Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[TwistedChief]

Originally Posted by MTG#10

You really just posted a Motley Fool article to back your opinion?



Okay, I can't take anything you say in regards to the stock market seriously again. Deuces.

The difference is I've traded with both Vanguard and Blackrock thousands of times in my life when they were clients of mine. I know how they operate and who they are and their sophistication level. I'm able to gauge what they're doing based on the type of accounts they are and could've answered that without the article link. But I figured without an internet link, you wouldn't believe it as it wouldn't represent the high quality 'DD' you are accustomed to.

Next time I'll search for some random guy on reddit and link to that. Noted.

[MTG#10]

Look dude, you're the one who popped in to shit on the Reddit link I posted. Debunk what the guy found and explain what all of that information he stumbled onto really means or stfu.

And there are a hell of a lot more players on that list than Vanguard and Blackrock but you missed the point anyway...its not the total amount of shares all of those firms own, it's the significant increase of their buys AFTER the price shot up. The Motley Fool (appropriately named) article you linked wasn't even in the ballpark of how many shares those two own, Vanguard is now in over 43 mil and Blackrock almost 27 mil..that's a hell of a lot more than Fool's claims of 5k and 4k. But nice try champ.

[KCUnited]

[lewdog]

Back in on AAPL at 150.

[TwistedChief]

Originally Posted by MTG#10

Look dude, you're the one who popped in to shit on the Reddit link I posted. Debunk what the guy found and explain what all of that information he stumbled onto really means or stfu.

And there are a hell of a lot more players on that list than Vanguard and Blackrock but you missed the point anyway...its not the total amount of shares all of those firms own, it's the significant increase of their buys AFTER the price shot up. The Motley Fool (appropriately named) article you linked wasn't even in the ballpark of how many shares those two own, Vanguard is now in over 43 mil and Blackrock almost 27 mil..that's a hell of a lot more than Fool's claims of 5k and 4k. But nice try champ.

Okay.

First, 'champ,' your reading comprehension is embarrassing for an allegedly critically-thinking adult. The Fool's claim of 5k and 4k were the numbers of stocks these two institutions owned. It said nothing of their positions in any of the stocks you traffic in. But, good on you for spending time to read through a short blurb of information I provided you and not being able to grasp its simple meaning. It doesn't bode well for your ability to decipher the more complex topics we're going to move onto.

Blackrock and Vanguard have a number of funds and managed accounts that track indices. Do you know what happens when the price of these shares goes up relative to other stocks in the index? Hint: they become a larger part of the index. Then, funds like Blackrock and Vanguard buy more of the shares to reduce tracking error versus the index.

So, there's no mystery or surprise why those funds would be buying. It says nothing of their value or lack thererof.

As for the reddit thread, it's difficult for me to get past the first part:

Do this infuriate you? It Should....

Why would placing a bid ~$160 below the market infuriate you? Why would that influence the price of a security?

If you told me that someone was placing a very large order to sell one of your meme stocks right around the close at a price just slightly higher than the market in order to scare people into selling, I can see why you might feel that has meaning. But an order far away from the market has no bearing on the price of the security. If you feel different, explain why.

Second, MEMX. It was created by a consortium of banks who were tired of being overcharged by the larger exchanges (NYSE, etc). I realize you think that banks are cabal and everything they do is evil, but sometimes they do things just to save money. They created this exchange with that idea in mind over the longer run.

This guy looks at the exchange codes and singles out 'z' to be 'most disturbing.' Why? Because it REMOVES LIQUIDITY. Sounds scary, right? Wrong. Any market order 'removes liquidity' because it's immediately executed. Non-market orders add liquidity. If you spent time looking at the fee schedule, it's what you'd think. They charge fees when you remove liquidity (i.e., price taking) and rebate you when you add liquidity by showing prices. They are attempting to encourage market participants to show bids and offers and even paying to do so to develop critical mass. This is how competitive markets with start-ups work in all forms of life.

This 'z' code specifically though mentions that it both removes liquidity and is routed to another market. Does that sound scary? I'm not 100% sure how this exchange is set up, but you'll notice that this 'z' order where you essentially buy/sell at market and it's routed to another exchange incurs a cost that is 6x more expensive (which is *a lot*) than one where you buy/sell at market on MEMX. My guess is that's meant to encourage the members to trade on MEMX and not to use it to route the order to other exchanges, and thus the very punitive rate.

So, knowing all that, are you infuriated? Or is it more likely this guy posted a bunch of stuff without connecting dots or really understanding what he was doing and you just took him at his word that you should be infuriated rather than doing your own DD and realizing what he meant?

I don't care if you champion meme stocks. I don't care if you make or lose money in meme stocks. People make money in bad trades all the time just as people lose money in great trades - it's the nature of the market.

I only care that you continue to post the same stuff over and over again about hedge fund manipulation as if you have any clue what you're talking about.

[MTG#10]

^^^Thanks for actually typing out a real response instead of just "it's wrong". I'll read through it when I get some time.

[DaFace]

Originally Posted by KCUnited

I'd wager Crypto Bros have a better understanding of investing than Memestock Bros.

[DaFace]

Originally Posted by MTG#10

Ahh **** it, my shit can wait. No, you are 100% absolutely wrong but I'd love to hear your take on it.
...

Big banks buy and sell huge volumes all the time. Did it have some impact? Sure. But enough to cause the stock to go up 14x? Nah. That takes an army of people who suddenly feel the stock is going to go through the roof.

[MTG#10]

Originally Posted by DaFace

Big banks buy and sell huge volumes all the time. Did it have some impact? Sure. But enough to cause the stock to go up 14x? Nah. That takes an army of people who suddenly feel the stock is going to go through the roof.

Retail investors helped but had little to do with either big squeezes this year, they were primarily driven by whales.

[MTG#10]

Originally Posted by TwistedChief

Okay.

First, 'champ,' your reading comprehension is embarrassing for an allegedly critically-thinking adult. The Fool's claim of 5k and 4k were the numbers of stocks these two institutions owned. It said nothing of their positions in any of the stocks you traffic in. But, good on you for spending time to read through a short blurb of information I provided you and not being able to grasp its simple meaning. It doesn't bode well for your ability to decipher the more complex topics we're going to move onto.

Blackrock and Vanguard have a number of funds and managed accounts that track indices. Do you know what happens when the price of these shares goes up relative to other stocks in the index? Hint: they become a larger part of the index. Then, funds like Blackrock and Vanguard buy more of the shares to reduce tracking error versus the index.

So, there's no mystery or surprise why those funds would be buying. It says nothing of their value or lack thererof.

As for the reddit thread, it's difficult for me to get past the first part:



Why would placing a bid ~$160 below the market infuriate you? Why would that influence the price of a security?

If you told me that someone was placing a very large order to sell one of your meme stocks right around the close at a price just slightly higher than the market in order to scare people into selling, I can see why you might feel that has meaning. But an order far away from the market has no bearing on the price of the security. If you feel different, explain why.

Second, MEMX. It was created by a consortium of banks who were tired of being overcharged by the larger exchanges (NYSE, etc). I realize you think that banks are cabal and everything they do is evil, but sometimes they do things just to save money. They created this exchange with that idea in mind over the longer run.

This guy looks at the exchange codes and singles out 'z' to be 'most disturbing.' Why? Because it REMOVES LIQUIDITY. Sounds scary, right? Wrong. Any market order 'removes liquidity' because it's immediately executed. Non-market orders add liquidity. If you spent time looking at the fee schedule, it's what you'd think. They charge fees when you remove liquidity (i.e., price taking) and rebate you when you add liquidity by showing prices. They are attempting to encourage market participants to show bids and offers and even paying to do so to develop critical mass. This is how competitive markets with start-ups work in all forms of life.

This 'z' code specifically though mentions that it both removes liquidity and is routed to another market. Does that sound scary? I'm not 100% sure how this exchange is set up, but you'll notice that this 'z' order where you essentially buy/sell at market and it's routed to another exchange incurs a cost that is 6x more expensive (which is *a lot*) than one where you buy/sell at market on MEMX. My guess is that's meant to encourage the members to trade on MEMX and not to use it to route the order to other exchanges, and thus the very punitive rate.

So, knowing all that, are you infuriated? Or is it more likely this guy posted a bunch of stuff without connecting dots or really understanding what he was doing and you just took him at his word that you should be infuriated rather than doing your own DD and realizing what he meant?

I don't care if you champion meme stocks. I don't care if you make or lose money in meme stocks. People make money in bad trades all the time just as people lose money in great trades - it's the nature of the market.

I only care that you continue to post the same stuff over and over again about hedge fund manipulation as if you have any clue what you're talking about.

First off you are right, I quickly skimmed through the article you posted while at work and took "positions" as "shares", egg on my face and apologies for calling you champ.

Blackrock and Vanguard are only two of the high-stake owners from my list, yes they are the top two but there are 8 more who have also taken a very large position after the price jump so my point remains.

But back to Vanguard, I get what you're saying about tracking indices, but they bought over 6.7 MILLION shares after the price jump and now own 8.5% of the entire float (not counting counterfeit shares obviously but we'll get to that later). Do they own that high of a stake in all companies? If not why AMC? Are you telling me there's nobody who works at Vanguard that would see what happened and step in to stop this purchase(s) if it were just an overpriced stock destined to fail? I find that very hard to believe, but you obviously know more about them than I do so I wont argue about it.

For the Reddit post, even he is admitting he's not entirely sure what is going on with the buy high/sell low orders at specific time slots but it's a good theory. I'm not going to argue with you on the part of his post about the z code because admittedly it makes my brain hurt, but it sounds like you're guessing as is he. Would you like to address the rest of his post though? There's a lot more after that.

Also I'll do something rare for an internet debate, I'll will admit you know more about this shit than I do and I'm still learning. Having said that since you seem to be legit and know your shit what's your take on the entire situation? Have you read or seen the reports of the SEC investigation into the heavy manipulation of AMC by firms like Citadel re-routing retail investor purchases AH through dark pools so they wont hit the NYSE and affect the price? Have you seen/read reports of the insane amount of synthetic shares being traded every single day? These reports have been covered on CNBC and all over legit investing sites, not just on Reddit and Youtube channels. Do you think this whole thing is all bullshit and 4 million apes are wrong? Obviously time will tell on that, just asking what your opinion. As in-tune with the market as you seem to be I would think you'd be fascinated by what's going on and would have a theory of your own.

[TwistedChief]

Originally Posted by MTG#10

Also I'll do something rare for an internet debate, I'll will admit you know more about this shit than I do and I'm still learning. Having said that since you seem to be legit and know your shit what's your take on the entire situation? Have you read or seen the reports of the SEC investigation into the heavy manipulation of AMC by firms like Citadel re-routing retail investor purchases AH through dark pools so they wont hit the NYSE and affect the price? Have you seen/read reports of the insane amount of synthetic shares being traded every single day? These reports have been covered on CNBC and all over legit investing sites, not just on Reddit and Youtube channels. Do you think this whole thing is all bullshit and 4 million apes are wrong? Obviously time will tell on that, just asking what your opinion. As in-tune with the market as you seem to be I would think you'd be fascinated by what's going on and would have a theory of your own.

Here's what I will tell you. I think the reports of hedge fund nefarious behavior are crazy overstated. I think there's a lot that goes on in the shadows of these exchanges, but that doesn't make it nearly as evil as many would imagine. These stocks have a mind of their own and they've created a movement that no one saw coming. I applaud that as they have changed the rules of the game in a meaningful way. They have taken on some of the world's most sophisticated investors and broken the system. I worked at Goldman Sachs yet was so sympathetic to Occupy Wall Street right outside of our offices, so I fully understand the disdain for the financial establishment. It was part of why I left to go to a hedge fund in the first place because it was more egalitarian. And fair.

If I had to guess, these meme stock trades at some point won't end well. You've had a tailwind of a ridiculous bull market and remarkably easy financial conditions thanks to the Fed. Those factors aren't necessarily going away entirely anytime soon, but markets have purges every once in awhile and eventually you may see a sharp market-wide one. And the idea that people will hold onto these stocks believing that others will hold the line when the market as a whole is cratering will be the undoing. That's how I think this will end up. But timing that is virtually impossible. Just know that there's probably a very large negative tail that exists and things can go into a vacuum.

BUT. You mentioned Citadel. I dislike them with the fire of a thousand suns. I have had run ins in the past with their founder (KG) and he's ruthless to everyone he encounters. They are the worst of our business and I hope he's short every meme stock on the planet and I hope you're long and I hope they go to infinity.

I wish you luck in your investing, MTG #10. I always picture you as baby Mahomes and could never really hate you. Good luck, buddy.

[ChiliConCarnage]

Originally Posted by MTG#10

But back to Vanguard, I get what you're saying about tracking indices, but they bought over 6.7 MILLION shares after the price jump and now own 8.5% of the entire float (not counting counterfeit shares obviously but we'll get to that later). Do they own that high of a stake in all companies? If not why AMC? Are you telling me there's nobody who works at Vanguard that would see what happened and step in to stop this purchase(s) if it were just an overpriced stock destined to fail? I find that very hard to believe, but you obviously know more about them than I do so I wont argue about it.

The Big Three—BlackRock, Vanguard, and State Street—are the most important ... Some 22% of the shares of the typical S&P 500 company sits in

That's from Jan 2020. Blackrock and Vanguard are a multiple bigger than State Street, so, yeah it wouldn't be rare for them to hold 10% of a lot of companies. Also, indices tend to rebalance quarterly or biannually. If something shoots up abnormally fast it can become a huge weight in the small cap index until rebalancing moves it up to the mid caps. The system wasn't designed for stocks jumping 1000% a quarter or whatever

The whole point of indexing is you're trusting the market as a whole for pricing. TSLA was added to the S&P 500 last year after a huge run up. Was it a good time to add Tesla? We'll see but it hit profitability goals and was added.

[MTG#10]

Originally Posted by TwistedChief

Here's what I will tell you. I think the reports of hedge fund nefarious behavior are crazy overstated. I think there's a lot that goes on in the shadows of these exchanges, but that doesn't make it nearly as evil as many would imagine. These stocks have a mind of their own and they've created a movement that no one saw coming. I applaud that as they have changed the rules of the game in a meaningful way. They have taken on some of the world's most sophisticated investors and broken the system. I worked at Goldman Sachs yet was so sympathetic to Occupy Wall Street right outside of our offices, so I fully understand the disdain for the financial establishment. It was part of why I left to go to a hedge fund in the first place because it was more egalitarian. And fair.

If I had to guess, these meme stock trades at some point won't end well. You've had a tailwind of a ridiculous bull market and remarkably easy financial conditions thanks to the Fed. Those factors aren't necessarily going away entirely anytime soon, but markets have purges every once in awhile and eventually you may see a sharp market-wide one. And the idea that people will hold onto these stocks believing that others will hold the line when the market as a whole is cratering will be the undoing. That's how I think this will end up. But timing that is virtually impossible. Just know that there's probably a very large negative tail that exists and things can go into a vacuum.

BUT. You mentioned Citadel. I dislike them with the fire of a thousand suns. I have had run ins in the past with their founder (KG) and he's ruthless to everyone he encounters. They are the worst of our business and I hope he's short every meme stock on the planet and I hope you're long and I hope they go to infinity.

I wish you luck in your investing, MTG #10. I always picture you as baby Mahomes and could never really hate you. Good luck, buddy.

I admittedly fell into the "all hedge funds are evil" trap and the us against them mentality but I get not all are out there with the sole purpose to destroy struggling companies and screw over retail investors. I'm sure most if not all hedge funds had some sort of short position on AMC because it was going under before all this, but the smaller ones have likely already covered. It's the pricks like Citadel and what happened in '08 that give you guys a bad name and I'm glad you and now I recognize that. No hard feelings.

[eDave]

That was a good discussion.

[DaFace]

Originally Posted by TwistedChief

If I had to guess, these meme stock trades at some point won't end well. You've had a tailwind of a ridiculous bull market and remarkably easy financial conditions thanks to the Fed. Those factors aren't necessarily going away entirely anytime soon, but markets have purges every once in awhile and eventually you may see a sharp market-wide one. And the idea that people will hold onto these stocks believing that others will hold the line when the market as a whole is cratering will be the undoing. That's how I think this will end up. But timing that is virtually impossible. Just know that there's probably a very large negative tail that exists and things can go into a vacuum.

This has been my biggest concern (and the reason that I am pretty anti-memestock in this thread). We've basically trained a generation of "investors" to ignore fundamentals and take huge risks because bull markets tend to favor risky investments. Eventually, though, there's going to be a correction, and it could hit very, very hard for those who have gone all-in on the most risky investing options.

If people want to throw a little money at memestocks in hopes of catching a wave for a big payday, go for it. I actually don't have a big issue with that. Just make sure that you're protecting yourself with an overall portfolio that can withstand a correction down the road.

(And, preferably, at least CONSIDER that information provided by people who have a vested interest in getting more people to buy in might not be the most objective source of truth.)