Looks like a pretty good thread on what has been going on this past week with the highly shorted stocks...
I would just add that this is happening in a current environment of banking system equity/capital (the numerator) suddenly being reduced by $100b...
And also realize that the market for US government securities operates in a similar fashion... so if you think the Reddit people are trading directly with the Melvin people then you are as stupid as the people saying “we’re borrowing from China!”.. hate to break the news to you... it’s complicated...
Dear Media,
— Compound248 (@compound248) January 29, 2021
What’s happening with RobinHood?
A quick primer.
This is a “plumbing” issue. It is esoteric, even for those on Wall Street.
A very long thread on how the toilet is clogged.🚽🧻🪠
Read on
👇👇👇💎💎💎🚀🚀🚀👇👇👇
The Reddit people don't know what they're doing?
ReplyDeleteSheesh, is all this plumbing necessary so businesses can be properly financed?
ReplyDeleteThere is at least a small (so far) general credit contraction going on due to recent equity/capital reduction... so there is going to be some margin calls...
ReplyDeleteLooks like the Melvin short position had to be reduced... if the Reddit people were preposition long then they were in a good position going in to it.,,
I’d like to know how Citadel people were positioned... if the Melvin people were 138% short maybe Citadel was net long?
Youd have to get a team of forensic accountants to really dig into it.... AOC need not apply....
“all this plumbing necessary so businesses can be properly financed? “
ReplyDeleteI think this set up was a result of the Dodd-Frank regulatory modifications.., was supposed to help...
Otoh, In any situation with this stuff there is going to be some sort of short term disruptions if Depositories are allowed to immediately return 5% of regulatory equity/capital to shareholders.... that’s not going to happen without a ripple... let’s just hope this is as bad as it gets...
ReplyDeleteDavid P. Goldman (Asia Times) has a good write-up on this.
ReplyDeleteThe great GameStop conspiracy
The numbers don't add up; there simply aren’t enough small players to pull off operations like this
The great GameStop short squeeze involved the biggest market manipulation in stock market history. A handful of yet-to-be-identified operators used day traders’ social media sites like Reddit’s WallStreetBets as a screen for the mother of all short squeezes.
By piling into heavily-shorted, small-capitalization zombie stocks with depressed prices and low trading volumes, the cabal pumped up their prices to the point that established long-short equity funds had to cover their shorts.
By salting the social media sites with rumors, the cabal drove small day traders into the target stocks as a screen for their operation. As the big players exit – which they began to do Thursday – the small day traders will be wiped out.
The short squeeze stocks whose sudden flight crushed some long-established hedge funds began tanking today, with the two favorites, Gamestop and AMC, down 35% and 54% respectively.
Identifying the perpetrators is a matter for the Securities and Exchange Commission, which has the technology to trace the trades back to their beneficial owners. But the evidence is overwhelming that the short squeeze was something else than the madness of crowds.
source: The great GameStop conspiracy