He has seen this movie before.
Holmes, president of the issue management firm Cavalry, is best known as the former chief of staff to former Senate Majority Leader Mitch McConnell, R-Ky. Holmes has spent his career among the Republican establishment, which has spent the past five years getting steamrolled by the populist force of Trumpism – a grassroots movement that stormed the ramparts of the GOP, ousted the establishment and remade the party in its image.
Almost no one in the party saw it coming. When it did, few of the establishment players understood just how vast the force was that suddenly lined up against them.
On Wednesday morning, as GameStop shares continued to surge, Holmes took to Twitter and typed out a simple message: "Wall Street, welcome to our world."
I called him to ask what he meant by that. "This is an event," he explained. "This is a social and economic moment in our society. There are a few times when you can definitely point to a moment and say society has changed, and this is one of them."
There are scores of similarities between former President Donald Trump's "Make America Great Again" movement and the GameStop surge. There is a sense of fighting back against disrespect of the elites, belief that systemic rules have been written to benefit insiders at the expense of regular people, and new internet technologies that widely distribute power that was once held exclusively by a small group.
There's a healthy dose of skepticism of the media, and a belief in fake news. And both movements are inspired by viral memes – funny, angry and engaging images depicting the movement as engaged in a heroic struggle.
Before the bell Thursday, GameStop shares briefly eclipsed a previously unthinkable $500, more than the share prices of Apple, Goldman Sachs and General Motors. After trading opened, the stock jumped more than 6% to about $370 a share. GameStop shares were worth about $40 a week ago.
But the most important similarity is the bravado of the members of the movement. On a Reddit forum Wednesday, users cheered each other on, urging "Hold the line, boys!" and "buy and hold!"
One user, named "ishabwa," wrote "THE OLD GUARD IS HORRIFIED. BACKS AGAINST THE WALL. PAINTED INTO A CORNER. ITS ALL BECAUSE OF YOU." Another described this moment as the GameStop "revolution" and wrote: "This is our chance to stick it to those who never took us seriously. Either we forge economic history or loose it all, I'm willing to take this risk."
Scouring those same Reddit message boards, entrepreneur William LeGate felt like he had seen this happen before, too.
But he uses a different touchstone: Occupy Wall Street, the left-leaning anti-establishment movement that blossomed in the wake of the 2008 financial crisis.
"This is Occupy Wall Street Part 2, but this time it is on their turf, and there are real financial consequences," he said. LeGate, who received a $100,000 Thiel fellowship to drop out of college and start a company when he was 18 years old in 2013, has been watching the WallStreetBets Reddit discussion for several years.
He said he is seeing increasing frustration and anger, which is exploding in the Covid pandemic era – and it is bringing together the traditional political left and right.
"People were willing to take a risk on Trump and now they're willing to take a risk in the markets," he said. "A lot of people just want to see the world burn right now, and they're enjoying watching it happen."
He said he's already seeing people on the WallStreetBets Reddit page looking for new targets – and there are two themes. First, they're looking for highly shorted stocks where big hedge funds might have a lot of leverage. And second, they're looking for nostalgia plays – to bring back the companies from their youth. That's why Nokia, Blackberry and Blockbuster are all getting attention.
Wall Street investors are going to have to factor in a new set of risks. "The risk assessment that they're going to have to make is this: is this a meme-able stock that a bunch of kids on Reddit could hit and blow up the price?" LeGate said.
But what explains that nostalgic impulse in the midst of a revolution? It is the same emotion that animated the MAGA movement – which, after all, stood for make America great, again. It is a desire to return to an earlier time that the members of the movement remember as better than today.
"There's a feeling I sense across society that people want to go back to a simpler time," LeGate said. "No one likes Covid. People don't feel the economy is fair. Everything looks better in hindsight."
And he argues that efforts to regulate trading will feel to Reddit traders more like suppression, and could fuel more anger.
"If someone on Main Street loses half their portfolio in a day, nothing's going to happen. But if a hedge fund does, they literally stop the trading," he said. "I myself question whether this is really about protecting the individual investor or protecting the hedge fund."
Holmes believes the key to understanding the power of this new movement is the gamification of investing melded with an anti-elite fervor. Sticking it to hedge funds and potentially making a lot of money is, simply, fun. And if you believe its also the right thing to do, and thrive on the engagement of a community of like-minded traders, so much the better.
"When things really get going is when the fun meets the purpose," Holmes said. "This is the perfect storm of those two."
His warning to Wall Street is: understand this. Be willing to scrutinize yourself. This not going away, and it is probably bigger than you think.
"People need to take the time to understand the social dynamics of this. What are the problems that have created this class of retail investor who seek to completely destroy your industry, and how do you remedy that?" Holmes said.
Holmes said he has spent the past decade watching American politics turned inside out. An earlier generation of politicians spent their time raising money at country club ballrooms from hundreds of donors writing $500 or $1,000 checks.
But now they spend their time on the internet raising money from millions of donors making $5 and $20 contributions. In politics, the retail money turned out to be bigger – much bigger -- than the institutional money. And that's driven massive political spending inflation: the big Senate campaigns that once cost $15 million now cost $100 million.
"The pool is unlimited," Holmes said. "And that's the problem. The volume of potential participants is a hell of a lot bigger than people think it is, and it is certainly a lot bigger than the number of people who participated in this."
Other establishment Republican veterans agree.
"Don't underestimate the very real anger and sense of grievance – and the very justified sense of grievance – among the American people," said Michael Steel, a partner at Hamilton Place Strategies who was a senior advisor to the Jeb Bush presidential campaign in 2016. Understanding that, he said, can help investors understand who the next targets of Reddit rage might be, and how extensive the new movement is.
Kevin Madden, a former advisor to Mitt Romney, said, "anger can oftentimes be a more potent force than ideas. Those who felt they belonged to a political party of ideas found that grassroots anger, which can be very intoxicating, took over the political marketplace. It can also take over a financial marketplace."
Madden recalled the way populism overtook the Republican presidential primary in 2016.
"One of the mistakes an establishment can make at the beginning is thinking this is someone else's fight. Marco Rubio says this is a Jeb Bush problem, and Jeb Bush says this is a Rick Perry problem," he said. "They all believed this was someone else's fight, and they all paid a huge price. That force redefined the party in its image for potentially the next decade."
Together these Republican strategists see Melvin Capital's decision to close out its GameStop position and take an enormous loss this week as something akin to the victory of populist Republicans in driving the establishment Republican House leader Eric Cantor from office in Virginia in 2014. It was an early demonstration of power. And it was a precursor to the much more dramatic events to come in 2016 and in 2021.
LeGate, the WallStreetBets watcher, agrees.
"It's a really powerful message," he said. "I think this is the first wave of what's going to happen."
But LeGate said he didn't buy any GameStop stock himself, for fear of an SEC investigation into his viral tweets about the movement.
Instead, he said, he is 100% invested in cryptocurrencies.