Concern over Gamestop and AMC?

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Nowizard
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Concern over Gamestop and AMC?

Post by Nowizard »

The actionable aspect of this question involves consumer psychology and the potential for market manipulation. Is it of sufficient concern to consider with individual stock or even fund purchases? What is the process leading to the extremely rapid and significant increase in AMC and Gamestop stocks after periods of more typical increases and decreases? Does it suggest the possibility of overall market manipulation being greater than typically considered?

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nisiprius
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Re: Concern over Gamestop and AMC?

Post by nisiprius »

I have no doubt at all that there is market manipulation going on in microcap stocks, which is a good reason not to invest in individual microcaps. For heaven's sake, Roaring Kitty Posts THIS

Image

and the price of Gamestop doubles. Of course he's manipulating the price of Gamestop by posting this, but imagine trying to prove it. No stock is mentioned, no claim that he's doing or about to do anything, just a crude sketch of an unidentified guy leaning forward in a chair. And the price of Gamestop doubles. Imagine the SEC trying to take action on that.

But I see no reason why this should concern indexers, apart from indignation and The Principle Of The Thing. And of course general concern about an apparent reemergence in general market mania.

The stock market is big. Individual stocks are small.

Gamestop or AMC could go to zero or could grow 10X and it wouldn't have any visible effect on VTI.

I created this chart in 2021. You can't do it as a pie chart, by the way, the pie slices for Gamestop and AMC are too small to be visible. Current market cap is $18.49 billion for Gamestop, $3.39 billion for AMC so no need to update the chart.

Image
Last edited by nisiprius on Tue May 14, 2024 9:40 am, edited 4 times in total.
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BitTooAggressive
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Re: Concern over Gamestop and AMC?

Post by BitTooAggressive »

Well I don’t do individual stocks so for me it is not a practical issue.

There was a huge amount of short selling going on relative to the number of actual shares. So when other investors started purchasing shares it made the price go up even more and more piled in and eventually the shares had to be returned so it caused even more buying.

Borrowing a stock that is already greatly leveraged is not something I want any part of.
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Re: Concern over Gamestop and AMC?

Post by Kenkat »

All the short sellers apparently did not learn their lesson last time, so it’s time for a new semester of “Short Selling Risks 101” to begin.
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Re: Concern over Gamestop and AMC?

Post by conservativeinvestor »

You are concerned about some guy on twitter and a single stock being manipulated but not about Jim Cramer or the other talking heads on the nightly news and other financial media doing the same thing?

The difference here is that there is an army of redditors and "normal" people that like Gamestop and AMC as companies more for nostalgia / personal resaons than financial and don't like "smart money" doing all the short calls, so they are ready to rally the "apes" to try to stick it to the man.

Is it manipulation? pretty clearly. Is it different than how the other financial "smart money" works to manipulate the market, that doesn't seem as clear.
Last edited by conservativeinvestor on Tue May 14, 2024 9:46 am, edited 5 times in total.
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Re: Concern over Gamestop and AMC?

Post by ScubaHogg »

conservativeinvestor wrote: Tue May 14, 2024 9:31 am You are concerned about some guy on twitter and a single stock being manipulated but not about Jim Cramer or the other talking heads on the nightly news doing the same thing?
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Re: Concern over Gamestop and AMC?

Post by Catalina25 »

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Re: Concern over Gamestop and AMC?

Post by Clever_Username »

I'm not concerned about any particular individual company or stock, at least not as to how it affects my portfolio or planning.
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Re: Concern over Gamestop and AMC?

Post by muffins14 »

Some people need hobbies. I feel bad for the management of GameStop or AMC that have do to manage budgets and investor expectations when this kind of random gambling is going on.
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Re: Concern over Gamestop and AMC?

Post by rockstar »

This is entertaining. If you’re bored, throw some gambling money at these names. But expect to lose most of it. If you win, consider it luck like a lottery ticket.

I do find it fascinating from a behavioral aspect.

I’m looking at 1 day graphs of AMC and GME, and they look the same. Mind blown.
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Re: Concern over Gamestop and AMC?

Post by Hacksawdave »

GME makes up 0.0064% of VTSAX total stock market. In my case this amounts to about $12. AMC is even smaller at 0.0019% or roughly $3.25. They are not included in the S&P 500 where the bulk of my index funds are invested. So, with all this ‘activity’ going on, what would be my action plan with such a generous sum? Absolutely nothing.

There are reasons why people lose ‘everything’ in the stock market and why 80% plus underperform the indices. By buying and holding the index, I became a multi-millionaire by holding companies such as Enron, General Motors, Lehman Brothers, Pacific Gas and Electric, TWA, WorldCom….
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Re: Concern over Gamestop and AMC?

Post by Hacksawdave »

conservativeinvestor wrote: Tue May 14, 2024 9:31 am The difference here is that there is an army of redditors and "normal" people that like Gamestop and AMC as companies more for nostalgia / personal resaons than financial and don't like "smart money" doing all the short calls, so they are ready to rally the "apes" to try to stick it to the man.

Is it manipulation? pretty clearly. Is it different than how the other financial "smart money" works to manipulate the market, that doesn't seem as clear.
Mostly it was not investment related as mentioned. Many just wanted to ‘stick it to the 1%ers’ without realizing that a $12B hedge fund is really dinky in size when compared to a $1.1 trillion index fund owned by millions of shareholders. Unfortunately, many lost just about all they invested during the frenzy.

CNBC mentioned that AMC sold some shares during yesterday’s rally to realize some capital. Makes sense.
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Re: Concern over Gamestop and AMC?

Post by Clever_Username »

Hacksawdave wrote: Tue May 14, 2024 11:15 am GME makes up 0.0064% of VTSAX total stock market. In my case this amounts to about $12. AMC is even smaller at 0.0019% or roughly $3.25. They are not included in the S&P 500 where the bulk of my index funds are invested. So, with all this ‘activity’ going on, what would be my action plan with such a generous sum? Absolutely nothing.

There are reasons why people lose ‘everything’ in the stock market and why 80% plus underperform the indices. By buying and holding the index, I became a multi-millionaire by holding companies such as Enron, General Motors, Lehman Brothers, Pacific Gas and Electric, TWA, WorldCom….
You sure know how to pick 'em ;-)

I really like that expression, by the way, although I'd be more inclined to say "... despite holding companies such as ..." -- great way to phrase the situation.
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Re: Concern over Gamestop and AMC?

Post by DetroitRick »

I am an individual stock investor to some extent, but no this doesn't concern me at all. There is the manipulation that you can see, and that which you can't. Both have always existed. In either case, I don't use social media or general public opinions to make MY stock choices, and that is all that matters to me. My choices are made for deeper reasons, with deeper research for my rarer investments in small caps.

But all manipulation has a finite life and will work itself out eventually. If people want to have some fun, that's fine by me. Group think is always, always dangerous. But in this case, I largely think folks are just having some fun. I won't wag my finger at them, even if this is something I personally would avoid. Whether individuals themselves succeed or fail, I bet that there will be good lessons learned. Either way, they won't bring down the market. It's part of the game.
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Re: Concern over Gamestop and AMC?

Post by billaster »

It's funny that the so-called respectable traders and market analysts try to manipulate the market every day but some inconsequential internet dude does it and beats them at their own game and they get all righteous and up in arms. Oh, the humanity!
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Re: Concern over Gamestop and AMC?

Post by rockstar »

billaster wrote: Tue May 14, 2024 11:43 am It's funny that the so-called respectable traders and market analysts try to manipulate the market every day but some inconsequential internet dude does it and beats them at their own game and they get all righteous and up in arms. Oh, the humanity!
Listened to the Citadel guy on the drive in to work talking about how great they were because their fees weren’t low. The guy said: would you go to a low cost brain surgeon? Then he went on about pricing power.

These guys are really a piece of work. They’re really good at separating rich people from their money.
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Re: Concern over Gamestop and AMC?

Post by conservativeinvestor »

rockstar wrote: Tue May 14, 2024 10:50 am This is entertaining. If you’re bored, throw some gambling money at these names. But expect to lose most of it. If you win, consider it luck like a lottery ticket.

I do find it fascinating from a behavioral aspect.

I’m looking at 1 day graphs of AMC and GME, and they look the same. Mind blown.
Yes it has been quite the show to watch. I don't have any money on the table, but it has been fun to watch from the sidelines.
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Re: Concern over Gamestop and AMC?

Post by Wanderingwheelz »

billaster wrote: Tue May 14, 2024 11:43 am It's funny that the so-called respectable traders and market analysts try to manipulate the market every day but some inconsequential internet dude does it and beats them at their own game and they get all righteous and up in arms. Oh, the humanity!
Mr Gill might be more consequential than 99% of the people you think are more influential than he is. Taylor Swift may only be marginally more influential than he is at this moment in time. He got the whole world talking and acting in irrational ways with one dumb tweet. It’s pretty amazing.
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Re: Concern over Gamestop and AMC?

Post by rogue_economist »

What concerns me about this is the potential for spillover and domino effects. Yes as index investors we aren't going to have much direct impact from owning these stocks either way but history shows that might not be the relevant metric.

Often crashes are the result of a series of increasingly damaging events which are not rational but nevertheless happen. 1929 had a definite flavor of that, with clueless consumers putting money in individual stocks being manipulated by larger players behind the scenes.

Not to say that this will cause a crash, but with the markets already on edge over stubborn inflation and the uncertainty of the Federal Reserve's next move I find playing these stupid games akin to playing with matches. Wasteful, momentarily fun for those with latent pyromaniac tendencies, usually harmless, but occasionally devastating. I'd prefer the SEC to put a stop to this nonsense.
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conservativeinvestor
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Re: Concern over Gamestop and AMC?

Post by conservativeinvestor »

rogue_economist wrote: Tue May 14, 2024 12:20 pm What concerns me about this is the potential for spillover and domino effects. Yes as index investors we aren't going to have much direct impact from owning these stocks either way but history shows that might not be the relevant metric.

Often crashes are the result of a series of increasingly damaging events which are not rational but nevertheless happen. 1929 had a definite flavor of that, with clueless consumers putting money in individual stocks being manipulated by larger players behind the scenes.

Not to say that this will cause a crash, but with the markets already on edge over stubborn inflation and the uncertainty of the Federal Reserve's next move I find playing these stupid games akin to playing with matches. Wasteful, momentarily fun for those with latent pyromaniac tendencies, usually harmless, but occasionally devastating. I'd prefer the SEC to put a stop to this nonsense.
This is just a replay of the GME excitement from 2021. We've already been here and done this, they even made a documentary. It isn't rational but there is no bigger picture, it's a bunch of people brining excitment to their lives while trying to win the stock lottery and prove a point.
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Re: Concern over Gamestop and AMC?

Post by rockstar »

conservativeinvestor wrote: Tue May 14, 2024 12:04 pm
rockstar wrote: Tue May 14, 2024 10:50 am This is entertaining. If you’re bored, throw some gambling money at these names. But expect to lose most of it. If you win, consider it luck like a lottery ticket.

I do find it fascinating from a behavioral aspect.

I’m looking at 1 day graphs of AMC and GME, and they look the same. Mind blown.
Yes it has been quite the show to watch. I don't have any money on the table, but it has been fun to watch from the sidelines.
Nothing makes much sense today. Powell comes out and says rate higher for longer. PPI comes out hot. Treasury yields drop. Day to day stuff is comedy.

I bought a bit of AMC to participate in this nonsense. It’s less than 0.1% of my portfolio. So it won’t matter one way or another. But it gives me something to watch while the rest of my portfolio goes to the moon.
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Re: Concern over Gamestop and AMC?

Post by rogue_economist »

conservativeinvestor wrote: Tue May 14, 2024 12:44 pm
rogue_economist wrote: Tue May 14, 2024 12:20 pm What concerns me about this is the potential for spillover and domino effects. Yes as index investors we aren't going to have much direct impact from owning these stocks either way but history shows that might not be the relevant metric.

Often crashes are the result of a series of increasingly damaging events which are not rational but nevertheless happen. 1929 had a definite flavor of that, with clueless consumers putting money in individual stocks being manipulated by larger players behind the scenes.

Not to say that this will cause a crash, but with the markets already on edge over stubborn inflation and the uncertainty of the Federal Reserve's next move I find playing these stupid games akin to playing with matches. Wasteful, momentarily fun for those with latent pyromaniac tendencies, usually harmless, but occasionally devastating. I'd prefer the SEC to put a stop to this nonsense.
This is just a replay of the GME excitement from 2021. We've already been here and done this, they even made a documentary. It isn't rational but there is no bigger picture, it's a bunch of people brining excitment to their lives while trying to win the stock lottery and prove a point.
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Re: Concern over Gamestop and AMC?

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