Why is the solution always to either shut something down or to regulate? Why is educating people to act more responsibly never ever considered an option?
We require regulation, just as we require the police, because education doesn't matter to people willing to disregard ethics and harm others for their own gains.
There are two kinds of people involved: those trying to make a point and those trying to make a buck.
Some people trying to make a point are going to make a lot of bucks as well.
And some people trying to make a buck are going to lose a lot of money. Not everyone can get out of an inflated stock with gains, pretty much by definition. And those least likely to understand the point are also probably the ones buying into the stock late (and at an inflated price).
The mix of who makes and loses money is going to affect how society sees this. It will look somewhere between an egalitarian social movement, or a few now-wealthy loudmouths who took everyone else for a ride.
Making money in a bubble is all about timing... and it gets ethically complicated when some traders have control of the timing (in this case by declaring whether the vendetta against Melvin is over or not).
Note that I have made no ethical considerations for Melvin; they knew what game they were playing and are not victims here IMO.
No, I was broadly commenting on why education cannot trump regulation.
For the sake of argument, one can say that actions of forums like WSB should also be regulated to protect them, just like laws for compulsory wearing of helmet (while riding two-wheelers) or putting seatbelts (while riding cars) exist, even though one would think that education and common sense would make them do this automatically out of self-preservation instincts.
But since I am not an expert in finance or stock markets, I really am not in any sound position to comment on the specifics here.
My broader general argument (not at all related to WSB or the financial industry) is just that education alone is insufficient, and regulation is often required too for maximum efficacy.
Pessimism and apathy are the primary things holding decent Americans in thrall to the racist war state called USA. If our votes meant something, that state could change though it has been around for 231 years. Since they don't, it must instead be replaced. In the meantime, let's be less totalitarian, not more.
See that's the thing here - people have dumbed down democracy to voting. That's just one aspect of it. The other is the right to speak, advocate and protest freely. I've heard many people advocate for compulsory military service for a few years for every citizen to "instil discipline and patriotism and understand brotherhood, hardship and sacrifice etc. etc.". I have a different take on it - I say youngsters should be encouraged to join political parties instead to really understand and appreciate democracy. (Note that I used the word "encouraged" and not "compulsory" - democracy means more choice and less compulsions).
In Greece it's very widespread for young people (higher ed people 18-25) to join political parties. The corruption that this has led to, is unfathomable. The problem is that the political parties have no interest in democracy, just power and self perpetuation.
If you believe what is happening is wrong, it needs to be regulated so that it doesn't happen. If you believe it's not wrong, it shouldn't be either regulated nor educated against.
Now, if you do believe it's wrong and it should be educated against, how would this work? Do you think that this is wrong beacsue people are going to lose money? Maybe then it makes some sense to give better education, but this is obviously a special moment and it's hard to educate people so that they don't engage in a social phenomenon. Not to mention, a lot of educated people may be making some pretty educated bets and winning a lot of money; other educated people may just be 'paying' money for a cause that they believe in.
I'm not arguing that shutting down or regulating is the best solution, but it is the most likely outcome.
How would one go about educating people? There's been a lot of ink spilled on this story and it seems to have captured the public's imagination. Not all of the reporting is accurate, but all the major media outlets get out the point that this is essentially reckless market manipulation by a group of loosely banded individuals coordinating online.
I doubt anyone participating in this will cut it out if just told to by some authoritative body.
How is borrowing then selling 140% of the available shares legal? How is that not market manipulation?
This is the market at work. This was taken too far and the market has a method for correcting this behavior and we're seeing it now. The difference is retail is going to win AND there's no backroom deal to be made to stop the bleeding.
We NEED financial reform but we need to look at what allowed this situation in the first place, not ways to silence what are effectively the whistle blowers.
> How is borrowing then selling 140% of the available shares legal? How is that not market manipulation?
Why wouldn't someone be allowed to lend out a security they own to someone else?
If not allowed, why wouldn't I be allowed to make an agreement where I pay you the difference between a future stock price and some fixed value?
> The difference is retail is going to win AND there's no backroom deal to be made to stop the bleeding.
The backroom deal will be a phone call to the CEO of reddit, discord, disqus and similar and tell them to cut it out. Simple as that. No coordinating mechanism, this will die.
You seem to be hinting at the idea that naked short selling should be illegal, which it has been for over a decade. So here’s a minor clarification for you: The short interest (140% or more for GME) is calculated on the public float. There is a significant chunk of GameStop shares that are not publicly accessible, but could be borrowed against (the shares do exist). If you consider the total outstanding shares of GME, then only 99% or so of the company was shorted. So it’s a crazy high amount, but there is no proof that any (actually illegal) naked short selling was occurring. So long as the people holding the non-public portion allowed their shares to be borrowed, then nothing illegal is going on. If, in the unlikely situation that EVERYONE needed to close their short positions at once, these non-public shares could actually be sold if the owner wanted to. Of course, they could dictate a really high price if the public market volume isn’t enough to close out the short positions in the standard three day period.
The reason that short interest is calculated on public float is because that makes the most sense for normal situations. We just happen to have stumbled into one of those unusual situations.
GME stock has been on nasdaq's "failed to deliver" list for about a month now. That means someone sold a GME share they didn't own (short) and failed to give it to the new owner within the correct timeframe (3 business days I believe.)
Guess what the SEC has done about this blatant naked short selling. Nothing.
So while in theory naked short selling is illegal, in reality it is tolerate and allowed.
Can you explain how it's possible that 99% of shares were held by owners that were willing to loan their share? Surely at least 2% of GME was owned by "regular people" whose shares just sit in their brokerage accounts?
I was completely unaware this was a thing: that means there can be a "run on the bank" if all of the customers wanted to sell on a short time period, and they don't actually have the shares to cover the sales?
Despite the fact that there are widely repeated accusations of market manipulation by specific hedge funds on reddit, there is no actual evidence for it.
I'm not saying reddit is manipulating the market either (maybe! I dunno). Just clarifying this point.
Arguably, because we don't put people into office who are able and/or willing to require people to act responsibly. If we chose our politicians more carefully, we'd see better results. But we don't, so we get what we choose.
