In the movie Wall Street, the difference between Gordon Gekko’s network of players following his trading (you know Blue Horseshoe loves……….) and the millions of retail investors following the Reddit group “r/wallstreetbets”, is not much.
While Gordon Gekko was a fictional character based on some real-life events, the market exploits of the famed Reddit group is not. While the illusion may have become reality, it is fraught with danger and that nail biting is just beginning folks. As the rest of the universe is impressed with the Reddit gang, the mainstream wall street players are most definitely not. They in turn have felt some real pain at the hands of the acting in concert Reddit gang. So much so that at one point people were pulling the emergency rip cord. (that’s French for calling your original hedge fund suitor and asking for more cash)
It is amazing that several million people can chat on an internet website anonymously and discuss the trading of a stock and how to stick it to wall street proper, all the while not disclosing who they really are, and no one is the wiser. (which begs the securities regulatory question, but we will get to that eventually….) This is nothing new of course as the anonymous internet chat sites have created havoc over the years and made people make decisions that were not based on any sense of reality, just on pure greed and delusion.
You see investing is one thing. Stock trading, well that is its own sport all together. While many may have shown the world that sometimes the tail can wag the dog, rest assured the wall street wizards will not make that mistake twice in a lifetime. Unfortunately, the retail investors who were pounding on their chests a day or so ago are about to get what is called in the street some, “religion”.
Today, the stock of the ages, Gamestop is down and will most likely continue to go down. Why? Well, you did not think it would continue to go up, did you? You remember the adage, what goes up must come down and let us face it, Gamestop’s fundamental business is flawed and sorry folks is kind of done. You do not need to buy a game from a store anymore when you can down it for the same or a lesser price. You know kind of like movie theaters and other parts of the economy that may never be the same as they were after this wonder pandemic has shown us that we do not really need to go a theater to see a first run movie. (as cool as it can be to see special effects and listen to sound in a place built for it) Fortunately this world wide debacle has shown us that the streaming delivery of a movie can be as economically lucrative oh and cost much less to distribute. (say goodbye to a studio or two while you are at it) Shhh. Do not tell the Reddit gang….
In the long run what did this teach us? Well not much really. It is actually the same thing, just different players. Instead of chop shop brokerages and the likes of Jordan Belfort we have an internet chat site that was born out of the merry band of thieves on the likes of Tradex and Investorhub. They all got together, colluded (not unlike wall street proper does mind you) and decided to take down the hedge funds that were short something that made fundamental sense to short. Sounds about right.
Why you may ask? Well that is the complicated part. There is no fundamental reason other than they wanted to show the likes of those well to do traders and hedge fund Gods that they can do it too. But you must understand. Getting one right is one thing but doing it day in and day out is another thing entirely. Which the wall street wizards have been doing for a long, long time. So, who do you think will win at the end of the day? Yeah, I would put it all on the wizards and twice on Tuesday.
Now do not say we did not warn you……but all of those who made money and are looking forward to buying the expensive wine when restaurants in New York open again should probably wait a little to order. Gamestop’s price is coming down and it will probably wind up below where it started. How do we know that? We do not. But we have been on both sides of this fight before so take it from us we know a little something about trading. Most importantly, trading that is not justified or makes little to no fundamental sense. Yeah, some of you will make money, no question about it. (especially the smart ones who bought at the original price and sold at $300.00 a share)
But what none of you are used to is market exuberance. When millions of retail traders are babbling on the internet about a company that fundamentally should be out of business soon, at a lofty valuation, you know the writing is on the wall. Make no mistake about it, cash is where you want to be. Because a reckoning is coming, and you do not want to be standing there without a chair to sit in when the music stops. And it will. Some time, coming to a chat site near you in stereo surround sound.
So, you heard it here first ladies and gentlemen. Gamestop will eventually be GameOVER. The market, well it is showing signs of getting tired and a correction is coming. How much, when? Well clairvoyance is not our thing. But we can read tea leaves like the rest of them.
Oh, and don’t worry your chat site fingers about the wizards and hedge fund Gods. They have billions of dollars to play with so they can turn their own music on or buy another chair…………………………..