Earlier this week when my brother texted me about all this I told him I bet he could check back for my input after 6pm pacific time Saturday
A few years ago I was mindblown to learn that the derivatives market (including shorts) is orders of magnitude bigger than the stock market itself. Total value of all NYSE stocks is $15 trillion, and the derivatives market on top of that is $640 trillion or something.
Okay! Heavily requested livestream tomorrow @ 5PM PT/8PM ET. Get in your questions about How Reddit is Beating Hedgefunds (Gamestop explainer)
Here’s a question - do you think this is the end of Robin Hood? I can’t tell you how many small timers I’ve seen this am that are selling all their holdings in Robin Hood and moving elsewhere.
I was pondering this because it still feels different to me (and again, it’s possible that my understanding is extremely flawed).
When you sell a mortgaged house, what happens is that someone lent you money so you could buy a house. The house is collateral on the loan, but the bank did not actually lend you the house itself.
Short selling sounds a lot more like me trying to sell the apartment I’m renting.
I know that actual real estate law is tricksier than that, but fundamentally, that’s what short selling feels like and that’s why it seems so fucking scuzzy to me.
Hello, terrible question (considering that I’ve been around here for years now), but can we watch these somewhere after the fact? I’m never usually a video learning person, I always read instead, but I’d be realllly interested in hearing you talk about this one, and I can’t make the livestream.
They stay up on my youtube after! Same link.
Odds are I won’t be able to make it to the live stream when it’s live so I’ll ask it here - What are the odds the government will tie a bail out for all this nonsense to the next round of covid stimulus money?
I’m pretty much a brainless contributor to my work retirement fund. I’ve got my money in index funds with low fees and rebalance once a year but I don’t pay much attention beyond that. So, what I’m wondering is will this impact index funds - like is there any interaction at all with my Vanguard investments and hedge funds? Obviously, I don’t expect a specific answer re: my personal investments but I am curious whether this is going to screw over workers who have retirement accounts or is it just billionaires who are going to eat this loss?
TL;DR - who is going to lose out, assuming the government doesn’t (hasn’t already) interfered to help incredibly rich people?
My question: Some friends got in on the Reddit action and made some money on GameStop stonks. They are holding at least some of the stocks but have made money. Should I be worried that they will actually lose money when the stock price inevitably drops or am I worrying about my friends for no reason?
@kajellio really good question!!
(You wrote hedge funds but did you mean index funds?)
Vanguard and index funds (at least the ones I’ve researched and/or bought) are comprised directly of stocks and bonds, and don’t include any second-order bets like derivatives or shorts, so they are mostly not affected. Today the stock market lost about 2% overall, probably reflecting the general dip in confidence about stock markets. So your Vanguard and index funds lost a bit due to the overall market loss, but not anywhere near the degree of hedge funds who made much riskier bets by shorting specific stocks. And pension funds that working people rely on for retirement, etc. tend to avoid these high-risk investments too. As best as I can understand, only billionaires are getting pummeled by this particular game.
I definitely looked up what a hedge fund is to ensure that my random index mutual whatever funds aren’t effected.
Basically no, hedge funds are alternative investments only available to advanced investors who are very rich. It would run foul of regulations to let poors and regulars have them. Therefore it is extra illegal for the regulars to stop the richer from getting richer
I googled “how do I invest in hedge funds”
To invest in hedge funds as an individual, you must be an institutional investor, like a pension fund, or an accredited investor. Accredited investors have a net worth of at least $1 million, not including the value of their primary residence, or annual individual incomes over $200,000 ($300,000 if you’re married).
You and I are safe.
I wonder if my pension is safe…
My opinion is that this is a flash in the pan and things will go back to normal soon, but hopefully with some regulations on margin calls for all investors.
So basically, the way that “regular index funds” COULD be affected is if the hedge funds are squeezed so much they have to do a massive sell off of other assets to have enough money to pay back their position on the shorts.
So far, it doesn’t seem like that is going to happen. But this whole thing could have insane consequences on the market as a whole if it does.
FYI, Planet Money did an episode on this and I found it informative and interesting. It was a good complement to the livestream because @anomalily explained short selling in a way that I could understand and then Planet Money gave more history and other context.
Also they played bits of a “Wellerman” parody about this whole thing and it was delightful.
In my head: “meh, I might be getting burnt out on this whole Gamestop thing…”
“… let me open a tab right now to listen to this.” Apparently memes and parodies need to be incorporated more into educational stuff for me.
Yeah… That was always gonna happen. Sounds like some of the crowd knew what they were getting into. But I’m sure many who got swept up in it couldn’t afford it.