Sunday, January 31, 2021

Kansas City Insider Explains Stonks, Short Selling & The Squeeze

Forgive us if we believe that, behind the scenes, the war over Gamestop is nothing more than crisis manufactured to force more regulation and negatively impact the American economy.

On the bright side, forevermore we'll use the term "STONKS" to describe a facet of the economy that's basically just a more boring form of gambling. 

Meanwhile, politicos have capitalized on the drama to rally their own PR fortunes.

Best of all, a KICK-ASS KANSAS CITY INSIDER shares a worthwhile Sunday night contemplation in order to offer edification and a fact check against those who would decry one of many financial tools that most people don't REALLY understand. 

Check-it . . .

Short Selling Swine And Congressional Fools That Condemn Them.

The news has been breathlessly debating the evils of selling a stock short the last few days.

Short-selling, quite simply, is selling something you don’t own, hoping to be able to buy it back at a later date cheaper than when you purchased it.

So let’s take a simple, local example.

You sell ten (10) KC Chief’s Superbowl tickets at the $5,000 face-value each. You do this because, through your exhaustive research, you discover that Mahomes won’t playing, there is an extremely deadly new strain of the China-Flu in Tampa, and, the NFL, due to so many injuries this season, will play the game as a flag-football match; no tackling.

Worse yet, the NFL knowing this information will kill their biggest money-make event of the year, will announce all this only one day before the game’s start date.

You uncovered all of this. You know that value of the tickets will crash as soon as it’s announced.

So you sell 10 tickets (you don’t own) at $5,000 each, $50,000.

You then announce your findings to the world hoping that the tens of thousands of fans that held these soon-to-be-worthless tickets, could get out before the price went to near zero.

Some people believe you and sold their tickets immediately. Some even followed your example, and sold tickets they didn’t own. Others waited, but as the rumors circulated, and prices crept lower.

Now if people listened to you, and the tickets did go to zero, you stand to make, at most, $50,000. A small reward for saving others millions from being defrauded by news hidden by the NFL.

The Squeeze . . . Or, The Other Side Of The Coin.

Now lets look at it another ways.

Lovely Tammy Reid, wife of Chief’s head coach got wind of these evil short-sellers. She was confident that your news was wrong. She bought all the tickets she could get her hands on. She even talked her friends into jumping on board and buying tickets.

Every time the rumors began to circulate that something may be wrong with the Superbowl game, the price of tickets dropped, Tammy and her friends purchased tickets.

As the tickets grew scarcer, the price went higher and higher, soon topping the highest prices ever paid for a Superbowl ticket.  Tammy assured her girls that nothing was wrong, and those tickets were as valuable as the market said they were locking in millions of profits if any of Tammy’s-team sold at these high levels.

You, our short-selling swine, soon realized that if Tammy’s-Team continued, not only would you lose your money, but your house, car, and pretty much everything you own in your attempt to do a good deed and let the fans know they might be being ripped off.

As a short-seller, your risk is limitless. The upside potential is if the price goes to zero, in our case, the most you can make is $50,000. But if those tickets double in price, or triple, or go parabolic and skyrocket to, say, $70,000 each, you have to go into the market and buy the tickets you promised to deliver…You stand to lose $700,000 even if your information is accurate.

In the above scenario, who’s evil?

Is it Tammy’s-Team that has driven prices sky-high, making them unaffordable to just about anyone?

Or is it iur white-hatted short seller, trying to save innocent fans a few dollars and get paid a predefined profit for alerting K.C. fans from this fraud?

If you answer is, “it depends on who’s right”, give yourself a gold-star. You're correct.

Markets move on information. The consumer needs all the information, positive and especially negative, to make an informed decision with their hard-earned dollars.

If Congress makes a mistake (when have they not?) and bans the short-seller, a very valuable flow of information is eliminated from the market. And making informed decisions just became that much more difficult.

And, if you say that Mr. Short-seller is just trying to drive the price down so he makes a profit, my answer would be one word; TESLA.

From nearly TESLA’s start, short-sellers have railed against this company highlighted flaws, difficulties, etc. and, in most cases, their information has been accurate, yet the price keeps climbing.

You see, the thing is, short-sellers can only alert the market to potential damaging information.  Real value, as in the case of TESLA, will counteract anyone’s attempt to harm the market. As Elon Musk continues to outperform each downside prediction, the value of his company continues to climb, no matter how damning the short-sellers news has been.

Short-sellers can’t cause the price to drop even if the information they have is accurate. They must convince others to believe in their theory, and then convince them so strongly that they actually take action, and unlimited risk.

#############

You decide . . .

24 comments:

Anonymous said...

Better title: AOC Wants Your Stonks

Dex said...

I think AOC and Ted Cruz isn't so much against short selling as she is against Robin Hood acting on behalf of hedge funds and not their investors.

Anonymous said...

Musk hates short sellers too.

This is more about pushing back against the hedge funds.

Fortunately, they only represent themselves and whatever regulation they suffer won't effect most people. Let them beg for a change, they've been merciless with most Americans.

Bb said...

^^^

Trouble is, when you start tinkering with the markets like that, you don't know what the end result will be.

Over regulation has killed many economies throughout history.

Most people believe in the free market because it works.

In the long run, the game stop crowd are going to have to eat their losses because it's just not a good company.

Anonymous said...

Thanks for the education. Best description my pea brain has seen. I finally get it. Short sellers don't create nothing, as the media has been selling us, but actually create information, all be it negative. Thanks Tony.

Anonymous said...

You get it half right 8:22. What the hedge fund jackals were doing is what I call "engineering an outcome". They in effect tried to destroy GameStock in order to make serious bank. We don't know if GameStock was over or undervalued now do we? No. They were not interested in an honest answer only in destroying this business. If you want to short sell you should actually have to buy the stock at full price. What those jackals did was neither honest or ethical and it should be stopped.

Anonymous said...

The elites got burnt good and their asses are still chaffed about it. That was round one. They have more coming. I'll have no problem participating against them again.

Silvestor orgalthorp said...

Short selling is no big deal. The problem is when billion dollar hedge funds short sell while going on television financial shows and talking down the company with intent that people start dumping their stocks
That should be criminal

Anonymous said...

I can't wait to put thousands of dollars in to Gamestop tomorrow to really "stick it to the man."

Anonymous said...

KC has always had champagne tastes with a wino's budget. After they lose the Stupid Bowl this year don't look for anything out of them in the rest of your lifetime.

Anonymous said...

The lefty swamp rats in Washington took major losses and they’ll fix it so they never lose and somebody will go to jail

Anonymous said...


Robinhood will allow buyers to purchase only ONE share of Gamestock tomorrow..

the goy founders must've got word from their financial overlords to stop screwin' around with THEIR scam..Oy Vey!

Anonymous said...

HE SWINGS AND HE....MISSES

Hey, you were doing ok there, conveying the basics, but then you went all TESLA on us and short-circuited.

Performance in the last 12 months = 519.16%
Oh yeah, that's sustainable, completely normal.

Reality Speaker said...

Saudi Joe and the commies are gonna fuck the dollar up (down).

Buy limited mined crypto (BitCoin) before the greedy gubmnt swamp dwellers figure out how to get their greasy fingers on it to get rich(er).

Fiat money (dollars) is doomed with the "stimulus" presses running day and night to buy votes and fake loyalty.

Anonymous said...

Thankfully. Weinrich Zitzmann Whitehead Investment Securities are no longer around to short sell stocks. They lost alot of money on bad ideas. They were clueless. "Near the Country Club Plaza" - what the heck did that slogan mean - they couldnt afford a place on the Plaza I guess.

RIP Winerich Zits & Blackheads

Get some Clearesil

Anonymous said...

I'm buying Gamestop!

I'm buying silver!

Viva la revolucion!!

Anonymous said...

Still chuckling at the joke posted @12:11, slamming "fiat money"and recommending Bitcoin!

Wonder if he stashes his "Bitcoins" under his mattress or has his imaginary Girlfriend hide them for him.

Kudos on your humor, amigo!

Anonymous said...

The only ones making any money off of this is members of the Tribe.
They always do.

Anonymous said...

Thanks Tony. I had thought short sellers were midgets but more I know better.

Anonymous said...

6:03 The dude has something. Bitcoin is limited. There are only a certain number of them, and they have recognized value independent of governments, whether you want to jump on that bandwagon or not, which is why they are valuable. Contrast that with the US Dollar, where at the whim of congress, the US Mint flips on the printing presses. Any casual observer of economics can tell you that the value of something decreases when the supply is plentiful. It works the same way with the dollar. Tell me how flooding our economy with trillions of dollars at the whim of congress helps the US domestically and on the world scene? In the long run, the value of the dollar drops and it takes more of them to buy a loaf of bread or a Hyundai. Now that we are going to lose our energy independence, and the Saudis and the Russians can charge what they want for oil, watch as the price of gas goes up not only because of our devalued dollar, but because domestic oil is in short supply and our oil-producing partners will punish us for daring to be independent. I'm not saying bitcoin is the answer to our problems, but if the US economy crashes, a recognized, government-independent form of currency may be much more valuable than the toilet paper printed by the US Mint. Like prepping, it's a hedge against tougher times. Nothing wrong with that. What is wrong is burying your head in the sand and thinking the almighty US Dollar can weather any storm. Not in a world economy.

Byron Funkhouser said...

Tony. Decent analogy, except for the glaring typo in the sentence about Patrick Mahomes not being on the field. Correct that typo, have your mom proof read it for you, and give your balls a tug.

Anonymous said...

@8:36 Pixie Dust is limited also, and shares all the characterisics you describe for the other mythological substance called "Bitcoin"!
Wanna buy a "nickle bag"? Only $75,000 today, guranteed to go up tomorrow!

The only value in Bitcoin is in provingthat Ponzi was the Nicola Tesla of scamming.

Anonymous said...

@ 9:59. Please quantify pixie dust. Tell me how many shares are available. Bitcoin is limited to 21 million "coins," an arbitrary term that represents a Bitcoin share. The US Dollar? As many as the US government wants to print. If the government needs a million dollars, they just print it. Bitcoin and other digital currencies are as real as any other commodity market. Ever heard of "futures?" Go ahead, smart guy - show me a "future." Put one in my hand. I'll wait. Yet, futures are traded every single day on stock markets throughout the world. Even short calls are pixie dust, as you are banking on something happening that hasn't happened yet, and assigning a value to it. Major financial institutions recognize Bitcoins and other digital currencies as valid, legal tender. I can buy stuff with BTC today. Show me what you can buy with your magical pixie dust. And if you are so high on the almighty US dollar, just wait until the Fed goes to the "digital dollar." If you think BTC is pixie dust, what will you think of our toilet paper currency in its digital form?

Anonymous said...

9:59 just got knocked the fuck out. He's sore he didn't buy bitcoins when they were a dollar each.