Young Koreans are echoing r/WallStreetBets in their war against short sellers

https://restofworld.org/2021/south-korea-wallstreetbets-moment/

65 104 5 years ago

1cvmask• 5 years ago

There were also a number of long hedge funds and sophisticated investors (who followed market sentiment on reddit and elsewhere)in Gamestop.

jjoonathan2• 5 years ago

How the hell did short selling become a social justice boogeyman?

The narrative in the article -- that people truly feel sympathetic with the garbage companies being shorted to the point of being angry at shorts -- sounds like some ludicrous nonsense r/hailcorporate would dream up.

Kocrachon• 5 years ago

Because a bunch of people don't understand how the market work.

like all these people who think they're buying GME stock is going to save GameStop, cuz they somehow think that GameStop get some of the money from their stock purchases... So yeah I really don't know what the heck is going on in people's minds right now.

calyth20183• 5 years ago

Why does anyone want to save GameStop? They're pretty notorious for shit CS and shit trade-in prices.

Or is this just people who are at the generation where they don't actually remember GameStop's actual practices and wax nostalgic about it?

hntrader2• 5 years ago

They can get some of the money, indirectly, through an offering. The price on the secondary market drastically changes a listed company's fundraising prospects.

MegaButts6• 5 years ago

They don't think they'll save GameStop and almost nobody cares. They just want to see hedge funds lose money, and they've already lost billions so many have already objectively succeeded.

They also love to see Jim Cramer have meltdowns, which is almost every day now.

If you want to hate on /r/wsb that's fine (there are many legitimate reasons to hate that subreddit), but don't pretend to understand something you clearly don't.

navait• 5 years ago

A lot of people get angry when you bet against success.

bidirectional3• 5 years ago

Which is ludicrous. Success is not a uniform good, nothing wrong with shorting Enron stock or bonds issued by the Third Reich.

notyourday2• 5 years ago

How the hell did short selling become a social justice boogeyman?

It so happened that most of the short sellers are the members of the 'special rules for us' club - the same club that has been ripping off and living off the regular investors for decades. The actual targets of this are the likes of analysts, fund CEOs, etc on CNBC/Fox Business and their lawyers, accountants and politicians.

xadhominemx• 5 years ago

How have short sellers been ripping off regular investors?

JMTQp8lwXL• 5 years ago

Prematurely causing companies to go under puts thousands of people out of work. Kind of like how the Fed keeps interest rates low so zombie corporations can keep rolling over the debt --keeping many people employed-- stopping Wall Street from tanking businesses helps middle class people keep their jobs, so the thinking goes.

mobjack2• 5 years ago

Shorting stocks doesn't cause businesses to tank.

What determines the success of a company like GameStop is whether people go to their stores and spend enough money to cover business expenses. It has nothing to do with the price of the stock.

dcolkitt• 5 years ago

The academic evidence is overwhelmingly against this hypothesis[1]. Short sellers make money by identifying companies that are unhealthy, overvalued, or even outright fraudulent. Almost all the time these conditions precede the short selling activity. The evidence shows that short selling improves corporate governance, reduces fraud, improves price efficiency, and slows the formation of speculative bubbles.

Even the lay notion that short sellers hurt companies by taking capital away misses the bigger picture. Virtually all short selling takes place in a long/short portfolio. (Dedicated short sellers make up less than 1% of hedge fund assets.) The proceeds from short sales are reinvested in other companies. Even if you think short selling "destroys jobs" at the shorted companies, then the converse is that it must also create jobs at other, better companies.

[1]https://www.reddit.com/r/slatestarcodex/comments/la88gv/shor...

0xfaded• 5 years ago

What is the cost per middle class job saved? I'm sure someone has statistics on this.

The logic seems to go that the Fed should contract out job creation to private companies, which in theory produce economic growth. But this creates a feedback loop, where public revenues generated by said growth goes back to private companies.

The ultimate, hidden truth of the world is that it is something that we make, and could just as easily make differently.” - David Graeber

yellowstuff• 5 years ago

This would make more sense as a narrative if there were any prominent examples of short sellers materially harming the operations of a company, but I can't find any. In theory short sellers could help push a company into insolvency, but so could a lot of other vicious cycles for a failing company- worse terms from suppliers, worse credit terms, less trust from customers.

The Wikipedia page on "bear raid" mentions a single example, from 1609. https://en.wikipedia.org/wiki/Bear_raid

smnrchrds• 5 years ago

I don't get it either. But it seems that a majority, or at least a large vocal minority of people believe you should either support corporations or do not support them, but you should never do anything against them.

Example: when you write a comment criticizing a company or their policies, you get tons of replies saying "well, if you don't like them, don't use them. Don't go around badmouthing them."

In the eyes of many, you should either help corporations or ignore them. Anything else is considered unethical, unconscionable, "bitching", etc.

vkou2• 5 years ago

It's simple.

Short sellers want the price of stocks to go down, which makes them bad people, because everyone currently invested in the market wants stock prices to go up.

People who haven't yet invested in the market don't want prices to go up until they do, but nobody asks for their opinion.

Also, due to the poor state of financial education, people think that a low stock price means a company will go out of business.

robjan• 5 years ago

Almost every working person is invested in the stock market through various pension and retirement plans. To put things very simplistically, if the stock market goes down, people aren't going to be able to retire.

015a• 5 years ago

It feels like its part of the broader, somewhat global, rebellion against the financial economy; all the domains of finance which have become disconnected from the real markets and real economy, which more-often-than-not only exist for banks to make money off each other, and to crash both the real and financial economies when they screw up.

Arguably, it started back in 2008 with the global recession, which was, again arguably, totally the result of missteps and corruption in the financial economy. By the end of that, practically no one was held accountable for what happened. and we entered an insane decade+ long bull market inflated by our sovereigns printing money rarely to support Americans, but rather American companies and our financial markets. This bull market coincides with a massive rise in cryptocurrency, which also represents a rebellion against established financial markets and the meddling of both sovereigns and financial corporations in the financial stability of the average citizen.

Then, you reach short-interest, which historically serves some minuscule, though non-zero, amount of utility for the real economy, and has come under legitimate fire as being another tool which puts our economy at risk. I think the problem with short selling is best summed up by the end of the Big Short, as the main characters are sitting on steps of an abandoned bank, having made billions of dollars profiting off of the destruction of the American economy. The strange thing about markets, and economics in general, is that they are self-fulfilling prophesies. If enough people want a stock to drop, if they want a company to suffer by having a financial interest in it suffering; it will. This is different from simply selling a stock, which in-some-way causes the price to drop, because it changes the narrative from "I don't think it will go up" to "I think it will go down". By selling a stock, you're removing your stake; by short-selling, you're increasing your stake in a negative direction (and moreover, short interest is almost always leveraged, which compounds the problem).

In other words, I think the increasing zeitgeist surrounding the perception of our financial markets as being unable to serve the interests of the real economy, and more importantly the average American, is an unusually accurate response to a real problem, and it follows that it would become a social justice issue. The government needs to take this seriously; again, economies are self-fulfilling prophesies. Crisis often start not because there is a crisis, but because people believe there's a crisis.

michaelbrave• 5 years ago

This is correct I feel. The other part of the attitude is that the financial sector doesn't actually provide any value to anyone except the financial sector, it's seen a wealth horde for those who manipulate systems causing far reaching consequences. It's not respected and often not understood by the people. Short selling is seen as especially malicious as it causes a preemptive destruction of something in a time when everything is getting destroyed anyway, and doing so to make those who are already rich richer when people are literally starving due to unemployment isn't a good look.

calyth20183• 5 years ago

I think the problem with short selling is best summed up by the end of the Big Short, as the main characters are sitting on steps of an abandoned bank, having made billions of dollars profiting off of the destruction of the American economy.

That frankly is the wrong takeaway, or at least completely missing the original sin IMO.

The original sin is banks that wrote mortgages to people who shouldn't have them, with terms that basically fucks them over. In the absence of the short side, someone might not have profited, some FI may not have keeled over, but the people, who were sold those mortgages, were still fucked just the same.

The short side, calling bullshit on the long side, would not have existed, or at least be very foolish to do so, if the long side weren't doing something so stupid at such a scale that actually threatened the day to day lives of people.

currymj• 5 years ago

this just happens from time to time, it's part of mass psychology for whatever reason. people just have a moral intuition that short selling is bad.

Read about Clarence Saunders and the Great Piggly-Wiggly Corner of 1923. Similar story, populist Main Street guy going up against the short sellers. Except in the 1920s.

smabie2• 5 years ago

Hard to take anyone seriously who wants to ban short selling. Moreover it's not even possible without making an exemption for market making firms.

Also they're talking about how GME made people aware that short selling was a problem? The shorts got crushed..

woopwoop2• 5 years ago

One of the most powerful people in the world literally saying "Short selling should be illegal.":

https://mobile.twitter.com/elonmusk/status/12017814896391618...

bidirectional3• 5 years ago

Yes, hard to take Musk seriously given where his incentives lie.

markus92• 5 years ago

Also owner of some of the most-shorted stock out there.

magicalhippo• 5 years ago

I took programming and not finance during uni, so I know nothing regarding this. From what I've gathered, the point of the market, in theory, is to determine the correct price of a stock. For some value of correct.

Obviously I'm not thinking of spreading false rumors after taking up a short position or similar, but merely wanting to profit from identifying a potential price mismatch doesn't seem inherently wrong to me. Am I missing something?

Is it the lending part that's problematic?

travmatt4• 5 years ago

One of the people in the world most vulnerable to short selling is against it.*

Short selling is still an essential part of markets and price discovery, it’s not really that hard to understand why Elon is against it.

Aunche6• 5 years ago

Musk is a memer. Bashing short selling is just a way to get him free PR. He also said that Tesla's stock price is too high.

oh_sigh• 5 years ago

This guy also accuses random heroes of being pedophiles on his twitter.

fractionalhare• 5 years ago

I would be wary of using someone's power to support their claims. Especially after the last four years of American politics...

kevinmchugh2• 5 years ago

Some shorts got crushed. Anyone who shorted after the price rose is sitting pretty

justapassenger2• 5 years ago

Lots of people were lead to believe that stock market is free money and they were lead to believe that short selling is taking away their free money.

It’s not a war against short sellers. It’s people wanting free money, from very complex ecosystem they don’t understand.

It’s like someone after taking first class of CS101 declares a war against crashes, as they keep on breaking their great programs.

hahahahe2• 5 years ago

Govt herded everyone to invest in stocks. Now they want to sneak out the back before rates jump.

jorblumesea• 5 years ago

It's not people wanting "free money". It's people seeing the capital class, which basically gets money for producing nothing of value or substance, and saying "why not me".

The entire idea of wall street looks very parasitic, despite preforming a very valuable role in our modern economy.

justapassenger2• 5 years ago

The same people also “invest” into Bitcoin, that’s whole existence is built around wasting electricity and producing tons of e-waste.

I’m not questioning economical imbalance. But it’s really about free money, as stonks only go up.

hahahahe2• 5 years ago

Herd mentality in Korea is very strong. It’s one of the best places for scammers to run pump and dumps.

mlrtime3• 5 years ago

Off topic: Is this also the reason why the succeed so well with containing COVID?

rubyist5eva2• 5 years ago

If you want to ban short selling you are anti-speech and anti-free-association.

I don't like short-selling, because essentially you are making profit on the misery of others - but I tolerate it because I value freedom more.

At least, I'm glad it seems that WSB has somehow managed to defeat "ugly" speech with "more speech".

kminehart3• 5 years ago

Short selling is valuable. What's more valuable than putting your money where your mouth is?

The way I see it, every action you take in the stock market is a reflection of your beliefs; if you buy a stock, you believe, and are indicating, that the stock is undervalued. If you sell a stock, you believe that the stock is overvalued.

Short selling is a valuable way to indicate that you believe a stock is overvalued whenever you don't own the stock.

I understand why some may read about short selling and think it's profiting off of other's miseries, but they provide value in the market, and whether or not people are short selling the stock, if it's overvalued then it's overvalued.

travmatt4• 5 years ago

Markets cannot find efficient prices without short selling.

rubyist5eva2• 5 years ago

I don't necessarily disagree with you. I suppose I should've added the caveat, "short selling with the express purpose to drive a company out of business/the market completely" - which is what it looked like the hedge funds were trying to do with GameStop.

a_c_s• 5 years ago

Right: in a world of similar market participants short selling is super valuable.

But what about when a market actor has enough wealth to massively short sell and enough media pull to be able to create a self-fulfilling prophecy about a company being in bad shape? (And enough pull with regulators to be let off the hook with the lightest of penalties?) This is when the market is no longer healthy nor free.

ameister14• 5 years ago

if you buy a stock, you believe, and are indicating, that the stock is undervalued.

That's not true. You could believe that the company is stable and gives a good dividend each year. It could be valued perfectly well and you'd want to buy it because it would be precisely worth it to you. less than or equal, essentially, not simply less than.

Short selling is a valuable way to indicate that you believe a stock is overvalued whenever you don't own the stock.

I don't think this is true, because the reporting on shorts isn't constant and because traditionally it's a far smaller community.

It's a valuable way to indicate that SOME people believe a stock is overvalued and seems to have been used as a replacement for independent research and valuation of a company.

manicdee• 5 years ago

I'd really prefer it if the people loaning me money weren't betting against me paying it back and expecting to make more money off my failure than my success.

tobyhinloopen• 5 years ago

Funny how so many people are trying to stick it up to the rich when they also can just signup a broker account and buy some stocks (or short them if you dare). It’s not something only rich people can do...

Then the first thing those that do signup do is to buy GME while the price is inflated like crazy. Every newbie buying GME is going to lose most of their money. The current situation is a shorter’s dream.

Edit: looking at the price now, it isn’t really that bad now, I just wouldn’t dare to touch it

klmadfejno2• 5 years ago

Headline: > Young Koreans are echoing r/WallStreetBets in their war against short sellers

Subheadline: > A generation fueled by pessimism is shunning conventional long-term investments in favor of high-risk bets.

Skimming the article I couldn't actually follow what they're doing. Are they doing anything? Buying shorted stocks on a margin? By non-conventional do they just mean meme-y stocks with poor fundamentals?

bidirectional3• 5 years ago

About two weeks ago a post[1] went to the top of /r/WallStreetBets where a user advocated shorting the South African Rand. So in the space of days we went from WSB being a crusader against the evil shorts, to heavily upvoting the idea of shorting a struggling nation.

The user posting it had an absolutely laughable lack of knowledge on the trade -- they literally believed they would profit if the USD outperformed ZAR, not factoring in the interest to pay on the short -- combined with eyebrow-raising statements on SA history. But this didn't stop everyone from laughing at the idea of blowing up a country's economy. To me it completely poisoned any idea of WSB being a force for good, or even remotely rational.

[1] https://old.reddit.com/r/wallstreetbets/comments/lkzviy/i_am...

havelhovel• 5 years ago

To me it has completely poisoned any idea of WSB being a force...

Good! WSB was a place to talk about making (reckless or stupid) investments. Pundits and politicians sold a different, mostly harmful narrative.

totetsu• 5 years ago

Most of the discussion there seems to be about how is a bad idea

chartpath• 5 years ago

Is there any way to replicate this for housing speculation?

LargeWu• 5 years ago

It's happened before. Watch or read 'The Big Short'. Both the film and book are fantastic.

Young Koreans are echoing r/WallStreetBets in their war against short sellers

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