Why Did Reddit Trigger a GameStop Stock Surge?

[Vanadium 50]

Is there a dark pool of off-eBay merchandise transactions? Large institutional investors will trade off-exchange

That is an interesting question. I know the reverse is true for Ebay: large institutions buying off Ebay. I know one lab that bought a bunch of Vax computers for spare parts - while they still could. But we're drifting.

 

[BWV]

That is an interesting question. I know the reverse is true for Ebay: large institutions buying off Ebay. I know one lab that bought a bunch of Vax computers for spare parts - while they still could. But we're drifting.

Well then I won’t mention the dark Etsy pools

 

[Astronuc]

MassMutual fined $4 million for failing to monitor GameStop booster Kevin Gill
https://www.marketwatch.com/story/m...nitor-gamestop-booster-kevin-gill-01631828263
Gill, aka Reddit’s ‘Roaring Kitty,’ helped drive meme-stock frenzy while employed at MassMutual subsidiary

NEW YORK — Massachusetts regulators are fining MassMutual $4 million and ordering it to overhaul its social-media policies after accusing the company of failing to supervise an employee whose online cheerleading of GameStop’s stock helped launch the frenzy that shook Wall Street earlier this year.

The settlement announced Thursday by Secretary of the Commonwealth William Galvin centers on the actions of Keith Gill, who was an employee at a MassMutual subsidiary from April 2019 until January 2021. His tenure ended as GameStop’s stock price suddenly soared nearly 800% in a week, as hordes of smaller-pocketed and novice investors piled in, to the shock and awe of professionals.

Gill’s job at MassMutual was to create educational materials for current and potential customers, but regulators say he was also posting more than 250 hours of videos on YouTube and sending at least 590 Tweets about investing and GameStop through accounts that were unaffiliated with the company.

 

[Vanadium 50]

Predictable. And predicted.

 

[Stephen Tashi]

I'm not familiar with the Wallstreet Bets forum. I've looked at examples from it presented by YouTuber "Wall Street Millennial". But how do people know that the investments and trades presented on the forum are real?

 

[kyphysics]

I'm not familiar with the Wallstreet Bets forum. I've looked at examples from it presented by YouTuber "Wall Street Millennial". But how do people know that the investments and trades presented on the forum are real?

What do you mean by real, ST?

If you mean the person proposing a trade is really who they say they are and not some hedge fund or other financial institutional "hire" that is trying to manipulate the forum crowd, then I'm not sure there is any way to know that for sure. There could be "plants" there. I suspect there could just as easily be some 13-yo kid wanting to have fun and mess with folks in proposing crazy trades and seeing if anyone bites too.

If by "real" you mean the quality of the trade is good (i.e., you're buying a good bargain), then I guess you could do fundamental analysis on the stock/company in question or maybe technical analysis (if you're just trading), etc. Of course, lots of times the Reddit army isn't interested in fundamental trades. Instead, they may be looking for a $GME-like set-up. There could be a company with a huge short-interest position relative to float and getting everyone to buy call options (in massive droves) creates a gamma squeeze on market makers and brokers that forces them to delta hedge (i.e., buy the underlying security to protect against upside risk), which drives the stock price up. That, in turn, can force short sellers to cover high, which drives the stock even higher. That $GME set-up is what they often look for. This schema: gamma squeeze--->delta hedge--->short squeeze was popular in the late-1990's dot com era. Jesse Felder (retired hedge fund manager), who followed WSB back in 2020 (pre-$GME squeeze) had been commenting on it quite a bit. He saw similar online crowd behavior from the late-1990's and what was going on in the WSB forum.

Other times, people just seem to pick some "story"/meme stock they like (regardless of its fundamentals) and seem to want to pile in. No logic maybe other than, "Hey, this seems to have a great story/narrative behind it and I think it'll go up on its next presser announcement. I'm putting 90% of my life savings into this company with no revenue, negative income (debt and cash burn), and a hunch it'll be the next big thing. YOLO! I'm all in." With these stock proposals, you can usually tell they are nothing more than pure gambles.

 

[Stephen Tashi]

What do you mean by real, ST?

If you mean the person proposing a trade is really who they say they are and not some hedge fund or other financial institutional "hire" that is trying to manipulate the forum crowd, then I'm not sure there is any way to know that for sure.

I mean whether the amount of stock ( or put or call etc) that a post says was bought or sold was actually bought or sold. I'm not asking whether the poster portrays his identity truthfully.

 

[kyphysics]

I mean whether the amount of stock ( or put or call etc) that a post says was bought or sold was actually bought or sold. I'm not asking whether the poster portrays his identity truthfully.

I'm not sure there is a way to know for sure, ST. Some are probably lying, while others are telling the truth.

In real life (not the warped culture of WSB), people tend to tell exaggerated tales of their winnings and hide/diminish their losses. So, normally, I would tend to more naturally believe a "loss" story. . . .The culture of WSB, however, makes it sort of a virtue to have dumped your life savings into short-dated call options on a long-shot bet and to lose it all in glory (or, win big). So, I don't know what to believe there.

 

[kyphysics]

Vanda Research's Vanda Track gives daily data on retail investor flows. Pretty cool.
https://www.vandatrack.com/

VandaTrack provides daily data on retail investors’ net purchases of US single stocks and ETFs. Check the leaderboard of the most bought and sold securities on a daily basis, access a customizable web-based user interface, or use our API to automate the download of the data.

Their Twitter page is here for nerds wanting to follow:
https://twitter.com/VandaTrack

Sample Tweets:

 

[phinds]

Vanda Research's Vanda Track...

How much does this cost?

 

[Stephen Tashi]

What, technically, is a "retail" investor?

 

[phinds]

What, technically, is a "retail" investor?

A non-institutional investor. You. Me. NOT an insurance company.

 

[kyphysics]

How much does this cost?

Unsure. I only view the free Twitter feed. That and occasionally browsing WSB and sometimes Tik Tok Investors' Twitter too (for humorous anecdotal "data").

 

[Stephen Tashi]

What kind of data and processing would be needed to determine only those trades of a stock made by "retail" investors?

 

[kyphysics]

What kind of data and processing would be needed to determine only those trades of a stock made by "retail" investors?

I'm curious too. I am not sure. Sounds like a Google-ing/research project someone can take on in this thread.

Maybe Vanda does it by some process of elimination (separate out institutional flows and categorize the rest, by default, as retail) based on available flow data. But, I have no idea what is collected daily when it comes to stock flow data, however. I only know big institutional investors with $100 million or more in assets under management have to file quarterly 13f statements to the SEC (that discloses their holdings). But, that wouldn't help much here.

Bloomberg.com often publishes their mom and pop/dumb money vs. smart money (institutional investors) indexes and flow data. But, I don't know how they collect that data either. I just like to look at the charts when they put them out. I know retail got crushed in 2018's market meltdown vs. the smart money, but (in a reversal) crushed the the smart money in 2020's meltdown.

 

[phinds]

Institutional and various types of "official" investors are required to register as such so brokers know which trades on their platforms are made by individuals and those made by institutional and other investors.

I don't know if anyone / any institutions aggregates such information from the various brokers but certainly the SEC could if they wanted to and may well do so.

 

[Stephen Tashi]

There are many different stock exchanges. Aren't there "dark pool" exchanges where the identity of traders (e.g. pension funds) is disguised so people can't guess when an institution might be trying to buy or sell a large number of shares? Or does a "dark pool" merely delay reporting such transactions so nobody can quickly take advantage of the knowledge?

 

[Office_Shredder]

There are many different stock exchanges. Aren't there "dark pool" exchanges where the identity of traders (e.g. pension funds) is disguised so people can't guess when an institution might be trying to buy or sell a large number of shares? Or does a "dark pool" merely delay reporting such transactions so nobody can quickly take advantage of the knowledge?

Dark pools cannot delay the reporting of transactions, it's a rule they need to be reported as soon as they happen. The reason they are called dark is because the orders people send to the exchange are not published, so you cannot know if someone is trying to buy or sell.

 

[kyphysics]

An $8,000 bet on shiba inu coin allowed a warehouse manager to retire after the meme coin's stunning rally, report says​

https://finance.yahoo.com/news/8-000-bet-shiba-inu-192639050.html

• A 35-year-old former warehouse manager made an $8,000 bet on shiba inu at the start of the year.
• His investment ballooned to $1 million, enabling him to retire, according to Fortune

From $8,000 to over $1M in 1 year...not bad.

I wonder if I should speculate (I won't call it investing) in cryptos?

 

[jrmichler]

Before putting money into the latest fad, such as crypto or Gamestop, get a copy of and read Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay: https://www.amazon.com/dp/1539849589/?tag=pfamazon01-20. A good read and I highly recommend it.

 

[mfb]

A few cryptocurrencies rise in value, many others disappear. News will only focus on the people who happened to pick the "right" one. Stories about lottery winners are not a good reason to play a lottery.

 

[russ_watters]

I wonder if I should speculate (I won't call it investing) in cryptos?

I heard Squid Game crypto was going up...

 

[kyphysics]

A few cryptocurrencies rise in value, many others disappear. News will only focus on the people who happened to pick the "right" one. Stories about lottery winners are not a good reason to play a lottery.

Have any good crypto loser stories for us? I'd love to hear some.

On a semi-related note, has anyone in their lifetime seen this much craziness in financial speculation? It feels insane nowadays. It's not just one asset class and a relatively small number of people. It feels widespread throughout society and into practically every asset class.

 

[Astronuc]

has anyone in their lifetime seen this much craziness in financial speculation?

Between 1995 and its peak in March 2000, the Nasdaq Composite stock market index rose 400%, only to fall 78% from its peak by October 2002, giving up all its gains during the bubble. During the crash, many online shopping companies, such as Pets.com, Webvan, and Boo.com, as well as several communication companies, such as Worldcom, NorthPoint Communications, and Global Crossing, failed and shut down. Some companies, such as Cisco, whose stock declined by 86%, Amazon.com, and Qualcomm, lost a large portion of their market capitalization but survived.

https://en.wikipedia.org/wiki/Dot-com_bubble

There was a technology mutual fund, Firsthand Technology Value Fund (TVFQX) that a friend and colleague bought into, and another friend who bought individual shares in companies like JDS Uniphase, Global Crossing, because the internet was the new and future economy, and traditional industries, e.g., railroads were dinosaurs.

I watch as TVFQX rose from something like $30/share to something like $170, then watched it fall back to $40/share. All the time, my friends expected the stocks to rebound and continue to go up - because that's what the market does. Well, then the accounting scandals of some companies became exposed, and in some cases, companies filed for bankruptcy. The values of many stocks decreased during mid-2000. For example CAT went from $30/share to about $15/share, but it recovered through early 2008, then plummeted again with the crash through the remainder of 2008 into 2009, which would have been a buying opportunity.

TVFQX never recovered, and in 2010, it was closed and folded into a type of closed-end fund ("business development company"). It now trades under SVVC, and they have not done well.
https://www.marketwatch.com/story/firsthand-fundholders-get-second-rate-deal-2010-07-25
https://finance.yahoo.com/quote/SVVC/

That friend did buy AMZN at some point, and it has done well. He also owns AAPL and some other tech stocks, which have done well in the last 10 or so years.

I told the other friend who bought individual stocks that he should sell his dot.com/tech shares and invest in the railroads, CSX and NSC. He laughed and declared that railroads were dinosaurs. This was about 1999/2000. Had he followed my advice at the time, he would have doubled his retirement account. Instead, by holding the tech stocks, he lost about 70% of his retirement account.

 

[fluidistic]

An $8,000 bet on shiba inu coin allowed a warehouse manager to retire after the meme coin's stunning rally, report says​

https://finance.yahoo.com/news/8-000-bet-shiba-inu-192639050.html

From $8,000 to over $1M in 1 year...not bad.

I wonder if I should speculate (I won't call it investing) in cryptos?

Possibly. If there is currently less than 7k cryptocurrencies, I think a simple winning strategy could be to invest 1 dollar in each one of them, and sell the ones that do x10000 in returns. The problem might be to avoid fees...

 

[fluidistic]

Have any good crypto loser stories for us? I'd love to hear some.

On a semi-related note, has anyone in their lifetime seen this much craziness in financial speculation? It feels insane nowadays. It's not just one asset class and a relatively small number of people. It feels widespread throughout society and into practically every asset class.

Have any good crypto loser stories for us? I'd love to hear some.

On a semi-related note, has anyone in their lifetime seen this much craziness in financial speculation? It feels insane nowadays. It's not just one asset class and a relatively small number of people. It feels widespread throughout society and into practically every asset class.

Not sure what you consider a good crypto loser story, but some people took loans from banks and sold at a loss their cyptos, getting ruined. Others simply click on buttons and do future trading, losing in 1 click all the money they harvested for years. Others simply got scammed one way or another, even experienced crypto users. There are simple rules of thumbs to follow and if you depart from them, you must be aware that your funds aren't as safe as you would hope.
Lastly, cryptos might replace fiat currencies in the long term. As long as gen X is alive and the next generations, cryptocurrencies won't die off. I, for one, will always buy some cryptocurrencies if their price plummet, and then trade them with other youngsters. Unlike a stock or a company, this cannot bankrupt.

 

[russ_watters]

Possibly. If there is currently less than 7k cryptocurrencies, I think a simple winning strategy could be to invest 1 dollar in each one of them, and sell the ones that do x10000 in returns. The problem might be to avoid fees...

I have a fundamentally identical but lower risk/return strategy; an S&P500 index fund. No fees, long track record of consistent returns.

Caveat: i think for your strategy to work, it requires a time machine to go back and buy each of them not long after inception.

 

[russ_watters]

Have any good crypto loser stories for us? I'd love to hear some.

This is the one I referred to above:
https://www.google.com/amp/s/www.wired.com/story/squid-game-coin-crypto-scam/amp

The funny thing is, people were warned it was a scam and bought it anyway. I guess when you knowingly join a pyramid scheme you check your ethics at the door.

On a semi-related note, has anyone in their lifetime seen this much craziness in financial speculation? It feels insane nowadays. It's not just one asset class and a relatively small number of people. It feels widespread throughout society and into practically every asset class.

1929?

If there is anything different now, it's that small-time investors have been wooed into the game. And it seems that due to their small investments they are ok with massive risks.

 

[russ_watters]

Lastly, cryptos might replace fiat currencies in the long term.

That's the last thing crypto investors should want, but I don't think it is likely anyways.

As long as gen X is alive and the next generations, cryptocurrencies won't die off. I, for one, will always buy some cryptocurrencies if their price plummet, and then trade them with other youngsters. Unlike a stock or a company, this cannot bankrupt.

You mean...prey on the gullibility of kids? And if you're saying the supply of gullible kids will never go to zero I agree, but that doesn't mean any (or all) crypto can't go to zero. Either way, a predatory investing strategy is not something I would feel good about.

 

[fluidistic]

That's the last thing crypto investors should want, but I don't think it is likely anyways.

You mean...prey on the gullibility of kids? And if you're saying the supply of gullible kids will never go to zero I agree, but that doesn't mean any (or all) crypto can't go to zero. Either way, a predatory investing strategy is not something I would feel good about.

Not really. Since in my mind cryptocurrencies will replace fiat, teaching kids about crypto is morally a good thing, and if I can convert myself fiat into crypto, in higher and higher quantities over the years, I am actually helping the transition. If this gets me rich (I don't think it will, I started near vacuum and too late into the game thanks to media and my non curiosity to investigate what the heck it was), then it's fine. I don't mind that BTC or other cryptos become stable over time, especially if their real world use cases increase. That's a good thing.

 

[BWV]

Isaac Newton lost a fortune in the South Sea Bubble - so don't trust you are smart enough to avoid getting wiped out in a speculative mania

 

[fluidistic]

Isaac Newton lost a fortune in the South Sea Bubble - so don't trust you are smart enough to avoid getting wiped out in a speculative mania

At least I,would have tried to do my part to change.the world and try to avoid a new 2008 crisis, as ''Satoshi Nakamoto'' dreamed of. BTC was invented for that purpose, not to become rich (he never touched the huge amount of BTC he mined in the early days, after a few transactions to some cryptographers).

 

[russ_watters]

Contradicting goals is a red flag to me. They can't all succeed, but they can all fail.

As my primary investing goal is to retire low-end rich, I invest with my head, not my heart. But to each his own. My concern for the younger investors is that they are learning habits that will likely not serve them well.

 

[artis]

Isaac Newton lost a fortune in the South Sea Bubble

Only because he forgot to turn ON sound for margin notifications in Trading 212...

The man probably got carried away with that whole gravity thing, forgot to check the stocks while they were falling at a rate of 9.8m/s2

 

[fluidistic]

Contradicting goals is a red flag to me. They can't all succeed, but they can all fail.

As my primary investing goal is to retire low-end rich, I invest with my head, not my heart. But to each his own. My concern for the younger investors is that they are learning habits that will likely not serve them well.

If I had to invest with my head rather than my heart, for the short term I would invest most of my money intro crypto for the simple reasons that it is more volatile than stocks (plus no trading fees and no broker to pay), and still goes up much more than stocks in average (that's essentially the reason why a hamster is doing better than Warren Buffet does, lately). If I had to drop a penny for the very long term and not look back in how it's doing for the next 40 years, I would still bet on crypto. When I look at long term charts like Cac40, I see that since 1997 or so, there is basically no upward trend, however inflation has accumulated a high percentage since then. So, at least in the local stock market, it doesn't really look appealing to say the least, while crypto may (or not) offer a better alternative. It is not clear at all, to me at least, which would be a safer, less riskier, investment.