In the classic Walt Disney (DIS) movie “The Lion King”, the lion and the great ruler Mufasa, dies after a herd of Genoese overthrows him in an attempt to save his son Simba. Symbolically, this is exactly what is happening to the Wall Street shortlisted lions these days. A herd of investors, some experienced and most less so, simply override buy orders or positions on stocks that are short, increasing their value and making the big players bleed.
This has led to rallies in quite a few stocks, including GameStop (GME), AMC. (AMC), Nokia (NOK) and Blackberry (BB). This also happened last year with the Hertz stock, which flew after announcing Chapter 11, meaning insolvency. This rally caused massive bleeding at hedge funds on Wall Street. For some, it is even acute.
How much did they bleed? These are many billions of losses. Just for example, Melvin Capital, which held a short position on a Gamestop stock, had to borrow $ 3 billion from friends – these members are Citadel and Point 72 funds – just to balance the accounts following the losses the stock shorted on them. Citron also closed their position at a loss.
David Einhorn’s Greenpoint company – the one that Elon Musk sent him underwear after it made a short on the stock – reported last week that its position on Tesla led to the company’s biggest loss and that it had to eat its hat to change its position ahead of Tesla’s entry into the TSLA. S&P.
So far, the shortstops have lost more than $ 5 billion on the gamestop stock, when according to S3 data, last Friday they lost $ 1.6 billion and last Monday they lost close to $ 920 million. Those responsible for the loss are a group called the Wall Street Bets, which currently has close to 5 million surfers on the social network Reddit, who are consciously going out to squeeze in and knock out the hedge giants.
Wall Street veterans, who do not yet know so much how to digest the whole new situation, not only shout “Guild” about someone daring to create big losses for them, they prefer to think of the “new investors” as a brainless herd just rushing forward. But it is a sin to the truth. Because maybe some really are young outsiders who have no idea of their lives, but it seems that the latest rally in Gamestop and IMC shares. – which have risen by hundreds of percent each in the last week alone – is much more than that.
Social anger that began to bubble already in the subprime crisis
This is an organized band of investors that includes hundreds of thousands of investors, who have learned from the best – that is, from the Wall Street sharks themselves – and they go out in search of blood out of revenge. What is revenge for? Quite a few. Bloomberg estimates that this bad blood was already generated in the banks’ bailout packages in the 2008 subprime crisis, in which the banks, which were directly responsible for the severe crisis since 1929, received bottomless and lawless bailouts and used some to distribute fat bonuses and dividends to those who fueled the bubble.
The irony is that in 2008 the hedge funds, including the hedge fund of the legendary investor Michael Berry, were the ones who helped burst the subprime bubble when they began betting against the private real estate market and bond series (CDOs), which turned out to be bond bonds Garbage all along the boulevard, bonds defined as AAA at the highest level and below. Today, hedge funds, operating in the dark, have become the bad face of Wall Street; at least in the eyes of new investors and they want to make a profit at the expense of the rich.
Looking at the broader context in the U.S., which includes, among other things, the enormous debts of students who pledged their future for education and the ethnic turmoil that erupted last year due to the death of Floyd George, they all constitute fuel against what they see as hegemony.
And they make quite a bit of money. Some posted profits of $ 5 million or more in one trading day. Some are closing student loans and debts, and some are continuing to fuel the hype in order to earn more.
The new class war is on Wall Street
The veteran investor Shlomi Cohen, Which closely monitors the markets on Wall Street, actually supports the moves of members of the Wall Street Bets group. He says it is the right of every investor to do as he pleases in the free market, and says that the SEC – the US Securities and Exchange Commission – should examine the conduct of hedge fund managers.
“There is an argument now between 2 approaches,” he says Cohen in an interview with BizPortal. “So the ‘smart’s, that is, the hedge funds made a 130% short on the stock. It raises questions about how to do such a thing, probably with pots and all kinds of foilsticks. Because they have no real oversight and have quite a few accounting games. They thought, probably rightly so. That gamestop would go bankrupt and they’re in a position, so in this forum they saw it and said let’s make them the mother of the short squeeze.
“These are small investors, with all this forum together not having $ 2 billion to do a short squeeze, so they buy votes with not much money and leverage themselves. But those who sell the options have to buy the stock to be covered and that created the squeeze. The barons, supposedly the experts, “They come and shout ‘Gueld!’. What are these kids who inflate a stock’s value and lose money. But they didn’t lose. They made a lot of money.”
Do you think this is a class war?
“The subject has certainly flooded the class war in the US, just seeing who are the harshest critics of Wall Street sharks, an Indian billionaire and a black broadcaster on Fox News, to understand that this is a war. So the shortlisters do not understand how to buy a stock at $ 350 that is not worth a tenth of that. So what?
“The same thing they said about Tesla and people lost their underwear there. The hedge funds failed miserably in Tesla and that’s right. Palihfitia said yesterday that the big hedge fund managers meet in a hotel room and agree on which stock to do short. So after that they come and shout to the SEC “Should the SEC investigate how a situation was created that made them short on 130% of a company. 20% is considered high, so 130% ?!”
Do you think this will lead to changes in the market?
“I think hedge funds will no longer go back to producing such 130% positions, they will be more cautious. But the market will not change. That is also what is good in US markets. It is a free market, anyone can buy at any price he wants. Take, for example, SHOELS TECHNOLOGIES (SHLS), only yesterday it was issued on NASDAQ and in the first hour it jumped by 1,150%. It’s crazy, but it’s the free market. ”
Regardless, which stock do you find interesting?
“SOLADGE is very interesting and I think it has a significant upside in the coming years. It is expected to benefit from the new administration, but it is also making very interesting moves. It is in the electric car peripherals market, it went out of production in China and recently opened an almost completely mechanized plant. “Bird in the country and it has managed to cut costs due to this and go down to a level of pricing that is close to production in China. It also manufactures batteries for electric cars and due to the global shortage it is expected to earn quite a bit of that.”