Showing posts with label investing. Show all posts
Showing posts with label investing. Show all posts

Thursday, January 28, 2021

"Upcrash. A gain so fast and rapid, that it might previously have been thought to be impossible"

A roundup from today's Gamestop news:






















Labels:

Wednesday, January 27, 2021

From 2001, a Michael Lewis profile of the first minor ever to face SEC proceedings for stock-market fraud

From a long article by Michael Lewis for the NYT:
On Sept. 20, 2000, the Securities and Exchange Commission settled its case against a 15-year-old high-school student named Jonathan Lebed. The S.E.C.'s news release explained that Jonathan -- the first minor ever to face proceedings for stock-market fraud -- had used the Internet to promote stocks from his bedroom in the northern New Jersey suburb of Cedar Grove. Armed only with accounts at A.O.L. and E*Trade, the kid had bought stock and then, ''using multiple fictitious names,'' posted hundreds of messages on Yahoo Finance message boards recommending that stock to others. He had done this 11 times between September 1999 and February 2000, the S.E.C. said, each time triggering chaos in the stock market. 

...

When I first read the newspaper reports last fall, I didn't understand them. It wasn't just that I didn't understand what the kid had done wrong; I didn't understand what he had done.

...

Jonathan slouched in. Even that verb does not capture the mixture of sullenness and truculence with which he entered the room. He was long and thin and dressed in the prison costume of the American suburban teenager: pants too big, sneakers gaping, a pirate hoop dangling from one ear. 

...

he created his own Web site devoted to companies with small market capitalization -- penny stocks. The Web site came to be known as Stock-dogs.com.

...

''People who trade stocks, trade based on what they feel will move and they can trade for profit. Nobody makes investment decisions based on reading financial filings. Whether a company is making millions or losing millions, it has no impact on the price of the stock. Whether it is analysts, brokers, advisors, Internet traders, or the companies, everybody is manipulating the market. If it wasn't for everybody manipulating the market, there wouldn't be a stock market at all. . . .''

As it happens, those last two sentences stand for something like the opposite of the founding principle of the United States Securities and Exchange Commission.
(Yes, the article has been discussed at r/wallstreetbets.) Anyway: 




Labels: ,

Tuesday, January 26, 2021

A detailed discussion of whether the subreddit's manipulation of Gamestop stock is illegal

In today's newsletter, Matt Levine goes into great detail on various possible theories of prosecution. The TLDR:

I guess my answer would be that it might be illegal in all sorts of ways, but it is not obviously illegal, and if the U.S. Securities and Exchange Commission were to go after WallStreetBets for this stuff they will be breaking new ground and going beyond their previous cases. I do not want to say “this stuff is all fine,” but I will say I am not all that bothered by it.

He also discusses the new Leon Black/Jeffrey Epstein revelations:

After Epstein was arrested on sex-trafficking charges and died in jail, there was quite a bit of wild speculation about where his money came from, and specifically about why billionaires were so willing to pay him so much money for somewhat vague services. After all that speculation, finding out that Leon Black paid Epstein $150 million for differentiated advice that really saved him $2 billion of taxes is in some ways the most boring possible explanation.

At the same time … what? Why was Epstein, who was not a lawyer or an accountant or a college graduate for that matter, so good at tax? I actually don’t have too much trouble believing this—in my experience, some people are just born with a natural gift for tax structuring, and need surprisingly little formal training to achieve their potential—but it is fascinating. Black would go his lawyers and say “hey my guy found this way to save a billion dollars in taxes, is it legal,” and the fancy lawyers in the Paul Weiss tax department would say “wow, sure is, this is amazing, why didn’t we think of this, this guy is a Michelangelo of tax minimization”? I don’t know, it’s just a weird niche. Also what did Black actually do to save all those taxes?

More on WallStreetBets:





Labels: ,

Wednesday, November 6, 2019

People are exploiting the Robinhood investment app like any other video game

From Matt Levine's newsletter (which goes into much more detail about the exploit):
It makes an app that you can download to your phone, and then you can play a game on the app. As with many mobile games, there are in-app purchases, and you can end up spending a lot of money on the Robinhood game. The game is of course a stock-trading game. The purchases are stocks. You win by getting a lot of money. But there are other ways to play. Some people aren’t interested in playing the game as its designers intended. They want to hack the game, to find weird glitches and exploits, to take the game apart and build their own weird levels, to stream the resulting monstrosities to entertain their friends.

Many, many, many of my readers have emailed and tweeted about a Robinhood exploit that goes by the charming and accurate name “infinite leverage.” Here’s a Reddit user called ControlTheNarrative who claims to have gotten 25x leverage on his trading; that is, he put in $2,000 and turned it into about $50,000 worth of stock. Here’s another Reddit user called MoonYachts who claims to have gotten 250x leverage, putting in $4,000 and turning it into a $1,000,000 stock position. You are not supposed to be able to do this; normal stock market games do not allow you to bet a million dollars by putting up only $4,000 of your own. (“We’re aware of the isolated situations and communicating directly with customers,” said a Robinhood spokesperson.)

These people are posting screenshots and videos of their exploits. They are discussing ways to use the exploit for further, even more outrageous pranks. I do not exactly know what they are thinking. Presumably some part of what they are thinking is along the lines of “if I use $4,000 to buy a million dollars’ worth of stock and it goes up then I will make a lot of money.” But surely another big part of what they are thinking is “if I use $4,000 to buy a million dollars’ worth of stock then my friends on Reddit will be amused.” Judging by the Reddit threads, and by my email inbox, this was a correct analysis. I suppose it is not a conventional financial analysis, but you should not underestimate the importance, in trading generally, of impressing people with your wit and boldness.
Labels:
Subscribe to: Posts (Atom)