You could write a dissertation on investor behaviours just in this thread.
To summarise:
- everyone would agree market manipulation is wrong / illegal
- doesn’t matter which directoon you think the stocks / assets will go (long/short) it’s still illegal
- doesn’t matter if you are a hedge fund, billionaire or small investor with your stimulus cheque
So what has happened over the last few weeks?
Some professional investors and hedge funds bet that a dog stock that can’t make money and is basically reaching the end of its existence with major changes (GameStop) and therefore, legally take a short position in that stock
At the same time, a social media forum decides to poke those hedgies in the eye by coordinating a ramping of that stock that ignores its fundamentals and increases the stock value by 50x. Everyone starts to buy in on those rumours and the stock is no longer hinged to any fundamentals of its business
So how does it play out?
A couple of hedge funds get absolutely smashed, a few private investors make an absolute fortune, some other hedge funds and billionaires probably make more than the retail guys combined, but as they are on their side, no biggie
In the meantime, the market participants end up with liquidity strain on settlement risks and are probably told by regulators to shut down the circus as its role is to promote properly functioning markets, not to become a Caesar’s Palace with stimmie cheques and 401ks.
Everyone who was long starts losing the plot and claiming that the markets are rigged in favour of hedge funds and billionaires and politicians start getting involved and brokers will go under by as the anger turns to RH and Interactive Brokers etc
Conclusion
The Reddit Bois colluded on a faceless social media platform to undertake the most obvious form of market manipulation you can find. But because the victim was a regulated hedge fund, who actually had done nothing wrong, then it’s all good in one’a hood?
Give me a break, it’s an absolute scandal and questions the integrity of the market, where a dud company worth $500m dollars is now sitting with a market cap of $13.5bn
The reality is, the money will be made when this corrects down the way and the hedge funds will make more money from GNE than they could ever imagine, then the stimmie cheques that were late to the party will lose everything
——————————————————-
Sorry for the long post, but some of the perspective in here is so skewed I’m not surprised Raffe bailed...
Sent from my iPhone using Tapatalk