People like Jim Chanos and Mark Cohodes are known to do good work exposing frauds like Enron. It is really the unlimited money printing/bailouts that have broken the market and now shorts like Cohodes have gone out of business. I remember hearing Chanos covered his Tesla and GameStop shorts a few months back but I think he was still short IBM.
Cohodes interview by Grant Williams awhile back: https://m.youtube.com/watch?v=cGtR3JX5Aao
Chanos interview by Mike Green:
Chanos interviewed by James Grant:
Here is a good Twitter thread explaining how the short squeeze of hedge funds removes liquidity from the market:
https://mobile.twitter.com/UrbanKaoboy/ ... 7011975170
Essentially by not being able to go short in order to hedge, because shorts will get targeted, hedge funds will have to derisk by reducing longs. We saw this happening in real time as broader equity markets fell. To satisfy the demand for liquidity as their shorts were causing huge losses, hedge funds had to liquidate longs. The most common pairing with a GME short was an AMZN long. Of course, if the hedge funds were not idiots and had not shorted over 100% of the available stocks, they would have been able to cover their positions without this happening.
Without the ability to short, hedge funds and institutions will have to hold more cash and put less into equities, bonds, and credit, which will reduce liquidity further. This is consistent with how the US stock market did not really take off until 2013, when the VIX dropped from elevated levels post-2008, and the hedging via put options became more affordable, thus more capital could be allocated into risk assets instead of cash, bonds, and gold. The VIX had still not moved to it’s pre-Covid range and has moved higher recently despite a muted down move because if shorting is untenable, put options must be used to limit risk. Maybe put options will remain even more expensive moving forward.
But again this would not have happened without the central bank put and investor psychology conditioned to buy every dip regardless of fundamentals.
Let us sum up the prerequisites:
1) Infinite money printing/QE causing mostly one way price action, also influencing investor psychology
2) Moral hazard of allowing hedge funds to be too big to fail, Janet Yellen collects speech fees from Citadel and Goldman then is on the phone with Citadel and Goldman when things go sideways for hedge funds after their pay-for-order flow scheme blows up, all brokers move in concert to crush the little guy
3) Hedge funds being jackasses and shorting more than 100% of publicly available stock, making the squeeze technically possible
4) Wealth disparity giving younger people motivation to take desperate measures to get rich quick, or otherwise just to inflict pain on hedge funds. Joker memes circulate
, it’s not about the money, it’s about sending a message
, everything burns. The GME bubble is as much about anger
5) People like Elon Musk or Chamath Palihapitiya can pump it on Twitter (no doubt in my mind they either are backers for or are in league with WSB), whether it’s TSLA or BTC or GME or Dogecoin there is an influencer/network effect in place to mobilize the flash mob, it’s just no longer centrally distributed and what is being pumped on WSB and Twitter may not be pumped on CNBC and in fact may be in opposition to it.
I look at all the rich and powerful people it took to build the tottering jenga tower but yes if it can be blamed on a strong gust of wind they will try to do it, but even if arguments are technically and legally correct they will be viewed by WSB and many sympathizers as morally wrong, and the attempt to squelch the volatility will lead to even greater problems.