US Politics: Winning is Easy, Governing is Harder

[Larry of the Lawn]

Gizmodo is reporting that Google Play has deleted all negative reviews of Robinhood as "coordinated or inorganic" if they mentioned how it shutout trading in AMC and GME.

[Mindwalker]

Correction: The second policeman who was on duty Jan 6 and who took his own life was not Capitol Hill Police, but Metropolitan.

[Fragile Bird]

Look, orderly markets are what all stock exchanges around the world want. When markets fall a certain percentage curbs are put in place to slow trading down. When markets were plunging last spring some markets shut down. 
 

Trade has been halted in GameStop multiple times in the last week, at least five times yesterday and already once today. It didn’t matter who you traded with, Robinhood or Goldman Sachs, you couldn’t buy (or sell) the stock. All firms have an obligation to trade in an orderly manner, all firms have clauses that allow them to suspend trading in stocks. Robinhood was overwhelmed with volume, and they let people sell out so they weren’t trapped in the stock. There are SEC rules about liquidity.

And, btw, much of the short position has been cleared out. The price of GameStop went up because there were no shares available for the shorts to clear their positions, but according to CNBC this morning there are lots of shares available now, yet, after an initial drop the price has gone up again.

There is good that will come out of this if, finally, I hope, better rules on transparency will be passed. I don’t think you are going to see arbitration clauses set aside, though. But, I’d like to see arbitration decisions published. You aren’t going to see the the rights of firms to suspend trading eliminated either. Brokerage firms are governed by SEC rules setting out financial requirements because, you know, you don’t want your firm to go bankrupt. They also have to have the best interests of all their clients in mind, not just the aggressive traders.

By transparency I also mean the rules should be the same for everyone, the information available should be the same for everyone. Firms see tiers of bids and asks, we should all see that. Stock exchanges are allowed to sell co-location deals, meaning firms have nano-seconds for their computers to see prices faster than anyone else, so the buy at lower prices and sell at higher prices. Michael Lewis explains it all in one of his books. There should be rules about spoof bids, bids thrown in to move a stock price and then withdrawn.

And then there’s the whole issue of short selling, should it be allowed at all? I remember how angry people were (me included) at short sellers in 2008 and 2009, the shorts were just driving companies into the ground. I’ve always viewed the stock market as a place where you can invest in companies, where businesses will succeed because they’re run well or fail if they aren’t. I’ve never shorted a company in my life. What is the purpose of the stock market? That’s a pretty fundamental question IMO.

The hedge fund billionaires made billions off of other people, because they bought low and sold high, or shorted and made money on the difference. Now other people are making money off them. It’s a dog eat dog world out there, tough luck.

[Martell Spy]

Quote

 

“For a party that rails against cancel culture, they sure are canceling a lot of people,” said Burnett. “They love the word cancel culture. Canceling Liz Cheney, that’s the latest. She happened to speak the truth.”

Burnett later aired footage of Gaetz himself calling out cancel culture.

“It seems that Matt Gaetz should probably ... I mean, if he’s consistent, be outraged at Matt Gaetz,” she suggested.

“I’m not for the cancel culture,” Gaetz said in one clip.

“Well, except for, you are,” Burnett commented.

 

Erin Burnett Flips GOP Rep. Matt Gaetz’s ‘Cancel Culture’ Whine Back On Him
“For a party that rails against cancel culture, they sure are canceling a lot of people,” noted the CNN anchor.

https://www.huffpost.com/entry/erin-burnett-gop-cancel-culture-hypocrisy_n_6013b7c8c5b6bde2f5be3308

[Mindwalker]

Interview with Ezra Klein on functional and effective government, the filibuster etc. (I finally got what Bernie is up to wrt reconciliation!):

 

[Fez]

48 minutes ago, Fragile Bird said:

....

The Gamestop situation is crazy, and is a very big deal for the retail investors getting caught up in the bubble, their online brokerages (but for the traditional ones that have bee around a while, it seems like just a server load issue, not a fundamental problem that ones like Robinhood have), and for the hedge funds on the other side. It is also potentially a very big deal for the short seller market as a whole, because of how much mainstream attention it is getting.

However, it is an extremely small, to almost entirely nonexistent, deal for the vast majority of Wall Street. So while we might, might see reforms specific to the short selling market, and maybe also a few small things affecting online retail brokerages, I highly doubt we'll see any changes that affect the whole of the market. There'd be too much pushback from far too many business interests that haven't been villainized in this story to the point of having no political leverage.

[IheartIheartTesla]

I am quoting from an NYT article that I cant access but saw this snippet on the Guardian:

Quote

Some moderate Democrats have joined many Republicans in pushing the administration to narrow the scope of recipients for the direct checks to more directly target low- and middle-income Americans. Such a move would shave hundreds of billions of dollars off the proposal’s overall price tag. Officials privately concede that they would consider reducing the income threshold at which the size of the checks would begin phasing out for individuals and families.

Biden did not announce thresholds for the checks in his proposal, but in December congressional Democrats proposed $2,000 individual checks that would slowly begin phasing out for those earning more than $75,000 a year — and allow some families earning as much as $430,000 a year to receive smaller payments.

Are these "moderate" Democrats worried about the deficit? What exactly is their thinking to weaken the Administration's bargaining position with the Republicans by signalling their intent for supporting a smaller package? 

[Fragile Bird]

1 hour ago, The Great Unwashed said:

I think shorts should be banned (obviously, but would think so even if I were a liberal). It’s for the same reason athletes aren’t allowed to bet on their own games - too much incentive to influence the outcome in your favor. If you don’t like a company’s fundamentals, just don’t buy the stock.

This goes to my question about the purpose of a stock market. I have a very conservative view, as I said. The short sellers have always argued that if you can buy a stock because you expect it ("bet") to go up, you should be able to bet that the stock will go down. I think people can buy options instead of shorting.

1 hour ago, The Great Unwashed said:

I’m a novice at this short-selling stuff; I know how it works, but I don’t understand the underlying thinking and motivations. I’d be interested to get your thoughts on GME’s current price share in light of the shorts unwinding their positions - since GME is massively overvalued right now, wouldn’t the “smart” money be on shorting it once the furor dies down? I don’t see how this situation unfucks itself.

 The thinking behind shorting is that people don't realize they have paid too much money for a company. That's where research comes in. Lots of companies do lie about their business, or hide facts. They're supposed to be punished by the SEC if they are found out. But sometimes a business goes bad for reasons beyond their control. All kinds of stocks fell after 9/11. Boeing stock fell massively after two Max jets crashed, and a lot of people were quite happy Boeing got punished by the shorts for their manufacturing screw-up. Stocks can have a high price because people like the company. A good example is Tesla. The stock price has a history of volatility because analysts have always considered the stock to be over-priced, and Tesla regularly failed to meet production targets. Pretty well all the analysts have tossed in the towel now, because they've looked like fools as the price has soared.

The analysis on GameStop was it has too many physical locations while people are downloading games from their computers. They've had a big drop in sales over the last couple of years. They were probably worth more than the low they hit, the shorts got greedy and got punished. If only politicians got so badly punished for stupidity!

There's also another situation where shorts move in, when mania hits the market. That describes 98, 99, and 2000. People paid ludicrous prices for shares that not only weren't worth it, but the companies literally had no earnings. All kinds of new companies had IPOs based on a business idea with barely any business being done. The problem is the bubble that follows can last a long time. More and more people buy stocks, make money, and decide they are masters of the universe who can do no wrong. Eventually the bubble bursts and people lose a lot of money. I remember someone who had a stock that had dropped 50%, and who I begged to sell because it could drop another 50, 60, or 70%. He told me "of course it won't, people will lose too much money, how can that money disappear?" And once it fell I told him to sell and take the loss, and he told it would go back up! Poor fool.

Start-ups learned a lesson out of the crash, and decided not to IPO until they had built a solid business with actual customers and earnings. For a long time analysts have pointed this out as the major difference between now and the late 90s that has justified their high prices. However, the longer people have been stuck at home during the pandemic, the more interest in the market has increased. The stock trade volume numbers have been amazing, the volume numbers of options have been staggering, tens of millions more than previous years. Hell, than previous months! This feels like a bubble, but as I said, bubbles can last for a while.

The GME situation is quite bizarre, because there is this large group of people who want to screw the shorts. I have never looked at that Reddit page, but I have heard people were saying things like, "you may lose money, but it's in a good cause! Screw the shorts!" If you have a million people all willing to spent $500 or $1000 or more and who are willing to blow that money to achieve a purpose, then it's very difficult to figure out what to do. For one thing, what if they are willing to keep it up for months? Short sellers are in there, thinking it can't last long, but I'm certainly not willing to either buy the stock or sell it short. Maybe it will end in a week, maybe it will end in a month, maybe longer. Someone will eventually be left holding the bag, but in a Good Cause, right?

I would think it would be a cursed stock no short seller would ever want to touch again, but a lot of these guys (and the vast majority are guys) are very aggressive and would love to make money off people they likely view as fools, ripe for the plucking. 

[Kalbear]

@Fragile Bird, I'm totally with you and obviously the very first thing that we should do to stop this madness is make it so that if you buy a stock you have to hold on to it for no less than 1 year. That way the company can use that money to build up infrastructure and do dividends. 

Once you do that, then let's talk about banning shorts.

[Mlle. Zabzie]

5 minutes ago, Kalbear Total Landscaping said:

@Fragile Bird, I'm totally with you and obviously the very first thing that we should do to stop this madness is make it so that if you buy a stock you have to hold on to it for no less than 1 year. That way the company can use that money to build up infrastructure and do dividends. 

Once you do that, then let's talk about banning shorts.

What in the name of Sam Hill are you talking about? This is errant nonsense.  When you buy stock in the equity markets, 95% of the time the company in question is not receiving any proceeds.  The company only receives proceeds when you buy in a public offering BY the company (e.g., stock registered on an S-1 or S-3).  When you trade in stock you are trading your portfolio.  Your holding period is irrelevant to the company in question except to the extent that high velocity trading affects its ability to repurchase its own stock at attractive prices (which, to remind you all, a lot of you don’t like as a policy matter either).  

[Fragile Bird]

Just now, The Great Unwashed said:

But, otoh, I’m not the person who goes looking for marks to fleece either, so I’m wondering what happens when dogma goes up against naked avarice.

Yup. This whole week has been fascinating.

[DMC]

7 minutes ago, The Great Unwashed said:

But, otoh, I’m not the person who goes looking for marks to fleece either

Says the guy trying to start a cult.

[Fragile Bird]

8 minutes ago, Mlle. Zabzie said:

What in the name of Sam Hill are you talking about? This is errant nonsense.  When you buy stock in the equity markets, 95% of the time the company in question is not receiving any proceeds.  The company only receives proceeds when you buy in a public offering BY the company (e.g., stock registered on an S-1 or S-3).  When you trade in stock you are trading your portfolio.  Your holding period is irrelevant to the company in question except to the extent that high velocity trading affects its ability to repurchase its own stock at attractive prices (which, to remind you all, a lot of you don’t like as a policy matter either).  

I was just about to say that to Kal. There is a lot of talk right now about requiring a longer holding period. One year is not going to fly. I’ve been hearing a day, 4 days, a week. I was actually shocked to hear a rule was introduced requiring a hold of 40 seconds, because the computers were buying and selling within seconds. I think 40 seconds was done because the stock exchanges were having such trouble keeping up.

I did like his post for the idea that some kind of reforms have to be brought in, people really are angry out there about the unfairness they see in the markets. People want to invest in businesses without being massively manipulated, which is what they see now. I mentioned the other day that Discord banned WallStreetBets because of violent and ugly language. I assume that language was directed at Wall Street traders.

[Kalbear]

10 minutes ago, Mlle. Zabzie said:

What in the name of Sam Hill are you talking about? This is errant nonsense.  When you buy stock in the equity markets, 95% of the time the company in question is not receiving any proceeds.  The company only receives proceeds when you buy in a public offering BY the company (e.g., stock registered on an S-1 or S-3).  When you trade in stock you are trading your portfolio.  Your holding period is irrelevant to the company in question except to the extent that high velocity trading affects its ability to repurchase its own stock at attractive prices (which, to remind you all, a lot of you don’t like as a policy matter either).  

I'm aware, and I'm trying to point out the obvious stupidity of implying that the stock market should be based on the quality of the company in some way. That made sense when dividends were the primary way that people made any money on the stock, but that time has long, long, LONG passed, and decrying short selling when it's just a symptom of the gambling involved is ridiculous. 

[Mlle. Zabzie]

1 minute ago, Fragile Bird said:

I was just about to say that to Kal. There is a lot of talk right now about requiring a longer holding period. One year is not going to fly. I’ve been hearing a day, 4 days, a week. I was actually shocked to hear a rule was introduced requiring a hold of 40 seconds, because the computers were buying and selling within seconds. I think 50 seconds was done because the stock exchanges were having such trouble keeping up.

I did like his post for the idea that some kind of reforms have to be brought in, people really are angry out there about the unfairness they see in the markets. People want to invest in businesses without being massively manipulated, which is what they see now. I mentioned the other day that Discord banned WalkStreetBets because of violent and ugly language. I assume that language was directed at Wall Street traders.

Honestly for most of us, we are holding for at least 1 year in the states because we want long term capital gain.  Paying a top rate of 21% is way better than a top rate of 37% (not taking into account state taxes and the Medicare tax on net investment income).  Most American humans (Robin Hood aside) don’t actually day trade.  They don’t even own individual stocks.  Most American humans own managed portfolios either through mutual fund investments or through 401K plans.  It’s why Blackrock and Vanguard have outsized influence in the market.  Blackrock has sent every public company where it is a 5% investor a letter telling them they need to have certain plans in place on climate change and on diversity and that they will support Board challenges if the companies don’t toe the line.  It is a fascinating time to watch the market.

[Kalbear]

3 minutes ago, Fragile Bird said:

I was just about to say that to Kal. There is a lot of talk right now about requiring a longer holding period. One year is not going to fly. I’ve been hearing a day, 4 days, a week. I was actually shocked to hear a rule was introduced requiring a hold of 40 seconds, because the computers were buying and selling within seconds. I think 40 seconds was done because the stock exchanges were having such trouble keeping up.

I did like his post for the idea that some kind of reforms have to be brought in, people really are angry out there about the unfairness they see in the markets. People want to invest in businesses without being massively manipulated, which is what they see now. I mentioned the other day that Discord banned WallStreetBets because of violent and ugly language. I assume that language was directed at Wall Street traders.

To be clear - people do not want to 'invest' in business. They want  to gamble on businesses and then sell that stock later. As @Mlle. Zabzie points out buying stock is not remotely anything to do with investing in business unless you're buying stock off of an IPO or off of a new issuance of stock. 

My point is that your conservative viewpoint of people wanting to invest in businesses has not been accurate for 80 years, and complaining about it now when people other than rich investors are gaming the system is super sketchy.

[Fragile Bird]

6 minutes ago, Kalbear Total Landscaping said:

To be clear - people do not want to 'invest' in business. They want  to gamble on businesses and then sell that stock later. As @Mlle. Zabzie points out buying stock is not remotely anything to do with investing in business unless you're buying stock off of an IPO or off of a new issuance of stock. 

My point is that your conservative viewpoint of people wanting to invest in businesses has not been accurate for 80 years, and complaining about it now when people other than rich investors are gaming the system is super sketchy.

Lol, let me unlike your post!

Sorry, in the world I live in people also set up portfolios for investing purposes. People also trade stocks to make money as fast as they can. I’m talking about individuals, Wall Street and the very rich is another world. The 80/20 rule applies, 80% of stocks are owned by 20% of the people.

[Martell Spy]

13 minutes ago, DMC said:

Says the guy trying to start a cult.

Most cult leaders are in it for the sex, not the money.

[Mlle. Zabzie]

4 minutes ago, Kalbear Total Landscaping said:

To be clear - people do not want to 'invest' in business. They want  to gamble on businesses and then sell that stock later. As @Mlle. Zabzie points out buying stock is not remotely anything to do with investing in business unless you're buying stock off of an IPO or off of a new issuance of stock. 

My point is that your conservative viewpoint of people wanting to invest in businesses has not been accurate for 80 years, and complaining about it now when people other than rich investors are gaming the system is super sketchy.

I think that is too narrow a view.  I think there are many kinds of investors in the market right now.  There are the high velocity funds, which I think is what everyone is after right now (DE Shaw, among others, were in the vanguard, no pun intended, of this).  But there are also the pension plans, the value mutual funds, the income mutual funds, etc.  Many of them are buying long term positions in companies.  The company may not get the proceeds, but the buyers are buying for a value proposition (either because of an income stream from dividends or because it is an expected growth stock).  Furthermore there are additional classes of investors in the market providing capital - from direct lender shops providing mezz debt and preferred equity, to private equity funds making cash investments in convertible preferred.

Honestly, if you really want to get pissed off about the market, you should be instead focused on SPACs.  This whole gamestop thing is just an entertaining fluffy story.

[Kalbear]

2 minutes ago, Fragile Bird said:

Lol, let me unlike your post!

Sorry, in the world I live in people also set up portfolios for investing purposes.

Sure, and they're long-term gambling. They're still not (largely) making money off of dividends. They're not attempting to actually give that company money (what the normal definition of 'invest' means). 

2 minutes ago, Fragile Bird said:

People also trade stocks to make money as fast as they can. I’m talking about individuals, Wall Street and the very rich is another world. The 80/20 rule applies, 80% of stocks are owned by 20% of the people.

The vast majority of people doing anything with the stock market are doing it as part of long-term gambling to sell those stocks at a later date. But it's certainly not investing in the company.

2 minutes ago, Mlle. Zabzie said:

I think that is too narrow a view.  I think there are many kinds of investors in the market right now.  There are the high velocity funds, which I think is what everyone is after right now (DE Shaw, among others, were in the vanguard, no pun intended, of this).  But there are also the pension plans, the value mutual funds, the income mutual funds, etc.  Many of them are buying long term positions in companies.  The company may not get the proceeds, but the buyers are buying for a value proposition (either because of an income stream from dividends or because it is an expected growth stock).

Right - long term gambling. Very little money is in dividends, and this is clear from, ya know, dividend announcements. It's far better for the company to buyback their stock to increase their stock price (which is also what the stock owners want) and that's exactly what we see. We see almost no dividends, but absurd amounts of stock buybacks. 

2 minutes ago, Mlle. Zabzie said:

 Furthermore there are additional classes of investors in the market providing capital - from direct lender shops providing mezz debt and preferred equity, to private equity funds making cash investments in convertible preferred.

Sure, and none of that is the stock market, at least not directly. 

2 minutes ago, Mlle. Zabzie said:

Honestly, if you really want to get pissed off about the market, you should be instead focused on SPACs.  This whole gamestop thing is just an entertaining fluffy story.

Oh, there's absurd amounts of ability to get mad at the stock market, but right now I don't want to get mad at  that - I want to get mad at the asshats who are freaking out about Gamestop because people other than them are gaming the markets and they find it unfair. Fuck those people right in the ear.