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I don't think I've ever seen a market dive like it did today

Discussion in 'Stocks & Investments' started by kairo, Oct 6, 2020.

  1. Jan 13, 2021 at 8:55 AM
    #1241
    kairo

    kairo [OP] Well-Known Member

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    There's at least one more day of this coming. There's still tons of shorts that need to be covered by the 15th
     
  2. Jan 13, 2021 at 8:59 AM
    #1242
    pdaddy

    pdaddy WeLl-KnOwN mEmBeR

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    Does your brokerage app show you that info? I don’t think Schwab does
     
  3. Jan 13, 2021 at 9:00 AM
    #1243
    kairo

    kairo [OP] Well-Known Member

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    Not my research, just listening to people who are smarter than me and have fancier apps and tools
     
  4. Jan 13, 2021 at 9:22 AM
    #1244
    slodoug

    slodoug Well-Known Member

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    going in on ZOM
     
  5. Jan 13, 2021 at 9:53 AM
    #1245
    TreeFortRichard

    TreeFortRichard Hmmm..$o many repairs?

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    I am holding still...I did a TON of reading last night...
    I have only 2 major concerns from the ZOM SEC filings, and DESPITE these I am still holding. One is the involvement of SABBY INVESTMENTS LLC....They have a history of being paid to pump stocks and there's not a good track record for their involvement. They were busted shorting their own shares once...They are now a greater than 5% holder by compensation. See the amendment to the SC 13G filing on 1/5/21.
    Second issue is the exact wording from the 10-Q filed last quarter, the quarterly report... Page 30 "We do not have any products approved for sale, have not generated any revenue from product sales since our inception and do not expect togenerate any revenue from the sale of products in the near future. If our development efforts result in clinical success or collaboration agreements with thirdparties for any of our product candidates, we may generate revenue from those product candidate"
     
  6. Jan 13, 2021 at 10:03 AM
    #1246
    TreeFortRichard

    TreeFortRichard Hmmm..$o many repairs?

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    TD ameritrade does...but it's a randomly updated stat...I'm not sure the polling...If it's monthly, weekly....
    But if it were 150% short we can calculate the volume needed to cover...
    Market cap/price = total shares outstanding. But TD also tells you that. 69M So to cover you need 105M shares traded for a minimum coverage of shorts assuming EVERY share bought is to cover. Mind you people will be shorting THIS run up....
    SO Vol today so far is 104M so you could assume about 70% coverage...

    [​IMG]
     
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  7. Jan 13, 2021 at 10:51 AM
    #1247
    slodoug

    slodoug Well-Known Member

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    at least my LPTH popped today. missed another GEVO run. and shoulda got back in on CHWY when it dipped. got some BFARF
     
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  8. Jan 13, 2021 at 1:37 PM
    #1248
    pdaddy

    pdaddy WeLl-KnOwN mEmBeR

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    Ah a fellow BFARF connoisseur:proposetoast:
     
  9. Jan 13, 2021 at 1:37 PM
    #1249
    TreeFortRichard

    TreeFortRichard Hmmm..$o many repairs?

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    $GME vol 140M today...most probably finally covered.
     
  10. Jan 13, 2021 at 1:39 PM
    #1250
    TreeFortRichard

    TreeFortRichard Hmmm..$o many repairs?

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    Oh...I thought you said
    [​IMG]
     
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  11. Jan 13, 2021 at 1:51 PM
    #1251
    kairo

    kairo [OP] Well-Known Member

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    People are doing math and saying probably not. *shrug* I dunno, I just follow the trends.

    I bought that dip at $32 with a few more grand. Supposedly it hasn't even popped yet.

    I'll either be a genius or poor in the next week.

    Sold half my CHWY shares today at $110
     
  12. Jan 13, 2021 at 1:53 PM
    #1252
    Iwilltaco

    Iwilltaco Well-Known Member

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    Hasn’t even popped yet! That seems crazy
     
  13. Jan 13, 2021 at 1:53 PM
    #1253
    TreeFortRichard

    TreeFortRichard Hmmm..$o many repairs?

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    Or you set a stop loss and consider that your wager risk...
     
  14. Jan 13, 2021 at 1:55 PM
    #1254
    kairo

    kairo [OP] Well-Known Member

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    Stops are set :bananadead:. Let's gooooo GME
     
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  15. Jan 13, 2021 at 1:58 PM
    #1255
    kairo

    kairo [OP] Well-Known Member

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    Dow Jones:

    "A long-buying tsunami ... is the primary factor for the price move,' short-selling expert from S3 says

    GameStop Corp. (GME) shares soared Wednesday in an apparent short squeeze, but one analyst who specializes in information on short selling doesn't think that's the case.

    GameStop shares surged more than 60% Wednesday -- which would be its largest one-day percentage gain ever, according to Dow Jones data --more than a week after short interest on the videogame retailer's stock exceeded the number of shares outstanding. At last check, more than 125 million shares had traded hands in the day's session, compared with a 52-week daily average volume of 6.5 million shares.

    While GameStop has 69.8 million shares outstanding, short interest on the stock rose to 71.2 million shares on Dec. 31 from a previous 68.1 million shares, according to FactSet data.

    On Monday, GameStop shares finished up 10% (https://www.marketwatch.com/story/g...g-agreement-with-activist-investor-2021-01-11) after it reached an agreement with activist investor RC Ventures to add three of its members to the board, and advanced less than 0.1% on Tuesday. Also, on Monday, the company said holiday same-store sales rose 4.8% and that digital sales had jumped 309%.

    While noting that shorts definitely were a part of the buying binge, Ihor Dusaniwsky -- the head of predictive analytics at financial technology and analytics firm S3 Partners, which specializes in analyzing data on short selling -- said he doesn't agree that GameStop's price surge was the result of a squeeze.

    "GME's board shake-up and stronger holiday sales is causing a long-buying tsunami, which is the primary factor for the price move," Dusaniwsky said in emailed comments. "While I agree that we are seeing some shorts squeezed out of their positions due to massive mark-to-market losses today, this is much like the chicken-and-egg question -- did long buying lead to short covering\squeeze or short covering\squeeze lead to long buying?"

    Dusaniwsky believes it's the former.

    "We will not be seeing a massive drop in shares shorted over the next few days, more like a 10%-20% drop which would mean 7 to 14 million of shares covered, which is nowhere near the almost 70 million shares traded this morning," the analyst said. "Long buyers are the primary force driving GME's stock price up. "

    GameStop shares have skyrocketed more than 500% in the past 12 months, compared with a 16% gain in the S&P 500 index and a 42% rise in the Nasdaq Composite Index .

    -Wallace Witkowski"
     
  16. Jan 13, 2021 at 2:01 PM
    #1256
    kairo

    kairo [OP] Well-Known Member

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    Hello again folks. I’ve taken some time to do my own DD on GME and sharing it with you, in addition to all the other great DD out there. I’m going to cover shorts, debt, and what I think might accelerate GME’s mission to Mars.

    TL:DR; GME is a ticking time bomb. Shorts R Fuk. Buy shares, Sell puts to acquire shares cheaper. Buy leaps on red days. No idea what's gonna happen in the very short term but 2021 will be massive.

    About the Shorts
    So, updated short interest came out today. If you haven’t seen it, shorts increased their positions through the end of the year:


    12/31 short position update



    What. The. Fuck.

    I really can’t figure out the macro logic here because from the outside it looks like they’re digging their own graves.

    On the day-to-day scale, I think I understand how this is happening. If you look at the days with a high short volume ratio, the narrative is clear: Shorts are actively trying to defend GME crossing 20 significantly, and coming in hard when threatened. Shorts also took advantage of general market selloff on Jan 4 to push GME down.


    Days with heavy shorting activity



    This is also why GME ended up only ~12% after the recent RC announcement. Short volume was a whopping 4MM shares on that day.

    The problem is shorts are doing all this active shorting to defend their existing short positions, but they’re either not able or not choosing to close all of the intraday shorting, so it’s accumulating. As of 12/31 the total short positions (71.2M) exceed total issued shares (69.75M).

    The precarious position of the shorter
    Shorts find themselves in a very precarious position. Let’s talk about the float and DTC (days-to-close). The DTC number you see above is a lie. There’s an argument to be made that DTC is infinity.

    There are a total of 69.75M shares issued by GME. According to this guy who has a CapIQ subscription, insiders hold 22.8M shares. I was able to verify using this nasdaq source that the top insiders hold about 20% of shares:


    Top Insider Holdings



    The thing with insiders is that they can’t easily sell due to lots of restrictions so they’re not considered part of the “actively” traded part of the stock. I.e. They can’t just sell on price action.

    In addition to insiders, institutions now own 110% of GME shares. (Thanks shorters!). Some of these institutions may actively trade, but the top holdings (FMR, BlackRock, Vanguard, etc.) will not trade based on price action as they are generally holding for their ETFs / index funds that hold GME.


    Institutional Holdings



    Now, thought experiment. What happens if shorts decide to cover? They have to buy back 71M shares. Who are they going to buy it back from?

    1. They can’t buy them back from insiders.
    2. Let’s be conservative here, and say that Fidelity, BlackRock, Vanguard will hold on to their shares, but all of the other institutions will paper hand when shorts start to cover. This is very conservative because there are other institutions that hold GME for their own ETFs.
    So, 69.75M shares - 22.8M for insiders - 23.43M held by BlackRock/Vanguard/Fidelity = 23.52M shares left. So fuck all other short-to-float ratios out there, the short % of tradable float is at least 300%.

    Investopedia tells us that days to cover is “calculated by taking the number of currently shorted shares and dividing that amount by the average daily trading volume for the company in question.”

    GME’s 20-day average daily volume is about 10.4M shares, so that’s about 6.83 days to cover. This, however, is a lie. The DTC definition listed by Investopedia stops making sense when short interest exceeds purchasable float.

    Math whiz’s out there… if you have to buy 71M shares from a pool of 23.5M shares, and GME’s daily volume is 11M shares a day, how many days will it take to cover?

    Answer: Infinity. You can’t. You can never cover. There literally are not enough shares to buy to close your shorts. You can only buy-to-close 23.5M shares, and that’s even if you can convince all of them to sell (i.e. $$$$$). True DTC is Infinity. This is part of the reason shorts haven’t covered. There’s no way out of the burning building they’re in.

    How it gets worse part 1) Institutional Buying
    Here’s how it gets worse. Besides all the retards like you and me buying GME b/c of Lord Cohen and u/DeepFuckingValue

    , GME is about to cross some serious thresholds that make it attractive to more institutional buying.

    First, in the recent Q4 numbers release:

    • “The Company is continuing to suspend guidance, however, unless further unforeseen COVID-19 related impacts occur, it expects to realize positive comparable store sales results and profitability in the fiscal fourth quarter.
    So, GME is about to cross into the positive EPS category, which in addition to the debt story below is going to potentially unlock more institutional buying that is currently blocked by rules like not investing in companies with negative P/E.

    Second, let’s talk about debt.

    Debt
    Businesses leverage debt to scale; particularly true with retail businesses that have to pay for inventory in advance of selling it. High cost of debt -> lower profits -> lower ability to pay debt -> higher debt costs, and the cycle continues. On the flipside, if GME was able to increase its credit rating, you get lower debt costs, higher profitability, which leads to higher credit rating, etc.

    I believe we’re seeing a campaign from GME to pay down debt to reduce a) restrictive covenants in the 2021 notes (preventing things like more share buybacks) and b) upgrade their bonds to investment grade.

    Not only will a credit upgrade lead to cheaper debt, it will unlock more institutional investment that are currently restricted against buying equities with below-investment-grade debt ratings.

    Debt
    • Debt was $472MM up until July 2020

    https://preview.redd.it/l87lqgtwr1b...bp&s=7c897cd39f4b8874839fcdf602802cf015d78b22



    • GME announced a voluntary pre-payment of $125MM of debt (link) that will happen 3 days after the earnings call (earnings Dec 8, debt repayment Dec 11)... “using cash generated from operations to reduce our outstanding debt”
    Debt rating:
    • First, take a look at GME’s bond pricing. GME’s bonds were significantly impacted by the March crash. However, GME’s bond pricing has recovered and is now trading at par, meaning the market believes that GME will pay back its debt (i.e. not a bankruptcy risk).

    GME Bonds trading at par



    • Now, look at its Moody’s rating history. First, for context, anything under a Baa3 rating is considered junk (ratings chart here) and greatly affects who can buy your bonds and what types of rates you get.

    Moody's debt ratings. GME currently sits at B3



    Here are Moody’s actions on GME (source). In particular:

    • Downgrade on 5/2019 to Ba2
    • Downgrade on 1/2020 to B2
    • Downgrade on 4/2020 to Caa1
    • Upgrade on 7/2020 to B3

    GME upgraded to B3 in Jul 2020



    Speculation on debt:
    • GME is working with Moody’s & others to get credit rating back to Investment grade. Showing positive earnings/profitability and paying back debt early is key to this. I believe we should see an upgrade soon to at least Baa3 (the lowest level of investment-grade debt).
    • The market is not generally considering GME’s debt as risky as Moody’s credit rating would suggest. The market can move faster than Moody’s.
    Positive EPS + Debt ratings upgrade = massive institutional buying = shorts further in the hole.

    How it gets worse part 2) Passive Buying Feedback Loop
    GME is part of 62 ETFs holding about 10.7M shares in addition to a whole bunch in index funds (not ETFs). I couldn’t get a number for index funds but am going to estimate around 10M for them as well given the Vanguard/Fidelity numbers above.

    More than 50% of these holdings are passive, market-cap weighted funds. Now here’s the feedback loop that really fucks the short story up.

    1. Institutions buy GME ->
    2. Price goes up ->
    3. Market Cap Goes up ->
    4. Weight in Funds Goes up ->
    5. ETFs buy more GME for every $ of inflow ->
    6. Price goes up -> return to step 3
    At $20, GME is already up >5x from its low of ~$4 in 2020. This means that for every $1 thrown into IWM, for example, Blackrock is putting 5x as much of that $1 into GME as it was back at GME’s lows. As GME’s price goes up, any market-cap weighted fund puts more money into GME for every $1 of inflow.

    The passive feedback loop has already started. It will really kick into high gear with institutional buying.

    Other speculations:
    1. I believe RC is already slated to be CEO, and this will be announced in the June 2021 annual shareholder meeting.
      1. This is why the ICR presentation was pulled. RC didn’t want the content in the ICR presentation to be the market-adopted story on the GME strategy.
      2. 3 board members are retiring. I believe this is part of a pre-negotiated deal where RC is taking over. The 3 that are stepping down didn’t agree with the mgmt change.
    2. GME is due for a re-rate of price/sales. GME is currently trading at a P/S of 1 - if you ONLY include the ecommerce revenue. From a total revenue perspective it’s closer to .2. GME is currently worth less than its quarterly revenue. From the Q4 sales pre-release:
      1. “Net quarterly sales were $1.770 billion”
      2. “E-Commerce sales, which are included in comparable store sales, rose 309% and represented approximately 34% of total company sales, with total worldwide E-Commerce sales year to date reaching over $1.35 billion, far exceeding the Company’s $1.0 billion growth objective;”
    At this point, it’s really the endgame for shorts. They have to find a way to exit before Cohen is CEO.

    Positions:
    1. 10K shares at 13.7 cost basis
    2. a buttload of sold 1/15 puts (trying to add more shares at the lowest price I can get them)
    3. 20 20/30 call spreads for april
    4. ~30 itm calls (9c/10c) for jan 15 I plan to roll forward

    Positions in IBKR




    Positions in RH


     
  17. Jan 13, 2021 at 2:15 PM
    #1257
    kairo

    kairo [OP] Well-Known Member

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    So anyways, one of the original "founders" of this play started about a year ago with $100k. He has a youtube channel, and he also posts his weekly positions on GME every week. I, like pretty much everybody else just watched from the side because it seemed ridiculous.

    As of a couple months ago, this dude was in up to a million, and every week he was either shifting his positions around or holding.

    And then today, we all watched with anticipation to see what he did. And that stone cold bastard is still holding.

    He made almost $3m today and he's still all in.

    Somebody who was correct for a year, and still sitting on $3m all in is good enough for me to think the best is yet to come.

    upload_2021-1-13_14-16-59.jpg

    I mean the dude held his 1/15 calls through today. WTF!
     
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  18. Jan 13, 2021 at 6:07 PM
    #1258
    TreeFortRichard

    TreeFortRichard Hmmm..$o many repairs?

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    With all the things going on..and China reporting their economy is nearly fully recovered...a dip in YINN and I'm in...maybe even for some 4 month calls...
    https://finance.yahoo.com/quote/YINN/
     
  19. Jan 13, 2021 at 6:27 PM
    #1259
    theredofshaw

    theredofshaw Well-Known Member

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    Looks like we are all retiring early and buying another country tomorrow :rofl:

    4EA2F825-6002-46AB-854F-B6AD427E80B5.jpg
     
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  20. Jan 13, 2021 at 6:37 PM
    #1260
    Boyk1182

    Boyk1182 Well-Known Member

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    I call dibs on Australia.
     
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