lolz now AMC The Cinema group who is in deep financial trouble is seeing its shares pop!
This very much looks like a precursor to a crash induced by a bubble popping. My sense is that it will play out in a similar fashion to the dot.com one circa 2000, begin in a localized manner (dot.coms then, these weirdly counter-shorted firms now) and turn into a general correction.
Cue Trumpists blaming Biden.
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Wow! Is it hitting Blockbuster now?
Surely this is going to burn itself out pretty quickly given the speed at which it is hitting stock prices.
Thatâs probably on minimal volumes versus a norm of non-existent. I assume that is not much more than a shell company (although âLiquidatingâ suggest some asset disposal operations), which usually have a large percentage of shares in portfolios that donât track them anymore - being held until they can be sold for a writedown loss, or in retirement portfolios that see no tax advantage from a loss. Most of the balance is held by a limited number of actors, and then any trading happens within a small subset. One decent size order on a penny stock can triple it just to make the initial bid reach ask, then a second trade makes it look like something is happening.
One of my brokerage accounts has a depressing number of these, though most were from âsweat equityâ.
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I saw this on twitter!
Iâm looking forward to seeing which of these are hit over the next week or so.
Whoop Whoop!!
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Thatâs just one component of it. GameStop share float for instance was almost entirely short sold. Close to 100%. There will be other funds following the WSB crowd and pumping it as well, its not just retail traders.
Theyâve been pumping Blackberry, AMC and a few other stocks as well. Thereâs murmurs of them now looking at Silver which might be a bit harder being a global market. Discord have just now banned the WSB server due to âhate speechâ.
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Rumour in Toronto is that somebody in NY is going to collapse on Friday. If this were to trigger a global correction, it would be orders of magnitude more stupid than the Lehman failure.
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In the UK we have seen Pearson and Cineworld both jumped yesterday - Pearson is a publisher trying to move its business to an online model and the only recent news was losing a small contract with the government but has a big short presence and Cineworld like AMC is a debt laden cinema chain with a heavy short presence.
The suggestion now is that the bumps were due to people closing their short positions in anticipation of them being targeted for a squeeze.
I have seen a lot of mentions for Nokia, AMC and Cineworld being the next ones.
Nokia doesnât make any sense as they donât offer anything different from the Umpteen other phone manufacturers and in fact since the rise of touchscreen phones nokia have become almost obsolete.
Cineworld looks a prospect but what has me concerned with them is they are very heavily ladened with debt and currently are closed due to Covid restrictions and doesnât look like changing any time soon
They are not buying on quality of the underlying investment, but on how easy they think it will be to suck in funds to keep the buying momentum. These companies either have very little action on their day to day share price and/or a lot of people who have shorted them (basically borrowing a share to sell now with the aim of buying back at a lower price to give back to the fund you borrowed from).
With heavy amounts of shorts, at some point people will need to buy back the share to close the position, if the price rises they incur costs instead of making gains. As people close their short positions it adds a further boost to the share price.
This will also draw in people who trade stocks based on movement trends (and maybe some algorythms?) or who just wish to speculate.
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I donât actually know if there are funds obligated to buy a stock if the company value reaches a certain size. If so that would add to the upward movement. I always assumed this was a manual decision, but I donât know enough about how ETFs and funds work.
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Well, it wonât happen overnight, but index trading funds have to buy and sell as companies enter and leave the indices - which are largely composed on the basis of size.
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There is something humorous about the Robinhood day traders taking billions from the hedge funders. I do love that. At the same time there is something eerily prophetic about it happening in a name called âGamestop.â This market is wacky. Will the game actually stop now? Not sure.
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I was thinking of that but I thought that was set at fixed periods of the year, and still involved a decision by the index? ( I recall recent discussions whether Tesla would be added for example).
I think that is part of the appeal behind this. However, at some point this must surely rebound on many of those taking part - professional short sellers/funds will now be aware of whatâs happening and form a plan to exploit it wonât they?
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Just want to add a word of caution here. As someone who has made (and partly lost) large sums several times over the last 15 years taking very contrarian medium term positions, can I just recommend that this sort of short squeeze action is highly volatile and really relies upon good execution - which is best achieved via inside information (for maximum profit) and picking early momentum (for significant profit) and if you are not connected into the relevant market makers then you are really just gambling against the house.
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Yes, it is at pre-determined periods, and I believe there is some sort of review process so the âsnapshotâ effect doesnât occur - GameStop would join the DJ at this point if index closing date was today and there was no such process.
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Of course, when the big players get hurt, they find a way to rig the game again.
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Seen that.
A lot of talk about possible market manipulation from Trading Platforms due to them being put under pressure by large hedge funds - will be interesting to see what the Financial and Investment regulators think as it could have a massive flow on effect if some of these class action lawsuits gain traction
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