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More GameStop

by Jeff Carter
This post is by Jeff Carter from Points and Figures

Random thoughts on the GameStop saga:

  • Wouldn’t it be funny if GameStop management went to a lender and borrowed $5MM to $10MM in cash?  Then, announce to the market that they would be using the money to buy back stock!
  • It would not surprise me if yesterday when retail was banned from trading all the speculative stocks that the institutional money on Wall St used what’s known as “washed trades” to paint the tape lower.  I have seen it done plenty in the past and while illegal it is very difficult to prove.
  • If you hold any stock in your account that you do not want your broker to lend out for the purposes of shorting, send a note to your broker that instructs them under no circumstances is the stock you own available for lending.  That decreases the amount of stock outstanding available to be shorted and makes it harder to short.   I am not against shorting and think it is a necessary market function.  But, as an owner of a stock, it is one way to use an arrow in your quiver.
  • Unsubstantiated rumor is that institutions on Wall St piled into the short side of the trade yesterday.  If the stock rallies big today, I wonder if the “gamma” in options will take over?
  • I was reading the WallStreetBets page at Reddit.  These guys are out for blood and after yesterday I don’t blame them.  They have put in good till canceled orders at $5000/share.  Supposedly during (Read more...)

Retail Abandons GameStop ($GME)

by Jeff Carter
This post is by Jeff Carter from Points and Figures

A lot of people are upset that retail brokers are restricting trading on speculative stocks like GameStop.  I understand and empathize with their feelings.

At the same time, I have a little experience with volatile markets.  When I was on the board of the Chicago Mercantile Exchange, we regularly had to look at market volatility, position concentration, and adjust margins accordingly.  Contracts had circuit breakers built-in that were transparent to the marketplace.  Most agricultural contracts had daily limits.  Financial contracts were more fluid.

Believe me when I tell you it’s never fun to trade when a commodity is lock limit against you.  Been there done that.

I have had my clearing firm tell me to trim a position, or add cash to my account otherwise they were going to take things into their own hands and get me out.  I have seen volatility happen and had margins increased significantly overnight so holding a position was more expensive.  It forces a little discipline into your trading strategy when you have that “extra” constraint!

I haven’t looked at exact policies of each and every retail outlet, but I think I can generalize.  Basically, if you have a position, you can hold it or you can close it.  You can’t initiate new positions and “trade” the stock.  You can’t roll a position.

It certainly seems unfair on the surface.  After all, free markets for free men and all that. People ought to be able to make up their own minds with their own (Read more...)

The Gamestop ($GME) Saga

by Jeff Carter
This post is by Jeff Carter from Points and Figures

UPDATE:

And today your elite corporate overlords deemed that the Reddit Wall St. group was not beneficial to discussion and removed it. Discord removed it.  The idea that there was hate speech on the platform is preposterous.  This is simply an excuse.  If you are a Reddit Wall St member I would highly encourage you to set up a stream on Stocktwits.com or maybe better yet on Gab.com where the technology is vertically integrated.  There were over 2MM people that were members of the Reddit group. 

To my acquaintances that voted for Biden, he is far worse than Trump when it comes to civil liberties.  I know Stocktwits founder Howard Lindzon called Trump “Fat Nixon” for years. Joe Biden is resembling Erich Honecker at this point, or worse.  

The one good thing is that Chamath Palihapitiya has a gigantic megaphone and soapbox.  I would like to see him use it.  I know that my venture capital friends will remain muted, or at best gently prodding.  

In the comments section below, someone posted the full interview with Chamath P.  It’s a tremendous interview as I said, and the anchor really shows how dimwitted he is when it comes to markets.  He is just a teleprompter reader.   It’s now being blocked by either YouTube or NBC Universal. You can access it by paying for CNBC Pro. Screw them. 

This is fascism in real-time folks and it’s being practiced by the party that accused everyone else of fascism and shredding the Constitution (Read more...)