What if Game never StopWe talked last week about possible endgames for the GameStop Corp. trade, but I forgot a weird one. The first possible endgame I mentioned was that GameStop's stock price stays really high and the company grows into the valuation. Its turnaround plan works, it uses its elevated stock to do a transformative acquisition, something like that. In a few years, GameStop's stock price is around where it is now, or up a bit, but by then it looks normal because GameStop has the revenue and margins and growth to make that stock price reasonable. Most of the other endgames involved the stock price not staying really high. Here's the weird one: The stock price stays really high, and the company does not grow into the valuation. GameStop closed on Friday at $325, making it about a $22.7 billion company by market cap. What if it finishes this week at around $300? What if it finishes this month at around $350? What if it finishes this year at around $400? What if GameStop just floats along as a $25 billion company? Meanwhile it announces quarterly earnings, and the earnings are all negative, and progress on the turnaround is desultory, and being a mall retailer of video games doesn't sound any better in a year than it does now, but it … just … stays a $25 billion company? Oh there's volatility, don't get me wrong. Sometimes—in this weird possible future—GameStop goes up a lot in a week, sometimes it goes down a lot in a week. But it never goes back to $2.80 (the low it hit last April), or for that matter $18.84 (its price at the end of December). It remains a $300ish stock, give or take a few hundred dollars, or perhaps it drifts mostly up but with alarming pullbacks. Of course in this weird future fundamental value investors look at the company and say "this stock is enormously overvalued," but then what do they do about it? Fundamental value investors who owned the stock, one has to assume, got out last week when it went to the moon. Of course if you are a value investor you could sell the stock short to bet that it will return to its fair value, but, hey, good luck with that! A lot of hedge funds are in the hospital because they shorted GameStop on valuation; do you really want to join them? Meanwhile a lot of the float is held by insiders and index funds and index-ish investors. The index funds can't sell, because they have to own all the companies in their index, and GameStop is in their index.[1] They are missing a golden opportunity to get out at the peak, but that's life when you're an index fund. The insiders can sell, but gingerly, because the valuation is ludicrous and they don't want to get sued for swindling their shareholders. So a lot of that ownership will continue. "Diamond hands," I believe is the term. A lot of the posters on the WallStreetBets subreddit who piled into GameStop for fun and profit and vengeance, and a lot of the hedge funds and other professionals who joined them for a weird momentum trade, will eventually get bored and take profits. Diamond hands notwithstanding, many have already done so.[2] But other Reddit posters will learn the legend of GameStop and decide that they want to play, and other hedge funds will decide they might have some edge and get in for a trade. There will be buyers. The basic elements that attracted people to the trade last week had nothing to do with GameStop's business; there was no news about GameStop. What attracted people to the trade were the volatility, and the prospect of riches, and the fact that people were talking about it, and the social element of being able to talk about it with them, and the various dramatic story arcs and morals that people imposed on the stock price. In principle we could do that all again this week, and next week, and, why not, forever. Last week I compared GameStop to Bitcoin. The thing about Bitcoin as a financial asset, I wrote, is that "there is no underlying claim; there is just a widespread acknowledgment that people think it's valuable." I suggested that that was a fascinating and powerful innovation,[3] but that once you are accustomed to it you might get a little overconfident and think that any financial asset—GameStop stock, say—could work the same way. People will buy it because they think it will retain value because people will buy it because they think it will retain value because people will buy it because etc., recursing infinitely, with no underlying fundamental rationale. I thought that that would not work, with the stock of a mall retailer; eventually a bad earnings release or whatever will kill the vibe. But I know nothing. Maybe it can work; maybe GameStop traders can conjure value out of thin air and maintain it. Maybe people will buy GameStop because people buy GameStop, and it will go on forever because they don't stop. "The thing I like about GameStop is not its underlying cash flows," a venture capitalist will blog in 2027, "but the fact that it is a scarce digital store of value."[4] I don't think, however many days we are into this nonsense, that GameStop is a particularly important story (though of course it's a fun one!), or that it points to any deep problems in the financial markets. There have been bubbles, and corners, and short squeezes, and pump-and-dumps before. It happens; stuff goes up and then it goes down; prices are irrational for a while; financial capitalism survives. But I tell you what, if we are still here in a month I will absolutely freak out. Stock prices can get totally disconnected from fundamental value for a while, it's fine, we all have a good laugh. But if they stay that way forever, if everyone decides that cash flows are irrelevant and that the important factor in any stock is how much fun it is to trade, then … what are we all doing here? Anyway I have yet to see much evidence of people saying "well this was fun let's pack it up and go back to our day jobs." Fifty million shares of GameStop traded on Friday, which is a lot, but also the fewest of any day last week. The stock was halted for excess volatility, once, for five minutes just after the open—but it was halted three times on Wednesday, five on Tuesday, nine on Monday, nineteen on Thursday. After zooming up from Monday through Thursday morning, and then crashing on Thursday as retail brokers limited buying, the stock spent Friday trading like a, you know, $250-to-$380ish stock? I don't know? Today it opened at $316.56, though it fell as low as $212 and was halted at 10:27 a.m. Then it got better, though. Maybe it's just a $300ish stock now. Or maybe not, because now there's a new game. Okay sure silver why notYou see, silver has a 5,000-year history of being treated as valuable because people like shiny things, so it is not too surprising that Reddit has discovered it: Silver broke above $30 an ounce as the precious metal took center stage in the retail investor frenzy sweeping through markets. Most-active futures jumped as much as 13% to $30.35 an ounce on the Comex, the highest in eight years. That followed a weekend buying binge that overwhelmed online sellers of silver coins and bars from the U.S. to Australia. BlackRock Inc.'s iShares Silver Trust, the largest exchange-traded product tracking the metal, recorded an unprecedented $944 million net inflow on Friday. Like the buying stampede in GameStop Corp. and other small-cap stocks that has captivated the financial world in recent weeks, silver's advance can be traced to Reddit's WallStreetBets forum. One post last week declared the metal "THE BIGGEST SHORT IN THE WORLD" and encouraged traders to pile into the iShares trust as a way to stick it to big banks. Yet silver differs in important ways from stocks like GameStop. For one, the scope for a short squeeze in silver is far less obvious: money managers have had a net-long position on the metal since mid-2019, futures and options data from the Commodity Futures Trading Commission show.
And: The world's largest silver-backed exchange traded fund, the iShares Silver Trust, recorded almost $1bn in inflows on Friday, according to data from BlackRock, the fund's sponsor. The jolt of investments came as the subject percolated late last week on Reddit's r/WallStreetBets forum. One post urged people to buy shares and options to put a squeeze on banks. The surge in the silver price on Monday, however, prompted a backlash among some members of the board who speculated that institutions such as hedge funds were attempting to tap into the retail fervour that has sent stocks such as GameStop and AMC flying higher in recent trading days. ... A user named TheHappyHawaiian last week said buying shares in the ETF would "force physical delivery of silver" into the fund's vaults, thereby causing a "short squeeze" on the market, pushing up the silver price. The user wrote on the forum that it would be "incredible" to make large banks active in the futures market "pay dearly" for what he alleged were bets that the silver price will fall.
If this works with silver, they're gonna do gold. If it works with gold, they're gonna do the S&P 500. If it works with the S&P 500, they're gonna do Treasuries. If it works with Treasuries, they're gonna do U.S. residential real estate. If it works with real estate, they're gonna do Beanie Babies. If it works with Beanie Babies, they're gonna do GameStop again. "The global supply of silver is controlled by a subreddit": Isn't that just fun to say? "A shadowy cabal of financial interests decides the price of silver, and here is where they post about it on the internet." Don't you want to travel back in time and board an 18th-century Spanish treasure fleet, carrying silver from the New World to prop up Spain's waning global hegemony, and tell them "you really cannot believe how much dumber everything is going to get"? This is fine I guess? It honestly pains me to think about GameStop's management and board of directors, trying to figure out what to do about being memed and rocketed. Silver has no management or board of directors. "You can fondle the cube, but it will not respond." Silver doesn't care what its price is, and there has always been a certain amount of crankishness and manipulation in the silver market, so why shouldn't it be a Reddit thing? One enhancer of crankishness here is that there are a lot of different levels at which you could trade silver. With a meme stock, you can buy the stock, or you can buy call options as a more leveraged way to push the stock up. And you can have theories about how Wall Street is short too many shares of the stock, and plan to squeeze them out of their short positions as revenge. There's a fair amount going on, enough to make trading meme stocks a satisfying intellectual hobby with a bit of a conspiratorial appeal. But there's so much more of that with a meme precious metal. You can buy the stock (of a silver ETF), or you can buy call options as a more leveraged way to push the stock up. You can buy silver futures, or options on futures. You can buy physical silver coins, or you could until Reddit bought them all: Sites from Money Metals and SD Bullion to JM Bullion and Apmex, the Walmart of precious metals products in North America, said over the weekend they were unable to process orders until Asian markets open because of unprecedented demand. The start of Monday's trading session saw silver futures jump more than 8% as a frenzy that roiled stocks last week spread. "Pretty much physical silver is almost all gone in terms of live inventory," Tyler Wall, president and chief executive officer at SD Bullion, said in a Bloomberg TV interview. "Currently we're seeing the premium -- the price you pay over spot to get actual physical silver in your hands -- is skyrocketing. Most stuff on our website's at least 30% over spot and we can't source it for much less than that right now from our wholesalers."
All of these things live on different levels of abstraction, but they also interact: If you buy shares of the iShares Silver Trust (SLV), which holds physical silver (not futures), that will probably push futures prices up, and vice versa, and similarly with bars and coins. The opportunities to find shadowy enemies similarly multiply: Maybe Wall Street is short SLV shares, or silver futures; maybe you can squeeze them by forcing delivery on futures or forcing delivery into SLV's vaults or buying up all the bars and coins so they can't have any. (More plausibly, "Wall Street" is on both sides of each trade, with big firms long futures and short them, long SLV and short it, because that is kind of how everything works. But that just means you can be conspiratorial either way.) If you like worrying about short sellers and "counterfeit stock," you'll love worrying about empty vaults where the silver is supposed to be. You get to say words like "contango" and "backwardation." Meanwhile there is no company involved that can ruin your day by reporting bad earnings. If you want to spend some time with grand theories about how the world works on the internet, without too much interference from boring old business reality, silver really is more fun than GameStop. This is a GameStop blog nowI dunno, let's do some GameStop miscellanea. Puts. Benn Eifert of QVR Advisors pointed out a fun options fact on Twitter. Let's say that, back on Jan. 21, when GameStop's stock closed at $43.03, you thought it was wildly overvalued and wanted to bet against it. You could have sold the stock short: Borrow shares, sell them for $43.03, hope to buy them back cheaper. Or you could have bought a put option: Pay a premium, and then if the stock plunges you can sell the stock at the put strike price. You could have bought a $10-strike April put for just 33 cents: If the stock fell below $10 by April, you'd get back the difference between the stock price and $10; if it went to zero by April, you'd get back $10 for your 33-cent investment. The day before the Reddit rally really took off, the $10 puts were a way to bet on GameStop's stock collapsing quickly and totally. If you shorted GameStop stock on Jan. 21, you got absolutely ruined. It closed on Friday at $325; if you stayed in for that you have lost, uh, 655% of your money, oops oops oops. On the other hand, if you bought those puts, you did great. Those $10 puts, which traded at $0.33 on Jan. 21, last traded at $1.55 this past Friday. You're up 370%. The people who bought the stock did better—they're up 655%—but of course they were right; the stock went up. You were wrong; the stock did not go to zero, but you're still up 370%. Good trade! "Well risk managed shorts should be absolutely crushing it," was Eifert's conclusion. The math here is that the value of an option depends both on the spot price of the stock and also on expected volatility. In general, as the price of a stock goes up, the value of a put goes down: A $325 stock is less likely to fall below $10 than a $43 stock. On the other hand, as the volatility of a stock goes up, the value of a put also goes up: A stock that swings wildly is more likely to fall below $10 than a boring one. In this case, mathematically, the change in volatility outweighs the change in spot price. But the intuition here is roughly—roughly![5]—that options traders think that GameStop is five times more likely to go to zero now, with the price at $325, than it was a week and a half ago, with the price at $43.03. Can you blame them? On Jan. 21 people were like "huh this price might be too high," and would pay a little to bet on it dropping. Now people are like "huh this price is utterly meaningless, might as well be zero," and will pay even more to bet on it dropping much more. Hedge funds. Meanwhile why did my 401(k) lose money last week? Partly, hedge funds who were short GameStop lost money, and they had to sell their long stocks to raise cash. But more broadly, a lot of hedge funds who own all sorts of things target a certain level of risk; they want to own stuff that is likely to go up or down by X% in a day. When markets are quiet, their stuff goes up or down by less than X% each day, so they either borrow money to leverage up their positions or try to buy riskier stuff that might go up and down more. When markets are wild, their stuff goes up or down by more than X% each day, so they sell stuff to deleverage and de-risk their positions. So: As a flood of retail money sent stocks like GameStop Corp. and AMC Entertainment Holdings Inc. surging, the trading signals that guide how the smart money invest flashed red. Known as Value at Risk, this crude but widely used metric showed just how vulnerable the equity long-short crowd was to losses based on historic price moves. With institutional clients to worry about, the pros duly cut positions across the board -- while retail investors, who are free from such constraints, charged on. "When the risk models go haywire, you degross," said Benn Dunn, who helps these managers monitor risk as president of Alpha Theory Advisors. "What the hedge funds are holding long, they have to get rid of to get their exposures down -- to get their risk in line." According to Morgan Stanley's prime brokerage, the drop in hedge funds' exposure last Wednesday was historic, according to a rule of thumb for a normal distribution of statistical data.
The result of some redditors piling into meme stocks is that the meme stocks became insanely volatile, which caused professional investors to reduce risk, which caused all the other stocks to go down. The people who own all the regular stocks in their 401(k)s all paid, a little, for all the redditor gains on GameStop. It is a triumph of the little guy over the Wall Street pro, I guess. Roaring Kitty. My favorite thing in financial media is that, if you were a named character in "The Big Short," you have the whole rest of your life to go on television anytime you want and say absolutely anything you want, and they will let you say it above a chyron saying "GUY WHO CALLED THE 2008 CRASH THINKS WAFFLES ARE BETTER THAN PANCAKES." It is just a magical cottage industry of Guys Who Called the 2008 Crash (it's quite guy-heavy, sorry); it is going strong 12 years in and I really hope it lasts another 50. I hope in 2071 my grandchildren will turn on their televisions and see "LAST SURVIVING GUY WHO CALLED THE 2008 CRASH THINKS CONGRESS SHOULD PUT ASIDE PARTISAN DIFFERENCES AND GET TO WORK ON THE DEFICIT," and they'll say "what on earth was a 2008 crash?" But those are the rules; if you called the 2008 crash you are an expert on everything forever. I hope Keith Gill, who goes by "Roaring Kitty" on YouTube and something unprintable on Reddit, and who has become the face of the Reddit GameStop trade and made something like $48 million, gets similar permanent star treatment. He has gotten a lot of attention in the past week—here's an article about his high school and college track career—but it all has a certain novelty air to it, and I hope it will settle down into the sort of everyday well-who-do-we-call-to-talk-about-markets attention that the Big Short Guys get. I hope in a few decades he is an elder statesman of financial media, appearing regularly on television above chyrons like "DEEPF******VALUE SAYS FED'S MONEY PRINTING CAN'T END WELL," and my grandchildren will be like "wait does that man on TV have a swear word in his name?" So far so good; here is "How to Find the Next Moonshot Stock, According to 'Roaring Kitty.'" And what does Slavoj Žižek think? Really imagine not having a GameStop take: In his psychoanalytic theory, Jacques Lacan distinguishes between direct pleasure (enjoying the object we want) and surplus-enjoyment. For example, many people enjoy the activity of shopping more than what they actually buy. Wallstreetbets members have brought this surplus-enjoyment of stock-exchange gambling out into the open. … The excesses of wallstreetbets brought into the open the latent irrationality of the stock exchange itself. It isn't a rebellion against Wall Street but something potentially much more dangerous: it subverts the system by over-identifying with it, just like the presidential candidate in Croatia with his placard.
Yes, what the wallstreetbets members are doing is nihilistic, but it is nihilism immanent to the stock exchange itself, a nihilism already at work in Wall Street. To overcome this nihilism, we will have to move out of the game of the stock exchange. The moment of socialism is lurking in the background, waiting to be seized, since the very center of global capitalism is beginning to fall apart.
Elsewhere, here's Bill Gross's Investment Outlook about GameStop ("My heart has been with Main Street for many years, and there is no doubt that billions of dollars have flowed if only temporarily to the good guys"). And: "Steve Cohen Shuts Down Twitter Account After Receiving Threats." And some GameStop puzzles from Scott Duke Kominers. And: "GameStop's Reddit Revolution Echoes Occupy Wall Street Crusade." And: "When Ted Cruz and A.O.C. Agree: Yes, the Politics of GameStop Are Confusing." (Roaring Kitty is totally going to be a senator, isn't he?) And: "NY Young Republicans plan 'Re-Occupy Wall Street' after GameStop debacle." And: "Can hedge funds recoup GameStop losses by giving up avocado toast?" And: "Everything's a Joke Until It's Not." WeSPACLook honestly this is probably the most sensible thing I have ever read about WeWork: WeWork is in talks to combine with a special-purpose acquisition company, according to people familiar with the matter, a deal that would usher the office-leasing company into the public markets more than a year after its high-profile failure to stage a traditional initial public offering. WeWork's board and its Chief Executive Sandeep Mathrani have been weighing offers from a SPAC affiliated with Bow Capital Management LLC and at least one other unidentified acquisition vehicle for several weeks, the people said. A deal could value WeWork at some $10 billion, some of the people said. It couldn't be learned whether that includes debt.
The salient fact about WeWork, as far as access to capital markets goes, is that it had a fantastically botched initial public offering back in 2019. WeWork announced it was going public, filed a prospectus, was rumored to be seeking a $96 billion valuation, and had comically aggressive corporate governance terms and notoriously unhelpful financial disclosures. People read the prospectus and had a good laugh and all decided not to buy the stock, there was a brief flurry of lowering the valuation to humiliating levels, and ultimately the IPO was pulled, founder-CEO Adam Neumann lost his job, major investor SoftBank Group Corp. took control and WeWork limped back into the private markets. A good lesson to draw from that might be "don't announce an IPO until you've signed binding commitments from big investors to buy enough stock to take you public at a price that both you and they find acceptable." If WeWork had quietly shopped the IPO to investors and tried to get a few billion of commitments at a negotiated price, then either: - It would work, big investors would sign up to buy at a valuation of $20 billion or $50 billion or $90 billion or whatever, and the howls of laughter when the prospectus did come out would be muted and irrelevant; or
- It wouldn't work, no one would be willing to buy, WeWork would stay private and try again some other time, and there'd be a few brief news reports saying "WeWork was rumored to be shopping an IPO but nothing came of it," rather than the weeks of laughing and pointing at the prospectus that actually happened.
Of course U.S. IPOs don't really work that way—you don't sign up big investors before launching the IPO—but SPACs do.[6] "I never really understood SPACs until WeWork," I wrote last year. Meaning, WeWork was the company that, in hindsight, really should have gone public through a SPAC. It still can! (Another point that we have discussed about WeWork is that it really sold itself to investors based on projections rather than historical financial results: It was a vision for the future more than it was a profitable business. In IPOs, projections are frowned upon, and that's part of why WeWork's IPO was a dud. In SPACs they are fine, encouraged really, which is another good reason for WeWork to go public via SPAC.) So WeWork, after its humiliating debacle in 2019, is slinking back to the capital markets in a more low-key, sensible, risk-averse way. Except that SPACs are popular not just for their practical benefits but also because they're a big fashionable hyped trade right now, or at least they were before the financial markets became 100% Reddit memes. There are multiple exchange-traded funds to buy companies that do SPAC mergers, people declared 2020 the "Year of the SPAC"; they are hot right now, and you cannot expect WeWork to entirely resist hype. Also there's probably still time for Adam Neumann to launch a SPAC? And then buy WeWork back with it? AMC AMC Entertainment Holdings Inc., like GameStop, is a meme stock that soared last week; it got as high as $19.90 after closing the previous week at $3.51. Unlike GameStop, AMC ruthlessly exploited being memed to issue a bunch of stock and get its financial house in order. Good work! I wrote last Thursday: Also yesterday [i.e. Jan. 27] holders of $600 million of AMC convertible bonds converted them into stock at a conversion price of $13.51 per share. Six hundred million dollars of debt, vaporized by Reddit enthusiasm. "In the absence of significant increases in attendance from current levels, there is substantial doubt about our ability to continue as a going concern for a reasonable period of time," AMC warned investors on Monday; four days and a billion dollars later, there is somewhat less doubt. A week ago it was not crazy to think this company was doomed; now it is entirely possible that it will survive and thrive and show movies in movie theaters for decades to come because everyone went nuts and bought meme stocks this week. Capital formation!
But then I went on to say something a little dumb: AMC was trading around $9 at 11 a.m. today so I don't really know what those convertible holders were thinking but there you go. Maybe they were thinking "wow redditors really want to buy this stock, we'd better get some stock to sell them."
Many people emailed to say "well they had probably hedged their convertibles by selling stock short, and they used the stock they got on conversion to close out their shorts." Which is totally a thing, as I know, because I used to design and build and market convertible bonds for a living. I just did not think of Silver Lake Management, the private-equity firm that owned the majority of the AMC convertible, as a hedged holder. I seem to have been right about that, as it turns out; they did not hedge their convertible bonds, but instead held them outright, converted them on Jan. 27, and sold all the stock at more or less the same time. Still my skepticism about what they were thinking was totally unfounded, because they got the timing exactly right: They converted on Jan. 27, the best day for AMC's stock since 2018, and blew out of the stock the same day at "an average price of $16.05 during a Reddit-fueled rally in the company's stock." Here is the filing. I guess I was right, too, that their thinking was "wow redditors really want to buy this stock, we'd better get some stock to sell them." So they did. They timed it better than the redditors did, too. Elsewhere, here's a Bloomberg News story about how AMC and American Airlines Group Inc. used the meme-stock/short-squeeze rally to raise cash: "We certainly didn't have a row for 'surprise equity offering' in our AMC model," said Bill Housey, a senior portfolio manager at First Trust Advisors, who used to own AMC debt but fully sold out of his position in recent days. "Companies that were otherwise facing real financial challenges are finding an unexpected source of capital." It's no coincidence that some of the most troubled borrowers are now the ones benefiting the most from the retail-driven rallies. Their huge debt loads, combined with the devastating impact that Covid-19 has had on their ability to generate revenue, were among the reasons their stocks were so heavily shorted in the first place.
I wrote a few times last week about stock prices as a signal about the efficient allocation of capital: Stock prices tell you which projects society values, and a rising price is a signal that a company has more valuable projects and should have more capital allocated to it. I felt a little like I was kidding, when I wrote that last week? GameStop's stock was not up 1,625% last month because people thought its projects were 16 times more valuable than they were the month before. GameStop's stock price did not seem to be sending a particularly useful signal about what projects society expected to have the largest cash flows. On the other hand people like movies? And video games? And, uh, Tootsie Rolls? And they miss going to the theater, and the mall? And on airplanes? What if the meme stock rallies do tell us what society values, and society is just feeling sort of sad and nostalgic right now? "Sure selling video games at the mall is not a lucrative business anymore," the kindly billionaire says, "but that's not the point; the point is that these stores were a big part of my youth and I am going to save them even though it doesn't make any financial sense." Except that somehow the kindly billionaire is the distributed impersonal logic of the stock market? And also Reddit? Exxon ChevronHuh: The chief executives of Exxon Mobil Corp. and Chevron Corp. spoke about combining the oil giants after the pandemic shook the world last year, according to people familiar with the talks, testing the waters for what could be one of the largest corporate mergers ever. Chevron Chief Executive Mike Wirth and Exxon CEO Darren Woods discussed a merger following the outbreak of the new coronavirus, which decimated oil and gas demand and put enormous financial strain on both companies, the people said. The discussions were described as preliminary and aren't ongoing but could come back in the future, the people said.
If you are going to announce an enormous controversial merger of two oil giants, you might as well do it this week? All the people who dislike concentration of economic power, and oil companies, are distracted right now. "Exxon and Chevron announced this week that they will combine in a historic $350 billion deal, more on that if we have time, but now back to the most important business story, a money-losing mall retailer of video games." Things happenLeon Black, a hard-charging financier steps back under pressure. 'Trillion Dollar' Mt. Gox Demise as Told by a Bitcoin Insider. Dogecoin Plunges After Rally, Sparking Outcry on Reddit. Mnuchin's Wife Linton Plays Murderous Fund Manager in New Movie. Grimes Gave Her And Elon Musk's Baby A Viking Haircut. Elon Musk Says He Wired Up a Monkey's Brain to Play Video Games. If you'd like to get Money Stuff in handy email form, right in your inbox, please subscribe at this link. Or you can subscribe to Money Stuff and other great Bloomberg newsletters here. Thanks! [1] It is for instance about 20% of the S&P Retail Select Industry Index, oops. [2] We talked on Friday about how retail investors were probably net sellers last week. And Keith Gill, the leading figure in the WallStreetBets GameStop trade, has apparently cashed out $13.8 million of profits. [3] Yes I know it is roughly true of other things, U.S. dollars for instance, you don't have to email me. I still think that some people online creating a pure consensus store of value from scratch in a decade is different from, and more interesting than, hundreds of years of government action evolving toward fiat currency. [4] This "scarce digital store of value" idea comes from the Bitcoin world, where scarcity is baked into the underlying algorithm and consensus mechanics. GameStop stock is not quite so supply-constrained: GameStop Corp., the underlying company around which this cloud of nonsense orbits, could just sell a bunch of stock. I have suggested it before. It is tricky, though, and the company hasn't done it yet. I suppose if this goes on for weeks it will. But if this goes on for weeks there's no reason to think that GameStop selling stock would end it. [5] Probabilities derived from options do not reflect expectations about real-world probabilities; people sometimes call them "risk-neutral probabilities" and you can be led astray by taking them seriously as probabilities. Also I am compressing various states of the world below $10 into just "go to zero"; if the stock goes to $6 those options pay off, etc. [6] In two ways. One, the SPAC is a pool of public money that buys shares of the target at a price negotiated by the SPAC sponsor; that's the whole point of the SPAC. SPAC investors, though, have withdrawal rights, so there is no guarantee that all the cash in the pool will actually go to the target (though the *price* will be fixed). Recent SPACs have gotten better about this, and can offer a fair amount of certainty, but it is generally not absolute contractual certainty. But the other thing is that most SPAC deals are accompanied by PIPEs, private investments in public equity, in which a few big investors negotiate to invest alongside the SPAC at similar terms. Even if lots of SPAC investors withdraw you still get the PIPE cash, which makes the whole deal both bigger and more certain. | 
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