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In January 2021, and a few times after, meme stocks experienced profound price increases based on little related to fundamentals. The reasons are varied - in some instances, there were many large players who were short the stock (GME, AMC) and waves of buying pressure from retail investors, as well as other hedge funds, caused the prices to cascade upwards in a truly hilarious manner (GME going from $18 in December to $480 at the peak). In other instances (TSLA in summer 2020 for example), it was the case that too many call options (a derivative that allows one the right, but not the obligation, to purchase a specificed security at a specified price, on or before a specific date) were sold, and those who sold options were forced to buy more stock to hedge, in a cascade upwards.
Due to various acts of incompetence by Robin Hood and other brokers, having insufficient liquidity to deposit with the clearing houses which settle stock trades (as exposed in the SEC Report, Robin Hood's head of compliance was unaware of the existence of margin requirements with the clearing houses), various things which appear sketchy occurred in January 2021, and at other times. For example, in January 2021, Robin Hood moved the stocks to "Position Close Only", meaning that one could hold or sell, but not buy any more of the specified securities.
For those who were new to markets, this became a crusade. It has long since ceased to involve any fundamental cause, or even revolve around any sort of evidence, but instead is a venue for a mish-mash of totally wild conspiracies that are reminiscent of QAnon.
Let's look at AMC. AMC is the movie theatre company of which you have likely visited in past. It has a market capitalization today of 4.20B (lol), In September 2019, AMC had a market capitalization of $1.1B. This is a 4x.
When one compares the company's books [1], the discrepancy becomes even more stark. At the end of 2019, AMC had a tangible book value of -3.7 billion. Today, it has a tangible book value of -4.8 billion. In Fiscal Year 2019, it lost 149 million dollars. This quarter, it lost 121 million dollars.
So uh, how is it alive? How does it stick around?
Well, there's a cult backing it, and they have essentially agreed to use the stock market as a Go Fund Me, with the belief that when the End Times/"Mother of All Short Squeezes" comes, AMC's share price will rise as high as $100,000 per share[2]. With 516 million outstanding shares, this would value the company at approximately 51.6 trillion dollars. They believe in earnest that they will be able to cash out from this level, and earn trillions of dollars that their counterparties obviously would not have available to pay them. They believe this is the case because they believe that short sellers have sold billions of "synthetic" or "fake" shares of the stock [3], despite no obvious mechanism for such a thing occurring, and positing a conspiracy that would require likely >10,000 people, all of whom could instantly betray that conspiracy in exchange for vast riches beyond belief, to all keep quiet for over a year and a half at this point. The CEO, Adam Aron, has somewhat played into the meme stock aspects in a way that makes me feel sorry for the cult believers. However, he has also attempted to dispel some of the mythos [4], to little effect. In link 4, the tweet thread, he states this, but says that part of the reason they have done their recent corporate action (issuance of a preferred share to all shareholders - effectively a stock split), is to show that there are no synthetic, or naked shorts.
And so, the preferred share was issued to each shareholder who owned AMC. The AMC "Apes" beforehand stated that this [5] would be [6] the nail [7] in the coffin [8] and The MOASS WOULD HAPPEN as SYNTHETIC SHARES WERE REVEALED.
Predictably, no such MOASS occurred, and the price of AMC and the split-off preferred equity ($APE) have bled since. Predictably, cults do not take kindly to evidence that The Date Was Wrong, and instead, Outside Forces Have Conspired To Ruin Us. [9] [10] [11]. 11 is a good example of the totally false information that runs rampant in these stock cults - the stock $HKD was halted 94 times during its run up and run down. The halts, by the way, are automated and processed by computers on the basis of price swings in short periods - there is no centralized authority who chooses what to halt and when, other than if the company has imminent news and requests the exchange halt the stock.
The reason that I make this post is somewhat of a follow up to [12], and to indicate that the reasons I believe social media is a pretty awful technology, and the reason I support greater censorship isn't solely a matter of politics. It's a matter of homeless people [13] [14] investing in a bankrupt movie theatre stock, because influencers who run Onlyfans accounts and monetize their Youtbe channels make money by being "leaders" of a "movement". Because people are convinced that this bankrupt movie theatre stock is their ticket [15] out of the middle class. Because [16] this is how to get back at the man - how to get revenge for 2008.
This Friday, there are approximately [17] 36,000 call options on AMC that will expire worthless. Given the option prices on AMC, it is safe to assume that these were all purchased for around $100 each. Every week, "The Man" makes $360,000 by selling options to retail traders who are convinced that The MOASS is coming. Prior to the pandemic, The company has sold to date, 200m or so shares after the retail crowd started buying the stock, at an average price of $20. The executives of the company sell all of their shares, as soon as they vest, and have no ownership interest. The CFO unloaded everything he had at $30. When the CEO unloaded at $50, the cult said that it was OK because he was doing "Retirement Planning". His retirement plan is likely "Be Rich".
People are going to lose all their money. People will develop crippling drug addictions. People will kill themselves. People will spend the rest of their lives convinced that the entire world conspired against them to prevent them from becoming millionaires, bitter and poor. Some of them will go postal and harm innocent theatre employees or random bankers, eventually.
And what great benefit do we derive from this? The nature of social media platforms is not a neutral venue in which all speech can be heard - you do not have an email box of "Thought Of The Day from Everyone In Your Town" - you have an intentionally cultivated set of messages sent to you, because they're maximally addicting. Any perceived increase in the "freedom" of your speech is a side effect and an afterthought to maximizing the stock price of BigTech.
It's possible that this is simply the same set of suckers that would have been taken in by any other scam at any other time in history, but the group feels larger and more committed with the passing of time, rather than losing faith, continuing to dump more good money after bad. I doubt the scale of the problem has ever been this large - I've not even mentioned the Gamestop, Bed Bath, BBIG, etc. cults.
I think when people conceive of social media censorship, they react viscerally because they do not want themselves to be silenced. This is the great error - it is never small communities that cause the problem, it is the influencers.. Analogizing to the past, I think that if little people generally want to argue for the virtues of Cannabilism, then free speech should allow them to do so in 1980 or in 2022. However in 1980, Ted Koppel would not appear on Television every evening extolling the virtues of Cannabalism, followed by a 60 Minutes piece on how THEY are keeping you from finding out how good flesh tastes.
Any society that renders it easy for its constituents to be quickly and easily brainwashed, in a fashion so pleasurable they do it to themselves to get the next dopamine hit when they refresh their feed, into anti-social and self-destructive behaviors is doomed.
BigTech does not facilitate this because it acts for Free Speech. It facilitates this because maximizing the quantity of speech makes more money.
Those who confuse the quantity of speech with freedom of speech make the same error as one who would see owning 50 guns as more free than 10, or 10 abortions as more free than 2. A freedom's true import is clear when it is utilized to effect, not when it is worshipped in effigy.
[1] https://finance.yahoo.com/quote/AMC/balance-sheet?p=AMC
[2] https://old.reddit.com/r/amcstock/comments/mv9tnf/amc_100k_dont_be_fooled/
[3] https://twitter.com/stephmase22/status/1566969527128162304?s=20&t=3K1ye3x0XGHSEKh-Hqyh8Q
[4] https://twitter.com/CEOAdam/status/1555303048989364227
[5] https://twitter.com/userofintellect/status/1556792984821063683?s=20&t=3CaLcH6xyJqf4b-inkSmhA
[6] https://twitter.com/AntonioTheMexi/status/1555395134182785024?s=20&t=3CaLcH6xyJqf4b-inkSmhA
[7] https://twitter.com/AMCcheerleader/status/1559655570776330241?s=20&t=3CaLcH6xyJqf4b-inkSmhA
[8] https://twitter.com/StacksMoney247/status/1557103509866258432?s=20&t=3CaLcH6xyJqf4b-inkSmhA
[9] https://twitter.com/CeccottiFrank/status/1566927882668355584?s=20&t=dviPpKxJTItHcSsFiSgaPw
[10] https://twitter.com/beachbumscali/status/1565014681160257536?s=20&t=dviPpKxJTItHcSsFiSgaPw
[11] https://i.redd.it/9axs30kdvaj91.jpg
[12] https://old.reddit.com/r/TheMotte/comments/ubedpi/culture_war_roundup_for_the_week_of_april_25_2022/i6qlleg/?context=3
[13] https://twitter.com/Michelle801Ape/status/1502217924462927872?s=20&t=zKPElFtnPP5-5qaXq0E0Gg
[14] https://twitter.com/DrJoRoJo/status/1396529297565921280?s=20&t=zKPElFtnPP5-5qaXq0E0Gg
[15] https://twitter.com/trini_amc_ape/status/1567350662026903553?s=20&t=zKPElFtnPP5-5qaXq0E0Gg
[16] https://twitter.com/LTwittington/status/1566509811444875266?s=20&t=zKPElFtnPP5-5qaXq0E0Gg
[17] htt
Thinking you can protect the investor from themselves through censorship is on the face of it ridiculous. Especially if you're also claiming no significant side effects from people holding this power.
Are investment communities cultish? Yes. Always have been, always will be. You won't fix this because so long as you allow people to buy and sell freely there will be Warren Buffets who make bank on speculation, the litanies of idiots who think they are Warren Buffet and get fleeced and the concert of charlatans that will sell you how to to become him.
Trying to stop suckers from being parted with their money is like trying to fill a bottomless cup. The universe will always design a better idiot, you cannot win. All that you can do is make the world worse for everyone with pointless regulation.
On another note, I don't care how competent you think you are to evaluate other people's motivations. That doesn't override our natural rights.
And finally, as it too often happens with well reasoned positions about what the market will or even has the possibility to do in the future, maybe you're completely fucking wrong.
Well, there's one thing you can do, and that is to kick the cultists out of your group when they start trying to sell you something.
Assuming you could actually make the distinction between organic collective enthusiasm and cult behavior in any meaningful way.
I can't think of a single time where real money was involved that this has been done successfully. Which one are you thinking of?
NFT folks got pretty much run out of town on a rail by every community I'm a member of.
NFTs continue to be a great technology used wrong by most projects where neither the average supporter nor detractor is very informed on their actual use. I'm an NFT fan if that includes ENS and not if it is limited to poorly generated image packs.
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