Reply #9: I don't get it

[econoclast]

I certainly am willing to believe that market manipulation exists, especially where a big position sits in shaky hands. But after reading the article I don't see how Goldman profited. Barclays ended up with Semgroup's positions. And Barclay's ended up with the billion dollar profit.

The usual idea behind a manipulated short squeeze is :

someone or some group has a giant short position but doesn't have the capital to hold on to that position if the price goes up

Knowledge of that situation gets out into the market

people with that knowledge go long where the shaky guy is short and then thy to move the market enough to induce the short/shaky guy to panic buy to cover the short. The panic buying generates huge profits for the manipulators on their long position.

Or

people with that knowledge realize "hey, the short guy is probably right!". "wish I had their position". Then it dawns on them that maybe they CAN get the position. They use the shorts shaky finances to flush out the position on the cheap. I have seen, back in the day, this happen on small exchanges with stop-loss orders. It used to be called "running the stops" on the Philadelphia exchange and it was common practice when buying an option position on that exchange NOT to place a stop loss order just to keep them from running the stop.

So while the Forbes piece indicates that Goldman and Citi and Merrill had access to the knowledge, but it fails to demonstrate that they profited. ( maybe they did but the article doesn't make that assertion )

Barclays profited. But the article doesn't indicate that they had the knowledge. But who knows? Especially with Citi and ML in the mix. Goldman is usually pretty close mouthed. But ML and Citi? Who knows who talks to whom?

Just based on the article I guess I'd be more inclined to be looking at Barclays.