Today's bonus edition of the newsletter--demanded by the insane trading in GameStop and other stocks this week--is authored by our fabulously talented young producer on "Power Lunch" and "The Exchange," Gino Siniscalchi.
Occupy Wall Street 2.0
Revolutions are usually marked by pamphlets, rallies, and propaganda ("Common Sense"--Thomas Paine's argument in favor of revolution back in 1776). The current one is being propelled by memes and social media, the modern-day pamphlet and soapbox.
What we are seeing in the market right now--redditors pumping AMC, GameStop, and the like--is a microcosm of a greater social revolution.
On the surface it is what it seems like--a market flash mob. A group of "memers" deciding to save the stocks they love: movies, video games, and more. They don't want to see the institutions they love die; they want to save them.
And now they have the tools to do so. A market that can't crash because it's being held up by trillions of dollars released from the federal government. A Federal Reserve putting a backstop on stocks, pumping in money to keep it going. All largely to the benefit of hedge funds and big investors--until now.
So what are these retail traders doing? Buying up shares of the companies. "Saving" them from bankruptcy. Giving them new life--despite what the fundamentals or technicals say. And, just as importantly, pressuring big-wig investors.
Some observers claim what they are doing is collusion, a coordinated effort to target heavily-shorted stocks. Others call it a casino mentality, with younger investors getting swept up into the moment and jumping into the trend, sharing videos of themselves buying stocks on TikTok. It's just a game; it doesn't hold the proper weight or seriousness. While it's great to see Gen Z investing, you have to wonder if this is hurting financial literacy rather than strengthening it.
Some of them will make obscene returns. Others will get hurt badly when this all comes crashing down. Keynes said it best: "The markets can remain irrational longer than you can remain solvent."
Still, you can't deny this is a major moment. Occupy Wall Street 2.0.
Only this movement doesn't need to physically march to Wall Street in order to protest. They can use social media, broker apps, and trading screens. It's a similar theme to what we are seeing across the country: racial justice movements, anti-establishment groups, supporters of decentralized cryptocurrencies--all a rejection of the established order. "All men are created equal"? Not when it seems like the politically powerful and wealthy elite insiders are the only ones with opportunity for upward mobility.
Mike Novogratz, now of Galaxy Digital, was saying much the same thing on Twitter: "This GME squeeze is deeper than a squeeze...It's a revolution" happening in parallel with the social unrest across the country, and symptomatic of "a growing inequality that is leaving our markets, our political system, and civil society more fragile than they have been in my lifetime."
The retail trading "mob," if you want to call it that, has figured out a way to take control of the market--an institution many suppose is run by the elites and no longer represents the average investor.
And they're finding allies in classic counter-establishment types like Elon Musk and Chamath Palihapitiya, who said yesterday on Halftime Report: "I think what this proves is this retail phenomenon is here to stay. There are 2.7 million people inside of [reddit forum] WallStreetBets. I think they are as important as any hedge fund or collection of hedge funds."
Whatever this group's motivation, be it political, revolutionary, monetary, or just meme-fueled anarchy--it's working.
They have the world's attention now.
What else will they do with it?
Thank you, Gino! -Kelly