"Don't touch my nuts... "
Gamestop update.... Melvin Capital to 'wind down'.......... one of the larger known players behind GME shorts needed a year to finally pay the piper. Wonder where their supposed 'long positions' were packaged and passed around to mitigate the risk of squeeze. If the markets continue to tumble as commercial defaults increase, we may find out. The slow burn of the economy continues....
So.... not directly GameStop related, but the London Metal Exchange (LME) halted Nickel due to a short squeeze. A Chinese billionaire had huge short positions, a short squeeze occurred, and was set to lose billions. The heavy losses would have disrupted (shut down?) multiple brokers. Rumor has it JP Morgan would have suffered massive losses and did not issue a margin call. So what happened? LME halted trading and cancelled 12 hours worth of settled trades.
So imagine you had a margin call which would bankrupt you... banks don't give a shit and you're SOL.
Be a billionaire with more influence than you'll ever see? The bank will cancel the margin call, force an entire exchange to shut down and cancel 12 hours worth of trades for all market participants.
What's becoming more and more evident, or at least confirmation bias, is the existing global financial powers will do absolutely anything to prevent any unauthorized transfer of wealth.
Rules for thee and not for me.
Here's just one article... many read the same way.
Sanitized for public consumption and devoid of the underlying details which should sicken most market participants.... unless of course you're the one in power....
It doesn't hurt... and direct registering shares removes the custodial brokerages from the equation. When you buy a share, you should own the share and have the right to determine if the share can be lent out.
I hope as more people embrace "crypto" and manage their own funds, it has the impact of people taking greater awareness and ownership of traditional finance.
You've got the first part correct. Overstock issued a digital dividend which could only go to legit shareholders. It forced shorts to cover. GME is rumored to have something similar brewing. A digital dividend which would force shorts to cover since the dividend can only be sent to legit shareholders... not borrowed/synthetic shares only used for shorting.
To answer your question, no. Additional synthetic shares would only make the situation worse for shorts. I believe the official share count is around 76MM. That means the dividend could only be sent to the registered shareholders within that 76MM.
So.... If, for example: the board, executives, ETFs, & retail (via DRS) hold 65MM shares, that would mean 11MM shares outstanding.
If, at the time of a NFT dividend announcement, there are 65MM shares owned, 11MM float, and 20MM shares shorted.... there's something wrong as there are more shares shorted than allowed to exist. The DTCC would have to verify who has the valid shares and which shares are synthetic.
If 65MM shares are owned, and there's a float of 11MM shares.... where do they find 20MM shares? The synthetic shares must cover, demand exceeds supply, ....and that's when MOASS occurs.
These are hypothetical numbers, but rumor has it the number of synthetic shorts is actually much, much higher.
I'm playing devil's advocate because otherwise buying GME shares is basically another version of the lottery.
Understood and thank you. If the entire situation with GME is true, then this is the most incredible opportunity to buy a guaranteed lottery ticket.
If it's not true, then IMO its still a good buy as GME is launching a new version of itself to succeed in a changing gaming environment. GME has 1.5+ Billion on hand and no debt. It has 2 different blockchain platforms to help roll out its new vision, and the company continues to perform well since last year.
While the MOASS theory has many unknowns and variables, GME is positioning itself to be an industry leader.
Either way, its quite the compelling story and hopefully the company's vision will be known to all this year.
I appreciate the questions.Read More
This doesn't make me optimistic....
Agreed. Given the government oversight seen thru the pandemic, Canada trucker protest, banning of gold, and other interventions... its reasonable to assume they would take action here to prevent a market fallout without publicly talking about it. Time will tell...
Overstock issued a NFT-based dividend which forced short's to cover. The shorts also sued claiming fraud. The courts ultimately didn't rule on whether the digital dividend was a "security" or not. This article was an interesting take on the situation:
Also, re: NFTs.... the profitability comes from more than collectables. There's an entire gaming-based ecosystem from acquiring & selling assets.
In essence, you have:
NFT - collectables
NFT - in-game assets
NFT - dividends
NFT - growing use cases which could be used for ticket sales, property rights, ownership verification, and the list continues to grow. Think "digitization of value".
Given some NFTs are selling for millions; there's $$$ to be made.
Whether crypto/NFTs are "securities" or not, is at the cross-road between TradFi and DeFi.
The war between TradFi & DeFi is just beginning.
DRS - Direct Registering System... basically, your shares are not held in custody by your broker in your name. The shares are directly registered in your name and cannot be lent out. The whole purpose of "DRS" is to prevent brokerages from lending out shares to be used by other entities to short. Computershare is the official DRS for GameStop.
When calculating the float, or number of shares available, you would count the # of shares held by executives, by funds, and #DRS shares. Lock up most of the float, then wonder where the shares are being lent to short.
I'm not an expert on SEC rules. Just saying there could be a rule which tells market participants to play nice. If one market player intentionally does something to trigger an event, they could be sued. Basically, large institutions have a modified set up rules and ignorance of those rules could land them in a legal hot water. (see example posted above for Overstock).Read More
What is to keep them from doing that forever?
When you go down the naked-shorting rabbit hole, you discover it has been going on.... for decades.... and it gets swept under the rug. Supposedly there are new rules being proposed to/by the SEC for financial institutions and their short positions. Existing rules do not allow for complete discovery of short positions. FTDs (failure to deliver) are one measuring device, but its insufficient and has no teeth... Also, cellar boxing is a thing and has been around for decades.
Too big to fail, right?
Yep. Pretty much. Who would've thought Archegos going under was going to impact Credit Suisse? Shit didn't hit the (public) fan until it was too late. Similar to what occurred in 2008/09. Few people knew how bad it was until it was too late. IMO, the people behind the scenes know exactly what's happening. The SEC does have a current investigation ongoing about abusive shorting. Most of the public doesn't know/doesn't care. The wheels of justice turn very slowly.... but I do agree the people in charge will do everything possible to minimize the impact... but the institutions have to play by established rules. The longer this drags on, the greater the chance a political shift occurs. If a president can ban the purchase of gold, I'm sure they could executive-order their way out of a tricky financial situation...
How can GME profit off of its new blockchain NFT thing?
I read about a small game developer putting their gaming asset on a blockchain. With an easier on-ramp/off-ramp for fiat/crypto, the secondary market was making big money for them. The owner hypothesized, an org like GME with a similar model, would be massive. Throw in collectables, special releases, etc. NFT alone would be a windfall far beyond just the casual gaming industry. Also, another possible scenario has a NFT/blockchain offering for shareholders. If there is no cash equivalent, then it would force shorts to cover. Similar to what happened to Overstock. They triggered a short squeeze until the shorts discovered a cash-equivalent and paid their way out of the squeeze.
Shouldn't there be hedge funds and everyone else getting in on the action and buying up GME?
My theory is... the people/institutions that know cannot intentionally take action which would trigger the squeeze. Either honor among thieves or an SEC rule prevents that behavior. GME needs to continue their transformation and say very little publicly. When they're ready, the NFT marketplace and whatever else will be part of their standard business plan.
Thanks for the questions.... I look forward to the day when the truth is known.Read More
@slutmagazine Yes, I am still bullish on GME squeeze. My "timeframe" has been obliterated as I, and probably many others, also believed it should have happened already. However, I also believe you're observing the lengths the financial markets will go through and protect the status quo. Here are "facts" as I know them to be true:
1) Shorts have not covered. GME represents the largest risk to the entire market structure. The amount of uncovered shorts dwarfs all others in relation to the available float. Other scenario's exist, but my play is on GME.
2) The key market makers are doing absolutely everything in their power to prevent the MOASS. Let that sink in - "absolutely everything". That's why the squeeze hasn't triggered yet. If you or anyone thinks they can time this market, good luck.
3) Financial institutions need to implement greater checks and balances within their organizations to identify potential shortfalls prior to taking positions. You might think this should be obvious, but GME represents a very large risk which caught them all off guard. Keep in mind, the intentional shorting of companies into the ground has long been a part of the wall street playbook. Maybe not by the big banks themselves, but by hedgefunds and others. The ones that make the largest margins by taking the biggest bets then manipulating market forces to improve the required outcome. However, those institutions have deep relationships with other institutions. For example, Credit Suisse and Archegos. The latter went under and the former had huge losses because of them....
From a quick google search:
How did Credit Suisse lose money from Archegos?
A risk management failure in the initial lines of defense protecting Credit Suisse was identified as the root cause of losses linked to Archegos, with senior management ignorant of the bank's exposure to the hedge fund all the way up to its collapse
Again, the "ignorance" at Credit Suisse will be used as the motivator to all banks to improve visibility into counterparty risk. It is of my opinion, the simmering fire that is GME is a known risk everywhere.
I also think its no small coincidence the Reverse Repo operation is now up to $1.7T.
"T" = trillions.
It was a high of $500 million during the 2008/09 Mortgage Back Security driven bank failures.
If you account for all the cash - globally - that has moved into the crypto markets, (which is not fully regulated as the financial markets) a pillar of support propping up the banks has been removed. If supply chain shortages continue, lockdowns prevent the economy from starting, and Russia/China continue to antagonize - the markets could blink; a crash sell occurs, margin calls are declared and the global market crash occurs. That would finally trigger massive margin calls but may not be enough to trigger GME. Throw in a stock buyback, merger, and NFT dividend of some sort which forces the hedge funds to play GME's game, then MOASS is assured. We are not to this point yet. What you're about to see is more closed door meeting between gov't and financial institutions to see what can be done to prevent a market collapse.
For the time being, banks are being kept afloat to prevent MOASS and the potential failure of a large portion of the global banking industry. IMO, we are teetering on the edge of a financial landslide.
And what ever happened to Evergrande? Have they finally declared bankruptcy? why isn't that spoken about anymore? have the international bonds been paid? Have the funds holding those bonds been reclassified? Have the funds reallocated to other investments since the evergrande bonds should be worthless?
You see the markets down and crypto tanking... what happens when the largest funds reallocate to get out of these failed businesses.... perhaps the crypto downturn is being caused by large institutions selling to raise capital to cover margins without tanking the regular markets.... what happens when there's no more crypto for them to sell... what happens when other whales finally step in to buy up discounted crypto prices.... what happens when the big market makers have to sell off their prime holdings (FAANG) to raise enough to prevent MOASS... its one more pillar gone that can never be replaced. Each step buys the market makers a little more time before they're declaring bankruptcy.
Actually, didn't Netflix recently drop? Remember Robinhood? They're also waaaay down. No surprise since they were the first ones to turn off the buy-button last year.
Its a global game of cat and mouse. The manipulation is more obvious now than ever before. They're running out of capital and running out of options. You and I are nothing to them. But the more people buy and hold, the more obvious the counter-tactics.
I hodl and support the efforts of greater transparency in the financial markets.Read More
@redpillschool Bullish. On one hand, the big banks were saying BTC was nothing. Now the gov't need an EO to look into crypto as a matter of national security? Right. Totally normal and nothing to see here. Watch the results.
What's really sad, is crypto was seen as a way of being your own bank. Now there are people almost begging for gov't regulations to save them from the mean crypto currencies. So many fucking idiots. They're everywhere.
@redpillschool It's pretty obvious the banks receiving the repo loans now are the same ones from the past few years. No big bank has gone under and bank stocks have been relatively stable/stagnant the past few years - especially compared to other industries.
Looking back at 2017, there were quite a few sizable banks with the First NBC Bank of New Orleans being the largest failure and total bank failure cost of $1.3B. Nothing failed in 2018 and banks as a whole have been relatively stable the past few years compared to 2009-2017.....
Now, Credit Suisse just got rid of their hedge fund division which is on the heels of the Archegos failure and several other hedge funds this year. Combine the hedge fund problems with the Chinese developer problems (e.g. evergrande), and there's a reason the reverse repo is around 1.5T <-- yes, a "T"... it was $500MM when the market failed in 2008/9.
So why the secrecy now?
Perhaps because the unlimited printing of money which is artificially supporting the markets will have to cease. Perhaps because small biotech firms are faltering. Only the vaccine makers are in triple digit increases this year. Perhaps the rampant short selling of certain companies (cough-gamestop-cough) exposed some large hedge funds to too much risk and banks are kicking the can down the street until they have a way out of that mess. Keeping people locked down while printing money is certainly keeping the explosive inflation at bay for the time being... but what happens when the Chinese real estate companies officially default which turns AAA bonds into worthless paper. What will banks use at collateral? What if crypto stays hot and more people take cash out of banks and drop into crypto? what if another major hedge fund fails? Then again, hedge fund launches are up this year and the reverse repo has them covered so everything is fine on paper.
Where's the idiosyncratic risk?
Chances are its the same place its been all year.... hedge funds that bet on the failure of certain companies by naked shorting with algorithmic (automated) trading systems on a select number of stocks deemed to be failures. Too bad a bunch of kids on social media got the word out.... With the collapse of major real-estate firms, banks must identify new sources of assets to back other investments as the cost cover is raised. Combine the above with the financial pressure of the ongoing C19 response, I'm surprised the global powers have kept things as calm as they have. Funny how changing the president suddenly quieted all dissent.
Who's in control?
The same ones that have always been in charge. There was a break for a few years but they're back on track and fucking it up. When this multi-decade experiment is over, those that caused this mess will be rich and won't care how bad it ends for a large majority of the population. The US will continue to be siphoned for its wealth, the middle class will slowly find itself eating bugs, the equality gap will continue to explode, and the population will continuously be goaded into turning on each other instead of working together. Nothing keeps the money flowing like a real good psychological event.
Collectively, most major firms are just getting back to the office and the 2022 budgets were being adjusted.
Once the holiday hangover is done, we'll see what they have planned next.Read More