/biz/ - Business & Finance

>>53476977
Recap

GME has been falling all year, to the immense satisfaction of the legacy financial media (and the established financial powers which control this media). Regardless, the stock is still up at least 3x from when the headline-making“short squeeze” started two years ago. This means that any entities (private equity firms, hedge funds) who still hold the original short positions will experience a realized loss of 300% if they close these positions today. And that assumes they’d be able to close those positions with only a 300% loss, as many GME shares have been bought up by other market participants (a group which now surely includes other private equity and hedge funds). Little was resolved two years ago; very few market participants who should have been liquidated actually were at the time.

Remember that if you hold a short position without a sufficient hedge, your downside risk is unlimited. If you have debt denominated in an asset that can rise rapidly in valuation (say a stock or an exotic currency), you can quickly run out of cash with which to buy the asset to make your debt payments. If the object of your debt has a low liquidity market, then the fun begins — for the very act of your buying the asset in any overlarge quantity raises its valuation, and your snake starts to eat its tail.

GME has indeed been heavily devalued this year; the trade is going in the shorts’ direction. But can this last? Heightened interest rates reduce short sellers’ options regarding capital procurement. And other market participants continue to buy the stock at these levels, knowing exactly what I know: that even at current levels, short sellers can now close their positions only with great difficulty and at great loss.

>>53476981
It should be noted that short selling is the basic mechanism by which the suppression of asset prices takes place — though this strategy can only work for so long if the underlying asset actually has intrinsic value. If demand for the shorted asset increases, price suppressors have to buy back the asset they’ve suppressed ata loss proportional to the gains enjoyed by holders of the asset. If an asset actually has real, intrinsic value, it will eventually be priced accordingly by the market. Those suppressing the prices of truly valuable assets work against a very basic and primal human instinct: that which tells a person to acquire valuable resources at little relative cost. To purchase that which is under-valued, so it may later be sold at profit. There’s simply not enough wealth in the world to suppress this basic survival instinct at the scale of millions of market participants forever if the asset in question has real value in the real world.

But all of this assumes that the underlying asset indeed has real value. If I’d short soldFTXstock back in October, I’d be in a villa as I write this. Financial markets area very interesting game in this way. The best players are the most skilled identifiers of value or value’s absence — rare talents which require a firm grasp on Truth, a developed taste for Beauty, and a studious dedication to Reason. The most perfect speculators are Plato’s Philosopher Kings.

>>53476987
Gamestop

Now let’s talk about GameStop. According to their latest balance sheet (Q3 2022), they’re sitting on an $800mm warchest, they have few expenses, and they have little debt. In Q3 2022 they added $500mm in Merchandise Inventory and Marketable Securities and $800mm in Accounts Payable. What does this Inventory consist of, what are these Marketable Securities, and who are these new vendors on the payroll? Let’s speculate.

GameStop is a household name with positive associations across the board for Millennials and Gen-Z. They’re already running an NFT marketplace, which launched in late 2022; you can buy NFTs from them right now.A marketplace for in-game NFT items that people can buy and sell within and across AAA games may be the next step. What if they make a market for a new kind of NFT that’s usable in mainstream games, in a digital distribution model as revolutionary as Steam’s was during the internet’s web 2 phase? What if they become the online marketplace that facilitates the buying and selling of in-game items and DLC across mainstream games? GameStop would secure this network and collect fees — distributed as dividends to GME holders at some point down the line — though the details of this system don’t matter for the moment.

Studios would sell their NFT items (and likely eventually full games) directly to gamers over this network, and gamers would trade these NFTs and games freely between each-other in an open market (while devs earn commission on aftermarket sales). These in-game items could then represent the $500mm of Inventory/Marketable Securities they added to their balance sheet in Q3 2022, and the $800mm of Accounts Payable could include the studios who receive their portions of the initial sales of these in-game items. With time, this network could become an integral part of the emerging Decentralized Metaverse, and it would represent a significant new avenue for outside liquidity to enter Mainnet.

>>53476998
All of this becomes technically possible as certain network interoperability and secure data-transfer standards are brought online this year, and problems of interface will be abstracted away as broader digital infrastructure development continues.


Let’s see if I’m right.

If I am, here’s another speculation: I think that if even half of the above turns out to be true, the resultant short squeeze and liquidity event wouldkickstart a kind of Occupy Wall Street 2.0, with the twist that participants (GME holders) become wealthy at the expense of the incumbent money power. Short funds would need to liquidate other assets to buy back GME shares, and they would need to do it quickly before they become insolvent as the stock’s valuation increases.The need to liquidate other assets would be existential for these firms: they would sell everything that wasn’t nailed to the floor.When people ask “where did all the liquidity come from?”, this will be the answer. It will have been pushed out of other asset classes by this big financial hydraulic press.

In the greater social context, such an event wouldbe an expression of the inter-generational wealth transfer we already know will be taking place in our lifetimes. Funds and firms wouldbecome forced sellers of bonds, corporate shares and real-estate largely owned by, or managed on behalf of, the Baby Boomer generation. This liquidity would flow towards the (mostly) young people around the world who hold GME. Imagine the social effects as shorting hedgefunds, investment banks and private equity firms(many ofwhommanage portfolios for both private and public sector pensions around the world) are liquidated or experience significant losses — affecting the whole economy — at the very moment that thousands and thousands of 20- and 30- somethings get a verybig and very public payday.

>>53477012
There is no practicable way for the legal system to stop this train once it starts to roll. Institutional power can’t just decree, “these players don’t actually owe that money”. Other majorestablishment entitiesare almost certainly on the other side of this trade now, after all. Short selling is a legal economic activity that represents a basic aspect of functional financial markets, but it will become immediately clear which institutions and market participants have been playing parasitic and fundamentally non-productive “money games” with our civilization’s incredible wealth since 2008. To actually pick winners and losers in the market at this scale, institutional actors would (in practice) have to nationalize large swaths of the financial services sector. Setting aside the property rights of the various entities (and members of the public) to whom the money is rightfully and legally owed, do wethink that the players not involved in this circus(and surely this group represents the vast majority of market participants) will ever allow nationalization at scale to take place?It would be like the king claiming ownership over the lands of all the gentry at once, just to save the estates of a few of his favourites from falling into disrepair. That’s not how this kind of thing goes.

>>53477021
Monies Old and New

Remember that the Internet-Centric cadre of Big-Tech is New Money, historically speaking: its share of the zero-sum real economy has increased at the expense of incumbent players like 20th century industrialists, raw materials merchants and financiers, and the governments/militaries these legacy groups employ for both the protection of their physical infrastructure and the legal enforcement of debt repayment obligations. New Money tends to confront Old Money; new social systems come into being; power is reallocated and reconsolidated. We see these power shifts happening all around us today.

The change of Twitter’s direction, for example, leaves the incumbent power with one less tool with which to exercise its traditional control of public opinion. And the reputational damage Big-Tech incurred last round is only now becoming clear as public anger mounts over years of state-demanded suppression of legitimate online public discourse and opinion. Who says Google et all wouldn’t tell The State’s obviously (and now publicly) incompetent 3 letter agencies to walk the plank next time?And what if New Money players with strong hands decide they don’t want to play the game of musical chairs any longer? God knows that certain Big-Tech companies are in better financial straits than most Western governments, who are evidently at the end of their financial tethers. We know that these companies regularly brush off 9 figure fines, and we know that they provide essential services (but literally this time) upon which all advanced economies depend. Forget paper laws and paper regulations and think about the nature of realpower. Which entities truly holdit in our world today?

>>53477031
Shifts in the social location of power always accompany periods of great technological change, of which we live in the very deepest historical example. Welcome to the Second Renaissance, anon — like the last, it will be a time of both profound beauty and profound suffering.

Be good and keep your head down.

Your friend,

Ben

Put me in the screenshot. BSV is Bitcoin. GTK.

I'm listening, but what could they possibly do that would "game-changing"?

>>53477163

This, except a free market and integrated with both existing blockchains and the modern financial system:

>>53471837
>>53471837
>>53471837

>>53471842
>>53471842
>>53471842

I'd love to see it happen, though I doubt a group of retail investors can successfully rugpull Wall Street financial institutions.

We shall see.

>>53477536

The Printing Press you wrote your post with means that, for the first time ever, "a group of retail investors" can successfully do whatever they want. Now that we have open access to the market, you and I are the market. Remember how much money was made at every technical stage of the 20th Century's computerization of markets.