Mental Models Podcast It's not a brain in a jar, that's the gist!
Dr. Daniel Krawczyk & George Baxter, JD, CFA
72 episodes
9 months ago
GameStop $GME shops mainly sold physical video games. They would also stock many resale items. The physical locations capitalized on the same type of business that comic book shops often had by selling collectibles as well. Many projected that Game Stop had a very limited future and had been cut out of the supply chain as many electronic games are simply sold online in recent years.
Hedge funds had high interest in shorting GameStop at the end of 2020. In January 2021 a long position idea existed with the idea that a pivot to in-person gaming meetings could be a way forward. Michael Burry was featured in the Big Short and he had advocated for a potential bright future for GameStop lending credibility to the value position. Melvin Capital was known for this, and was pretty aggressive in advocating for the short position.
“Deep F…ing Value” (aka “Roaring Kitty”) entered the scene with the WallStreetBets crowd and advocated for buying GameStop and driving up the price. Around GameStop there was herd mentality forming and a desire to squeeze the hedge funds. It was equivalent to an ‘occupy Wall Street movement’. Everyone online had to going to buy Game Stop stock and not sell it for the short squeeze to work. These are known as “diamond hands”, which also happens with cryptocurrency. It became the ‘Prisoners Dillema’, a trust game, where everyone has to stay the course and not sell. A religious fervor built up as online investors from Robinhood wished to take down hedge funds that were seen as greedy.
We discuss the typical scenario around short selling and short squeezes. There is some value for markets to have short sellers as they act as a shock absorber. Contrarian short sellers are naturally unpopular due to the historical interest in companies continuing to succeed. A set of factors aligned in 2021: the bull case for the stock, an online sentiment to stick it to short sellers, and the natural appeal of using Robinhood to become wealthy from the comfort of one’s own home. Meteoric rises in the price continued until it had reached three hundred dollars per share. This scenario may serve as a sign that retain online investors are coming online. It’s a case where people with limited investing skills scored a victory in this risky scenario.
Some people may have participated simply to experience the thrill of being part of this movement as entertainment for some people. It is not healthy for society overall to have people treating the stock market like a casino. It had a sports betting feel to it.
AMC theaters was on the way to bankruptcy, but took advantage of a price rise to raise capital to help their business. GameStop might have done this same thing. Financial markets serve a purpose and this type of scenario goes against the natural functionality of markets. The risk levels always rise with betting on perception this way.
Perhaps GameStop will act as a gateway stock for people to begin investing careers.
$AMC
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GameStop $GME shops mainly sold physical video games. They would also stock many resale items. The physical locations capitalized on the same type of business that comic book shops often had by selling collectibles as well. Many projected that Game Stop had a very limited future and had been cut out of the supply chain as many electronic games are simply sold online in recent years.
Hedge funds had high interest in shorting GameStop at the end of 2020. In January 2021 a long position idea existed with the idea that a pivot to in-person gaming meetings could be a way forward. Michael Burry was featured in the Big Short and he had advocated for a potential bright future for GameStop lending credibility to the value position. Melvin Capital was known for this, and was pretty aggressive in advocating for the short position.
“Deep F…ing Value” (aka “Roaring Kitty”) entered the scene with the WallStreetBets crowd and advocated for buying GameStop and driving up the price. Around GameStop there was herd mentality forming and a desire to squeeze the hedge funds. It was equivalent to an ‘occupy Wall Street movement’. Everyone online had to going to buy Game Stop stock and not sell it for the short squeeze to work. These are known as “diamond hands”, which also happens with cryptocurrency. It became the ‘Prisoners Dillema’, a trust game, where everyone has to stay the course and not sell. A religious fervor built up as online investors from Robinhood wished to take down hedge funds that were seen as greedy.
We discuss the typical scenario around short selling and short squeezes. There is some value for markets to have short sellers as they act as a shock absorber. Contrarian short sellers are naturally unpopular due to the historical interest in companies continuing to succeed. A set of factors aligned in 2021: the bull case for the stock, an online sentiment to stick it to short sellers, and the natural appeal of using Robinhood to become wealthy from the comfort of one’s own home. Meteoric rises in the price continued until it had reached three hundred dollars per share. This scenario may serve as a sign that retain online investors are coming online. It’s a case where people with limited investing skills scored a victory in this risky scenario.
Some people may have participated simply to experience the thrill of being part of this movement as entertainment for some people. It is not healthy for society overall to have people treating the stock market like a casino. It had a sports betting feel to it.
AMC theaters was on the way to bankruptcy, but took advantage of a price rise to raise capital to help their business. GameStop might have done this same thing. Financial markets serve a purpose and this type of scenario goes against the natural functionality of markets. The risk levels always rise with betting on perception this way.
Perhaps GameStop will act as a gateway stock for people to begin investing careers.
$AMC
Mental Models: Brain Effects While Working From Home: #54
Mental Models Podcast It's not a brain in a jar, that's the gist!
11 minutes 34 seconds
5 years ago
Mental Models: Brain Effects While Working From Home: #54
Norepinephrine sends signals widely throughout the brain that move us into a task motivated stated. A brain regain called the locus coeruleus located in the brain stem is involved in the release of norepinephrine. As we shift to a more passive state, another type of brain cell called astrocytes take over (they get their name from their star shape). Astrocytes cells support neurons in the brain, and are the most abundant glial cells in the brain. A study by Yu Mu et al, 2019 (link below) with Zebra fish shows that Norepinephrine was released when they are moved to actively swim. Meanwhile, astrocyte activity increased when the fish moved to a passive state. When workers get tired, just like the Zebra fish who felt they were not getting anywhere with their swimming, a passive state sets in the brain. To overcome this passive state and increase Norepinephrine release into the brain, take a break or change up work pattern to increase productivity again. Other ways to increase task-engaged brain activity include getting early light exposure and exercising. Stay safe and healthy out there! For more on best investing strategies, avoiding bias and learning about your brain BUY 5 star reviewed “Understanding Behavioral Bia$” on Amazon - link here: http://amzn.to/2XHtsOE
Links:
Glia Accumulate Evidence that Actions Are Futile and Suppress Unsuccessful Behavior https://www.cell.com/cell/pdf/S0092-8674(19)30621-X.pdf
Decision Fatigue Mental Models podcast….
Russell Foster book on sleep. https://www.amazon.com/Circadian-Rhythms-Short-Introduction-Introductions/dp/0198717687
Video of Dr. Daniel Krawczyk and George Baxter on ETFguide Which Behavioral Traits are Hurting Your Investment Results? https://youtu.be/34VnOUyNgcA
Investors are often their own worst enemies. That's what investing great Ben Graham once concluded. In this episode, Lynn Dolan @ETFguide TV talks with Authors Daniel C. Krawczyk and George H. Baxter, JD, CFA about their new book Understanding Behavior BIA$: A Guide to Improving Financial Decision Making. Both men also host the Mental Models Podcast. https://youtu.be/34VnOUyNgcA
Other resources for ETFguide TV viewers:
1. Free ETF Guides https://tinyurl.com/y2gep5kj
2. Habits of the Investing Greats https://tinyurl.com/y6cg9n4v
3. Index Investing Show https://tinyurl.com/y3862uaa
Mental Models Podcast It's not a brain in a jar, that's the gist!
GameStop $GME shops mainly sold physical video games. They would also stock many resale items. The physical locations capitalized on the same type of business that comic book shops often had by selling collectibles as well. Many projected that Game Stop had a very limited future and had been cut out of the supply chain as many electronic games are simply sold online in recent years.
Hedge funds had high interest in shorting GameStop at the end of 2020. In January 2021 a long position idea existed with the idea that a pivot to in-person gaming meetings could be a way forward. Michael Burry was featured in the Big Short and he had advocated for a potential bright future for GameStop lending credibility to the value position. Melvin Capital was known for this, and was pretty aggressive in advocating for the short position.
“Deep F…ing Value” (aka “Roaring Kitty”) entered the scene with the WallStreetBets crowd and advocated for buying GameStop and driving up the price. Around GameStop there was herd mentality forming and a desire to squeeze the hedge funds. It was equivalent to an ‘occupy Wall Street movement’. Everyone online had to going to buy Game Stop stock and not sell it for the short squeeze to work. These are known as “diamond hands”, which also happens with cryptocurrency. It became the ‘Prisoners Dillema’, a trust game, where everyone has to stay the course and not sell. A religious fervor built up as online investors from Robinhood wished to take down hedge funds that were seen as greedy.
We discuss the typical scenario around short selling and short squeezes. There is some value for markets to have short sellers as they act as a shock absorber. Contrarian short sellers are naturally unpopular due to the historical interest in companies continuing to succeed. A set of factors aligned in 2021: the bull case for the stock, an online sentiment to stick it to short sellers, and the natural appeal of using Robinhood to become wealthy from the comfort of one’s own home. Meteoric rises in the price continued until it had reached three hundred dollars per share. This scenario may serve as a sign that retain online investors are coming online. It’s a case where people with limited investing skills scored a victory in this risky scenario.
Some people may have participated simply to experience the thrill of being part of this movement as entertainment for some people. It is not healthy for society overall to have people treating the stock market like a casino. It had a sports betting feel to it.
AMC theaters was on the way to bankruptcy, but took advantage of a price rise to raise capital to help their business. GameStop might have done this same thing. Financial markets serve a purpose and this type of scenario goes against the natural functionality of markets. The risk levels always rise with betting on perception this way.
Perhaps GameStop will act as a gateway stock for people to begin investing careers.
$AMC
