“GameStonk” Lunacy: Is Speculative Fervor Reaching Epic Proportions?

Published on
January 26th, 2021
Duration
45 minutes


“GameStonk” Lunacy: Is Speculative Fervor Reaching Epic Proportions?

Daily Briefing ·
Featuring Haley Draznin, Ash Bennington, and Thomas Thornton

Published on: January 26th, 2021 • Duration: 45 minutes

Senior editor Ash Bennington hosts Tommy Thornton of Hedge Fund Telemetry to break down a day of absurd price action as GameStop skyrocketed 90% today and zoomed an additional 46% during afterhours trading. Tommy and Ash reflect on the shrewd yet reckless speculations of the r/wallstreetbets traders, who pushed hedge funds that were short GameStop like Melvin Capital to the brink, with Tommy noting that this intentional targeting of shorts triggered a record day of long/short degrossing. Turning to technical indicators, Tommy comments on the buying exhaustion he is seeing via DeMARK indicators, saying “this is a bubble that I think could pop at any moment.” He recommends “ringing the register” on successful trades and turning to cash. Tommy closes by giving Ash a long idea: Zynga Inc ($ZNGA). In the intro, Real Vision’s Haley Draznin makes sense of the market as company earnings reports take center stage and wild swings resume on heavily shorted stocks.

Comments

Transcript

  • BB
    Benjamin B.
    29 January 2021 @ 17:09
    If were in a bubble now wait till Biden pushes out another $1400 of funny money for the masses to gamble with.
  • PW
    Paul W.
    27 January 2021 @ 13:54
    "and when people .......people that have no business making gobs of money..... that's a sign right there" WOW...... I guess the "paper boy" is talking about me again :D Should I apologise to someone for getting rich........ I was unaware that I had to ask for someone's permission........God ..... I'm such a nube at this.......
    • GG
      Guillaume G.
      28 January 2021 @ 10:08
      yes that was very poor phrasing.
    • GG
      Guillaume G.
      28 January 2021 @ 10:09
      rest was excellent though
  • LA
    Linda A.
    28 January 2021 @ 05:29
    Znga here we come! Epic show-thank u!
    • MJ
      Matt J.
      28 January 2021 @ 06:19
      He was meant to make the stock pump not dump haha bazinga! great content though!
  • ss
    sam s.
    28 January 2021 @ 03:14
    I always listen when Tommy is on. His viewpoint is gold.
  • LL
    Lance L.
    28 January 2021 @ 02:00
    I got in on AMC at 2.50 a share lmao
  • DG
    David G.
    27 January 2021 @ 00:02
    Are you still shorting TSLA, if not when did you cover that trade? And when you say you are short, is that always with put options with limited risk?
    • TT
      Tommy T. | Contributor
      27 January 2021 @ 23:32
      I am still short Tesla and last year I covered a bad short at the equivalent of 250. I am back short again and have Feb put spreads and getting ready to listen to my fav conference call to hear some classic Elon. By the way the quarter was terrible. Lost money again ex emissions credits which were huge at $401 million. Those will go away soon. Lot's of other questions within the release.
  • BT
    Billy T.
    27 January 2021 @ 06:02
    The bubble talk is just about everywhere. Was there this much bubble talk in before 2000? How about before GFC? Looking for comparisons.
    • EH
      Edward H. | Real Vision
      27 January 2021 @ 08:52
      Answer: yes
    • RP
      Raoul P. | Founder
      27 January 2021 @ 09:44
      Answer: Also yes.
    • JM
      Jason M.
      27 January 2021 @ 15:27
      Love Ed, Ash and Raoul.. "Tom - DARN, this is a family Channel right? Ash- We've said a lot worse"
    • DM
      Don M.
      27 January 2021 @ 21:41
      There was in both instances. And in both instances it was widely ignored under either. 1 - That's the old guys who either don't "get it" or missed out 2 - Yes it's a bubble but I don't want to miss out but will know when the "real" top is put in.
  • AP
    Ash P.
    27 January 2021 @ 21:04
    Tom, Ash....timed this convo to perfection...or so it appears.
  • JJ
    John J.
    27 January 2021 @ 20:32
    Great show, great commentary. Tom is terrific.
  • TC
    Tim C.
    27 January 2021 @ 02:29
    This was probably the Best interview with Tommy ever. I would still love to understand how you can short more than the outstanding float, aka a naked short. Maybe things are getting mischaracterized?
    • AB
      Ash B. | Real Vision
      27 January 2021 @ 02:35
      Thanks, Tim. That's a good question. There are definitely some folks questioning the accuracy of the data on the short interest percentages.
    • DZ
      Dennis Z.
      27 January 2021 @ 03:05
      Not at all- it's called re-hypothication! Calling Caitlin Long...
    • RM
      Robert M.
      27 January 2021 @ 03:43
      One answer I tripped across: Let us say there are 100 outstanding shares of company X held by investor A. Investor B comes in, borrows these 100 shares and short sells them to investor C. Which means, outstanding shares=100, short interest =100. Investor B borrows these 100 shares again from C and short sells them to investor D. So now, short interest is 200 and outstanding shares is 100.
    • JF
      Jack F. | Real Vision
      27 January 2021 @ 04:22
      Yup, that's right, Robert M. The way a stock's short interest can exceed its shares is outstanding is when a stock sold by a short seller is lent by the buyer’s broker to a second short seller, whose buyer’s broker lends it again, ad infinitum.
    • AB
      Ash B. | Real Vision
      27 January 2021 @ 04:35
      Yep. Robert and Dennis are both correct: It could certainly be asset re-hypothecation. In theory, assets could be re-hypothecated infinitely; in practice, I suspect there are mechanical constraints around the lending of the shares. The reality is we don't know exactly what the circumstances are. It's interesting that Tom expressed a bit of skepticism in the 151% figure that was stated on Seeking Alpha's data page as the short interest percentage. It's a really interesting question. We should dig into it in a future show when we can get more granular data around it.
    • JC
      John C.
      27 January 2021 @ 19:45
      So re-hypothication in short selling is kind of like fractional reserve banking, i.e. it’s really cool and fascinating that it can happen, and makes you scratch your head a bit until you get your head round it, but it can end up in a god awful mess if there is a run on the bank / pump in the stock...
  • DA
    David A.
    27 January 2021 @ 15:45
    Question for Mr Thornton: Are the tips you sell in your newsletter morally any different to people collectively coming up with a trade idea on Reddit? Aren't they just looking to exploit imbalances like the rest of us?
    • TT
      Tommy T. | Contributor
      27 January 2021 @ 19:17
      This is a good question. The action of the Reddit Wall Street Bets in my opinion (you can differ with me, it's OK) pushes people with overconfidence to go "all in" very risky trades. I don't believe it is illegal just like I didn't believe it was illegal when some hedge funds would do idea dinners which had the Feds do a probe years ago which was dropped. Or when the Tiger Cubs all have similar positions because they all talk. With my work, I explain clearly the risks and recommend sizing appropriately which is usually 1-5% per position. The moral issue is that the "all in" "YOLO" "HODL" could and probably will cause many to blow up when the music stops. I'm happy for all that have made money and in my view with those incredible gains these investors should ring the register and lock in some gains.
    • DA
      David A.
      27 January 2021 @ 19:26
      To Tommy T. Thank you. I appreciate your reply and I generally respect your contributions on Real Vision. I felt your comments yesterday, however, were rather condescending. I mean that to be constructive feedback.
    • TT
      Tommy T. | Contributor
      27 January 2021 @ 19:40
      David, noted. I am sorry if I was condescending.
  • SB
    Stewart B.
    27 January 2021 @ 17:32
    Love listening to Thomas Thornton. He is so kind and humble.
  • sj
    sara j.
    27 January 2021 @ 08:58
    Looking at this mania in some parts of stock market, BTC looks like a saint.
    • BC
      Bill C.
      27 January 2021 @ 16:28
      Interestingly, today, at this moment, Bitcoin down. Tried and true Treasuries up a bit. Hmmm.
  • TG
    Tony G. | Contributor
    27 January 2021 @ 14:46
    best in the business Tom Thornton.
  • VS
    Ville S.
    27 January 2021 @ 14:06
    Douchy
  • MS
    Matthew S.
    27 January 2021 @ 13:48
    wildest daily briefing by far.....
  • MN
    MYLENE N.
    27 January 2021 @ 11:15
    Tom I'm glad to hear you cried for your buddy the hedge fund manager. Ash, Please bring Tom back to talk about his put spread on $GME for educational purposes.
    • RC
      Robert C.
      27 January 2021 @ 13:45
      Agreed your guest sympathies with the hedge fund manager expresses his obvious dislike of This phenomenon of changing dynamics.
  • NF
    Neal F.
    27 January 2021 @ 13:23
    Weak guest. Consensus rehash.
  • PW
    Paul W.
    27 January 2021 @ 13:19
    "Reddit could shut them down" ha ha ha........ this is the whole point of reddit .....ya muppit
  • PW
    Paul W.
    27 January 2021 @ 13:18
    The Anarchists have taken over wall street........ and the establishment are MAD as hell...... :D
  • IL
    Irina L.
    27 January 2021 @ 12:41
    Great video! Tom is a very interesting guest. Thanks a lot!
  • AK
    ASHAY K.
    27 January 2021 @ 02:01
    For a chance, i agree with cramer - there is nothing illegal these guys are doing. If regulators shut them down, there are a lot of things they will need to shut down! C'mon - all those hedge funders selling their book on financial news networks, tweets etc??? How different are they?
    • SR
      Suds R.
      27 January 2021 @ 08:34
      It's interesting. I am still very new to this so I had read up about what a "short" is. Sounds to me that shorting is trying to manipulate the price of a stock. And this guy sounds pissed that the market is being manipulated by someone other than himself.
  • AK
    ASHAY K.
    27 January 2021 @ 04:19
    Yes "bubble" talk seems to be coming up every where. As long as the Fed is doing what it is doing (and said will continue to?), why blame investors when any such 'pop' in a bubble is nothing but a buy the dip opportunity? The Fed always cleans up the mess when equities drop 10-15% in a quick fashion i.e the 'Fed' put is a moving strike. Why would it be different this time?
    • CK
      C K.
      27 January 2021 @ 07:11
      I don't know... I has similar thoughts when people were comparing the FAANGs at their ATHs post-March to the dot com era, which felt like a wrong comparison (trillion $ companies vs lots of zero revenue URLs like pets.com and of course some descent companies like Microsoft and Cisco). But I think that you can have multiple bubbles at once, it's not just one big one. S&P and Nasdaq are in bubble territory but may be sustainable given the Fed's activities for the time being. However, you may have some smaller in absolute size but larger in proportion bubbles further down the risk spectrum, for e.g. in the domain of GME and NIO. Despite the current sustainability of the large index bubbles, we don't know how a smaller but riskier bubble burst can affect them, just like pets,com affected Microsoft and Cisco. Agreed, you can always buy the dip, but it may go lower than 15% before any buyers step (just like in March), even if the Fed acts faster. The common view (right or wrong, I don't know) was that pre-March crash, retail participation was low, but that post-crash it was retail that drove markets higher, with institutions (at least on the active side) watching from the sidelines and waiting for the bear market rally to end. Sure, most have piled in now, but if retail gets burnt when GME-like bets turn sour, exit en masse, and cause a drop in the overall market, what happens if institutions under-weight equities once again and retail doesn't participate in the dip buying? I know everyone hates bears these days, as Tommy says, and I'm also one of those retail investors who lost their jobs due to Covid and now trades full-time (without stimulus checks). However, I don't trade from my parents' basement and use my profits to buy new Playstation 5 games. I use my profits to feed a family of 4 (including two very young children) so I tend to agree with bears like Tommy and Raoul and am more cautious than the r/wsb guys. And I could be 100% wrong on this one, but speaking of bubbles, I think Robin Hood traders themselves are a massive bubble. I've had plenty of friends over the years who traded profitably far down the risk spectrum (at least they were when they were talking about it), but when I ask them a few years later (when they're now working full time) how their trading is going and they all say the same thing: I gave up, I couldn't figure out... I lost a lot of money and realised I had no clue what I was doing. I think we might see that happen in the next year or two. Sorry for the book chapter... feel free to bash me with counterarguments.
  • MH
    Michael H.
    27 January 2021 @ 00:10
    isn't coordinated group of overzealous 20-something traders jamming prices around shaking out counterparties normally called a proprietary trading desk?
    • JF
      Jack F. | Real Vision
      27 January 2021 @ 01:16
      LOL
    • WM
      William M.
      27 January 2021 @ 01:32
      You nailed it! Hilarious and so true!
    • PB
      PHILLIP B.
      27 January 2021 @ 01:51
      CWH might be on deck.
    • RT
      Richard T.
      27 January 2021 @ 07:10
      How are the demographics of traders discovered and become known? How is it known as a matter of FACT that" 20-somethings" are driving the market?
  • JC
    Juan C.
    27 January 2021 @ 07:08
    So you got on the wrong side of a trade? Move on, stop whining
  • VN
    Vitali N.
    27 January 2021 @ 02:02
    I clearly don't understand gamma squeeze. Thomas just said, dealer sells call options and has to buy a proportion of the stock, as it goes up, he buys more. I saw Chamath bought 50 GME calls. Why did some dealer have to sell him GME calls and be forced to hedge? Why not just be the exchange and if there's another party willing to take Chamath's change now and risk on Friday be done. What am I missing?
    • JL
      James L.
      27 January 2021 @ 05:16
      Most investors only want to buy options, so the markets largely lopsided. Most people selling options are professional traders, market makers, or institutional dealers. They aren't interested in taking a directional view on a stock, they're selling volatility. They don't have to sell they just want to make money. They can be directionally neutral by selling the option and buying the underlying to hedge the delta (change in the price of the option due to change in the price of the underlying) and capture the spread between implied and realized volatility. Options also have gamma (change in delta due to changes in underlying). The closer to in the money an option gets, the delta starts to increase, so the seller of the option has to buy more of the underlying to cover their delta which further increases the price, which causes a further increase in delta, especially on these low float stocks.
    • AS
      Arjan S.
      27 January 2021 @ 05:56
      https://www.squeezemetrics.com/download/The_Implied_Order_Book.pdf This is a pretty good (if dense) primer on how Gamma Squeezes (and other options greek craziness) occur.
    • CK
      C K.
      27 January 2021 @ 06:22
      Dealers are there to make markets regardless of the direction of the underlying. They are there to sell into a rising market or buy into a falling market and the only way they can do that is if they can hedge their positions. Without dealers, two willing parties can trade with each other on an exchange, but with a security like GME or Tesla, while you do have "shorts", they are more likely to be long puts (limited loss) rather than short calls (unlimited loss) so if you are trying to buy calls there may be no or very few sellers. Someone buying 50 contracts may have to go deeper into the order book to buy all 50 therefore negatively affecting their average execution price. Buying through a dealer would be cheaper. That's my understanding anyway. Also, generally speaking (not just wrt options), larger buyside institutions can get tighter spreads from dealers than by trading on an exchange.
    • CK
      C K.
      27 January 2021 @ 06:26
      Darn (to use Tommy's colourful language) - when I was typing my response I couldn't see any answers to Vitali's question... only when I pressed submit did James L's perfectly good answer appear - sorry for the duplication.
  • TT
    Tokyo T.
    27 January 2021 @ 06:03
    The kids that made a lot of money on GME are no different to Tommy. Go to Reddit and read the original comments (from last year), not the newcomers who just jumped on the idea in the last few days. They put the trade idea together months ago, shared it openly, and it's now paying off big time for them.
  • JP
    John P.
    27 January 2021 @ 04:18
    I think it would be great if rv did a quick video on how over 100% of a float can be short and where one can get the closest to real-time data on this metric/ how accurate it is.
    • AS
      Arjan S.
      27 January 2021 @ 05:53
      It’s basically just illegal (but unenforced) naked shorting isn’t it? Or is there some rehypothecation of shares involved?
  • JF
    Joseph F.
    27 January 2021 @ 01:39
    *Best*RVDB*EVER*. so many lols... "PEOPLE THIS IS NOT NORMAL!!!" .......Watching Zillow...I just had to say....dang. (Ash this is where you say "ah we're gonna have to bleep that part out.." lol
    • AB
      Ash B. | Real Vision
      27 January 2021 @ 02:02
      Thanks, Joseph!
    • MC
      Michael C.
      27 January 2021 @ 04:47
      When I see the action and comments about the Reddit flash mob, all I could think was: Santa Claus : You'll shoot your eye out, kid. A Christmas Story And my dear departed Mother's words: And someone is going to be crying.
  • DG
    David G.
    27 January 2021 @ 00:23
    I don't think this market will "fade," whatever that means. A controlled burn will swiftly be met with dip buyers, who will have to see a lower high of the broad markets and a sharp rollover. For euphoria to suddenly shift, this thing has to hit a brick wall, like 100 mph to Zero, in zero seconds flat. Instadeath! You are going to have to start the day hitting circuit breakers on the open. nothing less will scare this market.
    • DS
      David S.
      27 January 2021 @ 01:48
      Many speculators hope you are correct. DLS
    • MC
      Michael C.
      27 January 2021 @ 04:42
      “How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.” The Sun Also Rises.
  • BC
    Bill C.
    27 January 2021 @ 04:40
    Great video. One thing not mentioned, as far as I heard, the government is sending money printed out of thin air so millions of people. Should I repeat that? [Ash, still missing the file cabinet(s).]
  • CT
    Cherry T.
    27 January 2021 @ 03:27
    Thomas Thornton was hilarious. Incredibly funny guy.
    • LN
      Laurie N.
      27 January 2021 @ 04:28
      Was just going to type the same thing. Hilarious!
  • BC
    Bill C.
    27 January 2021 @ 04:02
    At minute 9 Ash mentions the oblique nature of sudden regulations. In the same sentence he mentions...currencies. And how suddenly it can go against you. My first thought related to currencies and regulation was bitcoin.
  • DP
    Daniel P.
    27 January 2021 @ 03:03
    Really enjoyed watching Tommy trying to come to terms with this insanity in real time.
  • sk
    samuel k.
    27 January 2021 @ 02:58
    Tommy is so chill.
  • MD
    Matt D.
    27 January 2021 @ 02:51
    I love it - Tom giving the r/wsb crowds some real trading ammo.
  • JM
    Jim M.
    27 January 2021 @ 02:27
    I have a Real Vision Circle of Ten, just my silly little way of expressing my 10 favorite RV regulars. Tommy is in it, obviously.
  • SM
    Stephen M.
    27 January 2021 @ 02:20
    'ape sh*t crazy'. That sums it up well! Great interview; love the humility! I remember the dotcom bubble burst and guys I worked with we're margined to the hilt and receiving margin calls from their broker in the am and having to sell their cars and other assets that afternoon to cover.
  • JA
    Jordan A.
    27 January 2021 @ 02:16
    I don't know about the ol' wave 5. CNBC and Bloomberg are constantly talking bubble. Almost every financial podcast is talking bubbles. I think you're too soon.
  • RC
    Ron C.
    27 January 2021 @ 02:13
    The live reaction to GME / Elon after hours was priceless!
  • MC
    Mark C.
    27 January 2021 @ 01:41
    I thoroughly enjoyed today's RVDB. Was entertaining and useful for us newbs...take profits. Wise advice. Thanks Tommy and RVDB crew.
  • JF
    Joseph F.
    27 January 2021 @ 01:40
    also suprised not to hear about the heavy calls on NOK
  • WM
    William M.
    27 January 2021 @ 01:39
    So much about this bubble reminds me of the Internet bubble.... incl. the wild and crazy short squeezes on little crappy companies etc. And now with much better and more universal internet access plus virtually zero trading costs this was inevitable. But as Marty Zweig would also say, "Don't fight the Fed" .... and maybe they don't want this bubble....but they want even less for this bubble to pop.... So something else will have to do that job - probably something almost nobody can see right now. Or maybe the cure for high prices is high prices to use a Rick Rule phrase...
  • JF
    Joseph F.
    27 January 2021 @ 01:39
    Also the Elliot Wave explanation was the best I've ever heard. #solid
  • NL
    Nikola L.
    27 January 2021 @ 01:25
    thank you team.
  • PW
    Paul W.
    27 January 2021 @ 00:19
    This is what happens when the fed injects $3T into the system and it gets plowed into assets. The hedge funds crying for fed intervention back in March on CNBC brought this upon themselves. I feel no sympathy.
    • JF
      Jack F. | Real Vision
      27 January 2021 @ 01:16
      interesting take, Paul
  • DN
    Douglas N.
    27 January 2021 @ 00:53
    Hedgeye says it's quad 2 gogoogogogogogogo
    • DG
      David G.
      27 January 2021 @ 01:08
      Yeah in terms of opinions it's either balls to the wall, or eject, eject, eject. There is no middle ground anymore. You either get Maverick and Goose doing inverted polaroid pics, flipping the bird, or you get Cougar holding on too tight, sweating bullets, because a few Migs showed up. We all know Goose is gonna die eventually, and Maverick will be shaken up a bit, but manage to be the hero in the end. Figure out how you will be Maverick after goose hits the water limp, and enjoy what you can until that day.
  • MC
    Michael C.
    27 January 2021 @ 01:01
    Marty Zweig (who called the 87 crash) did a bit of history in his book "Winning on Wall Street" Bear markets from 1929-1987 occurred on an average of every 3 1/2 year, lasting 18 months. His conditions for a bear market were: 1) Inverted yield curve (had that) 2)Extreme deflation (had/have that) 3) Ultrahigh P/E (have despite all the jiggering with "earnings", I think Zweig was saying extreme overvaluation so got that) Worst bear market in history had all 3 conditions, 1929-32, -89% DJIA When 2 of 3 conditions exist, average -38.5% DJIA Zweig used various signals to make his calls. We shall see whether we have a garden variety correction or something more. Does Tommy have any downside forecast when/if things revert? I like Tommy's humility and insight compared to another trader who is from the Church of What's Working Now...lol Thanks Ash and Tommy, GREAT show!
  • GH
    Gloria H.
    27 January 2021 @ 00:53
    The past 20 years have seen the financialization and commodification of EVERYTHING. With all due respect, what the heck did Wall Street expect — that they wouldn’t get bitten? After bail-outs, tax cuts, and “too big to fail,” the hedge fundies are lucky they get to escape with just some losses.
  • CR
    Coty R.
    27 January 2021 @ 00:41
    First off you don't need margin to trade out right puts or calls. Also, buy options requires 100%
  • LS
    Leeza S.
    27 January 2021 @ 00:22
    Wasn't naievety. It was arrogance. Dirty Asian country never happen in our superior country. I've been living in China 5 years so is easy to watch the biases