Numerology on Twitter

[Artful Dodger]

@Artful Dodger Does your microeconomics model have an estimate for the current amount of naked shorts?

We can make indirect estimates based on share volume and price movement, but there are caveats.

The main one is that the existance of HFT skews our measures of volume (where the same 1 share bounces btwn 2 hedgie's servers at high speed 10M times but for an net trade of zero). This distorts the volume reported so that we never see the true exchange of shares, making it difficult to apply a micro-economics model.

However, we are able to use special events like the S&P 500 addition on Dec 18, 2020 to estimate the total volume of shares that MUST be transferred to new beneficial owners. This is a case where the signal-to-noise ratio from HFT allows us to extract statistically significant estimates.

The S&P 500 addition lead to the sale of about 80M shares in the event, and my Dec 14, 2020 model prediction (published over in the Main thread) was accurate to within just a few dollars of the TSLA equilibrium SP on Mon Dec 21, 2020. That was a good validation of the model.

However, there was a 2nd shoe that dropped. We didn't get the new SI information for Jan 31, 2020 until after the Close on Jan 12, 2021. That's when we saw the true extent of how much net shorting occurred while providing the ~120M shares that traded during the Closing Cross on Fri, Dec 18, 2020 and during the AFter-hrs session. Turns out, about HALF all all those shares were sold short, but (again) we didn't find out until Jan 12 when we saw the net change in SI.

This newly updated SI data did predict the $880 equilibrium SP which would be required to lead to the sale of that volume of shares (based on historical data for elasticity of demand for TSLA).

Sadly as we know, the shortzes then just resumed their gambit and attacked the stock again the day before Q4 Earnings were released on Jan 26, 2021 (orchestrated by big shortz M. Burry).

The rest is statistics. We'll have a way of estimating what happened in December, by the middle of January, I'd reckon.

TL;dr HODL'ing

Cheers!

 

[StealthP3D]

If you don’t mind me asking, why would 12/9 be a distribution date instead of an announcement? Thank you.

It must be both.

Because both "distribution" and "announcement" have exactly 12 letters! Not a coincidence.

/s

 

[pz1975]

It must be both.

Because both "distribution" and "announcement" have exactly 12 letters! Not a coincidence.

/s

And your join date is Dec 12 = 12/12 = 12-1-2 = 9.

:O

 

[NickInLab]

This allowed me to use a simple supply and demand microeconomics model to predict a 90% increase in the SP due to the forced naked short covering.

I wonder if you could share (or point me to a post where you already did), at least generally, how such a model is built? Are you assuming some supply and demand curves and asking "what if I shift the curve like this?" I think many of us could benefit from learning how to build models like this.

Recall that during this time, many Retail Brokers were *unable* to deliver the Dividend Shares to their Beneficial Owners (read: Retail customers of the Broker), and MANY excuses were offered as to why they had not received their shares from the Clearing House. Yeah, they were unable because they weren't ENTITLED to any more shares because they were NAKED SHORT.

The thing I've never liked about this theory is: Why can't the naked shorts just do more naked shorting? After all, they already created shares out of thin air in the first place. Why couldn't they simply create 4x more?

In other words, it seems like there's a contradiction in the assumptions: On one hand, naked shorts can sell fake shares to longs, but on the other hand, the can't sell fake dividend shares to longs. Dividend shares are just shares.

The timing doesn't make much sense. Shares were owed to shareholders of record as of 8/21 and distributed on 8/28. "Legitimate"/"legal" naked MM short sellers would need to locate real shares (or FTD) by the settlement date. Short sales on the announcement date (8/11) would have had to settle more than a week before the dividend shares were due anyway.

Unless they are selling fraudulent shares--but that brings us right back to "why don't just they create more fraudulent shares?"

I think this theory makes much more sense if you assume the retail brokers were normal (not-a-naked) shorts. Not-a-naked shorts would need to borrow or buy new shares to pay as dividends to the longs they originally borrowed from because they can't create fake/fraudulent shares.

I bring this up because it might change how you think about the model. If the SI report represents the real short interest (and there is not a pool of "dark" SI from naked shorts), you could potentially adjust the model parameters to fit the SI report and come up with a better prediction for the next round of splitting. Not trying to tell you how to make your model, just food for thought.

($GME short interest was 134% of their total stock on about Jan 26, 2021)

Which doesn't necessarily imply naked shorting.

For instance, suppose one share exists, owned by A. A lends the share to B who sells it to C who lends it to D. D sells it back to A. B and D are now both short, A and C are long. There are no naked shorts in this example, but short interest is 200% of total stock, and longs hold 300% of total stock.

It's the same way fractional reserve lending creates money from nothing.

 

[Gigapress]

~29
S29
$29
| 29
129
12 9
12/9

https://twitter.com/x/status/1462204414270197763

(Joking on this one of course)

 

[dww12]

Again? For every 1 car death there are 29 motorcycle deaths per mile.

https://twitter.com/x/status/1462204414270197763

 

[dww12]

Five for One.

 

[LightngMcQueen]

We saw in Jan 2021 with the Gamestop $GME trading disaster that highly exposed Retail Brokers are VULNERABLE to default/bankrupcy (mainly Robin Hood and Melvin Capital, but also Interactive Brokers to name a few).

First of all: Thank you. Your post was awesome - so much to learn and think about.

Can you share more of your understanding WRT brokers vulnerability to default. Specifically vulnerability of:
- Interactive Brokers - I am surprised about that, Emmet Peppers (former IBKR employee and shareholder) mentioned few times that he considers them to be very well capitalized,
- Canadian brokerages, especially smaller ones not owned by big banks ... I know Canadian securities regulations are different and generally more conservative, but I do not know specifics related to short share positions. I know Canadian brokers are covered by industry-wide insurance, but insurance levels might be insufficient for many of the long term Elon fans.

 

[Artful Dodger]

I wonder if you could share (or point me to a post where you already did), at least generally, how such a model is built?

#227027 "AD Supply'n'Demand Model for TSLA shares - SP Equilibrium $671" | 2020-12-14

 

[dww12]

What the freck. 90% of Earth gravity 32.2ft/s^2 is 29. Single stage is 1.

 

[Artful Dodger]

Interactive Brokers - I am surprised about that, Emmet Peppers (former IBKR employee and shareholder) mentioned few times that he considers them to be very well capitalized,

There was an interview on CNBC with the Chairman of Interactive Brokers during which he explained in detail what the risks were, and why his company decided to deny its own customers the ability to sell GME while only allowing them to sell that equity. It was telling, but finally self-centered and demonstrated his fear for the company's viability going forward.

Interactive Brokers chairman: Worried about integrity of the market | Jan 28, 2021

TL;dr He's clearly worried about his own a** not the "Market".

 

[Gigapress]

Wow so this one actually seems to be legit.

1 car death per 29 motorcycle deaths --> 12/9

5:41 --> 5 for 1 --> 5:1 split

 

[ZeApelido]

Welp this sure feels like I’ve joined a cult.

And I am definitely drinking the kool aid.

 

[AZRI11]

This sounds logical

https://twitter.com/x/status/1462276620337782786

https://twitter.com/x/status/1462279273738387457

 

[Gigapress]

This sounds logical

https://twitter.com/x/status/1462276620337782786

https://twitter.com/x/status/1462279273738387457

Also this

https://twitter.com/x/status/1462289443772063745

 

[HankLloydRight]

How did I end up in a Q-Anon channel on 8chan?

 

[CaliBear1]

Freaking TMC. I used to read books.

 

[LightngMcQueen]

There was an interview on CNBC with the Chairman of Interactive Brokers during which he explained in detail what the risks were, and why his company decided to deny its own customers the ability to sell GME while only allowing them to sell that equity. It was telling, but finally self-centered and demonstrated his fear for the company's viability going forward.

Interactive Brokers chairman: Worried about integrity of the market | Jan 28, 2021

TL;dr He's clearly worried about his own a** not the "Market".

Thanks!
I did not see it same way … it still sounds to me that he was concerned about upstream: Citadel losses and maybe smaller hedge funds (who were likely profitable customers) going belly up. Of course that would result in losses for IBKR but not a blowout.

“Protecting integrity of the market“ was a generalized threat trying to present this manipulation as something that they did for little guy.

I assume(guess) that if a long Call expired ITM in brokerage it is up to MM/option originator to deliver the shares. My understanding is that Broker is responsible for custody of the contract but not for counterparty risk.

But …. If broker is on the hook, then I see how it could blow up on them in dramatic way.

I am drilling into it because as we are scheming about profits from 1209 Heist we might be missing a downside downside risks.

I am still not sure if smaller Canadian brokers e.h.: Wealthsimple, Qtrade, Questrade are exposed

 

[joh01652]

Some scenarios would likely require advance notice and a shareholder vote. A 2:1 split probably doesn't, while a 5:1 probably does. IANAL but with the distribution date being Dec 23, it might be possible that's considered more than the min. 10 days notification period required to the actual date of the split, so both the split announcement and a notice of a shareholder vote could be filed on 12/9. But I don't know enough to judge, so I'll watch and see.

I'm not sure what the utility of a 5:1 spit is. History tells us the SP could march back up to the $1K range just during the runup to the split. It's significant that Tesla doesn't need more capital going forward (local non-recourse loans FTW). So I don't think we'd see a "blow-off top" after the run-up like we did on Sep 01, 2020 when Tesla announced the $5B Equity Offering. I think the shortzes are forced to cover.

So, a 10:1 split might land us at around (maybe) ~$200 SP after the smoke clears, but I really think that's a secondary consideration for Elon: I believe his real target for this gambit is the practice itself of naked short selling via the "Madoff Exemption". Time to finally die, Bernie. "Are you still alive?": Elon.

Cheers!

An approximately $200 SP would also be appropriate for inclusion into the Dow, no?

I'm still crossing my fingers for a ratings upgrade and Dow inclusion by year's end...

 

[AudubonB]

Serious posts - other than this one - aren’t allowed in this thread. Any more such behavior and I might shut it down.