The issue the "professionals" have is that they know the share price is false & that's why they have been shorting it. A share price is based on what the company is worth, not what people drive it up to be by trying to out do the traders. If there is no value to the Company (or not to the extent the share price has grown 900% in a month) then there is no justification to the share price. It will no doubt come crashing down once the people driving it up have had their fun.
Right, and if more people want to buy a share in that company, that makes the company worth more, no? Simple supply and demand.
these are the same “professionals” who thought crypto was tulip bulbs. They’re hopelessly out of touch with the direction the markets are going in and are left holding big bags of shorts. Good riddance to bears imo.
I don't think you can argue that the share price really reflects the value of the company though. I shed no tears for brokers crying about it, they've been beaten at their own game, but the redditers have pretty clearly manipulated the market, think it's quite impressive myself. The same brokers upset about it would do it themselves in the blink of an eye.
i think it just goes to show that the stock market is just as much of a fugazi as anything else these "professionals" claim are tullip bulbs.
Anywho, this has just convinced me more that DEFI is still undervalued, get paid tomorrow and gonna load up on some more defi coins.
That tulip bulbs comment really got to you didn't it haha
Agreed, I heard on a podcast (might have been Lex Fridman?) a while ago that once something becomes a 'game' to people, they detach from the real life consequences, which I think is very similar here
ha yep, especially when ponzi/tulip bulbs hit a downturn they implode and disappear, which hasn't happened to the crypto market - it has returned stronger each time.
Can one of you guys who understand these things explain something to me about shorting, please.
Lets keep it simple. I own 100 shares in a company that are valued at £20 each. The paper value of those shares to me is £2000.
A hedge fund comes to me and says can we borrow your shares to short. I say yes.
The hedge fund sells those shares and pockets £2000. After forcing the share price down, it buys them back for £10 - a £1000 in total - giving the hedge fund an actual profit of £1000.
Presumably, it then gives me my shares back. But they are now only worth £1000. So through my good work of loaning them my shares, I am now personally £1000 worse off.
Clearly I am missing something but on the face of it, why would you loan shares to a company so they can force the price down meaning that you are going to end up owning an asset that is worth less than when you loaned it out?
The issue the "professionals" have is that they know the share price is false & that's why they have been shorting it. A share price is based on what the company is worth, not what people drive it up to be by trying to out do the traders. If there is no value to the Company (or not to the extent the share price has grown 900% in a month) then there is no justification to the share price. It will no doubt come crashing down once the people driving it up have had their fun.
Right, and if more people want to buy a share in that company, that makes the company worth more, no? Simple supply and demand.
these are the same “professionals” who thought crypto was tulip bulbs. They’re hopelessly out of touch with the direction the markets are going in and are left holding big bags of shorts. Good riddance to bears imo.
Not sure you know how a Company & their share price coralates. If Gamestop decided to sell off all their stock and other assets (shops, warehouses etc) do you think that would generate enough money to pay all the shareholders to the value of the current share price. Don't think it would.
Can one of you guys who understand these things explain something to me about shorting, please.
Lets keep it simple. I own 100 shares in a company that are valued at £20 each. The paper value of those shares to me is £2000.
A hedge fund comes to me and says can we borrow your shares to short. I say yes.
The hedge fund sells those shares and pockets £2000. After forcing the share price down, it buys them back for £10 - a £1000 in total - giving the hedge fund an actual profit of £1000.
Presumably, it then gives me my shares back. But they are now only worth £1000. So through my good work of loaning them my shares, I am now personally £1000 worse off.
Clearly I am missing something but on the face of it, why would you loan shares to a company so they can force the price down meaning that you are going to end up owning an asset that is worth less than when you loaned it out?
I don't really understand it either but I believe the hedge fund pays interest on what they've borrowed as well
Can one of you guys who understand these things explain something to me about shorting, please.
Lets keep it simple. I own 100 shares in a company that are valued at £20 each. The paper value of those shares to me is £2000.
A hedge fund comes to me and says can we borrow your shares to short. I say yes.
The hedge fund sells those shares and pockets £2000. After forcing the share price down, it buys them back for £10 - a £1000 in total - giving the hedge fund an actual profit of £1000.
Presumably, it then gives me my shares back. But they are now only worth £1000. So through my good work of loaning them my shares, I am now personally £1000 worse off.
Clearly I am missing something but on the face of it, why would you loan shares to a company so they can force the price down meaning that you are going to end up owning an asset that is worth less than when you loaned it out?
I don't really understand it either but I believe the hedge fund pays interest on what they've borrowed as well
Can one of you guys who understand these things explain something to me about shorting, please.
Lets keep it simple. I own 100 shares in a company that are valued at £20 each. The paper value of those shares to me is £2000.
A hedge fund comes to me and says can we borrow your shares to short. I say yes.
The hedge fund sells those shares and pockets £2000. After forcing the share price down, it buys them back for £10 - a £1000 in total - giving the hedge fund an actual profit of £1000.
Presumably, it then gives me my shares back. But they are now only worth £1000. So through my good work of loaning them my shares, I am now personally £1000 worse off.
Clearly I am missing something but on the face of it, why would you loan shares to a company so they can force the price down meaning that you are going to end up owning an asset that is worth less than when you loaned it out?
Shorting doesn't lower the value of the share though, they are gambling the share price will come down. they would also pay you a fee for 'borrowing' the shares from you.
@Rob7Lee you trade funds (as well as shares of course as remember the tips) very regularly I see? What's your thinking behind that?
Zynex up about 15% today. Anybody benefitting out of their gesture of goodwill?
I try to rebalance my portfolio once a year. Also if I see a fund way over perform compared to the market such as some of the BG one’s I’ll take some profit.
EG, I bought a lump of BG positive change last year avg price 2.4 sold 3.82 almost up 60%. On any measure that’s way out performed. Same with BG American, up 48% since last year, bought at average of 14.2 and sold 21.2. I’ve sold my original investment and kept the profit in.
otherwise most funds are long term holds generally bar a bit of rebalancing and adding to monthly.
of course they may go up further still, but it’s not often you get a combined 50+% return in around 9 months, if I could do that this year and next also I’ll be retiring then at 50!
Yep, I advocate doing this. I often re-balance client portfolios, especially if they are looking a bit "toppy". Nothing wrong with taking the profit & "banking" it somewhere else. A bit like in the old days with fruit machines. Put in £2 & if you get an early win then bank the original £2 & just play with the winnings.
Over the past 12 months I have taken quite a bit out of BG American. Usually hold around 8%-9% in a clients portfolio. Once I see it's gone into double figures I prune it back again. Normally find the portfolio needs rebalancing anyway as the Fixed Interest portion would have naturally decreased because of this.
Only problem I now have is where to invest these "gains". Fund managers are saying that Fixed Interest isn't going to give much by way of a return over the coming years - a few are recommending absolute return bond funds instead or alternatives / commodities such as Gold.
"remind yourself of why you bought this fund in the first place..does your rationale for buying still hold good? If so, hold..."
Dunno...
The rationale around why you bought the fund may still be the same but the amount you bought has changed. Again, it's all to do with diversification. If the fund price has increased by 100% then you are holding more risk as you are "overweight" in that asset - be it US equities, UK bonds, property or even cigarette cards.
Spot on, and that's predominantly why I sold some. I've got maybe 15 funds, when you have a few that go up by a serious percentage the plan I had has now changed, much more over weight in certain areas and I was on the max anyway really in those funds.
As @bobmunro says, I'm no way cleaver enough to beat the market, if I was I wouldn't be piddling around trading in my SIPP & ISA. I also have one eye on the fact I'll be 50 in a couple of years and want to have financial freedom in 5.
So I maybe don't have quite the risk appetite I once had, when you see the size of the growth in less than 12 months, all at the time when inflation is as flat as a pancake, it's hard to not bank some of that profit. If I could replicate that (which I won't) for the next 3 years I'm going to be very very happy!
OK, I get that general point now (thanks, all).
But in my case and Lindsell Train UK, looking it up, I bought into it because I thought I was underweight in UK focused funds and so bought in small amounts over a regular period from 8/18 to 2/19. Since then the UK markets have continued to under-perform but many believe that it's about time there was a re-valuation. If I agree with that, then I hold, unless I think this fund has underperformed the sector. That could be argued, but then we get into another tenet of fund investing...resist too much meddling. Fund manager as an individual still very much in place so do I still trust him? Or do I think there's a danger he might go the way of Neil Woodford? I don't know but I'd be wary of random articles which suggest so.
Please do critique this line of thought though, I really am unsure...
Pretty amazing a subreddit is able to put a $15bn hedge fund in trouble, surpised that it's not been done before tbh
if it continues they, and a few others are fucked. They're shorting 140% of GME, its honestly quite funny seeing "professionals" lecture about risk management on this, when the entire point of it is that a billion dollar hedge fund simply hasn't bothered.
All I know is that my portfolio looked very blue Monday, it’s very very red today, PC off and might as well do similar tomorrow, Mr Markets are clawing some money back......bastards 😳😳
All I know is that my portfolio looked very blue Monday, it’s very very red today, PC off and might as well do similar tomorrow, Mr Markets are clawing some money back......bastards 😳😳
Pretty sure a consequence of GME is that the ones taking a kicking are selling off their assets to be able to close out of their short positions.......... it will be very interesting to see how the end game plays out
Pretty amazing a subreddit is able to put a $15bn hedge fund in trouble, surpised that it's not been done before tbh
if it continues they, and a few others are fucked. They're shorting 140% of GME, its honestly quite funny seeing "professionals" lecture about risk management on this, when the entire point of it is that a billion dollar hedge fund simply hasn't bothered.
If people keep holding it will continue, and good, fuck em they don't have a God given right to make a profit. They take a risk with their investments.
@Rob7Lee you trade funds (as well as shares of course as remember the tips) very regularly I see? What's your thinking behind that?
Zynex up about 15% today. Anybody benefitting out of their gesture of goodwill?
I try to rebalance my portfolio once a year. Also if I see a fund way over perform compared to the market such as some of the BG one’s I’ll take some profit.
EG, I bought a lump of BG positive change last year avg price 2.4 sold 3.82 almost up 60%. On any measure that’s way out performed. Same with BG American, up 48% since last year, bought at average of 14.2 and sold 21.2. I’ve sold my original investment and kept the profit in.
otherwise most funds are long term holds generally bar a bit of rebalancing and adding to monthly.
of course they may go up further still, but it’s not often you get a combined 50+% return in around 9 months, if I could do that this year and next also I’ll be retiring then at 50!
Yep, I advocate doing this. I often re-balance client portfolios, especially if they are looking a bit "toppy". Nothing wrong with taking the profit & "banking" it somewhere else. A bit like in the old days with fruit machines. Put in £2 & if you get an early win then bank the original £2 & just play with the winnings.
Over the past 12 months I have taken quite a bit out of BG American. Usually hold around 8%-9% in a clients portfolio. Once I see it's gone into double figures I prune it back again. Normally find the portfolio needs rebalancing anyway as the Fixed Interest portion would have naturally decreased because of this.
Only problem I now have is where to invest these "gains". Fund managers are saying that Fixed Interest isn't going to give much by way of a return over the coming years - a few are recommending absolute return bond funds instead or alternatives / commodities such as Gold.
"remind yourself of why you bought this fund in the first place..does your rationale for buying still hold good? If so, hold..."
Dunno...
The rationale around why you bought the fund may still be the same but the amount you bought has changed. Again, it's all to do with diversification. If the fund price has increased by 100% then you are holding more risk as you are "overweight" in that asset - be it US equities, UK bonds, property or even cigarette cards.
Spot on, and that's predominantly why I sold some. I've got maybe 15 funds, when you have a few that go up by a serious percentage the plan I had has now changed, much more over weight in certain areas and I was on the max anyway really in those funds.
As @bobmunro says, I'm no way cleaver enough to beat the market, if I was I wouldn't be piddling around trading in my SIPP & ISA. I also have one eye on the fact I'll be 50 in a couple of years and want to have financial freedom in 5.
So I maybe don't have quite the risk appetite I once had, when you see the size of the growth in less than 12 months, all at the time when inflation is as flat as a pancake, it's hard to not bank some of that profit. If I could replicate that (which I won't) for the next 3 years I'm going to be very very happy!
OK, I get that general point now (thanks, all).
But in my case and Lindsell Train UK, looking it up, I bought into it because I thought I was underweight in UK focused funds and so bought in small amounts over a regular period from 8/18 to 2/19. Since then the UK markets have continued to under-perform but many believe that it's about time there was a re-valuation. If I agree with that, then I hold, unless I think this fund has underperformed the sector. That could be argued, but then we get into another tenet of fund investing...resist too much meddling. Fund manager as an individual still very much in place so do I still trust him? Or do I think there's a danger he might go the way of Neil Woodford? I don't know but I'd be wary of random articles which suggest so.
Please do critique this line of thought though, I really am unsure...
As I know you are a few years older than me, what's the long term plan, i.e. when will you be accessing the cash?
I wouldn't necessarily switch that particular fund, but more review how you sit overall compared to when you want the money etc.
@Rob7Lee you trade funds (as well as shares of course as remember the tips) very regularly I see? What's your thinking behind that?
Zynex up about 15% today. Anybody benefitting out of their gesture of goodwill?
I try to rebalance my portfolio once a year. Also if I see a fund way over perform compared to the market such as some of the BG one’s I’ll take some profit.
EG, I bought a lump of BG positive change last year avg price 2.4 sold 3.82 almost up 60%. On any measure that’s way out performed. Same with BG American, up 48% since last year, bought at average of 14.2 and sold 21.2. I’ve sold my original investment and kept the profit in.
otherwise most funds are long term holds generally bar a bit of rebalancing and adding to monthly.
of course they may go up further still, but it’s not often you get a combined 50+% return in around 9 months, if I could do that this year and next also I’ll be retiring then at 50!
Yep, I advocate doing this. I often re-balance client portfolios, especially if they are looking a bit "toppy". Nothing wrong with taking the profit & "banking" it somewhere else. A bit like in the old days with fruit machines. Put in £2 & if you get an early win then bank the original £2 & just play with the winnings.
Over the past 12 months I have taken quite a bit out of BG American. Usually hold around 8%-9% in a clients portfolio. Once I see it's gone into double figures I prune it back again. Normally find the portfolio needs rebalancing anyway as the Fixed Interest portion would have naturally decreased because of this.
Only problem I now have is where to invest these "gains". Fund managers are saying that Fixed Interest isn't going to give much by way of a return over the coming years - a few are recommending absolute return bond funds instead or alternatives / commodities such as Gold.
"remind yourself of why you bought this fund in the first place..does your rationale for buying still hold good? If so, hold..."
Dunno...
The rationale around why you bought the fund may still be the same but the amount you bought has changed. Again, it's all to do with diversification. If the fund price has increased by 100% then you are holding more risk as you are "overweight" in that asset - be it US equities, UK bonds, property or even cigarette cards.
Spot on, and that's predominantly why I sold some. I've got maybe 15 funds, when you have a few that go up by a serious percentage the plan I had has now changed, much more over weight in certain areas and I was on the max anyway really in those funds.
As @bobmunro says, I'm no way cleaver enough to beat the market, if I was I wouldn't be piddling around trading in my SIPP & ISA. I also have one eye on the fact I'll be 50 in a couple of years and want to have financial freedom in 5.
So I maybe don't have quite the risk appetite I once had, when you see the size of the growth in less than 12 months, all at the time when inflation is as flat as a pancake, it's hard to not bank some of that profit. If I could replicate that (which I won't) for the next 3 years I'm going to be very very happy!
OK, I get that general point now (thanks, all).
But in my case and Lindsell Train UK, looking it up, I bought into it because I thought I was underweight in UK focused funds and so bought in small amounts over a regular period from 8/18 to 2/19. Since then the UK markets have continued to under-perform but many believe that it's about time there was a re-valuation. If I agree with that, then I hold, unless I think this fund has underperformed the sector. That could be argued, but then we get into another tenet of fund investing...resist too much meddling. Fund manager as an individual still very much in place so do I still trust him? Or do I think there's a danger he might go the way of Neil Woodford? I don't know but I'd be wary of random articles which suggest so.
Please do critique this line of thought though, I really am unsure...
Nothing wrong with holding Lindsell Train UK Equity in your portfolio - just make sure its not your only UK Equity fund & you don't have more than say, 7%-8% of it. I usually advocate holding 3 different UK funds in a portfolio, totalling somewhere in the region of 18%-24% (depending on risk appetite etc) - so 3x 6%,7% or 8%. Currently I am holding 4 stocks (SDL Free Spirit, Artemis UK Select, MI Chelverton UK Growth and Miton UK Smaller Companies) but that's because I'm being slightly aggressive & feel that as the UK market is still way below where it was 12 months ago (whereas most other major stockmarkets are back to, or beyond where they were) then its a risk worth taking.
Been on a webinar this morning, hosted by Investec. They were using data from Bank of America/Citi and the view was that although markets seem to be a bit "frothy" they are not yet overheated. Citi gave it 7.2 on there "richter scale" where 0 is a bear market & 10 a bull market. Major concerns on the horizon is the ever increasing debt levels & the tax increases that will inevitably need to pay for it as well as inflation rearing its ugly head.
Gamestop was mentioned at the end. I'm not really up with the news on all of this but it appears that in the US there are no dealing costs when buying individual shares, more trading platforms than ever before & the general public using their recent Government Covid cheques to dabble in the market. Said the new "saying" was YOLO - You Only Live Once - and that may punters in the US were trying to outdo the "shorters" and make a killing when they see one.
Best way of showing how to short the market was in Trading Places - when they try to get ahead of the curve on the Orange Juice market by a dodgy OJ crop report.
Can one of you guys who understand these things explain something to me about shorting, please.
Lets keep it simple. I own 100 shares in a company that are valued at £20 each. The paper value of those shares to me is £2000.
A hedge fund comes to me and says can we borrow your shares to short. I say yes.
The hedge fund sells those shares and pockets £2000. After forcing the share price down, it buys them back for £10 - a £1000 in total - giving the hedge fund an actual profit of £1000.
Presumably, it then gives me my shares back. But they are now only worth £1000. So through my good work of loaning them my shares, I am now personally £1000 worse off.
Clearly I am missing something but on the face of it, why would you loan shares to a company so they can force the price down meaning that you are going to end up owning an asset that is worth less than when you loaned it out?
I don't really understand it either but I believe the hedge fund pays interest on what they've borrowed as well
Can one of you guys who understand these things explain something to me about shorting, please.
Lets keep it simple. I own 100 shares in a company that are valued at £20 each. The paper value of those shares to me is £2000.
A hedge fund comes to me and says can we borrow your shares to short. I say yes.
The hedge fund sells those shares and pockets £2000. After forcing the share price down, it buys them back for £10 - a £1000 in total - giving the hedge fund an actual profit of £1000.
Presumably, it then gives me my shares back. But they are now only worth £1000. So through my good work of loaning them my shares, I am now personally £1000 worse off.
Clearly I am missing something but on the face of it, why would you loan shares to a company so they can force the price down meaning that you are going to end up owning an asset that is worth less than when you loaned it out?
I don't really understand it either but I believe the hedge fund pays interest on what they've borrowed as well
Correct, there's a charge to borrow.
Thanks. Ok I understand there is a charge to pay for the hedge fund. But being their actions can force the price of a share down by 20/30/40 per cent or more, it must be one heck of a charge to make it worthwhile for the share holder to loan out his shares knowing when he gets them back, they will be worth much less.
Can one of you guys who understand these things explain something to me about shorting, please.
Lets keep it simple. I own 100 shares in a company that are valued at £20 each. The paper value of those shares to me is £2000.
A hedge fund comes to me and says can we borrow your shares to short. I say yes.
The hedge fund sells those shares and pockets £2000. After forcing the share price down, it buys them back for £10 - a £1000 in total - giving the hedge fund an actual profit of £1000.
Presumably, it then gives me my shares back. But they are now only worth £1000. So through my good work of loaning them my shares, I am now personally £1000 worse off.
Clearly I am missing something but on the face of it, why would you loan shares to a company so they can force the price down meaning that you are going to end up owning an asset that is worth less than when you loaned it out?
Shorting doesn't lower the value of the share though, they are gambling the share price will come down. they would also pay you a fee for 'borrowing' the shares from you.
Sorry I don't understand that. They maybe gambling that the share price will come down - although their actions make it more likely - but if successful, when the shares are returned they will still be worth less to the original holder. And if the fee that is paid to the share holder is so big to make it worthwhile to him to have shares returned at a smaller price, how does the person shorting the share make a profit?
@Rob7Lee you trade funds (as well as shares of course as remember the tips) very regularly I see? What's your thinking behind that?
Zynex up about 15% today. Anybody benefitting out of their gesture of goodwill?
I try to rebalance my portfolio once a year. Also if I see a fund way over perform compared to the market such as some of the BG one’s I’ll take some profit.
EG, I bought a lump of BG positive change last year avg price 2.4 sold 3.82 almost up 60%. On any measure that’s way out performed. Same with BG American, up 48% since last year, bought at average of 14.2 and sold 21.2. I’ve sold my original investment and kept the profit in.
otherwise most funds are long term holds generally bar a bit of rebalancing and adding to monthly.
of course they may go up further still, but it’s not often you get a combined 50+% return in around 9 months, if I could do that this year and next also I’ll be retiring then at 50!
Yep, I advocate doing this. I often re-balance client portfolios, especially if they are looking a bit "toppy". Nothing wrong with taking the profit & "banking" it somewhere else. A bit like in the old days with fruit machines. Put in £2 & if you get an early win then bank the original £2 & just play with the winnings.
Over the past 12 months I have taken quite a bit out of BG American. Usually hold around 8%-9% in a clients portfolio. Once I see it's gone into double figures I prune it back again. Normally find the portfolio needs rebalancing anyway as the Fixed Interest portion would have naturally decreased because of this.
Only problem I now have is where to invest these "gains". Fund managers are saying that Fixed Interest isn't going to give much by way of a return over the coming years - a few are recommending absolute return bond funds instead or alternatives / commodities such as Gold.
"remind yourself of why you bought this fund in the first place..does your rationale for buying still hold good? If so, hold..."
Dunno...
The rationale around why you bought the fund may still be the same but the amount you bought has changed. Again, it's all to do with diversification. If the fund price has increased by 100% then you are holding more risk as you are "overweight" in that asset - be it US equities, UK bonds, property or even cigarette cards.
Spot on, and that's predominantly why I sold some. I've got maybe 15 funds, when you have a few that go up by a serious percentage the plan I had has now changed, much more over weight in certain areas and I was on the max anyway really in those funds.
As @bobmunro says, I'm no way cleaver enough to beat the market, if I was I wouldn't be piddling around trading in my SIPP & ISA. I also have one eye on the fact I'll be 50 in a couple of years and want to have financial freedom in 5.
So I maybe don't have quite the risk appetite I once had, when you see the size of the growth in less than 12 months, all at the time when inflation is as flat as a pancake, it's hard to not bank some of that profit. If I could replicate that (which I won't) for the next 3 years I'm going to be very very happy!
OK, I get that general point now (thanks, all).
But in my case and Lindsell Train UK, looking it up, I bought into it because I thought I was underweight in UK focused funds and so bought in small amounts over a regular period from 8/18 to 2/19. Since then the UK markets have continued to under-perform but many believe that it's about time there was a re-valuation. If I agree with that, then I hold, unless I think this fund has underperformed the sector. That could be argued, but then we get into another tenet of fund investing...resist too much meddling. Fund manager as an individual still very much in place so do I still trust him? Or do I think there's a danger he might go the way of Neil Woodford? I don't know but I'd be wary of random articles which suggest so.
Please do critique this line of thought though, I really am unsure...
Nothing wrong with holding Lindsell Train UK Equity in your portfolio - just make sure its not your only UK Equity fund & you don't have more than say, 7%-8% of it. I usually advocate holding 3 different UK funds in a portfolio, totalling somewhere in the region of 18%-24% (depending on risk appetite etc) - so 3x 6%,7% or 8%. Currently I am holding 4 stocks (SDL Free Spirit, Artemis UK Select, MI Chelverton UK Growth and Miton UK Smaller Companies) but that's because I'm being slightly aggressive & feel that as the UK market is still way below where it was 12 months ago (whereas most other major stockmarkets are back to, or beyond where they were) then its a risk worth taking.
Been on a webinar this morning, hosted by Investec. They were using data from Bank of America/Citi and the view was that although markets seem to be a bit "frothy" they are not yet overheated. Citi gave it 7.2 on there "richter scale" where 0 is a bear market & 10 a bull market. Major concerns on the horizon is the ever increasing debt levels & the tax increases that will inevitably need to pay for it as well as inflation rearing its ugly head.
Gamestop was mentioned at the end. I'm not really up with the news on all of this but it appears that in the US there are no dealing costs when buying individual shares, more trading platforms than ever before & the general public using their recent Government Covid cheques to dabble in the market. Said the new "saying" was YOLO - You Only Live Once - and that may punters in the US were trying to outdo the "shorters" and make a killing when they see one.
Best way of showing how to short the market was in Trading Places - when they try to get ahead of the curve on the Orange Juice market by a dodgy OJ crop report.
sort of, yes, some eagle eyed users of wallstreetbets on reddit saw that Melvin had shorted GME to 140% of the stock price, and spent months artificially keeping the price of the stock down whilst also exposing themselves to far too much risk. They're now essentially bankrupt, iirc their short options expire on friday. It's possible that Melvin being so large (multi billion dollar hedge fund) the federal reserve might have to literally print money to keep them afloat.
Can one of you guys who understand these things explain something to me about shorting, please.
Lets keep it simple. I own 100 shares in a company that are valued at £20 each. The paper value of those shares to me is £2000.
A hedge fund comes to me and says can we borrow your shares to short. I say yes.
The hedge fund sells those shares and pockets £2000. After forcing the share price down, it buys them back for £10 - a £1000 in total - giving the hedge fund an actual profit of £1000.
Presumably, it then gives me my shares back. But they are now only worth £1000. So through my good work of loaning them my shares, I am now personally £1000 worse off.
Clearly I am missing something but on the face of it, why would you loan shares to a company so they can force the price down meaning that you are going to end up owning an asset that is worth less than when you loaned it out?
Okay, you're basically bang on, and your last question is a fair one.
The answer is what gives shorting its name: in the short term, you (as the lender) do not care, so long as you get your shares back. Because 100 shares is still 100 shares.
You are investing for the long term - of course, the opposite to the short. So you don't mind if someone has taken a risk on your stock price falling over the course of, say, a day or a week, because in the long run (over a few years) you can generally expect/hope your stock or portfolio or holding etc to make money.
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However, in the case of Gamestop, we are seeing something hitherto unprecedented that exploits and exposes the pitfalls of shorting quite as much as has happened. 140% of shares being shorted is just insane, and that it so happened to be Reddit/the average punters in their thousands to exploit the situation is really getting on the nerves of the hedge fund managers and fat cats.
Please do let me know if I've got any of the intricacies wrong on this btw.
@Rob7Lee you trade funds (as well as shares of course as remember the tips) very regularly I see? What's your thinking behind that?
Zynex up about 15% today. Anybody benefitting out of their gesture of goodwill?
I try to rebalance my portfolio once a year. Also if I see a fund way over perform compared to the market such as some of the BG one’s I’ll take some profit.
EG, I bought a lump of BG positive change last year avg price 2.4 sold 3.82 almost up 60%. On any measure that’s way out performed. Same with BG American, up 48% since last year, bought at average of 14.2 and sold 21.2. I’ve sold my original investment and kept the profit in.
otherwise most funds are long term holds generally bar a bit of rebalancing and adding to monthly.
of course they may go up further still, but it’s not often you get a combined 50+% return in around 9 months, if I could do that this year and next also I’ll be retiring then at 50!
Yep, I advocate doing this. I often re-balance client portfolios, especially if they are looking a bit "toppy". Nothing wrong with taking the profit & "banking" it somewhere else. A bit like in the old days with fruit machines. Put in £2 & if you get an early win then bank the original £2 & just play with the winnings.
Over the past 12 months I have taken quite a bit out of BG American. Usually hold around 8%-9% in a clients portfolio. Once I see it's gone into double figures I prune it back again. Normally find the portfolio needs rebalancing anyway as the Fixed Interest portion would have naturally decreased because of this.
Only problem I now have is where to invest these "gains". Fund managers are saying that Fixed Interest isn't going to give much by way of a return over the coming years - a few are recommending absolute return bond funds instead or alternatives / commodities such as Gold.
"remind yourself of why you bought this fund in the first place..does your rationale for buying still hold good? If so, hold..."
Dunno...
The rationale around why you bought the fund may still be the same but the amount you bought has changed. Again, it's all to do with diversification. If the fund price has increased by 100% then you are holding more risk as you are "overweight" in that asset - be it US equities, UK bonds, property or even cigarette cards.
Spot on, and that's predominantly why I sold some. I've got maybe 15 funds, when you have a few that go up by a serious percentage the plan I had has now changed, much more over weight in certain areas and I was on the max anyway really in those funds.
As @bobmunro says, I'm no way cleaver enough to beat the market, if I was I wouldn't be piddling around trading in my SIPP & ISA. I also have one eye on the fact I'll be 50 in a couple of years and want to have financial freedom in 5.
So I maybe don't have quite the risk appetite I once had, when you see the size of the growth in less than 12 months, all at the time when inflation is as flat as a pancake, it's hard to not bank some of that profit. If I could replicate that (which I won't) for the next 3 years I'm going to be very very happy!
OK, I get that general point now (thanks, all).
But in my case and Lindsell Train UK, looking it up, I bought into it because I thought I was underweight in UK focused funds and so bought in small amounts over a regular period from 8/18 to 2/19. Since then the UK markets have continued to under-perform but many believe that it's about time there was a re-valuation. If I agree with that, then I hold, unless I think this fund has underperformed the sector. That could be argued, but then we get into another tenet of fund investing...resist too much meddling. Fund manager as an individual still very much in place so do I still trust him? Or do I think there's a danger he might go the way of Neil Woodford? I don't know but I'd be wary of random articles which suggest so.
Please do critique this line of thought though, I really am unsure...
As I know you are a few years older than me, what's the long term plan, i.e. when will you be accessing the cash?
I wouldn't necessarily switch that particular fund, but more review how you sit overall compared to when you want the money etc.
Good question. The Lindsell Train funds are in my regular fund account only, not the SIPP. I'm still well overweight in cash even in my regular account, so I feel that - all being well - I could run both sets of fund investments for another 3 years or so, although I would continue to reduce risk in the SIPP funds.
@golfaddick, thanks a lot, mate. Currently my Lindsell Train UK is just under 6% of that fund portfolio. But the only other UK focused fund I have is ASI UK Ethical (3%). I honestly just don't feel confident investing more in the UK market at the moment, I'm not as bullish about it medium term as you (maybe it's a politically driven perspective but hey ho, money where mouth is, and all that). But also, and this is the trouble with funds, I know that several LT UK holdings also feature in the LT Global funds I have and the latter is a big chunk -21%-,and I have already taken profits from this one in the past. And I also have a bit of Fundsmith Equity which for sure holds equities classed as UK, and then heaven knows what is in the suite of Vanguard Life Strategy funds I have (18%) but bound to be some UK equities bundled in there.
I did also buy some of a Vanguard FTSE 250 tracker fund in the Dutch Degiro platform I recently opened, priced in euros, as my currency hedge :-)
So all in all I'm probably somewhere around 15-18% in UK equities, and if so, that would for me be about right.
Comments
Lets keep it simple. I own 100 shares in a company that are valued at £20 each. The paper value of those shares to me is £2000.
A hedge fund comes to me and says can we borrow your shares to short. I say yes.
The hedge fund sells those shares and pockets £2000. After forcing the share price down, it buys them back for £10 - a £1000 in total - giving the hedge fund an actual profit of £1000.
Presumably, it then gives me my shares back. But they are now only worth £1000. So through my good work of loaning them my shares, I am now personally £1000 worse off.
Clearly I am missing something but on the face of it, why would you loan shares to a company so they can force the price down meaning that you are going to end up owning an asset that is worth less than when you loaned it out?
Correct, there's a charge to borrow.
they would also pay you a fee for 'borrowing' the shares from you.
https://www.zerohedge.com/markets/after-all-139-gamestops-float-still-short
But in my case and Lindsell Train UK, looking it up, I bought into it because I thought I was underweight in UK focused funds and so bought in small amounts over a regular period from 8/18 to 2/19. Since then the UK markets have continued to under-perform but many believe that it's about time there was a re-valuation. If I agree with that, then I hold, unless I think this fund has underperformed the sector. That could be argued, but then we get into another tenet of fund investing...resist too much meddling. Fund manager as an individual still very much in place so do I still trust him? Or do I think there's a danger he might go the way of Neil Woodford? I don't know but I'd be wary of random articles which suggest so.
Please do critique this line of thought though, I really am unsure...
If people keep holding it will continue, and good, fuck em they don't have a God given right to make a profit. They take a risk with their investments.
As I know you are a few years older than me, what's the long term plan, i.e. when will you be accessing the cash?
I wouldn't necessarily switch that particular fund, but more review how you sit overall compared to when you want the money etc.
Been on a webinar this morning, hosted by Investec. They were using data from Bank of America/Citi and the view was that although markets seem to be a bit "frothy" they are not yet overheated. Citi gave it 7.2 on there "richter scale" where 0 is a bear market & 10 a bull market. Major concerns on the horizon is the ever increasing debt levels & the tax increases that will inevitably need to pay for it as well as inflation rearing its ugly head.
Gamestop was mentioned at the end. I'm not really up with the news on all of this but it appears that in the US there are no dealing costs when buying individual shares, more trading platforms than ever before & the general public using their recent Government Covid cheques to dabble in the market. Said the new "saying" was YOLO - You Only Live Once - and that may punters in the US were trying to outdo the "shorters" and make a killing when they see one.
Best way of showing how to short the market was in Trading Places - when they try to get ahead of the curve on the Orange Juice market by a dodgy OJ crop report.
Thanks. Ok I understand there is a charge to pay for the hedge fund. But being their actions can force the price of a share down by 20/30/40 per cent or more, it must be one heck of a charge to make it worthwhile for the share holder to loan out his shares knowing when he gets them back, they will be worth much less.
Sorry I don't understand that. They maybe gambling that the share price will come down - although their actions make it more likely - but if successful, when the shares are returned they will still be worth less to the original holder. And if the fee that is paid to the share holder is so big to make it worthwhile to him to have shares returned at a smaller price, how does the person shorting the share make a profit?
This is the free market, ladies and gents.
Must be time for people to start using decentralised exchanges and tokenised stocks after this, surely?
The answer is what gives shorting its name: in the short term, you (as the lender) do not care, so long as you get your shares back. Because 100 shares is still 100 shares.
You are investing for the long term - of course, the opposite to the short. So you don't mind if someone has taken a risk on your stock price falling over the course of, say, a day or a week, because in the long run (over a few years) you can generally expect/hope your stock or portfolio or holding etc to make money.
--------
However, in the case of Gamestop, we are seeing something hitherto unprecedented that exploits and exposes the pitfalls of shorting quite as much as has happened. 140% of shares being shorted is just insane, and that it so happened to be Reddit/the average punters in their thousands to exploit the situation is really getting on the nerves of the hedge fund managers and fat cats.
Please do let me know if I've got any of the intricacies wrong on this btw.
And talking of T212 and Freeshare they are getting slow with the US markets about to reopen
I did also buy some of a Vanguard FTSE 250 tracker fund in the Dutch Degiro platform I recently opened, priced in euros, as my currency hedge :-)
So all in all I'm probably somewhere around 15-18% in UK equities, and if so, that would for me be about right.
https://www.bloomberg.com/news/articles/2021-01-28/gamestop-resumes-rally-after-reddit-forum-s-brief-outage?srnd=premium-europe
This whole this is exposing the stock market for what someone on Twitter basically said it is: astrology for men!