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I think we have taken every single cliche about hedge funds and applied it to the current saga. Only problem, the facts don’t fit the narrative. At all.
a) Short selling is a legitimate activity, specially in over-priced stock.
a) Short selling is a legitimate activity, specially in over-priced stock.
b) There is no lesson being taught to a big bad hedge fund. They sought to bring price closer to value. That is the opposite of evil. It’s called re-pricing absurd valuations.
It’s called making the markets more efficient.
It is the opposite of manipulation.
c) There is nothing democratic or humbling business being conducted by WSB. It’s just a mob bringing a big fund to its knees with overwhelming tide of money. The mob is not manipulating the price in it’s classic sense, but it is taking the price away from value - a galaxy away
d) The kernel of the mob may have some higher purpose ‘of teaching a lesson’ to the suits. But the mob is only there to make some free money. There is no higher purpose involved. That’s delusional journalists thinking it up.
e) Indeed the company (or companies) involved may survive their current journey to collapse, if they are smart enough to raise capital at the silly valuations AND do everything possible to become a successful company (a million things). But still the resulting valuation
Would be a small fraction of where it is currently. Under no permutation will the companies do well enough to justify current valuation (no is too strong a word - maybe the valuation exceeds 5 trillion and they acquire Tesla...)
In no outcome will millions of investors NOT lose large sums of money. It’s a question of when. Remember, the hedge funds they want to teach a lesson to hardly have any skin in the game. They are running the funds with other people’s money. Even if a couple collapse, it’ll be ok
Ok for the fund manager. The ultimate investor may include some of the smaller investors too - many pension funds invest via hedge funds. So guess who gets hurt in part?
Before I end for today, a must read case for all interested, a case decided by Justice Posner, the guru of law and economics - where he held that short selling of more stocks than existed was not manipulation and in fact a good outcome: https://caselaw.findlaw.com/us-7th-circuit/1353166.html
Facts are quite similar to GME in many ways. I’ll come back to the topic as the events unfold over the next few weeks. Over and out for today. Do read the case.
