Going YOLO?$GME isn't the only GameStop in town. Other /r/WSB favorites include Blackberry and AMC, with online traders sending shares soaringhttps://t.co/2yWWdFhQgG via @WSJ
— Anthony DeRosa ? (@Anthony) January 27, 2021
SWARM INVESTING [$YOLO]
https://wsj.com/wallstreetbets-founder-reckons-with-legacy
https://bloomberg.com/how-wallstreetbets-pushed-gamestop-to-the-moon
https://marker.medium.com/gamestop-proves-were-in-a-meme-stock-bubble
The GameStop Fiasco Proves Weâre in a âMeme Stockâ Bubble
by James Surowiecki / 1/26/21
“GameStop is a struggling, kind of boring, mid-size retailer stuck in a legacy business â selling physical video games. But itâs also pretty much the only company anyone on Wall Street is talking about right now after its stock rose 160% in a matter of hours on Monday morning to an all-time high of $159. (By dayâs end, GameStopâs price had been cut by more than half, but that still left it up more than 300% this year and almost 3,000% from its 52-week low. And it was up another 15% at Tuesdayâs open.) It isnât GameStopâs precipitous rise, impressive as thatâs been, that has everyone fascinated.
GameStop, a games retailer whose shares have been soaring thanks to traders co-ordinating moves on Reddit, sits at ground zero of a battle that has shown have-a-go investors â with spare cash and boredom â are no longer just a sideshow https://t.co/OCNSu0EoMS
— Financial Times (@FinancialTimes) January 26, 2021
Instead, itâs what is fueling that rise: concentrated buying by thousands upon thousands of small individual investors who are using sites like Reddit and Robinhood to drive up what are now being called âmeme stocks.â GameStop is the best-known of these meme stocks, simply because its gains have become so outrageous. But it was preceded last year by Hertz and Kodak, which, despite having struggling businesses, saw their stock prices soar when they became Reddit darlings. And now stocks like AMC, Nokia, and Blackberry (which is, yes, still in business) have also caught Redditorsâ fancy.
How some chat room bros took down Wall Street royalty #WallStreetBets https://t.co/0verzfhvF8 via @business
— Robert Burgess (@BobOnMarkets) January 25, 2021
Itâs easy to see the meme-stock boom as just a speculative bubble, and evidence of how the current stock market has lost touch with reality. Speculative bubbles in so-called âstory stocksâ are, after all, familiar things on Wall Street. In the late 1950s, uranium stocks soared, followed a few years later by bowling stocks, and then RV stocks. (In 1969, a company called Skyline Homes saw its shares rise twentyfold.) And we all know what happened to internet stocks in the late â90s. But in fact, whatâs happening with meme stocks is very different from those previous crazes.
Itâs war.
Millennials vs Boomers.
WSB/Millenials have the numbers.
NASDAQ/Boomers are fighting (and losing) a rear guard action.
The smart moneyâs on WSB
NASDAQ doesnât have a chance. https://t.co/xEMmL7wb0a
— Max??? (@maxkeiser) January 27, 2021
In a classic speculative craze, investors may take cues from each other â the fact that everyone is buying internet stocks makes you think itâs smart to buy internet stocks â but theyâre not working together to make stock prices rise. With meme stocks, on the other hand, thatâs exactly whatâs happening: The small investors on the r/Wallstreetbets subreddit (which has 2 million subscribers) and other sites are taking part in a conscious collective effort to drive the prices of these stocks up. No one is in charge of this effort, though, of course, some voices are louder than others.
TL;DR GameStop, and WSB in general.
Boomers used the government and central banks to backstop the market, and pretend the gains made was skill.
Now a marginalized generation is exploiting the hell out of the system, while making of mockery of it. From the WSB manifesto.$GME pic.twitter.com/EEde7ueRZs
— Stephen Punwasi ? ? (@StephenPunwasi) January 25, 2021
But it is a self-organized campaign with people using the message boards to communicate with each other, encourage each other, and reassure each other (thus the many posts on r/Wallstreetbets admonishing fellow âautistsâ â their self-mocking term for each other â to not lose their nerve and to keep holding GameStopâs stock). Thus threads with titles âWe are the captains now,â
It seems Occupy Wall Street had the wrong approach.
— WallStreetBÎts (@wallstreetbets) January 26, 2021
âHave no fear, GME gang. We are consolidating in preparation for tomorrowâs moon landing,â and âGME â it never has to end.â In other words, whatâs happening with GameStop looks less like a speculative bubble and more like a contemporary, internet-mediated version of the âbull raidsâ that were characteristic of the stock market in the early 20th century, when organized pools of investors would combine to drive stock prices up. The traders on r/Wallstreetbets â which describes itself, tellingly, as âLike 4chan found a Bloomberg Terminalâ â are trying to do the same thing to Wall Street.
Hearing rumors that Ivy Leagues are offering a new major in "meme stocks" as an alternative to finance.
— WallStreetBÎts (@wallstreetbets) January 27, 2021
Perhaps more interestingly, it also looks a lot like what happened during the 2016 presidential election. Over the course of that campaign, a loosely organized community of alt-right meme lords and their followers, centered on sites like 4chan and Reddit, adeptly used social media to elevate Donald Trumpâs candidacy while barraging Hillary Clinton with an endless flow of memes targeting her supposed inauthenticity and corruption. What they did, in effect, was exploit the opportunities created by social media to disrupt the normal workings of the political system, at least in part for the lolz.
My latest:
I talked to the man who founded WallStreetBets. Heâs as stunned as you are about everything thatâs happened this weekâwhat he described as watching âa train wreck happening in real time.âhttps://t.co/av3EH5hRYD
— Akane Otani (@akaneotani) January 28, 2021
How are they doing it? By embracing companies that Wall Street, for good reason, hates: beaten-down firms in legacy businesses with weak economic fundamentals. The Redditors donât love these companies because they think their future prospects are genuinely great, even if in most cases thereâs been some catalyst that suggests the underlying business could improve going forward. Instead, what meme stocks all have in common is that they start off with a cheap stock price and a relatively low market cap, and theyâre heavily shorted, meaning that hedge-fund managers are betting that these stocks are going to fall. GameStop, for instance, was and still is one of the most heavily shorted stocks on Wall Street.
Both of those factors have been key to the success of these meme campaigns. First of all, stocks with single-digit prices tend to be more appealing to individual investors (even though the nominal price of a stock shouldnât affect your willingness to buy it) because itâs more fun and easier to imagine making a lot of money quickly if you own 100 shares of a $4 stock rather than one share of a $400 stock. And because these companies have relatively small market caps and low floats (meaning not that many shares are outstanding), concerted buying pressure from individual investors can more easily move the price.
i have blogged about the stonks, which are incredibly funny, and also about capitalism, which is not https://t.co/uZ8VDo7hwO
— Jack Crosbie (@jscros) January 27, 2021
Targeting stocks that are heavily shorted, meanwhile, makes it possible to orchestrate short squeezes. When a heavily shorted stock jumps in price â because, say, a crowd of individual investors all decide to buy at once â short sellers that canât take the pain start buying back shares to cut their losses. (In Wall Street parlance, they cover their short.) That drives the price higher, which in turn inflicts more pain on those short sellers who are still in, and so on.
You guys understand how manipulated this game is?
To daytrade stonks & take profit, you legally must have $25,000 in your account. Wonder who they paid to pass that regulation.
What middle class kid 17-24 has 25k sitting around?
They don't want to let us into trading.
— Reddit Trading ? (@reddittrading) January 27, 2021
Meme-stock traders have also become adept at using options â which you can now trade commission-free on most online platforms â to create the same kind of positive feedback loop, with buying in effect begetting more buying. Going after heavily shorted stocks is also smart because it taps into the long-standing distaste for short sellers, and gives meme-stock traders an enemy to focus on. Short selling is an essential component of any healthy stock market: Myriad studies have found that the presence of short sellers makes stock prices more accurate. But investors generally donât care about whether stock prices are correct â they want stocks to go up.
The political implications of what is happening here are extraordinary.
It's like Occupy Wall Street with a huge army behind them invading the most sacred and secured places with great ease.
Not really sure how this can be stopped, which is good.
— Glenn Greenwald (@ggreenwald) January 27, 2021
So anyone who is betting that stocks will go down is seen as a killjoy at best and an enemy of the state â or, in this case, of the community â at worst. Thatâs why, when well-known short seller Andrew Left of Citron Research said last week that GameStopâs stock price would fall to $20, he was savaged on social media and effectively cowed into silence. The point, then, is that even though GameStopâs current stock price is utterly irrational â it will never make enough money to justify a $6 billion market cap â the way Redditors and others have driven its price up has been quite smart.
Reddit has done more to punish Wall Street in the past week than the federal government has in the past 80 years.
— Blake Hammond â Louisville, KY 3/24-26 (@BigRadMachine) January 27, 2021
Theyâve shown, in a sense, that if you pick the right stocks, a self-organized community of small investors can make them rise, almost entirely by an act of collective will. In an odd way, itâs a remarkable testament to the internetâs ability to facilitate collective action. The challenge, of course, is that once that collective will begins to erode â either because people want to cash out or just get bored â there are going to be no fundamentals supporting the stock price, which means once these stocks start falling, itâll be look out below. But by the time that happens, much of the crowd will have moved on. There are always going to be crappy, heavily shorted stocks out thereâwhich means thereâs always going to be a chance for more lolz.”
PLAYING the STONKS MARKET [tinfa]
https://reddit.com/bankrupting_institutional_investors_for_dummies
https://wsj.com/blackberry-amc-and-other-reddit-yolo-favorites
https://slate.com/gamestop-reddit-wallstreetbets-gme
What the Hell Is Going On With GameStopâs Stock?
by Alex Kirshner / Jan 26, 2021
“In April, GameStop was a struggling video game and electronics retailer trying to sort out its future as the pandemic worsened consumer trends that were already working against it. The chain was losing money and staring down a long-underway shift in the gaming industry that pushed business away from GameStopâs brick-and-mortar model. (It turns out people donât like walking into stores during a pandemic to buy games they could just download from home.) The company had posted $470 million in losses in 2019, eight years after reporting a $340 million profit.
WallStreet Bets (r/wallstreetbets) is targeting silver.
Silver going to the ?? pic.twitter.com/Dk5Q1TcNE2
— ?Adam O? (@denverbitcoin) January 27, 2021
Right as the pandemic hit, it announced it would close 300 locations permanently. GameStopâs stock price on April 1 was $3.25. Itâs not clear things have improved much for GameStop. The company is actually closing more stores than it expected at the onset of the pandemic. But one thing has changed for the better: When trading ended on Monday, GameStop stock had hit $76.79âfour times its price to end 2020 and 23 times its price from the early days of the pandemic.
Silver is probably the most shorted, (using naked-shorts) security/PM in the world
The âCrash JP Morgan, Buy Silverâ campaign of 2010 drove the price from $15 to $50 (without Robinhood) #WSB/Reddit crowd could probably realize a 15x with a short-squeeze now @wallstreetbets pic.twitter.com/B1P7bl7gl0
— Max??? (@maxkeiser) January 27, 2021
The stock then jumped to $96.67 on Tuesday morning before dropping into the 80s as its roller-coaster run continued onward. GameStop has not, as far as anyone knows, completed the greatest comeback story in the history of free enterprise. But it has had one of the most memorable runs on the stock market ever. Itâs a story that encapsulates quite a lot about life in 2021: the democratization of financial markets, the mobilization of a giant online community, and the ability of obsessed amateurs to alter reality when they put their minds to it, especially when there isnât much else to do.
The tale of GameStopâs stock priceâand the central role of a subreddit called r/WallStreetBetsâwill be taught in business schools one day, no matter how it ends. The stock had been in steady decline since late in 2015, when the company reported disappointing earnings. GameStop, which was founded in 1984, had a simple business model: selling video games and equipment out of its physical locations. That became less lucrative as it became more common for gamers to buy games online, generally from non-GameStop sources, and download them directly to their consoles or PCs. The pandemic crash in March brought the stock to an all-time low, and a slight rebound over the spring and summer lagged behind the major indexes. In August, the well-known investor Ryan Cohenâfounder of online pet food giant Chewyâtook a 13 percent stake in GameStop.
The Silver Shortsâ Last Stand?
– Ted ButlerThe only alternative for the big silver shorts is to try & buy time and postpone the inevitable by arranging sharp selloffs in hopes of buying back as many short positions as possible, something they have not..https://t.co/h95Mvq59dT
— SilverSeek.com (@SilverSeekcom) January 23, 2021
In November, he wrote a harshly worded letter to the companyâs board, lambasting it for not keeping up with âthe transition from physical hardware to digital streaming,â among other errors. He took specific aim at GameStopâs CEO and blamed the company for squandering billions of dollars and âa massive amount of market share.â The letter generated a lot of press. By January, GameStop appointed Cohen and two associates from his investment company to serve on a newly expanded board. Cohenâs arrival turned GameStop into a âcult stock,â one financial analyst explained to Bloomberg News, where retail investors believed heâd be a corporate savior. Two days after the announcement that Cohen had joined the board, GameStopâs stock surged more than 50 percent, going from $20.42 to $31.40 after reaching as high as $38.65. Thatâs when the companyâs story went from typical to bizarre.
Around this time, institutional investors, apparently including at least one well-known hedge fund, took out massive short positions against the stock, which trades as GME. These investors figured that amateur investors saw Cohenâs big name and ignored the difficult fundamentals facing the business, overvaluing the stock as they bought it up in droves. So the professional investors tried to make money off GMEâs decline by borrowing the stock, selling it high, buying it back low, and pocketing the difference, minus the fees to borrow the stock.
The coolest billionaires are for the movement ???? https://t.co/lQCuHtu2BC
— Wall Street Memes (@wallstmemes) January 28, 2021
Lots of investors tried to short-sell the stock. (How many investors have âlongâ and âshortâ positions is not difficult to figure out.) As of Monday, 71.2 million shares of GameStop stock involved a short position, per Bloomberg, more than the total amount of publicly tradable shares, something thatâs only possible because not all shares of GME are available for purchase. One group that noticed the shorts on the stock was r/WallStreetBets. The Wall Street speculation community has more than 2 million members, hundreds of thousands of whom are online at any given time, to say nothing of lurkers.
"This is the digital ageâs first populist assertion of financial power over the true oligarchic elite…" – @jamespoulos #wallstreetbets https://t.co/vqvxEWNxLR
— The American Mind (@theammind) January 27, 2021
In September, an enterprising subredditor had posted a seven-point treatise titled âBankrupting Institutional Investors for Dummies, ft GameStop.â The subredditor noted the stock already had a significant short exposure (months before Cohen joined the board) and predicted that short sellers would be forced to abandon their positions and, in buying back their stocks, drive the price up. R/WallStreetBets users delighted in the idea and took it as a chance to egg one another on. Hype around GME continued bubbling up around r/WallStreetBets over the ensuing weeks, from posters who apparently saw it all along as a profit opportunity. The stockâs boom has made some of them big money.
There is discussion in their channel right now that if he makes $100M+, he wants to purchase Melvin's $44M Miami home and turn it into a Gamestop ?
— Zach DeWitt (@ZacharyDeWitt) January 26, 2021
The most famous is a user calling themselves âDeepFuckingValueâ who had apparently turned a six-figure investment into nearly $14 million by this Monday. Others may have just wanted to screw short sellers, who are by definition rooting for shareholders and companies to suffer. Theyâre also often considered to be sophisticated investors, cast against the determined amateurs populating internet forums.
At the end of November, the subreddit ascertained that hedge fund Melvin Capital Management was shorting GameStop, and the community rallied with fury against the New Yorkâbased fund. âWhen these boomers made their bet, GME wasnât a big thing on WSB yet,â one poster wrote. âI donât feel bad at all taking money from these rich greedy hedge fund managers.â âTheyâre not even playing with their own money,â another wrote.
Many of the Redditors at r/wallstreetbets do not believe this CNBC report that Melvin Capital closed out its position in Gamestop, thinking they're pretending to have done so to cause people to cash in & relieve the pressure. That's why they won't sell https://t.co/smRc9K73wh
— Glenn Greenwald (@ggreenwald) January 27, 2021
âIâm an old millennial. Iâm tired of getting screwed by the globalist elites,â said another. âThis isnât left or right republican or Democrat. Itâs the 1% versus everyone else.â Whether for profit or ideological reasons, the Redditors are winning. Theyâve bought the hell out of GME, and short sellers have begun to abandon their positions en masse, leading the stock to go up even more as they buy it back. Itâs a classic short squeeze. Melvin Capital was down 15 percent for the year on Jan. 22, according to the Wall Street Journal, leading the fund to take a $2.75 billion rescue package from other rich investors. On that day alone, short sellers against GameStop lost $1.6 billion, financial analytics firm S3 Partners said.
This is some insane, crazy, baller shit:
r/wsb just ran over one of the most successful hedge funds aroundhttps://t.co/qGyLsBzcr1
— Chamath Palihapitiya (@chamath) January 26, 2021
Itâs not clear how the story ends. Some professional analysts think the stock is due for a crash. Citron Research managing partner Andrew Left has argued the stock will fall to $20 per share. He tried to explain his reasoning in a livestream last week but couldnât because his Twitter account got locked after too many people tried to guess his password. He posted the video on YouTube and said GameStop backers were sending pizzas to his house and signing him up for dating profiles. Left decided to stop bashing GameStop, citing harassment by the âangry mob.â
Oh so NOW you want to regulate? https://t.co/mCSGNiqTqA
— Matt Stoller (@matthewstoller) January 27, 2021
It isnât just a technological shift that has worked against GameStop. Gaming companies now offer subscription plans, like Xboxâs Game Pass, that have made individual game purchases obsolete for some players. Future consoles might not even have a slot for a disc, further pushing the industry into downloaded games. GameStop does have a loyal fan base that enjoys the experience of walking into a store and buying a title. It also has a large trade-in business, though itâs not clear how the post-pandemic world will affect that. All of which is to say: GMEâs future could go any number of ways, but the reason its stock price quadrupled in three and a half weeks isnât that its business fundamentals are just that great. Itâs that, under a strange set of colliding circumstances, one group of stock traders sees GameStop as the perfect weapon against another.
what he means is "get out of my casino" https://t.co/ECgn94aW2Q
— Prof. Lemon Gogurt, Podcast State University (@Ugarles) January 26, 2021
If this feels outrageous, it might only be because a bunch of supposedly unwashed Reddit users are involved. After all, GameStop isnât the first stock to be subject to a giant short squeeze or to see its resulting value make little sense. When Porsche bought up a bunch of Volkswagen stock in 2008, short sellers scrambled to get out of their positions and briefly made VW the worldâs most valuable company. Itâs not clear why Porscheâs boardroom should have any more authority to dictate what happens in the market than a group of internet users operating in public view.
GameStop was briefly the largest stock on the Russell 2000 https://t.co/7kbmR1Yt4y pic.twitter.com/MvJ8R6c4FM
— Bloomberg (@business) January 28, 2021
Certainly, GameStop isnât the first stock to move heavily based on what a specific group of people has to say about it. Financial professionals spend all day talking about stocks on their Bloomberg terminals and yelling at one another on the phone about them. If one considers the Redditors to be untowardly moving the market by talking in public, arenât professional traders doing the same when they talk in private? Is there any difference between internet dorks hyping a stock and some hedge fund magnate going on CNBC to explain why the market will do as heâs predicted?
I wrote about the weird sense of ownership that's infused into how older liberals now praise "the Kpop stans" https://t.co/2kMlBGgJFC
— Abby Ohlheiser (@abbyohlheiser) June 23, 2020
Viewed through another lens, the rebels of r/WallStreetBets are doing old-fashioned internet organizing of the guerrilla kind you might find in politics today. TikTok teens and K-pop stars can sabotage the ticketing operation of a presidential rally. As long as there are enough amateur investors to throw weight around, they can decide whether a stock moves up or down. (Unfortunately, as with other internet hordes, some from this one have a taste for harassment.) Viewed through still another lens, someone on Reddit whoâs investing for profit is merely doing what professional Wall Streeters do every day.
Step 0: Citadel pays Robinhood for order flow. Citadel gets to see RH's orders a few milliseconds before they're filled. Citadel may choose to front-run some of those trades.
Step 1: RH's customers and WallStreetBets start manipulating $GME. This is happening in the open.
— Toxic (@toxic) January 26, 2021
Anyone doing it to sabotage the pros on the other side of the GME deal is betting with their heart, not unlike internet gamblers betting on sports or presidential politics. The GameStop saga isnât just a lesson in the internetâs broadening of access to markets, but in how the pandemic has accelerated that trend. A significant share of the bets on GMEâs stock going up have taken the shape of call options, where an investor pays a smaller amount up front for the right to buy a stock at a certain price by a certain date.
Because the volume of shares exchanged suggests that the HFT folks were all over this, all the way to $150. The message on WSB might be "lots of little guys screwing big Wall Street", but the truth is that the HFT robots were screwing everyone, while paying RobinHood a kickback.
— Toxic (@toxic) January 26, 2021
For instance, the viral Redditor whose GameStop holdings are now worth nearly $14 million apparently spent $25,000 to buy options on 80,000 shares (at about 31 cents per share) that give them the right to buy the stock at $12 until April 16. The value of those options at the end of the day Monday was $5.2 million.* Call options are not new, but theyâve become a smash hit among casual investors on the internet during the pandemic.
So, when you ask yourself, "who pays for no-commission trades, and why?" or "what's the harm of RobinHood's business model?", take a look at what happens behind the scenes, in the milliseconds after you press buy, but before you own those shares.
It's vampires all the way down.
— Toxic (@toxic) January 26, 2021
As white-collar professionals sat cooped up in their homes and watched their disposable income grow with less to spend money on last spring and summer, user-friendly investment apps like Robinhood saw significant growth. Young traders reportedly gravitated toward options, which can generate quick windfalls but are riskier than standard stock purchases.
Here's a piece we did in December about Robinhood's business model, which is selling user data to big hedge funds before they execute their users' trades:https://t.co/cYPUQfJpJo
— Jason Koebler (@jason_koebler) January 28, 2021
If you pay $3 for the right to buy a stock at a particular price, and the stock doesnât exceed that price to give you a quick profit, then your three bucks were a total loss. Plenty of inexperienced investors have lost their shirts this way during the pandemic. Others decided to buy options on GameStop, and some of them have made life-changing money.
Iâm not crying, youâre crying #WSB $GME $BB $PLTR $TSLA $BBBY $NOK $KODK $SRNE $AMC $EXPR $PTON $BABA $MSFT $AAPL $AMZN pic.twitter.com/a5hXdsHuuf
— WSB (@wallstreetbets_) January 27, 2021
Does any of this make sense? Not really. But it makes no less sense than the stock market itself sitting near record highs each day just as expiring federal unemployment benefits are pushing 8.1 million Americans into poverty and U.S. senators are balking at an enhanced stimulus package. It wasnât the GameStop stockâs Reddit hype team that first decided the market needed little tether to the daily realities facing most people, or even to a specific video game retailer. In other words, hate the game, not GameStop.”
GREAT SUPERSTONKS in HISTORY
https://americanheritage.com/paying-war
https://archive.org/way-to-outdo-england-without-fighting-her
https://strategic-culture.org/to-save-a-dying-republic-lincoln-greenbacks
https://glabarre.com/Treasury_Department_1861_Jay_Cooke
https://nytimes.com/civil-war-bonds-stocks
How Civil War History Explains Memestocks
by Emily Flitter / April 2, 2022
“In 1861, Jay Cooke, a minor money man hoping to help the Union army, lobbied Abraham Lincolnâs government to make investing accessible to more Americans. In 1972, Bill Gross, destined to earn the nickname âthe Bond King,â realized that more value could be squeezed out of the products that Cooke wanted to sell â government bonds â if they were traded by experts. And in 2021, a Reddit user named Roaring Kitty led a band of regular Joes on a crusade against financial engineers of Mr. Grossâs ilk. And that arc of U.S. economic history helps explain why people were calling me a puppet on the internet. At least that is how I came to understand it. At first, all I knew is that I was facing intense backlash from Roaring Kitty and company after I wrote about the evolution of what they, and other smaller retail investors, believed â a baseless theory that various powerful entities were out to get them and tank their stocks. While I was awash in all their bad vibes, I was also reading two new books: âThe Bond King,â by the NPR host Mary Childs and the forthcoming âBonds of Warâ by the historian David K. Thomson. I realized that there is a strong link between the Civil War-era campaign to sell bonds to working class people and a stock-hoarding movement among financially inexperienced masses connecting on the internet. Itâs called financial populism.
Over the past century and a half, finance in the United States has been characterized by an ebb and flow of who feels Wall Street is for them, who feels (or is) excluded. Understanding how we got where we are now is one way to demystify the Reddit-based investing revolution, which is powered by a conspiracy theory along with a deep resentment of the way real power and wealth seem so out of reach for most people these days. About the conspiracy theory: A year into the pandemic, a group of doctors, factory workers, salesmen, dentists and other investing amateurs came to the defense of companies facing existential challenges: a chain of empty movie theaters and a secondhand video game retailer. Hedge funds, run by superrich and increasingly powerful people, were shorting shares of those companies. The smaller investors fought back. They gathered on a Reddit forum called r/WallStreetBets, where group members goaded and cheered one another into buying more and more shares of these companies â GameStop and AMC Entertainment â vowing to hold on to them âwith diamond hands.â Stocks became stonks, jokey things infused with the currency of internet memes. The buying only stopped when a handful of retail brokerage firms cut off access to the market like a bartender cutting off a sloppy drunk. The stocksâ prices crashed and the biggest zealots moved from r/WallStreetBets to a new subreddit, r/Superstonk, and began posting essays many thousands of words long that they called âdds,â short for âdue diligences,â to explain what had happened. These were ostensibly research reports, modeled, perhaps, after professional financial analystsâ publications. They made the baseless claim that securities regulators, brokerage houses and the people in charge of the marketâs day-to-day functioning had gotten together and agreed to create fake shares of the stocks, which they were secretly passing on to hedge funds preparing to short them again. To fight back against this supposed scheme, the Redditors pledged to buy as many more shares of GameStop and AMC as possible to bring about the âmother of all short squeezes,â or the MOASS for short, when short sellers would be forced to pay whatever price the Redditors asked â maybe even $1 million a share â to cover their bets.
Reality check: There is no giant conspiracy, there are no fake shares; there will be no MOASS. The January 2021 short squeeze did cause breakdowns in the stock market, the most dramatic of which occurred in the brokerage houses that eventually shut down trading in those stocks, not based on any moral authority, but because they were about to run out of money to cover failed trades. But the Redditors accomplished something real. Like Jay Cooke, who pointed out how hard it was for most people to get access to investment products in 1861, the Reddit crowd highlighted structural problems in the stock market and prodded regulators to try to fix them. The Securities and Exchange Commission has since proposed several changes to stock market operations that would make them more visible and easily understood and faster. Wall Street has long boasted that its great-great grandfather firms saved the Union during the darkest period of the Civil War by generously lending Lincolnâs administration money. This claim, which financial titans repeat to imply that their work is morally good and descended from opponents of slavery, is now getting a fresh look. In âBonds of War,â Mr. Thomson describes how, after arranging an initial $50 million loan in early 1861, elite financiers in New York, Boston and Philadelphia basically told Lincolnâs Treasury secretary, an Ohioan named Salmon P. Chase, that they wished him the best of luck.
They felt it was too risky to keep buying U.S. debt, especially since individual states had regularly defaulted on their debt during the antebellum period. Jay Cooke, a financier from Philly who wanted to make the big leagues, persuaded Chase to make it easier for Treasury notes and bonds to be sold in small denominations, then started going door-to-door signing people up to buy them. He specifically targeted âsmall subscribers,â as he put it, who came away from agreeing to make their investments âalmost with tears in their eyes, so overjoyed at the patriotic scene.â Mr. Thomson, an assistant professor of history at Sacred Heart University, chronicles how Cooke assembled an army of salesmen and sent them all over the country looking for people who had saved a little money and wanted to make a statement while spending it. Buying Treasuries let Union sympathizers â including formerly enslaved people, Native Americans and residents of Southern cities â express their support for the cause no matter who or where they happened to be. It made buyers feel powerful. For the first time, wage-earners played a crucial role in the U.S. financial system â and they knew it. A new class of financial participants was born. On and off, well into the second half of the 20th century, the image of the investor that Jay Cooke helped create prevailed, especially during the periods in which the United States was deeply involved in world wars and appealed yet again to patriotism in search of financial support. If Jay Cooke made Americans feel like they mattered, Mr. Gross â unintentionally, you could say â instilled in them the opposite belief. Ms. Childsâs book is about the expansion of finance as a whole, told through the history of Bill Grossâs lifeâs work as the founder of what would eventually become the biggest bond fund in the world, PIMCO. Mr. Gross, whom Ms. Childs portrays as a single-minded whiz-kid seeking to prove his worth to his parents and former classmates, chipped away at the notion that anyone could be an investor by criticizing the buy-and-hold strategy for bonds. He began studying tables of bond issues and âmaking money buying the better bonds and selling the worse ones.â This made big money for big organizations, but it also made everything more complicated, bringing about a rule of experts.
Mr. Gross got the bond market going just as the dollar was disconnected from a fixed price for gold, ending the last vestige of the gold standard. The financial system grew much more subjective and more hospitable to operations conducted on the largest scale possible. Buying bonds was increasingly viewed as something that ordinary people just didnât do. The technology to buy and sell them didnât keep up with the technological innovations that brought stocks to life in the imaginations of retail investors. While no one was cut off from buying bonds, they werenât regarded as fruitful investments for just anyone. Eventually, Ms. Childs writes, Mr. Gross and his allies and competitors grew not just powerful, but arrogant. They seemed to feel that any means they could think of to serve their clients, regardless of their wider consequences for society, were justified. This was contemporary Wall Street culture taking shape. More and more, in every asset class, including stocks, the biggest gains were going to the biggest investors. I was in the middle of Ms. Childsâs book when I began exploring posts on r/Superstonk. I soon noticed a paragraph of text that seemed to be repeated over and over again by a slew of different posters on the forum. It expressed joy at the defeat of âsmug fine art collecting âhigh classâ billionairesâ at the hands of Redditors who were âcompletely immune to all the psychological warfareâ perpetrated against retail investors âfor decades.â The difference between the medium the Redditors chose for their rebellion and Mr. Grossâs area of expertise is important: Throughout his career, Mr. Gross generally viewed the stock market as a place where dumb money gathered. He never quite saw the point in participating in it. The Redditors would probably label this as snobbery, but the truth is the stock market is more susceptible to populist activity than the bond market. Although the oft-repeated post was not referring to Mr. Gross specifically â he played no part in the Reddit rebellion â it was clearly a rallying cry for people like Jay Cookeâs âsmall subscribersâ against the big financiers who took so much power away from the American public. Those ordinary people are now using the internet to try to get it back.”
PREVIOUSLY
MONETIZING DISSENT
https://spectrevision.net/2020/08/21/monetizing-dissent/
ACTIVIST HEDGE FUNDS
https://spectrevision.net/2018/04/09/economic-performance-art/
MEME MAGIC
https://spectrevision.net/2017/03/03/meme-magic/
OK BOOMER
https://spectrevision.net/2019/11/22/monopoly-is-theft/
VOLATILITY KINK
https://spectrevision.net/2020/10/29/election-kink/