Read this in the little voice in your head, and tell me it doesn’t sound familiar: Is this for real? It’s got to run out of steam. It can’t just keep going like this. How is this even happening?
What comes to mind? Maybe a recent event in politics, or perhaps a particular politician. A conspiracy theory that was treated as a punchline, then a nuisance, then a crisis. Maybe it’s something sillier — a whole new digital currency named after a meme. Perhaps then the voice in your head really wants to say: Why not? Let’s see where this goes.
You may have guessed that, right now, we’re talking about stocks.
Individual investors, many of them moved by calls to action on Reddit and other social platforms, have spent recent weeks aggressively buying up stock in GameStop, the struggling video game retailer, driving the price to extraordinary highs. On Jan. 28, 2020, it was treading at under $4; this year, on the same date, that number briefly exceeded $480. Thousands of traders, amateurish and sophisticated alike, made money, fast. Hedge funds that had bet against GameStop lost billions.
Discussion and planning around GameStop investment unfolded most visibly on a subreddit called WallStreetBets, where traders share tips, “due diligence,” investment theories and memes. It had grown substantially in size over the past year, especially as some of its users’ enthusiastic bets on Tesla paid off. (Its membership more than doubled in size this week, to over 6 million subscribers.) Members have spent recent days encouraging each other to hold on to GameStop — or buy more — through enormous swings in price.
As a financial and cultural event, this all seems genuinely novel, with no single precedent able to hold much explanatory power. There is plenty of fun, consonant trivia about internet stock trading bulletin boards and chat rooms, as well as from the retail trading boom of the 1990s. There could be lessons in the story of 19th-century bucket shops, which allowed regular people to gamble on, but not in, the market, before rolling out to dinner in horse-drawn buggies.
If you absorbed the rise of cryptocurrencies, this all may feel a bit less foreign. Likewise if you’ve kept up with the (market) story of Tesla, whose founder, Elon Musk, who has gone to war with short sellers, got in on the GameStop action this week. The precedent offered most enthusiastically by WallStreetBets is the one provided by finance itself: Professionals have been manipulating markets for years. Now it’s our turn. This doubles as a challenge to the finance world: Tell us how this is different.
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