stocks. You can already see that they're moving on to other stocks like AMC, Kodak, Nokia, etc. as well as other assets like silver. I don't think this will end well for some of the Redditors. I also think the WallStreetBets community has kind of a toxic culture, referring to themselves as "retards" and "autists" and "Downs" and other such labels. And there seems to be kind of a negativity to it, a desire to bring down systems and cause destruction and damage to financial markets. I am not sure that it's a good thing to foster communities such as this.

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Re: r/WallStreetBets and $GME

Post by Indy » Tue Feb 02, 2021 12:47 pm

Mori Chu wrote:
Tue Feb 02, 2021 12:24 pm
I also think the WallStreetBets community has kind of a toxic culture,
You just described every single message board.

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Re: r/WallStreetBets and $GME

Post by Indy » Tue Feb 02, 2021 12:54 pm

And I agree this one (or a few) stock trades are not going to 'bring down wall street' but it is certainly showing how to go about organizing in a way to overcome extreme wealth in the hands of a few people. I think Mark Cuban's post on there said that really well. The world will learn from this, and learn what worked and what didn't and be smarter about it next time.

Also, I am not sure the mutual fund vs individual stock argument is great. I am not a day trader, and do not study the market regularly. I decided about 13 years ago to stop investing in mutual funds when I could avoid it. Since then I have grown my retirement accounts that are all individual stocks by 563% versus the S&P 500 growth of 152% (through 2 significant recessions). Some of my retirement is stuck in mutual funds that I can't change, and none of those are anywhere close to my stock growth over those 13 years, either.

I agree it is probably riskier, but it isn't like I am going in and trading monthly or even quarterly. Almost all the stocks I bought I have had for a few years (DAL is the exception, as I couldn't pass it up when it dropped in to the teens).

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Re: r/WallStreetBets and $GME

Post by ShelC » Tue Feb 02, 2021 1:22 pm

If you guys want a good laugh, follow @BagholderQuotes on Twitter. They've been having a good time with GME and AMC traders.

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Re: r/WallStreetBets and $GME

Post by Nodack » Tue Feb 02, 2021 1:45 pm

Mori Chu wrote:
Tue Feb 02, 2021 12:24 pm
I find the whole Reddit / GameStop thing interesting but not likely to produce any longterm effect on the markets. I feel like people rush to the story because people love get-rich-quick schemes and they love sticking it to "the man," in this case greedy rich hedge fund managers. And sure, some of these Reddit folks made some handsome earnings on pumping this stock and then dumping the shares. But overall this isn't a viable long-term strategy for destabilizing or disrupting markets. It only works on a select few stocks that are overly shorted by hedge funds, and the hedge funds themselves can act to shortcut this behavior by reducing their shorting of such stocks. Also, given the power advantages they have over the market, HFT server latency, data they purchase, relationships with vendors like Robinhood, etc., they can simply lean on the situation until it is back in their favor. Yes, one or two guys lost millions of dollars on this GameStop thing. But the system isn't going to come crashing down. This isn't a revolution; it's a distraction.

I do think that the whole situation reinforces my view that the stock market is pretty silly, and that buying individual stocks is essentially just gambling. The value of these stocks doesn't really relate to the value of the company or the promise of its future; it's just a bunch of people buying and selling and watching numbers go up and down every day. The creation and destruction of wealth simply based on human behavior and herd mentality. I believe in the stock market in aggregate, such as investing in mutual funds and watching them grow over time. But I think that day-trading and trying to find stocks to "flip" in this way is a losing battle.


I hope this whole GameStop thing doesn't lead to a bunch of average Joes getting hooked on day-trading and then losing lots of money gambling on further stocks. You can already see that they're moving on to other stocks like AMC, Kodak, Nokia, etc. as well as other assets like silver. I don't think this will end well for some of the Redditors. I also think the WallStreetBets community has kind of a toxic culture, referring to themselves as "retards" and "autists" and "Downs" and other such labels. And there seems to be kind of a negativity to it, a desire to bring down systems and cause destruction and damage to financial markets. I am not sure that it's a good thing to foster communities such as this.

Doesn’t the money spent on a stock go directly to that company for the most part to spend as they wish? It seems like buying a stock is like buying a piece of that company. A influx of cash to a company isn’t going to hurt that company. I think most companies would like an influx of cash. They could do dumb things and drive the company into the ground or they could invest that money back into the company and increase their chances of success, which in turn rewards the investor too.

Apple was on the ropes and it’s founder who was kicked out of his own company was just rehired to run the company again. I was an early Apple guy and when Jobs left it about destroyed the company. Only a couple of places had Mac’s and if you went there to buy anything Apple they would try real hard to steer you towards PC’s. If you persisted they would admit they knew nothing about Apple Computers and would say the company is going out of business any day anyway. As an Apple fan and user it was very frustrating. Apple came to their senses and rehired Jobs and that’s the day I decided to invest in Apple. It took a couple of weeks to scrape the money together and get an account activated to buy the shares with the $2000 I scraped up. That investment paid off big time and I felt like I owned part of the company and invested capital that Jobs used to invent the wheel.

All this betting on a company to fail or betting on oil or wheat prices to go up or down is the gambling part I think is stupid.

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Re: r/WallStreetBets and $GME

Post by ShelC » Tue Feb 02, 2021 2:31 pm

There are technical aspects to trading involving charts, price action and volume that take some of the risk out. If you get good enough, you can learn to trade successfully pretty consistently. There's the gambling aspect when it comes to how much you're throwing into each trade and that's where having a strategy, plan and understanding risk vs reward plays a part. Momentum traders tend to be more gamblers riding the price action up and looking for squeezes like GME and AMC and probably don't do as well day in and day out when volume dries up and momentum slows down.

Fundamentals play a part too with bigger, steadier companies but that's more of the investment/longterm aspect of the market. Lately even fundamentals seems to have gone out the window tho.

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Re: r/WallStreetBets and $GME

Post by Indy » Tue Feb 02, 2021 2:35 pm

Nodack wrote:
Tue Feb 02, 2021 1:45 pm


Doesn’t the money spent on a stock go directly to that company for the most part to spend as they wish? It seems like buying a stock is like buying a piece of that company. A influx of cash to a company isn’t going to hurt that company. I think most companies would like an influx of cash. They could do dumb things and drive the company into the ground or they could invest that money back into the company and increase their chances of success, which in turn rewards the investor too.

Apple was on the ropes and it’s founder who was kicked out of his own company was just rehired to run the company again. I was an early Apple guy and when Jobs left it about destroyed the company. Only a couple of places had Mac’s and if you went there to buy anything Apple they would try real hard to steer you towards PC’s. If you persisted they would admit they knew nothing about Apple Computers and would say the company is going out of business any day anyway. As an Apple fan and user it was very frustrating. Apple came to their senses and rehired Jobs and that’s the day I decided to invest in Apple. It took a couple of weeks to scrape the money together and get an account activated to buy the shares with the $2000 I scraped up. That investment paid off big time and I felt like I owned part of the company and invested capital that Jobs used to invent the wheel.

All this betting on a company to fail or betting on oil or wheat prices to go up or down is the gambling part I think is stupid.
No. That is only the IPO (or if they have another offering of some kind). Otherwise, you are buying a share of the stock from someone else that already bought it. So that money doesn't go to the company, it goes to the previous owner of the stock. It is kind of like buying a home. Yeah, the first time a home is bought that money goes to the builder. But after that, it goes to the previous owner.

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Re: r/WallStreetBets and $GME

Post by Mori Chu » Tue Feb 02, 2021 2:38 pm

Doesn’t the money spent on a stock go directly to that company for the most part to spend as they wish? It seems like buying a stock is like buying a piece of that company. A influx of cash to a company isn’t going to hurt that company. I think most companies would like an influx of cash. They could do dumb things and drive the company into the ground or they could invest that money back into the company and increase their chances of success, which in turn rewards the investor too.
I'm no stock market expert. But I don't think that buying or selling shares of stock in a company directly helps that company, unless you are buying the stock from the company itself, i.e., the company is doing an IPO or has issued additional shares for sale. If Joe buys a share of stock in XYZ Corp from Suzie, the person who gets the money is Suzie, not XYZ Corp. I don't think XYZ even gets any margin or cut of the sale, do they? The only way in which individual stock transactions could help the health of the company, as I understand it, is if the volume of transactions goes up and raises the stock's price, that may help the company since it presumably owns and holds many of the shares in itself, so effectively it now holds a more valuable asset, which it can sell or borrow against.

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Re: r/WallStreetBets and $GME

Post by Indy » Tue Feb 02, 2021 2:40 pm

ShelC wrote:
Tue Feb 02, 2021 2:31 pm
There are technical aspects to trading involving charts, price action and volume that take some of the risk out. If you get good enough, you can learn to trade successfully pretty consistently. There's the gambling aspect when it comes to how much you're throwing into each trade and that's where having a strategy, plan and understanding risk vs reward plays a part. Momentum traders tend to be more gamblers riding the price action up and looking for squeezes like GME and AMC and probably don't do as well day in and day out when volume dries up and momentum slows down.

Fundamentals play a part too with bigger, steadier companies but that's more of the investment/longterm aspect of the market. Lately even fundamentals seems to have gone out the window tho.
I am not a trader, by any means. I make like 2 or 3 buys/sells a year (besides all the money I put into my 401k and company stock). But so far I have only bought companies that either I use a lot, or people I know use a lot.

I bought FB the week it went public for ~40 and sold at ~140.

I bought Twitter at ~20 and sold ~20 (didn't keep it long)

I bought Costco at 150 and still have today.

I bought Apple at 129 before the split and still have today.

I was stupid enough to buy Amazon when it was at its all-time high at the time of 329 and still have it.

I had Google for a year, had Go Pro for a year or so, and like I said bought Delta Airlines when it fell through the floor early last year. I am already up 40% on that, and hope it will be back to its normal share price in another year or so for a 120% gain.

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Re: r/WallStreetBets and $GME

Post by ShelC » Tue Feb 02, 2021 4:17 pm

But so far I have only bought companies that either I use a lot, or people I know use a lot.
And that's the best way to look at longterm investments - what's out there now that everyone uses, that's become a part of everyday life. FB, Google, Apple, Amazon or Starbucks, Netflix, Paypal. More recently Square, Roku, Uber, Lyft. All very tech heavy but that's life these days. Hell, look at Zoom pre-pandemic up to today. Those are the best "set it and forget it" types of plays. I keep a separate swing/longterm account specifically for those kinds of companies to invest in and not touch.

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Re: r/WallStreetBets and $GME

Post by ShelC » Sun Feb 14, 2021 8:21 am

Good update on the Reddit/GME surge that's settled down now 2 weeks later.

https://www.yahoo.com/news/reddit-day-t ... 36114.html
Keith Gill, the day trader and member of Reddit group WallStreetBets who is widely credited with igniting the recent GameStop trading frenzy, claimed in late January that he had turned his $54,000 investment into a $48 million dollar fortune. Days later, it had been sliced by more than half to $22 million, and regulators had set their sights on Gill, investigating him over potential disclosure violations.

Many retail investors fared far worse. One Robinhood user lost $70,000 in savings and contemplated committing suicide. Another, Alexander Kearns, did. GameStop's stock, which had peaked at more than $480, had dropped to around $52 as of Friday.

Before the rollercoaster went off the rails, however, one hedge fund walked away with a $700 million profit, brokerage app Robinhood raised billions in new financing after being forced to restrict its users from buying stocks, and trading giant Citadel likely made a hefty sum from the increased market volatility.

While the dust has far from settled, and some Wall Street firms did lose big, a David versus Goliath victory now hardly seems like the most likely outcome. It had made for a compelling narrative, too: an army of retail investors - without deep pockets, sophisticated trading algorithms, proprietary market data, or other tools of the trade - banding together to beat powerful, corrupt financial institutions at their own game.

Ultimately though, Wall Street and other big-money investors still appear to have ended up on top, and experts, at least those outside the industry, say it's that outcome that further proves how the system is rigged.

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