John Cochrane and Owen Lamont discuss the GameStop situation. “You do not have a robust, liquid market.” In a liquid market, any investor (or group of investors) faces a very elastic demand curve if he wants to sell and a very elastic supply curve if he wants to buy. Cochrane and Lamont offer several possible reasons for the inelastic supply in this case, but they do not push any one explanation in particular. Their understanding is incomplete, but I trust it more than others.
They both concede that the road that information takes to arrive at the market is a highway of mystery. The question is how to illuminate this mystery. The speakers mention it and move on. I think if light can be shed on how info gets to the market, that in turn will shed light on the sources of inelastic supply in this case.
GME now at 93.
The huge wild ride up is probably over – the gamma squeeze against shorts is.
Some shorts are good for the market. Owen’s earlier paper showed that when a company is fighting shorts, it’s long term returns are lower.
I don’t think they really address the short-attack
Dollar dumping for penny pumping, like described in the seeking alpha 2014 note by Klein (dup-but relevant):
https://seekingalpha.com/article/4352767-buy-when-you-see-asset-hyperinflation
No pumping against a short attack can last forever – or perhaps not even for a week at over 1000% (was ~$14 in Dec, $140 would be 10 * = 1000% more) Lots of WallstreetBets folk bought “overpriced” shares. Don’t know how many buyers, nor shares.
Noah Smith has a fun piece about GameStopulism:
https://noahpinion.substack.com/p/gamestopulism
Is silly faux-populism the first sign of a slow return to normalcy?
Among the many amazing things about the GameStop episode is how various populists of both the Left and the Right have tried to present the struggle of day traders against hedge funds as a revolt of the people against the powerful.
sorry, asset hyperinflation is another of my current focus areas. Here’s short attack
https://seekingalpha.com/instablog/11442671-gerald-klein/3096735-anatomy-of-a-short-attack
Another day, another drop (of the GME bucket). Now down to 53.
Saw one WSB (WallstreetBets) guy ordering a $40 buy with $100,000 for … tomorrow?
Thinks that’s the Despair phase.
I think down to 30, maybe 20 (60% likely it stays above).
Great chart: https://www.valuewalk.com/wp-content/uploads/2017/12/Anatomy-Of-A-Bubble-1.jpg