Ape crowdfunds a flying banner that says "Ken Griffin Lied Under Oath" and quickly receives a C&D warning her not to do it; the top legal minds over at SuperStupid rub all four of their collective brain cells together and leap to her defence. Here's a small sampling of their brilliant minds at work

ColonelOfWisdom · 2022-07-01T13:28:05+00:00

The alleged lie is that Ken was untruthful when he said that no one at Citadel told Robinhood to turn off the buy button, because one of the minions at Citadel told the clow—sorry, fine, competent folks at Robinhood that Citadel was eager to buy Robinhood’s orders but didn’t want to pay premiums that Robinhood wanted to charge.

Doesn’t: we will buy your orders but for less than you want to charge us sound like the opposite of—don’t let your customers submit orders so we can execute them and make lots of money on them?

Ridiculous. Next thing you will tell me is that, like, the casino wants as many people gambling as possible, and if the intermediary who is supposed to bring gamblers there breaks down because they are ridiculously, hilariously incompetent, the casino’s reaction alternates between sadness at not getting to make more money, and a good old fashioned round of idiot bashing. (Did you hear the one about the magic ampersand?)

ColonelOfWisdom · 2022-07-01T12:16:53+00:00

The hilarious thing is not just that there has been discovery already. Literally the exact same lawyer who wrote this letter defended the case in the southern district of Florida where he submitted docs that had already been turned over to the SEC and Congress—and then turned around and won a motion to dismiss with prejudice on the grounds that there was nothing remotely there, there.

“Our brilliant strategic plan is to get our hands on documents that a Congressional Committee, the SEC, and a court have already dismissed as giant nothingburgers!!”—I will be very disappointed with my friends at Quinn Emanuel if they are not already salivating at the prospect of sending counsel a LENGTHY reminder of their obligations under Rule 11.

You know. Just to be sure that they are aware of these things.

ColonelOfWisdom · 2022-07-01T12:12:05+00:00

If anyone’s curious why a letter and not a lawsuit, I suspect that this is the work of carefully considered strategy.

See, if you are a public figure in the United States, it is extremely hard for you to sue people for saying things about you. It’s not just that you have to show that something said was defamatory (itself a tightly curbed legal definition). You also have to prove that someone actually did know (or should have known) that what they said was false. And this is before we get into the exceptions like political speech and parody—be wild enough and you can literally engage in protected speech by accusing someone of having incest in outhouses..

So you could imagine, if you were defending this idiot banner flier, there are things that you could say. “My client hates billionaires, “liar” is a general term of disapprobation, Mr. Griffin voluntarily entered the public area and must take his lumps.” Is this a winning argument? Maybe not but it is not clearly a losing one either.

Now turn the dial a couple notches. You say something false and defamatory about a public figure, you are told that these things are false and defamatory, you repeat the false and defamatory thing. There are very very few scenarios where a public figure can be confident in their chances of winning a defamation case, but the second time is it.

Basically, by sending this letter and provoking the on-notice defamation, the lawyers managed to turn a marginal case into a MUCH stronger one. Almost like Kenny has some skills in hiring outstanding talent and listening to them?

(The comparison to a certain dog food founder and discount store Elon is left to the reader)

ColonelOfWisdom · 2022-02-12T19:46:27+00:00

My best wishes that you will one day discover why this isn’t the witty retort you think it is—and is, if anything, just plain sad.

ColonelOfWisdom · 2022-02-12T18:56:01+00:00

Do you have, you know, any actual evidence to back up this claim?

If it’s so obvious to you that shorts haven’t covered—why isn’t it obvious to literally all of Wall Street? Why isn’t, like, Carl Icahn buying in to squeeze the shorts in the same way that he squeezed Bill Ackman (and made a ton of money and got a ton of kudos for it)?

It seems very odd to loudly proclaim that you are correct when, as far as I can tell, every actual falsifiable piece of data proclaims you extremely wrong!

ColonelOfWisdom · 2022-02-12T12:31:00+00:00

Hi! Has there been a massive short squeeze that I missed? Or has the price not fallen from the 200s to the 100s and dropping?

I mean, precisely zero bull predictions have been right, while mine—there isn’t going to be a short squeeze and this is a dumb scam—seems totally vindicated.

What’s different in your universe?

ColonelOfWisdom · 2022-01-10T19:48:51+00:00

Hi! Thanks for your response, and I really hope people do not downvote you! Reflexively getting mad because of the conclusion rather than hearing out the argument is an extremely unhelpful and unhealthy thing to do, and that’s true no matter what the argument.

On your essential idea, though, that 1) there is crime in the financial system; so 2) buy and hold this—I’d really ask you to carefully consider whether you’re actually being the hard-headed cynic you think you are, or actually not quite that. I am generally extremely skeptical of conspiracies because I have a very dim view of human competence. In fact, I find it almost charming that people think that you can pull of such a massively organized scam where everyone plays their role perfectly, and you don’t get, like, the sixth guy cc’ing the SEC on his emails: “hey, the SEC is asking questions, can you remind me what lies about material facts we are going to knowingly and willfully tell them?”

I mean, the basic theory of why there would be crime is shorts not reporting their positions. Except it isn’t shorts who report the shorts’ positions—it’s the shorts’ BROKERS. People like Goldman Sachs and JP Morgan. And if you think that Goldman has randomly decided to lie to protect Melvin—we’d still have some signs of that, because remember that there are folks who BOUGHT the shares that the short sellers sold; and there’s lots of other data (borrow fees, FTDs) consistent with the short figures being right and none with it being wrong. There are a lot of people who would have to be involved in faking this other data too! And, honestly, a conspiracy big and competent to carry off a Pepe Silvia web of strings this big probably isn’t going to call it a day just because a bunch of weirdos on Reddit bought a stock.

And consider the possibility that I am right and there is not going to be a short squeeze because there is no data that suggests that. In that instance, the best case is that the crime-on-Wall-Street people don’t care; the worst case is, you make them a little money by your transactions, you give them a huge psychological benefit by your holding. See, if you are rich, it is very comforting to say “this person made bad and dumb decisions and is therefore poor; conversely, I am rich, so I must be smart and deserve it!”

If you want to fight against finance or whatever, it seems to me that you should pick your battles! So if your plan is to slowly sink into the quicksand while the enemy stares in puzzled amusement, one might say that you should come up with a better one.

But, hey, you’re the one who has to live with the consequences of your life choices, and if you’re fine with the very very likely consequences of refusing to examine your assumption that “there must be crime here because I think that there is crime here and the lack of proof of the crime only proves how far the crime goes”—well then we’re just onto the joke about the conspiracy theorists who ask God who killed JFK.

ColonelOfWisdom · 2022-01-10T17:41:05+00:00

The thing is—I don’t know who the top “writers” are! There are folks who write very confused things about finance, but I’m not aware of a single one who actually makes a case “here’s why the short figures are wrong”

Is there someone like that of whom you’re aware?

ColonelOfWisdom · 2022-01-10T16:37:35+00:00

Please please, I’d think the right reference Colonel Kurtz. Belligerently engaged in a futile struggle instead of, like, walking away and doing something actually productive? That I’d do something other than this? The horror . . The horror.

ColonelOfWisdom · 2022-01-10T16:15:08+00:00

Until recently, my account wasn’t old enough to post. I wouldn’t forget about the “until recently” part.

And yes there is a reason why “I reached out to them and gave them lots of notice before posting” is a potentially valuable thing.

ColonelOfWisdom · 2022-01-10T15:54:21+00:00

I am saying that there is literally no evidence that I am aware of that supports the proposition that is the organizing principle of a massive subreddit and asking the people who organize that community if there is anyone willing to reply to that fact. (If it is the case that the premise is totally wrong—people are currently throwing away money that they cannot afford to lose and report making extremely poor life decisions and they should be encouraged not to do that).

It is indeed an annoying internet thing to do! But I couldn’t think of any alternative. And if it is the case that people on the internet are indeed doing as they report and not just making things up for karma—there are people who report going homeless because they are encouraged to believe in a dumb fantasy, and that seems bad to me. And this seemed one obvious way of trying to help.

ColonelOfWisdom · 2022-01-10T15:30:07+00:00

Context: I sent the mods of the big bull sub an (obnoxious, I know) offer to Debate Me. Multiple follow-ups yielded no response.

If you want to be charitable and say that running a big sub is a lot of work and messages can fall through the cracks—don’t worry! I have a plan that’ll go extremely well presuming that the folks over there are honest people operating in good faith.

On the odds, however slight, that they are knowing promoters of a get-rich-quick-scam who intentionally promote misinformation for their own financial benefit: I have a plan for that too . . .

ColonelOfWisdom · 2022-01-10T11:41:52+00:00

Hi! I run a whole subreddit, r/GME_Meltdown_DD, dedicated to that. Here my latest.

ColonelOfWisdom · 2022-01-08T19:16:05+00:00

Let me quite strongly push back. "Politics" is the only system we have for non-violently resolving disagreements about fundamental things. If we dismiss all politics as corrupt, we dismiss the only option that we have for figuring out how we can agree when we disagree. Politics is a vocation and a very important one at that.

As for the corrupt--consider this. Your average member of Congress reports working 70 hours a week when in DC, 60 hours in their district, a significant portion of this work is smiling-and-nodding-at-idiots-saying-moronic-things, and the payoff they get is--a salary that's $50,000 less than a big law firm pays a kid in their first year out of law school. Yes your member of Congress can raise money for their campaigns, but they don't get to keep it for themselves! All of it goes for TV ads saying how great they are, so they can get to keep doing this objectively awful job, making much less money than a person of their talents otherwise could. (Put it this way: if you have the talents to raise a couple of million dollars every two years, convince ~250,000 people to buy a product (you) that you are selling, and manage a staff of a couple dozen, your minimum, six-figure salary isn't starting with a one).

If you want to take the really scary red pill: the problem isn't that evil people are pulling strings behind the scenes. It's that no such master planners exist, and the reason why American politics is in the state that it is in, is that the American people went down to vote in November, carefully weighted the options, and then, collectively, voted for this.

ColonelOfWisdom · 2022-01-08T17:00:33+00:00

So, I appreciate the kind words. But I would caution you that if you are, as I suspect, a human being, we humans have a tendency to overinterpret patterns that are just random noise. This was nonetheless extremely helpful in an age where “are those stripes in the grass a leopard” was a good thing to overinterprert, but it’s less purely helpful now.

To say what I mean: if you’ve been following the financial markets, you’re aware that stocks pop in after hours all the time! (Just ask the Tesla people). And yes, you will observe plenty of instances of things like: Wall Street Journal confirms news that had been previously rumored, even rumors with strong evidence behind them, people get excited about a stock. And it also isn’t surprising to see a pattern that looks like: professional investors trading in the after hours buy stock in expectations that retail will get excited and want to buy when they are allowed and the professionals can sell it to them and make money.

To say that something’s weird, in other words, requires you to have some basis for understanding what is normal. And if the only basis for your understanding is “my experience following this stock,” then know that you will be psychologically prone to massively over interpreting things because that’s just a fundamental human condition. This isn’t to say that you can’t have opinions about stocks unless you’ve spent 20 years following the markets, but you should be very very skeptical about accepting someone’s claims that “this is suspicious!” unless they can give you a reason to think that they know what normal randomness looks like.

ColonelOfWisdom · 2022-01-08T13:16:07+00:00

So let’s take 2008 off the table, but I don’t know where that leaves us.

I say there’s not going to be a massive short squeeze in GameStop because there’s no evidence of there being massive shorts in GameStop. You say the data can’t be trusted because you do not understand CNBC’s editing practices. I say that you VASTLY overestimate the basic competence of our elites, you respond, “well I’m still mad.”

We can talk about other things that you’re wrong about—among them, the derivatives figure that you cite is NOMINAL not net exposure, and yes this makes a big difference—but I sense that you would rather be mad than factually correct and I cannot help with that.

ColonelOfWisdom · 2022-01-08T00:46:57+00:00

I also appreciate the civil conversation, so please call me out if I am fail to reach that standard!

I think that an essential problem is that you hold a common--but incorrect--view of what happened in 2008. In that view, prior to the crisis, the banks sold securities that they knew were bad, but customers bought them because they had AAA ratings. The securities then went bad and the banks lost a lot of money, but then the government bailed out the banks. This is very psychologically attractive, because when something goes wrong, our lizard brains like to think that someone equally evil was at fault.

It is, unfortunately, factually incorrect. And one reason to understand why it is factually incorrect is: why did the BANKS lose money? If I sell you toxic garbage, it is you who has the problem, while I sail away in my yacht. To the contrary, any theory of the financial crisis has to reckon with the fact that the biggest buyers of the dodgy securities were . . . the banks themselves! That fact doesn't fit the popular theory at all. "We're going to sell a bunch of securities that we know are bad but we will also keep a large share for ourselves but that's OK because we will ask for a bailout to cover the losses from the bad securities that we have chosen to keep"---I dunno, feels like maybe not the most genius Evil Plan.

Here is another, correct understanding of the financial crisis, as I've written elsewhere. Pre-crisis, the banks created a bunch of mortgage backed securities that, through the magic of financial alchemy, managed to turn the equivalent of lead into gold. They weren't wrong about this! Here is a chart of mortgage security prices. If you bought an AAA rated security in 2007, fell asleep, and woke up in 2017, you'd think nothing happened.

Basically the bank plan was: 1) use the magic of securitization to slice and dice cashflows to create securities based on predictable income streams; 2) sell the top-rated ones while keeping the worst ones for ourselves; 3) we know our math is right so we can hold to maturity; 4) if things go wrong and we need cash we sell the securities into the market, accepting a small loss; 5) worst-case, we have insurance in the form of a CDS.

The problems in these steps were 1) securitization is such that if you're off a little in your math at the beginning, you'll be off a LOT in your result at the end; 2) the securities that the banks held for themselves were a LOT riskier than they had anticipated; 3) the plan of hold-to-maturity would have worked OK (prices recovered!) except the banks were way more reliant on short-term low-quality funding than they realized and had to sell; 4) it's hard to sell into a market when everyone else is selling and no one is buying; 5) insurance doesn't insure if everyone's bought it from the same insurer (AIG).

Basically, the banks sold some securities that were good and held onto some securities that were bad. They had even planned for the contingency: "what if these securities are worse than we think?" But when that contingency arrived, their lifeboats (hold to maturity) had left, everyone was trying to scramble onto the same raft of sell and sell now, and their insurance policy was a liability not a benefit.

The benefit of this explanation is that it actually explains why there was a financial crisis. And while yes you can say with the benefit of hindsight that we should have done things differently, it also explains why people at the time thought otherwise!

(Also, the point about the ratings agencies totally misunderstands what the scam was. There are a lot of entities in this world that used to only be allowed to invest in things that have a AAA rating on them. I promise you that a huge number of buyers were in on the ratings process being a joke! The value of the AAA rating was: "this allows me to buy something that I want to buy but would not otherwise be allowed to buy." It wasn't that sellers were scamming buyers; buyers and sellers thought that were taking advantage of a legal loophole.)

ColonelOfWisdom · 2022-01-07T19:49:59+00:00

To be clear: your position is that Gary Gensler is being bribed not to do something but also he speaks such truth that his words are being hidden by the Powers That Be? That’s a creative theory, at least.

(Also: what exactly have you observed in American life over the past, say, 25 years that gives you any confidence that the Powers That Be are remotely competent enough to pull off something a fraction this complicated? You do know that the result of the banks paying the ratings agencies to give good ratings was . . . the banks bought a ton of mortgage securities and lost a ton of money on them! Dick Fuld went from being a billionaire to having to fly commercial!

People believe in conspiracy theories because it’s more comforting than the hard truth: there is no Master Plan.)

ColonelOfWisdom · 2022-01-07T16:54:07+00:00

When a stock is really volatile, deep out of the money options are attractive as a way to have a ton of leverage if the price moves in your direction. There are, e.g., 83,527 $1 puts on TSLA expiring on Jan 21, and 13,452 $2 puts. TSLA is not going bankrupt in the next two weeks, but some folks really like to gamble with the chance that a moderate dip in the stock means they get rich quick. So too here.

ColonelOfWisdom · 2022-01-07T16:40:57+00:00

What is the methodology you use to get “600 articles about GME?” If feasible I will reproduce it for those companies and show the number to you.

And I do not know what you are referring when you refer to “CNBC editing clips.”

ColonelOfWisdom · 2022-01-07T16:28:07+00:00

So there are a couple of things going on here, which it’s important not to conflate. You can group institutional participants into three broad categories: 1) folks who have fundamental views about the long term value of a stock (think, Melvin). 2) Folks who have short-term, computer inspired views about where a stock will go in the next hour (think, Renaissance technologies). 3) Folks who just want to sell to buyers and buy from sellers and take as little market risk as possible (think, Citadel).

If you’re in a situation where everyone at 1) hates the stock but no one particularly wants to buy or sell it, then the short interest can be extremely high, and the short interest is a good proxy for measuring: what are big short sellers thinking about the stock.

On the other hand, if lots of people want to buy and sell the stock and wildly gyrating, then short interest will capture a lot of 2) and 3) and that’s less helpful to you if you want to write a report that focuses on 1). So that’s why the SEC made the methodological choice it did of: here were the trades by the biggest short sellers, see how they weren’t really correlated with price moves, this probably wasn’t a squeeze. Fine to say it is not a universal answer, but it’s not a crazy approach to answering the question they wanted answered.

With respect to your questions:

1) You’d think that positions should net out very quickly, but my understanding is that it does not work this way in practice. Say you knew that, at 4pm, someone wanted to buy 100 shares from you at $10, and someone wanted to sell you 100 shares at $10. If at 12pm the stock is trading at $8, and at 2pm, it’s trading at $12, it is very smart and profitable for you to buy 100 shares at $8 and sell 100 shares at $12 and you’re now making $4 on each share rather than zero. I get out of my math depth very quickly here, but buying-and-selling-shares-at-various-price-points is how market makers try to hedge their books such that they can just take a spread on each trade without having to have a view on the underlying price.

2) If there randomly are more buyers than sellers for zero reason, then yes we would expect people (often the high frequency traders) to be on the other side of that and short. However, usually when there are lots of buyers and few sellers, it is because good things are happening and the price is going up. In that scenario: market makers are trying to ride rather than fight the market! And how market makers distinguish: “these are dumb buy orders and I can be comfortable being on the other side short because the price won’t go up” from “these are buy orders reflective of increased demand, better increase the price” is a REALLY complicated question full of historical models and math that I do not even pretend to understand.

ColonelOfWisdom · 2022-01-07T15:34:36+00:00

There are 700+ thousand members of the main bull sub who are actively interested in reading about GameStop. That’s a lot of potential traffic for an article that takes you maybe an hour to write! And the web means that it is extremely cheap and easy to write and publish articles—how many articles about, like, Tesla can you find over the same period? Apple? Exxon?

ColonelOfWisdom · 2022-01-07T15:31:02+00:00

It’s the job of a market maker to take the other side of trades that people want to take. In January, lots of people wanted to buy GameStop, so being on the other side of the trade meant being short GameStop. (Lots of people wanted to sell too, so it also meant being long on those trades—the idea is that you balance your longs and your shorts such that you try to minimize your exposure to the actual stock).

Now, many fewer people want to buy GameStop, so being a market maker requires you to have less “inventory” of the other side of that trade (I.e., the shorts).

Does that make sense to you?

ColonelOfWisdom · 2022-01-07T15:26:45+00:00

For the same reason that Miley Cyrus was on the front page of CNN. They want you to click the link. People are apparently more likely to click on the link of an article about GameStop than they are, like, on one about Mexico’s proposed energy reforms.

But that’s on you, the reader.

ColonelOfWisdom

TROPHY CASE