threedots

Seconded. The last week has been actually quite unsettling and completely changed my perception of HN.

Friction is the difference. Naked shorting removes the need to locate borrow. That need acts to prevent runaway supply expansion. Naked short selling also circumvents the rights of share owners as a class to decide whether to allow synthetic share creation.

Short selling has both supply and demand effects. So while it 'soaks up investor money' it also creates demand for incremental money through lower prices.The laws right now basically exist to constrain the supply that can be brought on quickly to prevent that getting of line. That's one of the main reasons to ban naked short selling - because it removes the friction to massive and infinite supply increase. It's also super risky because if you don't succeed you end up short a bunch of shares at artificially lower prices. So practically the scenario you are worried about is already addressed in securities regulation.

I would say that short sellers are even more important around primary transactions because then share price matters more. Good prices prevent new investors being left holding the bag and inefficient allocation of capital which could have gone to a different business with better investment opportunities.

Rules already exist around what you can and can't say as a short seller. What is it that you don't like about them? Do you think no one should be allowed to say negative things about companies?

Shorts can't drive companies in the ground if that's not where they're headed anyway. First of all most short sellers are not activists. The perception that shorts causing companies to tank is because activist short sellers are right a high percentage of the time so often their reports result in a quick price adjustment. Being an activist short seller is a very high risk activity so they tend only to pull the trigger when they have high conviction. For example I'm not sure Muddy Waters has ever been wrong in calling out an accounting fraud. I have a really hard time buying the line that short sellers bring down good companies (examples?) and the fact that people do think that seems to me more of an indication of the power of corporations and their management than anything else.

What is the mechanism by which you think shortsellers cause companies to go bankrupt? Can you think of any examples of short sellers causing a bankruptcy?

I read that reddit thread earlier when it was at the top of r/all and it is unhinged.

How this went from vanilla pump and dump to this conspiratorial lunacy is beyond me and I hope it stops when GME comes back down to earth.

It had lots to do with GME in that GME was the source of the risk (because of its through the roof volatility) that the DTCC was protecting against. But if your implication is that the DTCC has a dog in that fight you are way off base - they exist several layers below hedge funds in the trading stack and have nothing to do with each other, in fact I'd be willing to bet Gabe Plotkin couldn't even tell you what DTCC stands for.

It's a good question. I can only speak for myself but I would only be interested in investing in a very small number of funds and they don't want my money (or sometimes anyone's money). Unless you are convinced a fund adds value after fees it's very hard to justify when you can construct your desired market exposure with passive products which are much cheaper and more liquid. It's painfully boring to do that so like everyone else I'm tempted to punt on sexier things every now and again but most of the time I don't.

To answer your last point, there's some of that for sure - in many parts of finance complexity is good for margins. And yes it's tough to demonstrate much value if your investing process amounts to placing buy orders for index funds. It's not all bad incentives though, hedge funds can offer uncorrelated (to the wider market) returns which are very valuable in a portfolio.

No you're good. I'm a career hedge-fund/market guy and all of my investable assets (outside of my company and my house) are in vanguard trackers. I'd guess most of my friends who are professional investors are the same (except they likely have some investment in their own fund).

That's not to say there aren't better investment options in the world but they aren't accessible to ordinary people (even quite rich ones).

There is a big difference between handing out light punishments and actively colluding. In the case of Cohen, his light punishment is because they were never able to find the smoking-gun evidence they needed to put him away properly on criminal charges despite a massive effort to do so so they settled for what they could get. It's not enough to be guilty (hi OJ), and Cohen was guilty as sin I don't doubt it.

It's trivial for the SEC

I don't know if you're implying the SEC is in cahoots with the hedge funds, and not just any hedge fund but one associated with SAC/Cohen whom the SEC went to war with. I'm sympathetic to your general point but as someone who has spent his whole career in the financial markets that seems vanishingly unlikely to be the case here.

The point is that without short selling option MMs couldn't hedge so no one would sell put options.

It does reduce prices because it increases the supply of available shares, it's just that reducing prices isn't necessarily a bad thing. We want the prices of bad things (e.g. frauds) to go down and more generally we want prices to reflect reality which happens more effectively when informed investors can express negative views through shorting.

Secondary markets provide liquidity for primary investors which makes making primary investments much more attractive. A stock market is just a highly organized kind of secondary market. How many VC investors there would be if they could never sell, or if they could only sell at prices which were random? Without a secondary market all investments would be permanent and that would make investing much less attractive.

Secondary markets also provide important capital allocation benefits. They make it easier for good companies to raise additional capital (e.g. via a rights issue) or buy other businesses (using their shares). They also provide an important benchmarking role allowing non-listed companies to price transactions on the basis of listed company valuations.

If they bought in at 10 and sold between 50-100 if they owned 14% of the free float they would have lost 0.5-1bn. That assumes they didn't increase exposure as the price went up and it ignores the borrow cost.

They then lost a bunch of money on options the exact amount of which we don't know. They also lost a whole bunch of money on other positions going against them which we don't know but can guess at.

To get to a 3bn loss (which btw is just a guessed number based on how much new capital they took)you probably only need to assume they are down around 10% on the rest of the short book (ex GME) which under the circumstances is entirely plausible. That assumes they run something like 200% gross exposure with an evenly balanced book with 12.5bn aum.

I'm not sure where the conspiracy is here. 3bn is a huge number to lose in a week but it looks roughly right given what happened and it's not exactly unprecedented either.

Protecting investors is literally the first part of the SEC's three part purpose statement.

The SEC came into existence because retail investors lost huge amounts of money in the 20's in speculative bubbles. The same thing is going to happen here so the SEC is literally doing what it was set up to do.

I mean you can just do the maths, no? They probably had a few hundred million position (maybe larger) with an entry cost under <10$. There may be some puts in there too which will have been a total loss.

The supply of shares for covering is not constrained by the number of actual shares in issue in the ordinary course of trading (you can create this condition artificially if you want to but people usually don't). There can always be more shares created for short sellers to cover with through shorting itself.

Short squeezes are usually not about supply constraints, they are about forced buying caused by margin requirements. High short interest just indicates a lot of potential forced buyers in the event of a price spike. Except in special cases there is particular magic to having 100% of the float on loan except that this is a high number which suggests many potential forced buyers under the right circumstances.

I don't understand why people think Melvin would do this. Sure they might be prepared to flout SEC rules if they thought they could get away with it but whether they sold is trivially verifiable and they would be guaranteed to get caught. Exiting the position was probably also a precondition of the new investors putting money in.

The comment you pasted is incoherent rambling. It's honestly like something from a qanon forum. Even ignoring that prices don't work how they seem to think the mechanism they suggest for manipulating them doesn't make sense (it would also be very illegal and again trivial to verify for the SEC).

The fact you're confusing option types is not helping your credibility. Writing put options is a bullish move. Melvin may have been writing CALL options (I doubt it to be honest but maybe).

I'm well aware of how citadel is structured thanks, I used to work there.

If you think options dealers go around taking massive unhedged directional bets then you are very misinformed. I don't have any inside knowledge but i'd bet a pound to a penny the options desks have been making out like bandits this week.

This reads like GPT-3 output, like what on earth are you talking about. I don't think you understand how options market making works and for the record citadel is not a prime broker. I'm no citadel fan but the descent of this sub into lunacy conspiracy is something to behold.

I can tell you with some confidence that no partner at any of those funds could care less what some public market long/short outfit thinks and vice versa. Both of these groups of people invest money and that's about where the similarity ends.

The 16" MBP is terrible with an external monitor (or at least mine is with my external monitor). Fans spin up like crazy and the case gets hot enough to fry an egg on. It's the one terrible weakness of an otherwise great machine.

In Europe/UK an IP is PII. This link explains it: https://ico.org.uk/for-organisations/guide-to-data-protectio...

I am a cofounder of a non-VC backed startup. We work together because (1) we're friends (2) like working together (3) have complimentary skillsets. We split the equity 50/50 and receive the same salary. We've been doing it several years and we've never had even a single conversation on the topic, we just assumed from the beginning it was an even split and that's how we went about it.

I run a business in this space. Realistically your chances of having data that is useful to a HF (of any kind) is pretty low so I wouldn't bank on it as a revenue source unless you have a strong reason to believe (1) your data is predictive of something an investor cares about and (2) isn't already covered by other data.

Depends on the sport. The uplift from PED usage in certain sports is obscene. I would guess that most top level amateurs in strength sports are doping or have doped, and traditional doping indicators (e.g. FFMI >25) suggest the same. There are fewer good indicators in endurance and skill sports to work with.

I like David Lewis's description of philosophy as 'measuring the price'. The point being that every belief and theory commits you to others and that the goal of philosophy is to find out what the implications of a given position are and then to weigh the attractiveness of being committed to that position against all the other positions

The full version:

The reader in search of knock-down arguments in favor of my theories will go away disappointed. Whether or not it would be nice to knock disagreeing philosophers down by sheer force of argument, it cannot be done. Philosophical theories are never refuted conclusively. (Or hardly ever. Gödel and Gettier may have done it.) The theory survives its refutation—at a price. Argle has said what we accomplish in philosophical argument: we measure the price. Perhaps that is something we can settle more or less conclusively. But when all is said and done, and all the tricky arguments and distinctions and counterexamples have been discovered, presumably we will still face the question which prices are worth paying, which theories are on balance credible, which are the unacceptably counterintuitive consequences and which are the acceptably counterintuitive ones. On this question we may still differ. And if all is indeed said and done, there will be no hope of discovering still further arguments to settle our differences.

It might be otherwise if, as some philosophers seem to think, we had a sharp line between “linguistic intuition,” which must be taken as unchallengeable evidence, and philosophical theory, which must at all costs fit this evidence. If that were so, conclusive refutations would be dismayingly abundant. But, whatever may be said for foundationalism in other subjects, this foundationalist theory of philosophical knowledge seems ill-founded in the extreme. Our “intuitions” are simply opinions; our philosophical theories are the same. Some are commonsensical, some are sophisticated; some are particular, some general; some are more firmly held, some less. But they are all opinions, and a reasonable goal for a philosopher is to bring them into equilibrium. Our common task is to find out what equilibria there are that can withstand examination, but it remains for each of us to come to rest at one or another of them. If we lose our moorings in everyday common sense, our fault is not that we ignore part of our evidence. Rather, the trouble is that we settle for a very inadequate equilibrium. If our official theories disagree with what we cannot help thinking outside the philosophy room, then no real equilibrium has been reached. Unless we are doubleplusgood doublethinkers, it will not last. And it should not last, for it is safe to say that in such a case we will believe a great deal that is false.

Once the menu of well-worked-out theories is before us, philosophy is a matter of opinion. Is that to say that there is no truth to be had? Or that the truth is of our own making, and different ones of us can make it differently? Not at all! If you say flatly that there is no god, and I say that there are countless gods but none of them are our worldmates, then it may be that neither of us is making any mistake of method. We may each be bringing our opinions to equilibrium in the most careful possible way, taking account of all the arguments, distinctions, and counterexamples. But one of us, at least, is making a mistake of fact. Which one is wrong depends on what there is.”

I think the point being made is that Uber is externalising cost onto society by (among other things) hiring its drivers as gig workers and not as proper employees. That is quite separate from whether or not Uber is making money.