Deep F______ Value

[mattee2264]

 

What I find a bit suspect is that he obviously knew the stock became way overvalued but still held on and kept cheerleading the stock. He's a smart guy so he must have known the dynamics of what was going on. So while I don't think he went into this trying to engineer a short squeeze he certainly rode it for all it was worth and encouraged others to do so.

[Castanza]

This guy is genuine, he deserves every penny of his gain (sorry, should say, he deserves every million of his gain)

I'll trade him for 1,000 Chamath anyday. And other high-IQ all-about-me characters that seem to be everywhere now in the investment world.

 

If ever retail investor community needed a face as public ambassador, his would be the right one.

Just a working man. I like that.

 

My only regret he wasn't on this board and decided to be on Reddit.

Opportunity cost for sure, but it is not like I would have invested in GameStop (would have put that in the value-trap pile)

 

I wonder if he visits here at all. Sanjeev should recruit him  ;D

[LC]

COBF/Kitten themed red headbands? Yes.

[Xerxes]

This guy is genuine, he deserves every penny of his gain (sorry, should say, he deserves every million of his gain)

I'll trade him for 1,000 Chamath anyday. And other high-IQ all-about-me characters that seem to be everywhere now in the investment world.

 

If ever retail investor community needed a face as public ambassador, his would be the right one.

Just a working man. I like that.

 

My only regret he wasn't on this board and decided to be on Reddit.

Opportunity cost for sure, but it is not like I would have invested in GameStop (would have put that in the value-trap pile)

 

I wonder if he visits here at all. Sanjeev should recruit him  ;D

 

LOL indeed

[Xerxes]

 

What I find a bit suspect is that he obviously knew the stock became way overvalued but still held on and kept cheerleading the stock. He's a smart guy so he must have known the dynamics of what was going on. So while I don't think he went into this trying to engineer a short squeeze he certainly rode it for all it was worth and encouraged others to do so.

 

I think the short squeeze could have been a lot worse had Robinhood didn't what i did. Looking back now, listening to some commentaries, it seemed that the wobbling in the S&P500 in January may have at least had some relation to the infinite squeeze that didnt but could happen. Like a vortex that what just slightly pulling the carpet (S&P500), due to the hedge fund leverage. Sure, this is a lot bigger than GameStop, but as El-Elrian said today at Bloomberg, market was smelling and was trying front run hedge fund who wanted to make a dash for liquidity. I'll try to find the stat of the out of wack the position where. I realize it is silly to think that such a irrelevant company (GameStop) could cause the almighty S&P500 to wobble.

 

On DFV, i think  due to the unneeded popularity that this caused (and because he is a nice person) he felt obligated toward his Brethren and not just dump his shares.

 

[Xerxes]

I got a silly idea,

 

Why can DFV not be nominated as candidate for the next edition of the book Greatest Trade Ever.

They even gave a nod I think to B Ackman with a column in Barron's with his shorts.

[backtothebeach]

 

I think the short squeeze could have been a lot worse had Robinhood didn't what i did. Looking back now, listening to some commentaries, it seemed that the wobbling in the S&P500 in January may have at least had some relation to the infinite squeeze that didnt but could happen. Like a vortex that what just slightly pulling the carpet (S&P500), due to the hedge fund leverage. Sure, this is a lot bigger than GameStop, but as El-Elrian said today at Bloomberg, market was smelling and was trying front run hedge fund who wanted to make a dash for liquidity. I'll try to find the stat of the out of wack the position where. I realize it is silly to think that such a irrelevant company (GameStop) could cause the almighty S&P500 to wobble.

 

On DFV, i think  due to the unneeded popularity that this caused (and because he is a nice person) he felt obligated toward his Brethren and not just dump his shares.

 

Could have been much worse than a wobble, according to Interactive Brokers' Thomas Peterffy:

 

Meanwhile, our boy Deep F___ Value bought 50000 more shares today, apparently below $40:

 

 

[Spekulatius]

 

What I find a bit suspect is that he obviously knew the stock became way overvalued but still held on and kept cheerleading the stock. He's a smart guy so he must have known the dynamics of what was going on. So while I don't think he went into this trying to engineer a short squeeze he certainly rode it for all it was worth and encouraged others to do so.

 

I think the short squeeze could have been a lot worse had Robinhood didn't what i did. Looking back now, listening to some commentaries, it seemed that the wobbling in the S&P500 in January may have at least had some relation to the infinite squeeze that didnt but could happen. Like a vortex that what just slightly pulling the carpet (S&P500), due to the hedge fund leverage. Sure, this is a lot bigger than GameStop, but as El-Elrian said today at Bloomberg, market was smelling and was trying front run hedge fund who wanted to make a dash for liquidity. I'll try to find the stat of the out of wack the position where. I realize it is silly to think that such a irrelevant company (GameStop) could cause the almighty S&P500 to wobble.

 

On DFV, i think  due to the unneeded popularity that this caused (and because he is a nice person) he felt obligated toward his Brethren and not just dump his shares.

 

Yes, the wobbling in the broader indices and in particular some hedge fund hotel stocks in January was definitely caused by the WSB crowd.  I think the  root cause was that long/short funds were getting obliterated by the many short squeezes and they had to reduce gross exposure which means selling longs and covering shorts.

 

And those that weren’t getting obliterated were probably probably getting scared and reduced gross exposure anyways. You see these type of things happening when things get a bit crazy in the market and at times the movement of individual stocks seem to make no sense fundamentally,

[5xEBITDA]

 

What I find a bit suspect is that he obviously knew the stock became way overvalued but still held on and kept cheerleading the stock. He's a smart guy so he must have known the dynamics of what was going on. So while I don't think he went into this trying to engineer a short squeeze he certainly rode it for all it was worth and encouraged others to do so.

 

He plainly states in more than several of his videos that the stock had a very high short interest and a short squeeze could happen. I think he's still under investigation, which doesn't really bode well for him since its not like he only ever talked about the fundamentals and the short squeeze was a surprise.

[LC]

I wasn't sure where to post this, but saw an interesting piece over on WallStreetBets which attempts to make clear some of the GME trading experience, I suppose informed by the recent congressional hearings on the topic:

 

 

First of all, all credit and thanks to u/ThatGuyOnTheReddits and his mesmerizing DD. I'm writing in r/GME cause I really hope a lot of APES can read into it.

 

Not financial advice, just a normal ape, the stock is loved quite as much as the crayons and colors on the chart.

 

​

 

This is HUGE.

 

-- TLDR --RobinHood Securities says in its annual report that they shut down trading due to margin demands. That's because they are engaging in CFD practices and they/you NEVER OWNED YOUR GME SHARES DURING THE RUN-UP. The price exploded before they were able to delta hedge their naked CFD positions, and they got margin called for $3,000,000,000 to cover the shares they needed to buy.

 

You aren't buying shares off of the open market on RobinHood (or possibly on any mobile-only trading platform). Those buy orders are being routed to MMs to be purchased off-exchange so that it doesn't affect the active trading price. Your sell orders ARE sold on the active open market, so that it actively helps crash the price.

 

RobinHood got margin called because they were naked shares due to engaging in Contract for Difference trading, where they don't buy the shares you pay for because they expect you to lose money anyways. They just pay you the difference in price if you make a profit once you sell your position.

 

--

 

This week we already have GREAT DD with a lot of incredible discoveries. That's so good.

 

--

 

​

 

Here the original post by u/ThatGuyOnTheReddits

 

Go there and upvote and comment, so it will be read and analyzed.

 

​

 

Evening Apes,

 

I think the NYSE testimony released prior to the hearing tomorrow just solidified what I've been thinking all along about RobinHood...

 

I believe RH and it's sister company RobinHood Securities are engaging in CFD (contract for difference) trading, and that the orders they send to Citadel are being used to dump sell orders on GME. CFD is when a broker (normally web-based trading platforms, FX contracts, or futures) is engaging in the buying and selling of shares that don't actually trade. I also believe RobinHood was shorting GME...

 

https://thetradingbible.com/brokers

 

In this scenario, RobinHood continuously sends order flow buy and sell orders to Citadel (I'm just using Citadel as a name, it could be any market maker). When a trader enters a buy order, that order is sent to the MM, and the price is set for the trade and the trader is given access to their shares at the current price. RobinHood has fulfilled their agreement to best-price, and the MM paid for the order, and the customer has access to their shares.

 

But that doesn't mean that the MM actually went through with purchasing or selling those share orders yet. They paid for the order, but they only need to execute it "in a reasonable time".

 

https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-arnuks-20210317.pdf

 

"2) They recently changed their PFOF method from one giving them a set payment per share to one giving them a percentage of the spread instead. Think about this: A Robinhood trader wants the spread in the stocks he/she is trading to be as narrow as possible. The HFT market maker buying those orders benefit most when that spread is as wide as possible. And now Robinhood benefits most when the spread is as wide as possible as well! This is an amazing misalignment of interests. "

 

"While PFOF is legal, we have long wondered how it possibly could be. How can a broker, charged with the duty of getting its clients the best available prices, possibly do so by selling that client’s orders to amazingly sophisticated HFT firms, who in turn will make billions of dollars trading against these orders?"

 

Forex brokers and MMs are well-known to take inverse positions to retail trades. I think RobinHood was as well. CFD brokers have to delta hedge their actual holdings as their clients positions become profitable. As long as the clients are losing money, there is no reason to ever buy the securities, as the position is just going to lose money anyways. CFD brokers will only buy the security you own if that security starts becoming profitable and it will cost RobinHood more money to buy the share later. They are basically shorting your shares on their books.

 

"While retail brokers and market making firms, claim that price improvement (PI) accrues to retail investor orders, such price improvement is a flawed calculation:

 

It is based off of a slower price feed (the SIP),

It does not take into account odd-lots,

And the NBBO reference price it uses is largely set by the very same HFT market makers providing the “PI” in the off-exchange environment. "

"When a few HFT market-makers buy up orders that account for as much as a third of the volume – orders that tend to be less-informed, uncorrelated, and benign, so that they are not represented on exchanges, what is left on those exchanges is that much more toxic and costly to trade with. Market impact costs are higher, and spreads are wider as well. Two studies that confirm this are the Babelfish study of transaction costs in “Meme Stocks”7 and an additional academic study, that amazingly points out that when Robinhood experiences technology outages, spreads in the general market become narrower. Wider spreads mean that retail investors receive worse prices, even after accounting for PI, and all other investors see their costs increase as well."

 

"It should surprise no one that investor orders do not dominate these races; HFT Market makers do. Investors’ orders typically find themselves further back in the queue. As a result, investors miss opportunities at buying cheaper stock, and when they do get filled they are subject to outsized adverse selection. Despite this, brokers representing investors still route largely to these exchanges for that rebate."

 

Once RobinHood sells your orders to Citadel, Citadel can buy or sell the needed shares on any exchange they want to, to get themselves the best spread on the price difference. WHEN YOU BUY SHARES ON ROBINHOOD, YOU ARE NOT AFFECTING THE ACTUAL MARKET ORDERS. Your shares that you are buying/selling get collected by Citadel, and they can then buy/sell as they see fit with those orders.

 

Citadel can collect a large batch of buy orders, and then BUY those shares on a dark pool exchange that DOES NOT DRIVE UP THE ACTIVE MARKET PRICE. And they can also collect large sell orders into one large batch, and then SELL those shares on the ACTUAL MARKET WHICH ACTUALLY DOES DRIVE THE ACTIVE PRICE DOWN.

 

That is why you can see huge dumps on days with the SSR active and no large selling volume. Citadel/MM are capable of keeping ALL of the buying pressure OFF of the open exchanges, while simultaneously loading up sell orders to dump at once ON the open exchanges.

 

"• In January 2021, a record 47.19% of US stock-market volume traded “off-exchange and on February 9th we hit an all-time record of 50.47%, with retail representing 1/3rd of total US ADV"

 

Over 50% of all trading activity is done off-exchange. And retail is 1/3 of the total daily volume. They can literally keep 100% of retail buy orders routed through these MM off of the open exchanges, to avoid YOUR buy orders from driving the price up in real-time.

 

"• Wholesalers are also “market makers on NYSE and NASDAQ,” and appear to be adjusting the public market spreads in response to retail, thereby costing all investors more money."

 

"• Wholesalers are not a charity and trade against retail when it is profitable for them"

 

Here, he testifies that it is public knowledge to the exchanges that these MM both: take trades directly against retail traders, and directly manipulate the spread to their advantage.

 

"- Third, and finally, it must be conceded that the Securities and Exchange Commission (“SEC”) already has sweeping authority to do much of what needs to be done in connection with the issues in this hearing. The failure of the agency to appropriately respond to the most apparent deficiencies is not due to a lack of legal authority but a multi-decade lack of courage and imagination to take meaningful actions based on existing authorities"

 

At least he admits that the SEC knows what is going on and is choosing to actively ignore it.

 

https://sec.report/Document/0001699855-21-000006/

 

"Beginning on January 28, 2021, due to unprecedented market volatility and related portfolio margin demands imposed on RHS by the clearinghouse National Securities Clearing Corporation, RHS temporarily restricted or limited its customers’ purchase of certain securities, including GameStop Corp. and AMC Entertainment Holdings, Inc., on our platform (“Early 2021 Trading Restrictions”)."

 

RobinHood Securities says in its annual report that they shut down trading due to margin demands. That's because they are engaging in CFD practices and they/you NEVER OWNED YOUR GME SHARES DURING THE RUN-UP. The price exploded before they were able to delta hedge their naked CFD positions, and they got margin called for $3,000,000,000 to cover the shares they needed to buy.

 

TL;DR:

 

You aren't buying shares off of the open market on RobinHood (or possibly on any mobile-only trading platform). Those buy orders are being routed to MMs to be purchased off-exchange so that it doesn't affect the active trading price. Your sell orders ARE sold on the active open market, so that it actively helps crash the price.

 

RobinHood got margin called because they were naked shares due to engaging in Contract for Difference trading, where they don't buy the shares you pay for because they expect you to lose money anyways. They just pay you the difference in price if you make a profit once you sell your position.

 

They got hit with a $3,000,000,000 margin call because they were short so many shares of AMC/GME that were supposed to be owned in your accounts, but that they hadn't bought on the market yet.

 

Linked RobinHood Securities annual financial report, along with attached active lawsuits in the filing. It's a fun read if you have the time... Robinhood has shit for actual liquidity. Get out of that dumpster and get to a real broker.

 

Edit: 40% of all RobinHood accounts held shares of GME during the run-up. If there were 13,000,000, accounts at the end of 2020, and 40% of the accounts only held one share, RobinHood would have been on the line for $2,511,000,000 at the height of the $483 share price.

 

What was their original margin call again?

 

[Spekulatius]

^ I don’t think this is correct. If this were correct, Robinhood would be truly a bucket shop.

[LC]

I have no comment on the veracity (or the legality - CFDs are illegal in the US so they would have to have a legal structure that is right-on or over-the-line), I just thought it was an interesting take on the situation, that perhaps folks here would not usually be exposed to, perhaps for good reason! :D

[Lakesider]

Wheres the proof, im all in favour of these guys getting fucked up. But as someone that has been a follower of WSB for a long time there is alot of shit being made up on that subreddit at the moment.

 

Some of these people are as guilty as HFs for taking advantage of uneducated investors.

[TwoCitiesCapital]

Yea. I generally agree.

 

I don't know 100% for certain myself what happened, but there are way simpler explanations that I think make more sense than this one.

 

Robinhood and others had to stop trading in the names because with all of the volume being traded (multiples of the total shares outstanding on some days), the settlements process was getting f'd and there was the real likelihood of cascading settlement failures and shares not being delivered.

 

Not only that, but brokers are often fronting that cash for new deposits so you can trade immediately or fronting you the cash from sales so you can trade immediately.

 

So you have settlement issues with the same shares being bought/sold multiple times a day, but each transaction itself requiring a t+2 settlement and the delivery of the shares for it to work. A single failure to deliver could screw a dozen transactions in the daisy chain that followed AND you have under-capitalized brokers (like RH) who've fronted all this cash from sales proceeds and new deposits on trades that now appear unlikely to settle/receive the shares in exchange for that cash.

 

Add to all of that the fact that someone was going to eat the billions in losses from the options sales and a stock that is moving from $150 to $350 back to $150 in a span of 20 minutes and you have a powder keg begging to explode and take some important pieces of the financial system with it.

 

Definitely seems like it just needed to slow down some for the antiquated system to catch to all the trade activity and delivery of shares. Just my take though - I guess their could be guys actively plotting behind the scenes to do illegal stuff to scalp retail reddit crowd, but I just think there are far more straightforward answers that seem more plausible.

 

TL;DR - reddit is just making up stories to make themselves feel better for ending up as bag holders in a collapse that we all knew was coming

[ValueArb]

These WSB screeds just give me a headache. All allegations, no facts, just (deliberate?) misinterpretations of facts.

 

Keep pumping those turds WSB traders.

[LC]

Yea. I generally agree.

 

I don't know 100% for certain myself what happened, but there are way simpler explanations that I think make more sense than this one.

 

Robinhood and others had to stop trading in the names because with all of the volume being traded (multiples of the total shares outstanding on some days), the settlements process was getting f'd and there was the real likelihood of cascading settlement failures and shares not being delivered.

 

Not only that, but brokers are often fronting that cash for new deposits so you can trade immediately or fronting you the cash from sales so you can trade immediately.

 

So you have settlement issues with the same shares being bought/sold multiple times a day, but each transaction itself requiring a t+2 settlement and the delivery of the shares for it to work. A single failure to deliver could screw a dozen transactions in the daisy chain that followed AND you have under-capitalized brokers (like RH) who've fronted all this cash from sales proceeds and new deposits on trades that now appear unlikely to settle/receive the shares in exchange for that cash.

 

Add to all of that the fact that someone was going to eat the billions in losses from the options sales and a stock that is moving from $150 to $350 back to $150 in a span of 20 minutes and you have a powder keg begging to explode and take some important prices of the financial system with it.

 

Definitely seems like it just needed to slow down some for the antiquated system to catch to all the trade activity and delivery of shares. Just my take though - I guess their could be guys actively plotting behind the scenes to do illegal stuff to scalp retail reddit crowd, but I just think there are far more straightforward answers that seem more plausible.

 

TL;DR - reddit is just making up stories to make themselves feel better for ending up as bag holders in a collapse that we all knew was coming

 

I would imagine settlements can be netted.

 

And brokers fronting $ is money good, I would imagine that is not a source of major instability or there are deeper issues in the plumbing, so to speak.

 

I don’t find either explanation adequate, frankly.

 

[Gregmal]

 

Total boss....Another example of how NOT HARD it is being in the finance biz. Anyone managing money making more than $150k a year is grossly overpaid in relation to the work they do. Myself included!

[fareastwarriors]

 

Total boss....Another example of how NOT HARD it is being in the finance biz. Anyone managing money making more than $150k a year is grossly overpaid in relation to the work they do. Myself included!

 

I worked at an active mutual fund company and most of our funds underperformed their indices for 10-15 years... Yet we worked in a nice downtown office and everyone earned fat paychecks.  All those those fancy MBA's and PhD's from Harvard, UPenn, and Stanford and CFA designations didn't help...We preached all the value principles and emphasized long term time horizon but at the end of the day, we didn't perform.

 

SMH

 

 

[Gregmal]

Well duh! The CFAs, MBAs, CFPs are just marketing gimmicks. One of my good friends is a CFA. Some years back when he was training I asked him what he was so focused on. He said he's working on the 2nd test. I laughed and jokingly told him he's one of the worst investors Ive ever met....if he got the designation, it would just be misleading to people who didnt know any better! He goes "yea but I can make more money with it"....aint that the truth.

 

My younger brother took level 1 and 2 of the CFA exams while in Med School. He's a bit of a math nerd and he did it for fun. Said it was a total waste of time.

 

Folks love pitching "long term" investment strategies....because "long term" generates more fees than short term....

[fareastwarriors]

Well duh! The CFAs, MBAs, CFPs are just marketing gimmicks. One of my good friends is a CFA. Some years back when he was training I asked him what he was so focused on. He said he's working on the 2nd test. I laughed and jokingly told him he's one of the worst investors Ive ever met....if he got the designation, it would just be misleading to people who didnt know any better! He goes "yea but I can make more money with it"....aint that the truth.

 

My younger brother took level 1 and 2 of the CFA exams while in Med School. He's a bit of a math nerd and he did it for fun. Said it was a total waste of time.

 

Folks love pitching "long term" investment strategies....because "long term" generates more fees than short term....

 

Yup.

 

 

But as employee, they were a very solid employer with high pay, great benefits, and a pretty good culture. The only reason I left was so I can focus on real estate. Now I don't have to pre-clear and wait for compliance to approve my trades. :)

Buy, buy, buy!

 

 

TBF, our funds average expense ratio of 0.40-0.60% were good deals in the active mutual fund community. The funds turnover were low at about 20-30%.  If you're an institution or pension and you want decent returns and not high beta, our funds would be solid choices.

 

I CANNOT stand all those companies/people peddling sucky 1%+ expense funds with all kinds of sale charges. It's criminal how much people pay for shit performance.

[Gregmal]

Yea I'm not hating on everyone in the field...but the truth is that too many finance folks are too full of themselves(or just in general take themselves way too seriously) and many think they are hot shit because of how much money they make, but the truth is they dont deserve to make the money they do and its not hard doing what they do.

 

Look at this guy Keith....chills in his basement and has fun with it. Plenty of others have mentioned similar things...I think(although I wasnt around for those days) ERICOPOLY even talked about how he'd spend some time researching and then just go for walks on the beach...I cant say I do things much differently. Its a shame folks just dont know any better and therein lies the problem.....the system is setup so that people are not properly educated in matters relating to financial markets and investing. And I can take some good guesses as to why that is....

[Longnose]

The best DFV video in my opinion. Also in line with the previous comments, I am not convinced many money managers in the industry do much more than this anyway.

 

[TwoCitiesCapital]

The best DFV video in my opinion. Also in line with the previous comments, I am not convinced many money managers in the industry do much more than this anyway.

 

 

F*cking hilarious. The reversal of the ticket in the reverse card, and shaking the 8-ball 4 times to get the answer he wanted, is amazing!

 

I know he's having fun with this, but I also have to wonder if this is what he did with GME

[boilermaker75]

 

Total boss....Another example of how NOT HARD it is being in the finance biz. Anyone managing money making more than $150k a year is grossly overpaid in relation to the work they do. Myself included!

 

Whiskey first then the stout chaser for a true Boilermaker!

[bizaro86]

The best DFV video in my opinion. Also in line with the previous comments, I am not convinced many money managers in the industry do much more than this anyway.

 

 

F*cking hilarious. The reversal of the ticket in the reverse card, and shaking the 8-ball 4 times to get the answer he wanted, is amazing!

 

I know he's having fun with this, but I also have to wonder if this is what he did with GME

 

Lol. Maybe I should replace my screener.co subscription with my kids banagrams.