Revenge Of The Excluded: The Biggest Short Squeeze In History

"It was a placid week in the US stock market ā€“ provided one was a long-only mutual fund manager," Goldman's David Kostin joked on Friday evening," "However, life was very different last week if one managed a hedge fund." Yes, indeed. On some measures, last week constituted the largest, most acute short squeeze in a quarter century. Over the past three months, for example, a basket of 50 Russell 3000 stocks with market caps above $1 billion and the largest short interest as a share of float,

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10 thoughts on “Revenge Of The Excluded: The Biggest Short Squeeze In History

  1. I took a look at the reddit/wsb pages.

    Plenty of account screenshots could be doctored of course but some of the starting stakes are in the 10s of thousands dollars. Now, if you can put $50K on RH, I’ve got a hard time calling you ‘poor’.

    BUT… you might be over-educated and under-employed.

    The language used is definitely reminiscent of other instances where mostly white, mostly male mostly young, mostly urbanites but nonetheless feeling deprived/excluded from The American Dream (TM) have protested. The politics of it might be less than straightforward i.e. you can have altt-right guys in there (in the original sense ie guys faking conservatism or neoreactionary belief to get a rise out of liberals as well as the newer sense ie when those guys eventually lost some of the irony and started believing in that stuff) as well as Bernie Bros – both united in the rejection of the status quo and their nihilistic approach to “politics”.

    That’s how you get to 1,800% return and scream “MORE! HODL THE LINE! WE GOT THEM BY THE SHORTS” (pun intended, i imagine)

  2. Ray Dalio is speaking out about the anger lurking just beneath the surface and the pleasure derived from inflicting pain upon “the other side”. We saw that earlier this month in reaction to the capitol riots…we are seeing it now in the markets. Ray himself has to be a little uneasy given where he resides in the strata of life.

    Go on WSB right now and see the anger directed at Steve Cohen. Andrew Left has already capitulated. This is both good and bad…change is needed.

    1. Change is so needed. It’s so needed across many different arenas of our social, economic, and political, systems.

      The different groups of elites love stasis. They love it when they are on top and things don’t change. They love a divided US Senate after rules are put in place that they benefit from. They must love this plague.

      They fear most the dirty people who never made it, because they are losers, if you believe some in at least one group of elites, organizing around the platform that the real problem is the people in charge.

      People have been purposefully divided, to fight amongst ourselves. (So duh!) This strategy is always deployed and is immensely successful, even more so now that Daniel Kahneman’s ideas escaped from the lab.

      We could be in for a few years of drama. Blue chips and dividend aristocrats seem like a good place to plop down a chunk for the show. With another chunk long volatility. Of course, gold is just a hunk of metal, with an infinite supply just below the lithosphere, with no role as insurance in one’s portfolio, so that’s out.

  3. Turchin. I’ve been thinking about Turchin’s thesis and the over production of elites. 30-somethings with a CFA and a few years of experience.

    This is a different demographic from “Deaths of Despair.” I’m thinking more like the Steve Bannon’s, cast out by the elites because there is no more room at the top, then turning on them, with the aim of undermining them and tearing the whole thing down.

    Silver is one of the exposed underbellies of the screwed up financial system that has screwed over so many people the last 40 years. The WSB strategy looks pretty good to me; but, I’m just a schmuck in the back row of the balcony who brings in my own PBR for the show.

    Go on and go forward on silver, WSB. The volatility will be amazing to watch. Can’t wait to read the Heisenberg Report articles on what is sure to be a period of high drama.

    Bring it on, WSB, use silver. So, a systematically important institution like JPM loses tens of billions. So what. Screw ’em and all the other skimmers and takers on Wall Street who do not add to the productive capacity of our nation’s economy.

    1. Was just out on WSB…they call themselves “degenerates”! hahaha ‘nuf said. 7M “degenerates” are joiners of the Reddit sub.

      Go ahead, Wall Street, speak out against America degenerates. And the SEC, just a matter of time before they clamp down on the stock trading freedoms of American degenerates.

      Can’t wait to hear elite-membership cardholder J. Dimon denounce a group of American degenerates during an invited lunch at a Midtown athletic club after his systematically important financial institution loses tens of billions.

      (meme inserted here of anonymous guy eating popcorn)

      1. Let’s not turn Heisenberg Report into a Reddit forum.

        I appreciate the enthusiasm, but please remember that I don’t, in any way, shape, or form, condone anything to do with populism as it’s manifested over the past four years across western economies.

        Steve Bannon, for example, is a cancer on society.

        This site is a place for intelligent debate around markets, politics, and socioeconomic issues.

        It is NOT a Reddit thread.

        The tone of comments should not (and will not) reflect a Reddit thread.

        Nor does this site condone any kind of rhetoric about “bringing the whole thing down.”

        I just want to make that clear so there’s no confusion — especially for new subscribers and/or new readers.

    2. LOL. Brilliant observation, hadn’t thought about this segment of the population before. Hits a bit close to home. You (or this fellow Turchin) are definitely on to something. Thanks for the chuckle… and reminder to go buy some SLV.

  4. It feels as though we live in a time when people want to test the limits of everything: finance/politics/whatever. certain that they “know” things ‘cos they read it online and they found others who “know” the same “facts” This overconfidence is what brings them to gamble money they shouldn’t, or to do mad stuff like attacking the capitol, safe in the knowledge that the mob is always wiser than everyone else. The internet never came with instructions: facts and maths and logic always ruin a good story, common sense is not that common and he who shouts the loudest is surely the wisest, and we must follow .
    Despite all I read I cannot make any predictions about the future, for I can scarcely understand the present. I have read many of the comments on wsb about gme, the gist of it is if hodor can (something about diamonds)…….something,something, something……robinhood(boo)…then they’ll all get Teslas and swimming pools…….and oh yes evil hedge funds …yes them too.And amongst all the poor grammer and unfinished logic it is hard to avoid the anger and rage they feel, and how if they could win just this once the world would be a better place…….and they might have enough time to put their winnings on that nice chestnut mare in the third and stick it to the bookies as well

  5. Hard for me to imagine there are not a lot of hedge funds that don’t now have some lurkers on WSB and Reddit. Staying ahead of this game could be fruitful if one catches the next wave w/o getting thrashed, but it seems to me the pros would be all over sucking the money out of any future moves. Am I missing something?

  6. Concur–HFs are more than likely scanning reddit, building models that scan for surges of momentum spikes in illiquid stocks that have relatively high short interest. They are co-conspirators, it is naive not to think so.

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