Gaming the System

2021 January 29
by drdog09

A lesson in the irrational market has just occurred. GameStop, the beloved 37-year-old (launched as Babbage’s) video game retail chain with over 5,500 stores, had been the maelstrom of a trading tug-of-war over the last week. Short-sellers pitted themselves against the loyal GameStop retail (individual) traders. According to S3 Partners analytics data, this tug of war skirmish didn’t end well for the former:

* Bearish GameStop short-sellers lost $3.3 billion during 2020, of which last Friday alone accounted for a $1.6 billion loss.

* Thanks to Bullish GameStop traders, many of whom hail from Reddit.com, the GameStop stock rallied by 51%, pushing the bullish momentum further.

You may ask, why would so many traders try to continue to short-sell GameStop after significant losses had already occurred during last year? In a rational market, when one conducts both the technical and fundamental analysis, it doesn’t take long to figure out that GameStop’s future is not long for this world, joining the likes of Blockbuster Video.

Tokenist

This article was posted on Monday January 25th. Since then the losses are now totalling $70Bn. In four days there has been a $68Bn aribtrage in capital all because a bunch of greedy institutional short sellers wanted to make money and the retail trader caught them at it. The losses to the hedges will go higher still by Monday.

What the author of the piece misses is the political aspects of this move. What is driving this is not economic. When I get a stimulus check or just have a couple of hundred lying around what the hey, take a flyer and buy a couple of shares of GameStop via the Robinhood app. If GameStop went to $0 par tomorrow I lost a couple of hundred. But on the flip side, the institutional short selling (illegally by the way) are preparing to lose billions as there is no limit to loss on a short sell position. The little guy is not getting hurt anymore than if he went to a casino and placed a bet on 33 black at the roulette table. Win or lose, then take the wife to the floor show, order a couple of drinks and call it an evening. But that big time short seller? No limit on loss, he will be hocking the private jet and handing the keys to the house in the Hamptons over to the bank. But wait! I thought you guys on Wall Street were big boys and you earned your bucks for your willingness to take the big risks. Now YOU find out that the game can be unrigged by mass action by retail trades? Cry me a river.

There is a state senator in Mass. that is suggesting there be a freeze on GameStop trading for 30 days. What the little twerp does not understand is that GameStop right now is hovering around $250. There are still outstanding limit orders and option trades that will be executed regardless, increasing the carnage.

The carnage is a good thing too. Let the little guy cream a couple of these big hedge funds over the next year. Blood up to the hip boots or higher. The fund managers will get wise in very short order — “… trading desk, you go short a stock, I want to know about it first and our percentage exposure better be less than 3% of our capitalization if the stock increased by 1000%.” The system will correct itself once a few hedge funds bleed out.

And if regulations are to come, it needs to be directed at the hedge funds not the retail customer. As it is right now to buy certain securities you have to be an accredited investor. Your total holdings have to be at a certain level less your valuation of your primary residence. That is all, as they say, to protect the little guy. BS. What it does is create a two tier investment system. If you are accredited, one has access to deals that Joe Six pack can only watch from the sidelines. The reality is he/she should be able to play too. Maybe a top limit on total assets at risk but not a outright ban. Freezing Joe out only seals his ability to increase his upward economic mobility.

To #WallStreetBets, I salute you!

45 Responses leave one →
  1. 2021 January 29 1:41 am
    [1]
    drdog09 permalink

    To the Liberals wringing their hands, I paraphrase a line from a movie —

    “You can’t handle Democracy! Son, we live in a world that has rules, and those rules have to be guarded by men with truth. Who’s gonna do it? You? You, Congresswoman Cortez? You have a greater responsibility than you can possibly fathom. You weep for Democracy and you curse the same when it comes to elections. You have that luxury. You have the luxury of not knowing what I know, that the past election, while tragic, is not the worse of it. And my Deplorable existence, while grotesque and incomprehensible to you, saves lives! You don’t want Democracy, because deep down in places you don’t talk about at parties, you want total control. You need that control. You use words like “sustainability”, “equality”, “equity”. We Deplorables toil against these words. You use them as a punchline. We the People have neither the time nor the inclination to explain ourselves to a one who rises and sleeps under the blanket of the very largess that We provide, and then questions the manner in which We provide it! We would rather you just said “thank you”, and went on your way. Otherwise, We suggest you pick up a tool, and stand to a job. Either way, I don’t give a damn what you think you are entitled to!

  2. 2021 January 29 6:40 am
    [2]
    justrand permalink

    Oddly, this fits into the whole GameStop thing in the sense that it highlights the wide and WIDENING chasm between the Elites and everyone else. Not Rich vs Poor…not Black vs White…Elite vs EVERYONE ELSE.

    If you are NOT: Rich and/or Elite and/or Powerful…then you are NOBODY. And yes, the Rich, Elite, and Powerful are the very people pushing SOCIALISM, because Socialism is a Two-Tier system: the Rich, Elite, and Powerful…and EVERYONE ELSE.

    https://www.powerlineblog.com/archives/2021/01/let-them-eat-solar-panels.php

  3. 2021 January 29 6:52 am
    [3]
    justrand permalink

    The Reichstag fire was an arson attack on the Reichstag building, home of the German parliament in Berlin, on Monday 27 February 1933, precisely four weeks after Adolf Hitler was sworn in as Chancellor of Germany. Hitler and the Nazis used the Reichstag fire as a pretext to CRUSH all remaining opposition.

    The “assault” on the Capitol on January 6, 2021 is being used quite openly as the Democrats “Reichstag Fire”. EVERY DAY morons like AOC are rushing to the 95%+ of the media that HATE everyone who opposes the Biden Regime and keening about how “terrified” they were…and DEMANDING that the government round up all these “Domestic Terrorists” and “Re-Program” them.

    The definition of “Domestic Terrorist” is essentially: “ANYONE who won’t kneel to the Leftist orthodoxy”

    https://greenwald.substack.com/p/the-new-domestic-war-on-terror-is

  4. 2021 January 29 7:21 am
    [4]
    bc3b permalink

    JR #2 –

    It is truly the elites versus everyone else. The welfare class is simply a tool used by the elite. Keeping them on welfare and dependent on the government means the elites can control them and their votes,

    One of the Dems/media’s big lies: the Republicans are the party of the rich. The oligarchs almost all are left-wing Democrats.

  5. 2021 January 29 7:26 am
    [5]
    bc3b permalink

    drdog09 –

    The evolution:

    In the 1980s there were mom and pop video rentals on every corner that sold VCRs and rented videos.
    In the 1990s Blockbuster and the big box stores took the business from the mom and pops.
    By the early 2000s every super market had a Red Box and streaming became a reality. Good bye Blockbuster.

    We still have a lot of things on VCR cassettes and my wife has a machine that will play them along with DVDs.

  6. 2021 January 29 7:32 am
    [6]
    justrand permalink

    Democrats, hell, ALL Leftists are nothing if not dumb & humorless

    Case in point:

    https://redstate.com/jenvanlaar/2021/01/29/318483-n318483

  7. 2021 January 29 7:46 am
    [7]
    justrand permalink

    I appreciate the author’s optimism, but as Jeff Goldblum says in ‘Indelendence Day’ when he opens his laptop on Air Force One and sees the timer run to zero: “Time’s up

    https://www.americanthinker.com/articles/2021/01/what_to_do_now.html

  8. 2021 January 29 8:03 am
    [8]
    bc3b permalink

    Sparta Report went dark about 10 days ago. Is anyone familiar with any other conservative sites that have closed down?

  9. 2021 January 29 9:21 am
    [9]
    justrand permalink

    This harpy (with apology to harpies) would have been right at home in Germany in the mid 1930s. She would have praised Hitler, and thanked him for allowing the German people the right to make the “sacred decision” to rid the world of Jews…since, you know, Jews weren’t legally human beings in the Third Reich, just as BABIES aren’t human beings to creatures like this alleged “minister”.

    If Dante were alive today, he would create an entire level of HELL just for monsters like this, well, MONSTER!

    https://www.lifenews.com/2021/01/29/baptist-minister-thanks-joe-biden-for-funding-planned-parenthood-calls-abortion-a-sacred-decision/

  10. 2021 January 29 10:06 am
    [11]
    drdog09 permalink

    I am late and a dollar short…. — https://www.zerohedge.com/markets/major-bank-publishes-list-shorts-will-surge-next — I said some quant would set up a bet against shorts. There is already a ETF doing so according to the article. Now a bank has listed the most outstanding shorted stocks on the exchanges.

    These facts may very well be why Wall Street is scared. With the noobs aware now they have the power to wipe out some major hedge funds.

  11. 2021 January 29 10:12 am
    [12]
    bc3b permalink

  12. 2021 January 29 10:28 am
    [13]
    drdog09 permalink

  13. 2021 January 29 10:52 am
    [14]
    JimNorCal permalink

    “Is anyone familiar with any other conservative sites that have closed down?”
    There have been a couple who removed commenting. I forget the names, maybe American Thinker and Federalist. And there are gazillions being deported from Twitter and Facebook.
    Plus Parler, though they assert they will be back.

  14. 2021 January 29 11:45 am
    [15]
    justrand permalink

    WTF???

    This goes way beyond the insanity the Democrats are famous for. READ THE BILL. It is designed to disarm the nation (except the rich, of course).

    Key points:
    – to get a license to possess a firearm and/or ammunition everyone needs to undergo a “Psychological evaluation”
    – everyone needs to pay an $800 “fee” to obtain “Firearm Insurance”
    – everyone who DOESN’T get the “Psychological evaluation” and pay the $800 “fee”, has a short period of time to turn in their firearms and ammunition…after which they will be fined NO LESS than $75,000

    The goal is to make it financially impossible for most people to possess a firearm and/or ammunition.

    https://www.congress.gov/bill/117th-congress/house-bill/127/text?loclr=cga-bill

  15. 2021 January 29 11:56 am
    [16]
    drdog09 permalink

    Clinesmith gets a slap on the wrist — https://www.washingtontimes.com/news/2021/jan/29/kevin-clinesmith-ex-fbi-sentenced-year-probation-f/ — Its behind a paywall, sorry.

  16. 2021 January 29 12:09 pm
    [17]
    drdog09 permalink

    15,

    Like to see how they enforce the no loaning ammunition to another party.

  17. 2021 January 29 12:45 pm
    [18]
    justrand permalink

    drdog, the goal isn’t to enforce the law…the goal is to make otherwise law abiding citizens CRIMINALS overnight.

    FEAR of prosecution, and thus increased COMPLIANCE.

  18. 2021 January 29 12:47 pm
    [19]
    justrand permalink

    speaking of GameStop and Reddit…I just had a long conversation with JM.

    Turns out my grandson is right in the middle of this!! And he is NOT doing it for the money…he is doing it to fight against the corruption and power of the government and Wall Street. He and his online friends are doing this as a form of revolt!!

    the apple didn’t fall to far from the tree!

  19. 2021 January 29 1:05 pm
    [20]
    drdog09 permalink

    Good for him!

    This is the digital version of Occupy Wall Street, right where it hurts them the most. I just finished our weekly campus mgt meeting online and the GME battle was a sidebar topic. Everybody is aware of it, it seems. Nobody appears to be for hedge fund side.

  20. 2021 January 29 1:18 pm
    [21]
    JimNorCal permalink

    Wow, this is elaborately impressive!

    “Google’s Threat Analysis Group has detected an ongoing campaign launched by North Korean cyber threat actors against cybersecurity researchers. The threat actors created a blog and Twitter profiles to establish their credibility with the targeted researchers. After gaining their trust, the threat actors ask the researchers if they would like to work together on research projects. If they agree, the hackers send collaboration tools that include malware. Some researchers’ computers were compromised after they visited the hackers’ blog.”

    SANS newsletter, which cites a number of new reports including this one.
    https://arstechnica.com/information-technology/2021/01/north-korea-hackers-use-social-media-to-target-security-researchers/

  21. 2021 January 29 1:19 pm
    [22]
    JimNorCal permalink

    The Clinesmith thing is a travesty.

  22. 2021 January 29 1:20 pm
    [23]
    bc3b permalink

    JimNorCal #14 –

    newsbusters.org also removed its comments section a couple months ago.

  23. 2021 January 29 1:57 pm
    [24]

    If a poll tax has a “chilling effect” on the right to vote, a firearms permit/insurance fee have would have the same effect on the 2nd amend.

    If we only had an honest supreme court.

  24. 2021 January 29 2:09 pm
    [25]
    justrand permalink

    exactly, IP. But even if we DID have an honest SCOTUS, Biden* is going to pack four more on there, and I guarantee they will be selected to allow either the bill Sheila Jackass Lee proposed or one even worse!

    The MOST important priority for the Democrats is DISARMING AMERICA!!

  25. 2021 January 29 3:17 pm
    [26]

    If bidet tries to pack he court, wouldn’t that require legislative action to increase the number , which could be filibustered if we still have the filibuster????

  26. 2021 January 29 3:30 pm
    [27]
    drdog09 permalink

    N. CO residents getting the succession fever — https://trulytimes.com/northern-colorado-residents-seek-succession-to-join-wyoming.html — Want to join WY.

  27. 2021 January 29 4:29 pm
    [28]
    PresidentRonaldPaul permalink

    I’m a long time member of WSB discord and reddit. To me it’s always unclear what’s going on in there although I read it every day.

    There are always people pumping some random stock. Sometimes it’s retailers and probably other times it’s some hedgefund people posing as retailers trying to get retailers to pump their latest bet or maybe AI who knows.

    I mostly just read it for generic ideas as well as the memes. It’s oddly a very right wing channel.

  28. 2021 January 29 4:32 pm
    [29]
    PresidentRonaldPaul permalink

    btw there is no way I’m buying a stock worth maybe 2 dollars per share that should be bankrupt for $400 dollars lol even if those who did so end up being proven right.

  29. 2021 January 29 4:36 pm
    [30]
    PresidentRonaldPaul permalink

    If anything I think a general awareness of gamma squeeze potential took hold in the channel this year specifically with regard to Tesla stock.

    I can’t tell you how many times I saw people buying ridiculous call options on tesla every week and every week it would go up and it would all happen again destroying shorts despite the stock closing in 2000 price to earnings ratio at the moment.

    Now just take your lessons from that, and they all of a sudden realize GME is the most shorted stock and somehow managed to do the same thing on it.

  30. 2021 January 29 4:41 pm
    [31]
    PresidentRonaldPaul permalink

    Making the best memes seems to the way to best pump a stock there.

  31. 2021 January 29 4:52 pm
    [32]
    justrand permalink

    a special edition “Week in Pictures” (the regular one is tomorrow)

    https://www.powerlineblog.com/archives/2021/01/the-week-in-pictures-extra-special-gamestop-edition.php

  32. 2021 January 29 5:15 pm
    [33]
    drdog09 permalink

    We piss and moan how bad things are and yet the world IS becoming a better place all the time.

    http://www.cornea.org/Learning-Center/Cornea-Transplants/Artificial-Cornea.aspx/

    A third of all blindness is related to cornea degradation or injury. That is now a thing of the past once it passes testing and regs.

    Fight we must, but let us not forget, that sometimes it is good for the soul to take stock of how far we have come. Hope everyone has a great weekend.

  33. 2021 January 29 5:20 pm
    [34]
    drdog09 permalink

    32,

    Thanks for that one. Some of the memes are absolute gems.

  34. 2021 January 29 5:26 pm
    [35]
    Eph permalink

    We have 17days left until the revolution!!!

  35. 2021 January 29 5:33 pm
    [36]
    drdog09 permalink

    #WSB saves a pension fund — https://www.youtube.com/watch?v=lS3zKR3t3Qs — Eph, the revolution is here, at least on Wall Street. Its becoming a rolling screw-you-hedgers as they move from stock position to stock position.

  36. 2021 January 29 6:15 pm
    [37]
    JimNorCal permalink

    “If bidet tries to pack he court, wouldn’t that require legislative action to increase the number , which could be filibustered if we still have the filibuster????”

    The number for SCOTUS is not defined in the Constitution, so they’re free to change it.

    The filibusters days are numbered, I think. Who recalls the “nuclear option”? Repubs considered using it but every newspaper in the world cried “OMG! End of the World” and they backed down.
    Then Dems got a majority in the next election and used it right away. No outcry whatsoever.

  37. 2021 January 29 6:59 pm
    [38]
    PresidentRonaldPaul permalink

    On another note, when Elon was pumping crypto today, BTC shot up to almost 38k. Robinhood reacted and came to the rescue by restricting all crypto buying as the hedgefunds were universally short on it as well.

    https://www.cnbc.com/2021/01/29/robinhood-restricts-crypto-trading-as-bitcoin-dogecoin-surge.html

  38. 2021 January 29 7:03 pm
    [39]
    PresidentRonaldPaul permalink

    https://twitter.com/thebabylonbee/status/1355199055752810497?s=21

    The Babylon Bee (@TheBabylonBee)
    ‘I’ve Been Shot!’ Screams AOC As Ted Cruz Greets Her With Set Of Friendly Finger Gun

  39. 2021 January 29 7:50 pm
    [40]
    PresidentRonaldPaul permalink

    realvision had a interview with Lily Francus on the gamestop fiascos.
    Her blog is good.

    https://nope-its-lily.medium.com/

  40. 2021 January 29 7:59 pm
    [41]
    Eph permalink

    36 DR

    Give it another week and that “revolution” ends

    If they ended Trump, this is a no brainer

    Im talking real revolution!

  41. 2021 January 29 8:00 pm
    [42]
    Eph permalink

    37 Jim,

    That’s real revolution !!!

    While we are busy with GME, Biden adds 5 more to SCOTUS.

    I give it 8 more days.

  42. 2021 January 29 9:10 pm
    [43]

    .Post 37 “The number for SCOTUS is not defined in the Constitution, so they’re free to change it”.
    Wouldn’t that require LEGISLATION passed by both houses?

  43. 2021 January 29 10:05 pm
    [44]
    justrand permalink

    IP, yes…if the rules still applied.

  44. 2021 January 30 4:13 am
    [45]
    drdog09 permalink

    “Give it another week and that “revolution” ends”

    Eph, Eph, you are forgetting Alinsky’s Rule #6 — “A good tactic is one your people enjoy.” Also Rule #4 — “Make the enemy live up to its own book of rules.”

    What’s not to enjoy? They are making millionaires out of Joe Six Packs. Giving Gen Z FU you money for the first time in their lives. All they are risking, for most of them, is a couple of measly Benjamins.

    This is self sustaining economically. The numbers favor the little hordes and their little $$. The only thing that will stop it is that the other side stops shorting stock in any significant way. And that IS the point of the exercise — stop the shorts.

    While those barricades are being breached, there are others that I am sure will find another gate to assault. This is a multivariate populist revolt. It has many facets and the Libs can’t cover them all. Besides we can spit and chew gum at the same time.

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