Anyone Here Play the Market?

[MightyGiants]

So when a big firm downgrades a stock and makes it go down and makes money on that dip which might create a panic sell and make them more money.  How

[Jolly Blue Giant]

JBG,

Do you see a difference between betting on a price going up or down (not actually affecting the price) and actively conspiring to change the price of a stock?

It seems to me, a lot of people are acting like short selling is some sort of sinister unethical action, which it is not.   They act like hedge funds are these sinister organizations when they are just private mutual funds that have pretty high fees (which had them out of favor for many years).


I believe very firmly that using insider knowledge or actively conspiring to change the price of a stock is both highly unethical and very harmful to investors, the market, and ultimately our economy.   The market needs to allow market forces to change prices, not some billionaire, not a bunch of people on Reddit, not any person.  You talked about doing stock research.   What schemes people are plotting to change a stock price is not something you can generally research

I have no problem with those who short sell. It's a high risk method to make or lose a lot of money. Not all hedge funds are short-selling to grow their customer's value (as far as I know anyway). I own a couple shares of Blackrock that focuses on long term value stocks. They have over seven trillion dollars in stock holdings of course. Their top holdings are Apple, Microsoft, Amazon, Facebook, Alphabet, etc. The reason I bought stock in Blackrock is because Biden has loaded up his advisory board and administration with Blackrock's top execs (Chief Executive Larry Fink will serve as a top official at the Treasury Dept; Blackrock's investment executive Brian Deese will head Biden's National Economic Council; Adewale "Wally" Adeyemo, former chief of staff to BlackRock chief executive Larry Fink will be a top official at the Treasury Department; Michael Pyle [BlackRock's global chief investment strategist] is going to be chief economic advisor to Vice President-elect Kamala Harris). Biden has ridden the Whitehouse of Goldman Sachs, Trump's primary team of economic strategists. For all practical purposes, Blackrock will be running the economy through Biden.

As far as the Robinhood millennials toying with the system, they are subject to lose as well as gain. The idea that the stock market is all about owning a small piece of a company and holding onto it to gain wealth has long left the building. Today's market is not your father's paper portfolio of train stocks and the likes of IBM, Kodak, and GE. Like it or not, it's become an electronic casino of sorts pitting wit against wit. And the big guys have a huge advantage because they can (and do) pay "professional analysts" to write pieces in the WSJ, or Baron's or Forbes or Motley Fool about a stock that is going to run or pull back so that the big guys can manipulate your thoughts and potential moves. You can no longer just study PE ratios and look at revenues and growth as a good indicator. Now it's all about momentum and the latest trend.

I got a kick out of a recent article about the SPAC offering of Canoo (a new Electric Vehicle (EV) stock) that raised millions more than they hoped for when it hit the market as an IPO. The article talked about how crazy life is in the "new market" and said that as far as their research shows (this is a direct quote): "Canoo (GOEV) is a wannabee EV company that seems to consist of a website and a dream, unencumbered by mundane things like factories, revenue or customers. Its shares were trading at twice the SPAC issue price last week"...LOL I will never forget that line "unencumbered by mundane things like revenue or customers". Still makes me laugh out loud. I see stocks rising on a 45 degree angle since last March that haven't had revenue in the green for several years.

Anyway, like I said, it's crazy.

[GordonGekko80]

So when a big firm downgrades a stock and makes it go down and makes money on that dip which might create a panic sell and make them more money.  How

[GordonGekko80]

You are suffering the harm I was talking about that was created by a bunch of Redditors conspiring to manipulate stock prices

As for big firms, they are allowed to make projections on stocks, but they are not allowed to profit on those projections

Plus: The Volcker Rule clearly forbids Principal Trading for Proprietary Purposes.

[GordonGekko80]

I have no problem with those who short sell.

But how is it possible that a company's stock can be oversold or overshorted by 140%?

This is where the system fails.

[MightyGiants]

I have no problem with those who short sell. It's a high risk method to make or lose a lot of money. Not all hedge funds are short-selling to grow their customer's value (as far as I know anyway). I own a couple shares of Blackrock that focuses on long term value stocks. They have over seven trillion dollars in stock holdings of course. Their top holdings are Apple, Microsoft, Amazon, Facebook, Alphabet, etc. The reason I bought stock in Blackrock is because Biden has loaded up his advisory board and administration with Blackrock's top execs (Chief Executive Larry Fink will serve as a top official at the Treasury Dept; Blackrock's investment executive Brian Deese will head Biden's National Economic Council; Adewale "Wally" Adeyemo, former chief of staff to BlackRock chief executive Larry Fink will be a top official at the Treasury Department; Michael Pyle [BlackRock's global chief investment strategist] is going to be chief economic advisor to Vice President-elect Kamala Harris). Biden has ridden the Whitehouse of Goldman Sachs, Trump's primary team of economic strategists. For all practical purposes, Blackrock will be running the economy through Biden.

As far as the Robinhood millennials toying with the system, they are subject to lose as well as gain. The idea that the stock market is all about owning a small piece of a company and holding onto it to gain wealth has long left the building. Today's market is not your father's paper portfolio of train stocks and the likes of IBM, Kodak, and GE. Like it or not, it's become an electronic casino of sorts pitting wit against wit. And the big guys have a huge advantage because they can (and do) pay "professional analysts" to write pieces in the WSJ, or Baron's or Forbes or Motley Fool about a stock that is going to run or pull back so that the big guys can manipulate your thoughts and potential moves. You can no longer just study PE ratios and look at revenues and growth as a good indicator. Now it's all about momentum and the latest trend.

I got a kick out of a recent article about the SPAC offering of Canoo (a new Electric Vehicle (EV) stock) that raised millions more than they hoped for when it hit the market as an IPO. The article talked about how crazy life is in the "new market" and said that as far as their research shows (this is a direct quote): "Canoo (GOEV) is a wannabee EV company that seems to consist of a website and a dream, unencumbered by mundane things like factories, revenue or customers. Its shares were trading at twice the SPAC issue price last week"...LOL I will never forget that line "unencumbered by mundane things like revenue or customers". Still makes me laugh out loud. I see stocks rising on a 45 degree angle since last March that haven't had revenue in the green for several years.

Anyway, like I said, it's crazy.

JBG,

Believe it or not, there are still investors like myself.   Look up Motley Fool (Which has great podcasts) as they are dedicated to the idea of investing in stocks rather than stock trading.  You have stock options, you have short selling, you have bought on margin.  Those are all tools that stock traders use.

As I said, I buy good companies (or good markets via ETFs) and sit on them.   I personally like dividend stocks.  I know they generally don't go up as much as other stocks, but I love the idea of making money from my investment without having to actually sell said investment.


While day traders and stock traders in general, get all the press, people like me still exist and I believe exist in large numbers.   We tend the follow the principles of Warren Buffet and we try to find good companies to invest in and then hold on to those investments for a long time

[MightyGiants]

I just looked at the markets today and they are all down 2% on a day that the news should have driven them higher.  If I had to guess I would say the pressure driving stocks down is all the manipulation news coming from the asshats over at Reddit.   People don't like to participate in something they feel is rigged

[GordonGekko80]

(null)
Exactly that.

Markets are totally out of sync because what was supposed to be a free market is in fact a closed market for the few only.

[Grime Time]

Just give me the same rules.  It

[Jolly Blue Giant]

Just give me the same rules.  It

[GordonGekko80]

Just give me the same rules.  It

[Blue4Life]

I agree on the fact that the Rules need to be the same for everyone. Therefore:

a) DO NOT allow a stock to be over-shorted or short squeeze
b) DO NOT allow collusion, no matter if it's done by retail investors or financial institutions (the latter being forbidden by rules and regs anyways)
c) DO NOT allow the Conflict such as the one seen between Melvin Capital, Citadel and Robinhood

Point blank. I read some of the comments on the Reddit Forum; Guys advising others to hold station and sit on their position, only enter selling limits at 500 USD and above.
Don't you think that this guy saying it doesn't sell his position to make the profit? Yeh, there may be a few fundamentalists who own the position because of the "war" they started vs the Hedge Funds, but there's so many speculators in there now they don't give a damn about the money and just want to make money.

But apparently the Reddit Cowboys (this is what I have decided to call them) now are into Commodity Futures (more specifically Silver). Why? Because there is a shortage of the commodity vs the Futures (same applies for Gold btw).
In other words; Would the holders of the Futures contracts wanting to deliver the underlying there would be a shortage of the Commodity. Again, an over-shortage but this has always been a known one.

Having said that; I wish the Reddit Cowboys luck in going into physical delivery on the Futures - Warehouse Costs, Shipping, Commissions... All of those are outrageously high. Doesn't even make sense to go into Delivery on it if you don't really need it.
That is a hard one to do. Unless... they are manipulating the price yet again by colluting.

Call it what you want, but principally, the GME stock had been a "victim" of the "pump and dump" type of scheme. In the case of GME and other stocks, this scheme worked very well, especially after the Occupy Wall Street 2 moniker had been attached to the "buy and hold" advise. The OWS2 resonated with many, many people and they purchased as much GME stock as they could afford. This pumped up the stock price to an insane level, that not supported by any investment metric. The institutional investors had sold their GME and other stocks and cut their losses. They can afford to and may even get some financial aid from the feds. GameStock employees had also sold their existing stock and/or exercised their stock options.

The people initiated the "pump and dump" schema will be investigated by SEC and probably will come down hard on them. Reddit will, or already did provide the logs and the content for GME stock discussion. Based on that, it really not that hard to determine the timeline for how it started up, when OWC2 entered the picture, etc.   

What left by now the many, many people, who had purchased GME stock at the inflated price. Like my daughter, who purchased two GME stock for $400, against my advise. At least she listened and put in a stop loss order. Hopefully, she'll learn that trading based on ideology isn't the best way investing in stocks.

In my view, shorting stocks, or betting, should be outlawed. It servers no other purpose, but accelerate the demise of a company and provide a windfall to the trader.

In addition, automated, digital training should be substantially restricted, like delay the actual trading. A lot of investment/trading companies run digital trading, where the latency is measured in milliseconds. This latency determines how far ahead they can get of others trading and make couple of pennies by executing the trade before others.

I recall, back in the late 90s trading companies installed direct fiber connections to the stock market, cost did not matter as long as the latency improved. Nowadays, it's short radio wave installation preferred to the stock market. The reason is simple. Fiber transfer speed is roughly 1/3 of the speed of light, while short radio waves are roughly 2/3 of the speed of light. Basically cutting fiber connection latency in half and beat other traders, who still use fiber connections...

[Jolly Blue Giant]

Call it what you want, but principally, the GME stock had been a "victim" of the "pump and dump" type of scheme. In the case of GME and other stocks, this scheme worked very well, especially after the Occupy Wall Street 2 moniker had been attached to the "buy and hold" advise. The OWS2 resonated with many, many people and they purchased as much GME stock as they could afford. This pumped up the stock price to an insane level, that not supported by any investment metric. The institutional investors had sold their GME and other stocks and cut their losses. They can afford to and may even get some financial aid from the feds. GameStock employees had also sold their existing stock and/or exercised their stock options.

The people initiated the "pump and dump" schema will be investigated by SEC and probably will come down hard on them. Reddit will, or already did provide the logs and the content for GME stock discussion. Based on that, it really not that hard to determine the timeline for how it started up, when OWC2 entered the picture, etc.   

What left by now the many, many people, who had purchased GME stock at the inflated price. Like my daughter, who purchased two GME stock for $400, against my advise. At least she listened and put in a stop loss order. Hopefully, she'll learn that trading based on ideology isn't the best way investing in stocks.

In my view, shorting stocks, or betting, should be outlawed. It servers no other purpose, but accelerate the demise of a company and provide a windfall to the trader.

In addition, automated, digital training should be substantially restricted, like delay the actual trading. A lot of investment/trading companies run digital trading, where the latency is measured in milliseconds. This latency determines how far ahead they can get of others trading and make couple of pennies by executing the trade before others.

I recall, back in the late 90s trading companies installed direct fiber connections to the stock market, cost did not matter as long as the latency improved. Nowadays, it's short radio wave installation preferred to the stock market. The reason is simple. Fiber transfer speed is roughly 1/3 of the speed of light, while short radio waves are roughly 2/3 of the speed of light. Basically cutting fiber connection latency in half and beat other traders, who still use fiber connections...

Superb analysis. I concur with everything you said, but I wonder how the whole Wall Street system (that probably runs on a bank of Cray-type computers) could differentiate between a digital buy/sell vs. a non-digital trade. I think it would be great if it's possible, but I can't think of any way to enforce it. No doubt, the heavies have an unfair advantage with superior equipment to work with; however, even a little schmuck like me can make some serious profit as long as I "buy low - sell high" of proven stocks. Of course the big guys will make more, but at least if I stick to the fundamentals there's plenty of profits for everyone. The "new millennials" (or "Robinhooders", as I like to call them) have sure made it more interesting than the stodgy old days of ticker tape and cigar filled offices. Just got to keep fully aware of the new players attempts at creative manipulations.

[MightyGiants]

Call it what you want, but principally, the GME stock had been a "victim" of the "pump and dump" type of scheme. In the case of GME and other stocks, this scheme worked very well, especially after the Occupy Wall Street 2 moniker had been attached to the "buy and hold" advise. The OWS2 resonated with many, many people and they purchased as much GME stock as they could afford. This pumped up the stock price to an insane level, that not supported by any investment metric. The institutional investors had sold their GME and other stocks and cut their losses. They can afford to and may even get some financial aid from the feds. GameStock employees had also sold their existing stock and/or exercised their stock options.

The people initiated the "pump and dump" schema will be investigated by SEC and probably will come down hard on them. Reddit will, or already did provide the logs and the content for GME stock discussion. Based on that, it really not that hard to determine the timeline for how it started up, when OWC2 entered the picture, etc.   

What left by now the many, many people, who had purchased GME stock at the inflated price. Like my daughter, who purchased two GME stock for $400, against my advise. At least she listened and put in a stop loss order. Hopefully, she'll learn that trading based on ideology isn't the best way investing in stocks.

In my view, shorting stocks, or betting, should be outlawed. It servers no other purpose, but accelerate the demise of a company and provide a windfall to the trader.

In addition, automated, digital training should be substantially restricted, like delay the actual trading. A lot of investment/trading companies run digital trading, where the latency is measured in milliseconds. This latency determines how far ahead they can get of others trading and make couple of pennies by executing the trade before others.

I recall, back in the late 90s trading companies installed direct fiber connections to the stock market, cost did not matter as long as the latency improved. Nowadays, it's short radio wave installation preferred to the stock market. The reason is simple. Fiber transfer speed is roughly 1/3 of the speed of light, while short radio waves are roughly 2/3 of the speed of light. Basically cutting fiber connection latency in half and beat other traders, who still use fiber connections...

Yeah, in the end, the whole Game Stop market manipulation was just a more elaborate version of a pump and dump that played on people's emotions and political ideologies.   As is always the case those doing the manipulating made out like bandits and everyone else got screwed.   What I found truly impressive if that they found a selling point that both liberals and conservatives could get on board with.   This was a doctorate level class on manipulating people for profit.

Like you I hope new laws and regulations will be put in place to stop this sort of nefarious activity.

As for computer trading and the speed of trading, I suspect that is toothpaste that will never be put back in the tube. 

[Jolly Blue Giant]

Yeah, in the end, the whole Game Stop market manipulation was just a more elaborate version of a pump and dump that played on people's emotions and political ideologies.   As is always the case those doing the manipulating made out like bandits and everyone else got screwed.   What I found truly impressive if that they found a selling point that both liberals and conservatives could get on board with.   This was a doctorate level class on manipulating people for profit.

Like you I hope new laws and regulations will be put in place to stop this sort of nefarious activity.

As for computer trading and the speed of trading, I suspect that is toothpaste that will never be put back in the tube.

Out of curiosity, I am confounded about the political angle you seem to bring up. I don't see anything political about this. Wall Street is equally divided between both sides of the political spectrum and in fact, the majority of wealthy elite are politically active for the left (Warren Buffet, Jeff Bezos, Bill Gates, Mark Zuckerberg, Jack Dorsey, George Soros, etc.) and in fact, the wealthiest of the elites in Wall Street work(ed) for BlackRock (assets measured in trillions of dollars) have left BlackRock for positions in Biden's administration. Before that, many of Trump's advisors in the financial world were from Goldman Sachs. But I would not conclude that BlackRock big wigs are liberal or that Goldman Sachs big wigs are conservative. In fact, I guarantee the people who work at both places have both liberals and conservatives sitting in their cubicles staring at computer screens all day.

This is more a story of David and Goliath where individuals who don't have private jets and a multi-million dollar escape pads in Miami and 200 ft yachts to play on, and in fact probably tend to live in one or two-story homes stuck there for a year because of the pandemic. I personally know five people who are trading regularly on Robinhood.  Two of them are Trump fans, the other three Biden fans (one in particular tends to lean obnoxious in his hatred of Trump). I just don't see how individuals playing in the market have anything to do with their political affiliations. The rich have both political leanings as do the middle class and the poor.

I'm reminded of a great scene by Leonardo DiCaprio in the "Wolf of Wall Street" when he went through a fit of rage and obscenities saying, "This is OUR #%$#^ HOUSE, and we - not them - built this @#@$ system and no one else is allowed...." etc. This is simply classic small guys vs. the wealthy elite who have built a money making system for themselves and only want outside players willing to lend money to their system money for their own gain.

But don't worry, the wealthy are going to survive and come up with new ways to fleece the little guy as they relax on their yachts being waited on by a bevy of gorgeous 20-somethings to serve their every desire. No matter what his or her political affiliation, he or she will enjoy the good life til the day they die. I'm also reminded of Bill Gates saying, "you have to be a genius to turn a $1.00 into a $1.01, but if you have a 100 million dollars, you can't stop it from becoming 101 million". Money begets more money, lack thereof begets misery.