Good piece on r/WallStreetBets

[Castanza]

The sub is invite-only now. I should've joined while I was scanning earlier!

 

There must have been a karma requirement or something because it kicked me and everyone I know out.

 

It's back up and running

 

First post I see “I MISSED YOU GUYS SOO MUCH!” 

 

Old salty hedge funds are just mad these kids are having fun and making a ton of money.

[Nomad]

I think retail investors are underestimating the number of different legal theories that could be an issue for them.

 

What legal theories are you referencing? I am only familiar with Rule 10b-5, which is here: https://www.law.cornell.edu/cfr/text/17/240.10b-5

 

A 10b-5 violation requires a material misstatement or omission of fact. Speculative statements of opinion ("This stock is going to the moon" or "Buy GME, can't go tits up") don't count. And there are more hurdles than this in the law. Importantly, the Supreme Court held in Ernst & Ernst v. Hochfelder (https://supreme.justia.com/cases/federal/us/425/185/) that there must be intent to deceive. On top of that, you actually have to show that the misstatements or omissions caused someone to buy or sell the stock in question, AND that they lost money.

 

Are regulators really going to trawl through millions of posts from 20-year-old kids looking for deliberate factual misstatements to trace to individual buy/sell decisions? I doubt it.

[TwoCitiesCapital]

I think retail investors are underestimating the number of different legal theories that could be an issue for them.

 

What legal theories are you referencing? I am only familiar with Rule 10b-5, which is here: https://www.law.cornell.edu/cfr/text/17/240.10b-5

 

A 10b-5 violation requires a material misstatement or omission of fact. Speculative statements of opinion ("This stock is going to the moon" or "Buy GME, can't go tits up") don't count. And there are more hurdles than this in the law. Importantly, the Supreme Court held in Ernst & Ernst v. Hochfelder (https://supreme.justia.com/cases/federal/us/425/185/) that there must be intent to deceive. On top of that, you actually have to show that the misstatements or omissions caused someone to buy or sell the stock in question, AND that they lost money.

 

Are regulators really going to trawl through millions of posts from 20-year-old kids looking for deliberate factual misstatements to trace to individual buy/sell decisions? I doubt it.

 

I would've thought it would've been more around the intentional manipulation, but looking back at Porsche/VW, the courts ruled in favor of Porsche.

[Spekulatius]

I think retail investors are underestimating the number of different legal theories that could be an issue for them.

 

What legal theories are you referencing? I am only familiar with Rule 10b-5, which is here: https://www.law.cornell.edu/cfr/text/17/240.10b-5

 

A 10b-5 violation requires a material misstatement or omission of fact. Speculative statements of opinion ("This stock is going to the moon" or "Buy GME, can't go tits up") don't count. And there are more hurdles than this in the law. Importantly, the Supreme Court held in Ernst & Ernst v. Hochfelder (https://supreme.justia.com/cases/federal/us/425/185/) that there must be intent to deceive. On top of that, you actually have to show that the misstatements or omissions caused someone to buy or sell the stock in question, AND that they lost money.

 

Are regulators really going to trawl through millions of posts from 20-year-old kids looking for deliberate factual misstatements to trace to individual buy/sell decisions? I doubt it.

 

I would've thought it would've been more around the intentional manipulation, but looking back at Porsche/VW, the courts ruled in favor of Porsche.

 

They ruled in favor of Porsche because what Porsche did (buying options on VW to gain control) was allowed in Germany at that time. Hedge funds who were in that trade wrongly assumed that it wouldn’t be allowed (in fact it would not be allowed in the US and many other countries) but they didn’t really know the rules. i don’t think you found more than a handful souls in Germany who felt sorry for the hapless guys.

 

Right now, there is a lot of odd trading going on where shorted crap stocks go up and perhaps higher quality stocks go down. It seems to me that long /short traders and institutions are wetting their pants because they are afraid they get blown up in an infinity short squeeze,  so they unwind their positions. This means that likely interesting opportunity may represent themselves.

 

For example, I suspect that some folks are long Dell and short VMW. This makes sense perhaps, but now VMW is going up and Dell looks a bit sickly. I am long VMW and it think interesting things could happen in the short run with the relatively small float in VMW.

 

I bought VMW for fundamental reasons so no big deal either way. I might buy some Dell too, if things get silly.

[TwoCitiesCapital]

I think retail investors are underestimating the number of different legal theories that could be an issue for them.

 

What legal theories are you referencing? I am only familiar with Rule 10b-5, which is here: https://www.law.cornell.edu/cfr/text/17/240.10b-5

 

A 10b-5 violation requires a material misstatement or omission of fact. Speculative statements of opinion ("This stock is going to the moon" or "Buy GME, can't go tits up") don't count. And there are more hurdles than this in the law. Importantly, the Supreme Court held in Ernst & Ernst v. Hochfelder (https://supreme.justia.com/cases/federal/us/425/185/) that there must be intent to deceive. On top of that, you actually have to show that the misstatements or omissions caused someone to buy or sell the stock in question, AND that they lost money.

 

Are regulators really going to trawl through millions of posts from 20-year-old kids looking for deliberate factual misstatements to trace to individual buy/sell decisions? I doubt it.

 

I would've thought it would've been more around the intentional manipulation, but looking back at Porsche/VW, the courts ruled in favor of Porsche.

 

They ruled in favor of Porsche because what Porsche did (buying options on VW to gain control) was plowed in Germany at that time. Hedge funds who were in that trade wrongly assumed that it wouldn’t be allowed (in fact it would not be allowed in the US and many other countries) but they didn’t really know the rules. i don’t think you found more than a handful souls in Germany who felt sorry for the hapless guys.

 

Right now, there is a lot of odd trading going on where shorted crap stocks go up and perhaps better stocks go down. It seems to me that long /short traders and institutions are wetting their pants because they are afraid they get blown up in an infinity short squeeze,  so they unwind their positions. This means that likely interesting opportunity may represent themselves.

 

For example, I suspect that some folks are long Dell and short VMW. This makes sense perhaps, but now VMW is going up and Dell looks a bit sickly. I am long VMW and it think interesting things could happen in the short run with the relatively small float in VMW.

 

I bought VMW for fundamentals  reasons so no big deal either way. I might buy some Dell too, if things get silly.

 

I thought there was an aspect of Porsche saying publicly that they weren't looking to acquire VW while actively acquiring the options to do so?

[Spekulatius]

 

I thought there was an aspect of Porsche saying publicly that they weren't looking to acquire VW while actively acquiring the options to do so?

 

If I remember correctly, Porsche’s CEO stated that “a Complete takeover is not our intention”.

 

First of all, Porsche never took VW completely over (they just acquired control ) and “intention” is a bit rubbery and subject to change.

Fact is that Porsche’s board voted in March 2008 on the matter and gave the go ahead to acquire a controlling stake and a couple of month later, they just did that.

 

At least to me, it seems that the hedgies didn’t really didn’t pay attention to details and got caught with their pants down.

[SharperDingaan]

This is very funny. Hedge fund bros bitching because retail found a way to beat them at their own game, and they don't appreciate the competition! Welcome to 21st century disruption.

 

Social media platforms are SCALABLE network businesses, hedge funds are not.

It used to be that as a big fund taking a specific position, you could be pretty sure that other funds would pile on; collectively driving the target share price down, & validating your thesis. Now you have to compete with a scaling network swarm that didn't get the memo, and which see you as scum. WTF  ;D

 

SD

 

 

 

 

 

[james22]

I'd like to see the SEC investigate Discord.

[wachtwoord]

There's 1 simple regulation which will avoid all of this: ban naked shorting (only abusive naked shorting is banned in the US right now as far as I'm aware, but I'm no expert).

 

Of course they won't do this. They'll come up with a bunch of complicated rules and regulations so they can spin it any way that suits them in the future.

[Spekulatius]

I'd like to see the SEC investigate Discord.

 

To find what? Rocket ship emoji’s? Bloomberg terminals have a built in chat function, why is that?

[clutch]

I'd like to see the SEC investigate Discord.

 

To find what? Rocket ship emoji’s? Bloomberg terminals have a built in chat function, why is that?

 

I think he's talking about Discording banning WSB.

[Read the Footnotes]

I think retail investors are underestimating the number of different legal theories that could be an issue for them.

 

What legal theories are you referencing? I am only familiar with Rule 10b-5, which is here: https://www.law.cornell.edu/cfr/text/17/240.10b-5

 

A 10b-5 violation requires a material misstatement or omission of fact. Speculative statements of opinion ("This stock is going to the moon" or "Buy GME, can't go tits up") don't count. And there are more hurdles than this in the law. Importantly, the Supreme Court held in Ernst & Ernst v. Hochfelder (https://supreme.justia.com/cases/federal/us/425/185/) that there must be intent to deceive. On top of that, you actually have to show that the misstatements or omissions caused someone to buy or sell the stock in question, AND that they lost money.

 

Are regulators really going to trawl through millions of posts from 20-year-old kids looking for deliberate factual misstatements to trace to individual buy/sell decisions? I doubt it.

There are other legal theories and you are completely ignoring civil litigation risk.

 

Going around bragging on social media about how much money you made is also like putting a target on your back if someone wants to know who they could file a suit against and potentially recover something. For a lawsuit to be viable, there would need to be a tort claim, there would need to be damages, and it's a whole lot more worthwhile if you know a few people who might have assets to go after.

[clutch]

moving onto precious metal bets?

 

[Read the Footnotes]

I think retail investors are underestimating the number of different legal theories that could be an issue for them.

 

What legal theories are you referencing? I am only familiar with Rule 10b-5, which is here: https://www.law.cornell.edu/cfr/text/17/240.10b-5

 

A 10b-5 violation requires a material misstatement or omission of fact. Speculative statements of opinion ("This stock is going to the moon" or "Buy GME, can't go tits up") don't count. And there are more hurdles than this in the law. Importantly, the Supreme Court held in Ernst & Ernst v. Hochfelder (https://supreme.justia.com/cases/federal/us/425/185/) that there must be intent to deceive. On top of that, you actually have to show that the misstatements or omissions caused someone to buy or sell the stock in question, AND that they lost money.

 

Are regulators really going to trawl through millions of posts from 20-year-old kids looking for deliberate factual misstatements to trace to individual buy/sell decisions? I doubt it.

 

I would've thought it would've been more around the intentional manipulation, but looking back at Porsche/VW, the courts ruled in favor of Porsche.

Yes, I was referring to intentional manipulation primarily. If there was coordination among a group or enough deception by a single individual then they might face criminal issues.

 

I have seen articles from reasonably reputable sources that make me believe it is possible that there was more going on behind the scenes than meets the eye. Though it is possible, usually someone doesn't have a good idea and suddenly it goes viral and becomes worth billions in market moves. Frequently making something go this viral involves a bit more effort on the part of someone. I'm not saying it happened in a way that might be prosecutable, but it might have.

 

I think the question is basically was the effort distributed in such a way that no one individual bears enough responsibility.

 

On a side note, Melvin Capital seems to be the fund that may be suffering the most. Melvin Capital was founded by Gabriel Plotkin a former trader at SAC Capital. Plotkin was also known as "Portfolio Manager B" in one of the SEC's complaints regarding insider trading. After the insider trading scandal and the shutdown of SAC, Plotkin launched Melvin Capital. Cohen reportedly invested $1 billion in Melvin. Cohen is also reportedly down 15% on his entire portfolio due to the Melvin investment. Cohen also contributed to the $2.75 backstop of Melvin.

 

Given the involvement of SAC Capital in the Fairfax shorting debacle of 2002, I would guess there are a lot of people here who will not feel too bad about Plotkin and Melvin or Cohen and Point72's difficulty in this matter.

 

On the homepage, Parsad describes Cohen's involvement in the 2002 FFH short selling incident:

 

https://www.cornerofberkshireandfairfax.ca/

 

In July 2006, Fairfax filed a massive lawsuit against the alleged cabal, which included one SAC Capital and its notorious founder Steve Cohen. The very same Steve Cohen who was subsequently indicted by the U.S. attorney general, alleging a massive cultural deficiency at SAC Capital, where Steve Cohen purportedly ignored blatant acts of insider trading.

 

In a sense, the illegal activities of SAC Capital and the other alleged members of the cabal, helped build the membership base of this investor forum.

 

An interesting distinction is that those of the CoB&F community who in 2002 made lots of money on their long call FFH LEAPS had to wait for the business and the market to prove them right, whereas in 2021 the WSB crowd forced a quick market manipulation through mobbing the market.

[doc75]

moving onto precious metal bets?

 

 

I see SLV on the CSE was up huge today. Likely not a coincidence.

[Spekulatius]

Looks one like folks in my office were gambling too. I hear words like Gamestock, AMC, Blackberry around our break room area this AM.

 

Even some boomers were apparently in.

[gfp]

I just got my hair cut 10 minutes ago.  My barber and his 17 year old son were both on Robinhood trying to figure out why their NOK buy orders were cancelled.  News came in mid-haircut that Blockbuster Video was the next buy...  Neither knew what a market order was, what business Nokia is in, etc...  Bonkers out there

[james22]

I'd like to see the SEC investigate Discord.

 

To find what? Rocket ship emoji’s? Bloomberg terminals have a built in chat function, why is that?

 

I think he's talking about Discording banning WSB.

 

Yeah.

 

"...hate speech, glorifying violence, and spreading misinformation."

 

LOL

[Spekulatius]

There is a bear market in Meme stocks today : GME, BB, AMC, NOK, PLTR are all down today.

[Jurgis]

There is a bear market in Meme stocks today : GME, BB, AMC, NOK, PLTR are all down today.

 

No $41t Sherlock.

 

Would have never guessed stock prices would drop when people are not allowed to buy them.  ::)

[Spekulatius]

There is a bear market in Meme stocks today : GME, BB, AMC, NOK, PLTR are all down today.

 

No $41t Sherlock.

 

Would have never guessed stock prices would drop when people are not allowed to buy them.  ::)

 

These newly minted millionaires need to move to a real broker. IB lets you buy anything. Got an limit order for NOK below $4 in just in case things get really funny on the downside.

[bizaro86]

There is a bear market in Meme stocks today : GME, BB, AMC, NOK, PLTR are all down today.

 

No $41t Sherlock.

 

Would have never guessed stock prices would drop when people are not allowed to buy them.  ::)

 

These newly minted millionaires need to move to a real broker. IB lets you buy anything. Got an limit order for NOK below $4 in just in case things get really funny on the downside.

 

IB is currently not allowing new GME options trades.

[cameronfen]

If this is true turns out I used to run cross country against u/deepfuckingvalue: https://www.letsrun.com/forum/flat_read.php?thread=10407357&fbclid=IwAR2bfPLb3Y5-thMpjKE5MVGdfnjMStRCMBaNMI_RB3WbFR37e6KdVQdj9yI

[Jurgis]

And today Motley Fool Rule Breakers say "Buy Moderna". +5%

(Most of their buy recs go up 5-10% on the day of the rec).

 

Maybe we should tell RobinHood to disallow buying Moderna too.  ::)

[Mephistopheles]

I am so angry about all of this. Can someone explain why if two parties want to make a trade it should not be allowed? I don't get it. I don't get the gamma squeeze thing either. Like the market makers took the risk to take the other side of the transaction by selling calls, did they not? So then they had to go buy stock to hedge but again, is that not part of the risk???