Wall Street's populist revolt
By Mike Allen
A popular rebellion, organized by the powerless against the powerful. It may sputter in politics, but it certainly seems to be working on Wall Street:
The market value of gaming retailer GameStop closed at more than $10 billion yesterday, on record volume of more than $26 billion, Felix Salmon and Courtenay Brown write.📈 "GameStop" was searched more on Google in the U.S. yesterday than "Biden" or "Tesla."
The winners: A ragtag group of traders from Reddit and TikTok, led by a man calling himself "Roaring Kitty."
The losers: Hedge-fund short-sellers who are learning — the hard way — the John Maynard Keynes maxim that the market "can remain irrational longer than you can remain solvent."
How it works: Thanks to Robinhood and other stock-trading apps, trading options in GameStop (or BlackBerry, Bed Bath & Beyond or any other smallish company Wall Street traders have bet against) is easy, fun, and carries a commission of exactly $0.
Giant hedge funds like Melvin Capital now find themselves at the mercy of thousands of small investors using the internet to coordinate buying attacks.
The bottom line: Short-selling — betting that a company's stock will fall — is a crucial element of efficient markets. But, thanks to Reddit, it's also never been more dangerous.
Wall Street veterans say the newbies' lack of experience and diversification mean they’ll eventually get crushed by their trades.So far, however, the small guys are laughing all the way to the bank.
The market value of gaming retailer GameStop closed at more than $10 billion yesterday, on record volume of more than $26 billion, Felix Salmon and Courtenay Brown write.📈 "GameStop" was searched more on Google in the U.S. yesterday than "Biden" or "Tesla."
The winners: A ragtag group of traders from Reddit and TikTok, led by a man calling himself "Roaring Kitty."
The losers: Hedge-fund short-sellers who are learning — the hard way — the John Maynard Keynes maxim that the market "can remain irrational longer than you can remain solvent."
How it works: Thanks to Robinhood and other stock-trading apps, trading options in GameStop (or BlackBerry, Bed Bath & Beyond or any other smallish company Wall Street traders have bet against) is easy, fun, and carries a commission of exactly $0.
Giant hedge funds like Melvin Capital now find themselves at the mercy of thousands of small investors using the internet to coordinate buying attacks.
The bottom line: Short-selling — betting that a company's stock will fall — is a crucial element of efficient markets. But, thanks to Reddit, it's also never been more dangerous.
Wall Street veterans say the newbies' lack of experience and diversification mean they’ll eventually get crushed by their trades.So far, however, the small guys are laughing all the way to the bank.
From Axios
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