Why GameStop fiasco is not necessarily a gamechanger

The whole world seems to be obsessed with the GameStop (GME) situation, with most people just trying to understand what is going on. I don’t think I have ever received as many market questions from family, friends and acquaintances in a short period of time as I have over the last couple of days. For most of us who follow and invest in markets, it is not what is happening that matters; the more important question I am focused on is what it means for the market.

There are plenty of people saying that this is a major inflection point: a common refrain is that this signifies a democratization of the market from which there is no turning back. I can see why many might think or say that. After all, most of us wish it were true, but it ignores two things.

The first is that this isn’t the first dramatic short squeeze, nor will it be the last. My background is in interbank foreign exchange, and when I worked in a dealing room, position squeezes happened to a lesser or greater degree multiple times every day. They were so common that we never really attached any greater significance to them. It was simply common sense to buy if everyone else was short, or sell if they were long. The bigger the entity you worked for, or the more people you could point that out to and convince to join you, the bigger your chances of success in squeezing out those positions and creating an exaggerated move.

That kind of manipulation and that degree of collusion would probably be illegal now, but to us back then, it was just a legitimate trading technique. So much so that when I left forex and started concentrating on stocks, it completely baffled me why it didn’t happen more often. If anything, the need to borrow a stock to short it made short sellers in the stock market far more vulnerable to pressure than forex traders. Still, there have been a few examples in recent years, with the Dryships saga springing to mind. The GME affair is a dramatic example, for sure, but it is basically just an example of a trade that is as old as trading itself.

The second relevant thing is that this was simply an exceptional situation. The short sellers went too far. Their technique in some cases of shorting, and then publicly trashing companies, had hurt too many small investors who were now looking for revenge. By selling 140% of the issued stock in GME, short sellers left themselves exposed. What the Wall Street Bets community on Reddit realized was that at that level of short interest, hardly anyone has stock to sell. The chances are that if you own GME you had already loaned it out, so you didn’t have it to sell immediately to the buyers.

In other words, there was a shortage of the stock. We all know what happens when short supply meets high demand, right?

Basically, what we are seeing is the collective power of a host of small investors, all of whom have access to significant leverage, harnessing that power. That is enough to create violent gyrations in a small cap stock with exceptional circumstances, and in doing so, punish the over-the-top behavior by short sellers.

But is it anything more than that? Probably not. Here's why.

The fact is that around eighty percent of the total stock available in S&P 500 companies is owned by institutions, and that isn’t counting stock held by company insiders. Even if total unity of individual investors could somehow be achieved, they would still be outnumbered 4:1 if they tried to take on the combined might of banks and other financial institutions in the stock market.

Interestingly, that eighty percent number is significantly lower in Europe and elsewhere outside the U.S., but that is a discussion for another time.

It is not that I want the big banks and institutions to control the market. The reality is that regardless of what happened this week, they still do. Trading and investing based on ideology, hopes, or how you think things should be is never a good idea. Reality always intrudes at some point, and the reality is that the way things stand in America, big money is still big money, and still firmly in control. You may not like that and may believe it needs to change, but there is no sense in denying it, and certainly no sense in going broke trying to prove your point.

To be clear, that doesn’t mean that individual investors can’t make money in the market, or that they will always be ripped off by the big players. It is absolutely quite possible as an individual investor to find good opportunities. Some of those opportunities may even come again when united action meets special circumstances, and they may even be as profitable for some as GME has been this time. But based on my years of experience, they will remain the exception, not the rule.

So no, this isn’t a "turning point" in the way markets work. It isn’t a significant shift in the power dynamic in investing, and it certainly isn’t a sign that small investors should be opposing what Wall Street does at every opportunity. If you try that, you will go broke very quickly, even if you made a small fortune on GME.

By Martin Tillier - NASDAQ.com

How I fell for a Phising attack : My Story by Nidhi Razdan

Back in June 2020, I had announced on Twitter that I was moving on from NDTV after nearly 21 years to join Harvard University as an Associate Professor to teach journalism. I truly believed it was a terrific opportunity. But here I am, almost eight months later, devastated by the realisation that this entire process to "hire" me; my "appointment" to Harvard was all part of an elaborate and sophisticated phishing attack to access my bank account, personal data, my emails, my medical records, passport and my devices like my computer and phone. I wanted to write this piece to explain what happened to me and hope that it serves as a lesson to everyone else.

So how did this happen? In November of 2019, I was invited to speak at an event organised by the Harvard Kennedy School in early 2020. One of the apparent organisers of this event contacted me separately to say there was a vacancy for a teaching position and would I be interested. I submitted my CV, thinking I had nothing to lose by trying. I never really expected anything to come of it. A few weeks later I was "interviewed" online for 90 minutes. It all seemed legitimate, the questions were thorough and professional. I did a basic google search and found a journalism degree programme being offered by the Harvard Extension School. Contrary to what many are tweeting, Harvard has a school called the Extension School offering a Journalism Degree Programme. The actual programme is called the Master of Liberal Arts, Journalism degree. The Extension School lists 500 faculty of whom 17 are categorised as journalism faculty. A number of these people are working journalists. I believed I fit this profile.

In January 2020, I got an email from an alleged Harvard Human Resources person from what appeared to be an official Harvard email ID, with an offer letter and agreement. The offer letter and the agreement appeared to be on a genuine letterhead with the University insignia, and contained the "signatures" of all senior Harvard University officials who actually do hold those positions even today. The emails from this individual were all marked to what appeared to be an official group university ID. They also separately emailed my former employers at NDTV and others for recommendation letters and official-looking acknowledgments were sent back to them. They too did not think anything was amiss.

Over the next few months, many emails were exchanged between me and these alleged Harvard email IDs where they sought my personal information for a "work visa". I was also sent an "official" invitation to attend a faculty orientation in March 2020 but that was called off due to the pandemic. I honestly didn't think anything of it since COVID had suddenly started disrupting all our lives and lockdowns were being announced the world over.

In June 2020, I quit NDTV and announced my decision to move to Harvard. Based on all the communication thus far, I had no doubts about the genuineness of the exercise. I was sent class schedules; details of the subjects I would be teaching; a detailed break up of my class. The classes were supposed to start online in September 2020 but were put off first till October and then January "due to COVID". Again, I didn't think anything was amiss. I had been told a work visa had been issued in the US for me which would be sent to me only when travel was required. I would have also needed a visa from Delhi but it never reached that stage since no travel was on the cards immediately.

However, I had started to get frustrated with the administrative processes and expressed the same repeatedly on email. I was also told my salary would be paid irrespective from September 2020 but no money ever came. It was all blamed on chaos due to COVID or IT failures. At one point they even sent me a bank transfer slip even though no money ever came.

By now I realised something wasn't right. I still didn't imagine this was a massive fraud but thought it was lack of coordination between university departments.

In December, I wrote to the head of HR at Harvard but didn't hear back. Then in January I wrote to the office of the Dean of the Graduate School of Arts and Sciences. It was only earlier this week that I heard back from them telling me there was no record of my appointment and that the people claiming to be their HR staff do not exist! I wrote back to Harvard expressing shock at this and urged them to take this matter seriously since there are people impersonating their senior staff and even forging their signatures on fake letterheads, including the Vice President of HR and their Chief Financial Officer.

I also immediately wrote to those entities or organisations with whom I was associated and told them what had happened. My lawyer read all the emails and realised that this was a massive phishing exercise, in all likelihood aimed at stealing my money and taking my personal data to misuse it.

I have filed a police complaint and handed over all the documents and communication. This was a gross criminal act. I am very shaken by this and keep kicking myself for being such an idiot. With the benefit of hindsight, could I have done more due diligence? Absolutely, yes. But these scams succeed because they look so real. What these scamsters put together was good enough for me to throw away a 21-year career in TV.

In hindsight, I guess I never saw any cause for alarm because of the pandemic and the chaos and disruption it had caused the world over. Also, because no one ever asked me for money, this was a very sophisticated attack. And that there is a lesson for me and for us all - never trust anything online. I am angry, disappointed and upset but also relieved that I found out what was going on and alerted authorities including Harvard before any serious damage was done. If after all this the only thing I can be accused of is being stupid, then I'll take it on the chin, learn from it and move on.

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