HN Theater @HNTheaterMonth

Here's the best explanation I've found https://www.youtube.com/watch?v=4EUbJcGoYQ4

From what I understand, investors shorted 150% of stocks, so when people start buying the shares and the share prices, the investors are forced to sell their shorts, thus increasing the price and the whole things snowballs

Louis Rossman (Apple repair guy) had a similar great take on it: https://www.youtube.com/watch?v=4EUbJcGoYQ4 (and followup: https://www.youtube.com/watch?v=DdpVzzXWOTA )

⬐ boredumb

What a time to be alive where an apple repair youtuber is more trustworthy than cable networks.

Louis Rossmann's take: https://www.youtube.com/watch?v=4EUbJcGoYQ4

Melvin Capital lost Billions last week alone. They needed to get bailed. You have been sold the narrative by the same people who screwed you in 2008. The bubble is the consequence of Hedge Funds getting greedy and repeatedly screwing a "dead company", by overshorting the shares.

Don't take my word for it, take Louis Rossmann's, somebody known to stand for the little guy.

https://www.youtube.com/watch?v=4EUbJcGoYQ4

⬐ rusk

Surely if it's obviously a bubble they can bet on that bubble bursting and come through the other side on top? Is it just a matter of rules around capitalisation? Surely it would be good business for them to go get that capitalisation?

⬐ blackrock

I wonder if there is a systemic risk behind this.

Kind of like, if one domino falls, then the rest will tumble.

⬐ PartiallyTyped

This is partially what happened in 2008. Hedgefunds overshorted the housing market and then everything went down.

⬐ intotheabyss

Didn't hedgefunds "overlong" the housing market? They were borrowing on margin using housing debt as collateral, but the collateral turned out to be junk, so they got margin called when that collateral tanked (the CDOs), and banks with insufficient liquidity to cover the losses either collapsed or got bailed out.

Essentially the housing market bubble was people going long using worthless collateral.

⬐ PartiallyTyped

My understanding is that while the market crashed, certain people capitalised on the bubble breaking and kept shorting until it was ran to the ground.

⬐ pas

https://www.youtube.com/watch?v=lMUtU0tOmNE (The Pyramid Scheme that Collapsed a Nation)

⬐ dimator

That video was a great explanation, thank you

⬐ curryst

There's two sides to this, and his portrayal is a little disingenuous.

To quote the video:

> So if I'm an investor and I'm able to find this information, I might want to buy GameStop because I see that I know they're going to have to convince me to sell my shares.

And unless you have no idea what you're doing, you also know that by buying shares, you reduce the shares available to short sellers, thus increasing the price of the share you bought.

I don't see a way to argue that isn't market manipulation. The value of the shares has nothing to do with the value of the company, it's entirely about manipulating the flow of shares. I don't see a way that this is different from a pump and dump scheme, it just happens in reverse and is entirely unavoidable.

If this isn't market manipulation, shorting stocks is dead. Institutional investors will add checks that scan for stocks that are above 50% shorted and analyze if buying enough stock to push it to 120% or 150% shorted will make them money. They could buy 50,000 shares of a company, sell 25,000 of them at 3x the price, burn the other 25,000, and still come away with a 50% return on investment.

That's why people are calling it manipulation. Shorting stocks was already risky, but adding in a risk that a hedgefund will come in and ruin an otherwise-healthy investment makes them extremely unappealing.

⬐ sneakerblack

It's interesting to see how mainstream media is framing this as "bunch of idiots on reddit manipulate market to make money" instead of reporting on the fact that the investment funds got caught with their hands in the cookie jar and are now paying the price for it

https://youtu.be/xaVql5X44Pk

https://www.wsj.com/articles/citadel-point72-to-invest-2-75-...