I believe you are far off the mark here. Retail investors are well within their rights to drive up a stock to what could be above fair market value....some may well lose money in doing so. The whole narrative around retail vs. hedge funds/wall street is naive to say the least...people in financial services are worried that retail investors may lose a lot of money here which may dent confidence in the market.
The irony here is that you believe the market is a mockery which most of the time it isnt but at times it can be irrational. This is clearly one of those times....as an investment professional.....I look at this and see the irrationality of the price which is not underpinned by cash flow or a fair valuation close to the price...which is called fundamental investing and not trading like what is happening here.
value of a stock is what the market dictates is the value of the stock, not what an analyst wants the price to be. It is laughable to say that Hedges were using purely "fundamentals" for the past 10 years.
Were people in the financial services worried about retail investors when Melvin was shorting GME into the ground at $5 a share? Intentional manipulation to quickly bankrupt a company. How about with the 2000s derivatives bubble?
The only thing they are worried about is that they are getting the shitty other side of the game they made for the first time.
Price is what you pay in the market and value is what something is worth...clear difference.
Some people with in a group who hold a view does not mean the entire group holds that view.
In this game, I believe retail investors feel like they are winning now but ultimately many will lose money when the price comes down. In my view the price is not sustainable....
how much is a $20 USD bill worth to you? Its a penny or less of cotton.
obviously its not sustainable, we are entering a short squeeze. But capping at $4 a share shouldn't have been either, I think $60-$80 is a really reasonable assessment, it will spike, and rightly so, as the too greedy naked short sellers get screwed over and forced to cover their positions
A $20 USD bill is worth US$20 to me. That one is easy. My point still stands with regards to price vs value and that is how I invest. I buy stocks I think are undervalued and hold.
On GME, I have read r/WSB and the most of the posts/comments are emotional in terms of reasoning. When I’ve lost money investing it has been because I made decisions based on emotions. Often I wanted something to be true and I wasn’t able to face up to reality.
I believe short selling has a place in the market if done correctly. Don’t get me wrong, I’m against market manipulation. the buying or selling of shares by rational parties allows for true price/value discovery. My fear for WSB retail investors is that they are not rational and eventually the price of GME will come crashing down to a more realistic level in line with its future prospects and cash flow/earnings yield.
Under all the WSB bravado, I believe there is greed in that they all want to make big bucks. In that sense they are no different to the hedge funds. It’s really many small greedy fish vs a few large greedy fish....who will win? .... I’d rather avoid this fight and play a game where I’m more confident of winning.
Well I work in financial services and I care about people including retail investors which disproves your point. Everything is not black and white. There are of course people in the sector who dont care. There are a mix of views.....
Agree - and glad to hear that. I think the statement should have been posted along the lines of a majority of people who are in positions of power in the financial industry barely care about retail.
But what they're trying to achieve here (AFAIK) is a short squeeze. The whole point of this move is that there's massive short interest in GME, and the WSB crew (and anyone else long on it) can take advantage of it until those positions are closed.
After that, if people hang around, sure they'll likely lose money if they bought at the top, but until those big positions close, there's money to be made.
So from what I read, the shorts were (at least at one point) at 140% of the available float. If that's true (AFAIK) that means at least some were naked.
Agree 100%. I think the smartest bet here is buying put options that expire far out. Currently, the price of the $320 GME PUT expiring in Jan 2022 is $240. That's free money...
I've been keeping an eye on the far-out-dated put options, and I haven't seen anything that's more compelling than simply leaving money parked in an index fund. The expectation that GME will drop back down to Earth over that timeframe remains priced in.
The main takeaway from this incident is that margin-call-constrained short selling is even more dangerous than previously understood.
>The expectation that GME will drop back down to Earth over that timeframe remains priced in.
Yea, it does seem largely priced in, but perhaps not completely. If share price is $60 in 1 year, the ROI on that contract would be 9% -- so slightly better than what you'd reasonably expect an index fund to return. A $60 share price is higher than GME's all-time high prior this fiasco.
So you're paying $24,000 to bet that the stock will fall below a breakeven price of $80. Even if we assume that that's likely to happen, your maximum upside (i.e. if the stock goes to zero) is only $8,000.
THe price of that put is $240 .
So GME has to fall to 320-240 = $80.
Also the cost of that put is twenty four thousand dollars. Not exactly chump change.
The irony here is that you believe the market is a mockery which most of the time it isnt but at times it can be irrational. This is clearly one of those times....as an investment professional.....I look at this and see the irrationality of the price which is not underpinned by cash flow or a fair valuation close to the price...which is called fundamental investing and not trading like what is happening here.