Dan Niles on how retail traders saved AMC and GameStop

Those retail investors have saved both AMC and GameStop.  There's no question about it.  That's the only reason these companies are surviving today, they were able to raise money at incredible valuations.  So those CEOs should be really grateful to the retail trade.

~ Dan Niles, CNBC interview, 7:20 mark, June 4, 2021

Bloomberg Businessweek on the FOMO economy

It's not just crypto: It's stocks such as those of AMC Entertainment Holdings, GameStop, and Tesla that are beloved on Reddit and Twitter, and it's the houses and condos being snapped up almost as soon as they list. The pressure to keep up with neighbors, friends, and social media meme lords who seem to be in the process of becoming wealthy - or, at least, talking about it - can feel unbearable.

[...]

People flush with pent-up savings after a year of lockdowns have more ways than ever to throw darts at the financial dartboard: zero-commission, zero-minimum trading apps; social media message boards; and exchange-traded funds you can hop in and out of as easily as stocks, including a few that explicitly play to the trend-chasing crowd with such tickers as BUZZ and, yes, FOMO.

[...]

Another cause of FOMO right now is the lack of a strong competing narrative.  Warning against risky short-term speculation and saying "it'll all end in tears" are widely derided as boomerisms.  Partly because it seems out of touch with Generation Z's economic reality, but also because asset prices keep bouncing back.  Bitcoin's rebound from a more than 80% decline in 2018 to a record high this year, along with property and stocks, is classic regret fuel for those who missed out.

~ Lionel Laurent, "The FOMO Economy," Bloomberg Businessweek, June 14, 2021

After the GameStop short squeeze, Andrew Ross Sorkin asks Ken Griffin if the markets are "fair"

Sorkin: Let me ask you a maybe more meta question about all of this, which is, do you believe that the markets unto themselves are completely fair and when I, when I say fair, do you believe that my mother has the same opportunity to make money in the market, as you do?

Griffin: It all comes down to a matter of horizon and strategy.  It’s like asking if I went and play golf this weekend with Tiger Woods, would I win.  Of course not.  But there are various ways to compete with Tiger Woods off a golf course and do very well.  I’m not gonna play him on his game, on his course.  Your grandmother might be very aware of a change in technology or otherwise that will impact our economy.  She might look at the car you drive five years and go, hmm, Andrew bought a Tesla.  And I think EVs (electric vehicles) are the future of America and I’m going to buy Tesla stock.  And if she bought Tesla stock five years ago, she would have made a lot more money than we made at Citadel.  So, I never underestimate the skill of the American retail investor at understanding emerging trends, where real wealth is created and their ability to take advantage of that wealth transformation.

~ Ken Griffin, "Citadel Founder & CEO Ken Griffin Speaks with CNBC’s 'Squawk Box' Today," CNBC, February 19, 2021

The Economist on Reddit traders and GameStop frenzy

Events on Wall Street have become so strange that Netflix is said to be planning a show to immortalise them. But what should be the plot?  One story is of an anti-establishment movement causing chaos in high finance, just as it has in politics.  Another is how volatile shares, strutting online traders and cash-crunches at brokerage firms signal that a toppy market is poised to crash.  Both gloss over what is really going on. Information technology is being used to make trading free, shift information flows and catalyse new business models, transforming how markets work.  And, despite the clamour of recent weeks, this promises to bring big long-term benefits.

~ The Economist, "The real revolution on Wall Street," February 6, 2021

Bill Bonner: takeaways from the GameStop frenzy

So what was that all about, we wonder?  All the sturm and drang?  All the huffing and puffing on the part of bystanders?  Everybody seemed to get worked up about it. 

The shorts thought they were doing God’s work – helping Mr. Market find the appropriate price for GameStop shares.  The longs all wore white, too, confident that they were on a crusade to stop the rich from taking over the world. 

The only “takeaways” for us from the whole saga were that the Fed’s bubble must be getting ready to pop (the madness of the gaming crowd is reaching a fever pitch)… and that hatred towards “the rich” is running high – and growing.

~ Bill Bonner, "The Aftermath of the GameStop Short Squeeze," Rogue Economics, February 3, 2021

Nate Geraci on the speculative mania in "Reddit stocks"

The speculative mania in ‘Reddit stocks’ has simply overshadowed Ark Invest and pretty much everything else in the markets.  It’s a fascinating dichotomy right now with investors pumping money into companies of the past versus companies of the future. 

~ Nate Geraci, president of the ETF Store, "ARK Mania Finally Fading After GameStop Fever Sweeps Wall Street," WealthManagement.com, January 29, 2021

Steve Goldstein on the investment experience of GameStop and AMC speculators

And those traders are inexperienced. Cardify, a consumer-data firm, did a survey of 1,600 self-directed investors in GameStop and cinema chain AMC Entertainment, and found that most were inexperienced investors having less than 12 months of experience, and another quarter with one to two years’ experience. Nearly half made their biggest-ever do-it-yourself trading investment in the last four weeks, according to the survey that ended on Monday. 

Why? Of these overwhelmingly young and male investors, 45% said for quick financial profits. Nearly 20% said it was part of a long-term investing strategy, and 16% said to spite big hedge funds and institutional investors, according to Cardify.

~ Steve Goldstein, "GameStop’s meteoric gains have almost entirely disappeared — here’s advice for those who didn’t get out in time," MarketWatch, February 5, 2021

Vlad Tenev on the GameStop short squeeze and clearinghouse deposit requirements

Last week, we witnessed something the stock market has never quite experienced before.  Short squeezes on a small number of stocks triggered wild gyrations in prices, massive volatility that prompted clearinghouses to take swift action to protect the plumbing that handles stock trading every day. 

In a matter of days, our clearinghouse-mandated deposit requirements related to stocks increased ten-fold.  These deposits are the collateral we post to ensure our access to clearinghouse services on behalf of our customers.  They are what led us to put temporary buying restrictions in place on a small number of securities that the clearinghouses had raised their deposit requirements on.  As we noted in a blog on Friday, it was not because we wanted to stop people from buying these or any stocks — we built Robinhood to provide access to investing for all.  And it certainly wasn’t because we were trying to help hedge funds.

~ Vlad Tenev, "Robinhood CEO: We're helping those left behind by Wall Street, not hedge funds," USA Today, January 31, 2021

Kevin Duffy on the role of financial markes

We’ve lost sight of the fact that the financial markets exist to efficiently allocate capital.  Mock and destroy that function and you’ve done the same to a functioning economy.  Interest rates are no longer set in the marketplace, but manipulated by central bankers.  Active investment managers seeking value have been replaced by index funds on auto-pilot.  The market’s most capable sleuths and skeptics – short sellers – have been exterminated.  Investors and speculators have become divorced from their key role as price discovery agents.  Price and value no longer matter.

~ Kevin Duffy, "Game Over," LewRockwell.com, February 1, 2021

Kevin Duffy on GameStop narratives

The GameStop frenzy has struck a nerve with so many because it represents a morality play: David vs. Goliath, outsiders vs. insiders, the downtrodden upending the corrupt financial elites. To many long-time critics of bailouts, the Reddit crowd who made out like bandits signifies the beginning of a long-awaited populist revolt. To the young and tech savvy, this is the passing of the old guard which offers a glimpse of the future. 

Lost in all of the hysteria and spin is the real struggle taking place on Wall Street, that between bulls and bears. After 12 years of nonstop Federal Reserve-abetted asset inflation, the bulls have been winning so often, their ranks have swelled while those of the bearish community have dwindled. The short seller, that most extreme expression of skepticism, has nearly gone extinct. It was he who the Reddit crowd targeted and whose grave they’re now dancing on.

~ Kevin Duffy, "Game Over," LewRockwell.com, February 1, 2021

Reddit user on the rise of retail investors (2021)

This is a big moment.  A tug-of-war between tradition and the future.  Hedge fund managers live in the past, and continue to look down upon the retail investors.  They truly believe that we, the average retail investors, don't know anything about finances or the market (which may be true), and we're just gambling our money away.  This is the world they want to live in.  This was the past.

~ Reddit user benaffleks, week ended January 29, 2021

(As cited by Barron's, "The GameStop Revolut Has Just Begun. Get Ready." January 30, 2021)

Kevin Duffy on the GameStop frenzy

There is a cyclical aspect of the the GameStop frenzy few are talking about.  Bob Murphy made an interesting point that this is flipping "The Big Short," which was written by Michael Lewis right after the GFC in early 2010, close to the stock market bottom.  Short sellers were held out as heroes.  A decade later, after stocks have quadrupled and short sellers practically wiped out, they're the bad guys.  And the greedy and reckless speculators dancing on their graves are the heroes! 

We've come full circle, i.e. we're probably at peak euphoria for the so-called "everything bubble." 

As for Robinhood temporarily closing the casino doors for a day, this likley had more to do with existing regulations and capital requirements which go up with increased volatility.  Robinhood apparently had to raise another $1 billion so they could fully open the casino for business on Friday (helping push GME stock up 68%). 

Btw, AOC, Ted Cruz and Donald Trump, Jr. all attacked Robinhood for the same reason.  If they're all on the same side of an issue, laissez faire types have to be suspicious.  This will end in tears for the Reddit crowd who, as Bob said, refuse to take their chips and leave the poker table because they're "mad." 

This is amateur hour at the casino, and some angry, young, ideologically-charged traders are about to learn a very expensive lesson.  Who will AOC & Co. then blame?  Will they bail these people out?  The plot sickens...

~ Kevin Duffy, comment about "Ep. 1825: The Reddit/GameStop Phenomenon," The Tom Woods Show, January 30, 2021

Vlad Tenev on the temporary suspension of trading in GameStop

Our decision to temporarily restrict customers from buying certain securities had nothing to do with a market maker or a market participant or anyone like that putting pressure on us or asking us to do that. It was entirely about market dynamics and clearinghouse deposit requirements, as per regulation.

~ Vlad Tenev, co-founder of Robinhood, Yahoo!Finance interview, January 30, 2021

Glenn Greenwald on Reddit traders vowing to drive GameStop stock up to $1,000

It has also enriched a lot of people who bought at $20 or even $30 or $40 or $100, and the stock is now at $350 with no sign of it going down because they're vowing to hold onto the stock and even drive it up to $1,000 a share.  That's the vow on Reddit.  We'll see if that happens or not. 

~ Glenn Greenwald, "The Reddit Revolution, GameStop and Melvin Capital," 15:40 mark, January 28, 2021

Glenn Greenwald on the GameStop wealth transfer: "it's like a very effective populist uprising"

Clearly there are a lot of rich investors, a lot of probably big Wall Street people, even institutional investors, who profited along the way and what the ratio is between small Redditers and these bigger actors is unclear, but nonetheless, there is no question that it germinated in Reddit in the subthread, that at least some of these people have become wealthy whereas two weeks ago they were probably struggling or poor. And it really is, if you think about it in those terms, a massive transfer of wealth from hedge fund managers - just billions of dollars - transferred to Reddit users, and that's why it has caused so much fascination because it's like a very effective populist uprising against these hedge funds. And it's also causing an extreme amount of concern and worry for the same reason on the part of Wall Street, their media allies - people saying "this needs to stopped right away, we can't have this." Essentially, as several leftist commentators and right wing commentators have said, the reaction seems to be, "oh, wait, the wrong people are manipulating Wall Street for their own interests."

~ Glenn Greenwald, " 14:00 mark

Glenn Greenwald on GameStop and market manipulation

They knew that by playing the game that these hedge fund managers typically play, which is manipulating the market for their own benefit, they could also enrich themselves. Now, if manipulating the market to the enrichment of the people doing it is what Wall Street does every day - it's what hedge funds do all the time - the only thing that is different in this case is that instead of hedge fund billionaires making billions of dollars and getting rich off market manipulation, its a bunch of anonymous Reddit trolls who have bounded together to do it. 

~ Glenn Greenwald, "The Reddit Rebellion: Gameplay and Melvin Capital," 11:20 mark, January 28, 2021

Kevin Duffy calls out CNBC hypocrits over GameStop madness

I'm tired of the crybabies on CNBC who pimped for massive stimulus in 2020 and have the audacity in 2021 to complain about GME going 17-bagger in 10 days.

~ Kevin Duffy, tweet, January 28, 2021

Kevin Duffy on GameStop madness

While I'm not shedding any tears for the big hedge funds getting crushed by swarms of Robinhood day traders, this is a warning - exactly the kind of insane behavior you would see at a generational top. I follow the stocks of retailers pretty closely.  On a good day, GameStop (GME) might be worth $2 billion.  It hit a market cap of $30 billion yesterday and is set to open up 70% (after getting being down 44% yesterday). 

We've lost sight of the fact that the financial markets exist to efficiently allocate capital.  Mock and destroy that function and you've done the same to a functioning economy.

As Charles Mackay warned in Extraordinary Popular Delusions and the Madness of Crowds (1841): 

Money, again, has often been a cause of the delusion of the multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper.

~ Kevin Duffy, Facebook post, January 29, 2021

Andrew Ross Sorkin on GameStop madness

What I'm concerned about is this is a pump-and-dump scheme that effecitly is being cloaked as Mother Theresa has arrived on the scene. I think there are real underlying issues with the system that need to be resolved. I do not want to protect the system. I love watching the little guy beat the big guy as much as anybody, but what I wonder is whether these folks who are "sticking it to the man" are sticking it to themselves in truth because... the fundamentals are so far out of whack, a lot of people are going to lose a lot of money who can't afford to lose the money.

~ Andrew Ross Sorkin, interview with Stephanie Ruhle, MSNBC, January 28, 2021