Why GameStop went into crazy mode
Wall Street is upset because a bunch of regular people steamrolled the people who regularly steamroll regular people.
Right now, the media is reporting the NASDAQ CEO would like to have some sort of control to stop trading of certain stocks so that professionals can pause and adjust their books.
The media reports that professional investors are upset and concerned about what is happening with stocks like GameStop (GME) and AMC (AMC).
So why did GameStop rally? One word:
The subreddit /WallStreetBets contains a certain crowd of aspiring investors and traders. Now, I have zero hard data on this — but my guess is the demographic of the /WallStreetBets crowd is a combination of three generations: Gen X (the latter part of that generation), Millennials, and Generation Y.
The people of these generations either were heavily affected by the Great Recession. They either attempted to enter the workforce around the Great Recession and suffered, or they saw their parents suffer during the Great Recession.
People in those three generations have many things in common, but one of the biggest is this: gaming.
Reflect, if you will, on gaming and gamers' growth and change between 2007 and 2010. It is around this period when we saw more and more people entering into the gaming space. This is when we saw real personalities and professional streamers who make hundreds of thousands or millions from their followers. This is when we saw e-sports turn into a legitimate sport.
Gen X, Millennials, and Generation Y love to game. It is a joy — and it was an escape for many during a tough financial period for millions. And GameStop was a popular ‘hang out’ for gamers. Not a hang out in a past traditional sense, but a place to go and find like-minded people. And it was often the only place that a gamer could go and feel ‘comfortable’.
Fast forward to 2021, and you have three generations of people who do not trust traditional finance, but they do understand that they need to be more involved in their financial planning. These three generations don’t trust ‘Wall Street’ and its traditional leaders, but they do understand the value of the stock market and how it can create wealth and security. They want free markets, but they don’t (and rightly so) believe ‘Wall Street’ wants free markets.
And they have access to markets at a price point that previously only the elite of ‘Wall Street’ had access to. They have access to information and data that only professionals had access to 15–20 years ago.
Enter Citron Research.
When Citron’s main notified the world that he would post reasons why he is short on GameStop, that lit a fire under the collective butts of millions of Gen X, Millennial, and Gen Y traders/investors. Citron wasn’t shorting an oil company, and they weren’t shorting a bank, they weren’t shorting biotech — they were shorting a company that many have deep emotional attachments to.
And millions of them rallied to punch ‘Wall Street’ in the face. What happened to the professional short-sellers over the last few days is the digital equivalent of what the Jacobins did during the French Revolution.
And now ‘Wall Street’ is upset. They don’t like what has happened. ‘Wall Street’ pundits are complaining that the price of GameStop doesn’t make sense. It’s insane. It’s a bubble. Someone has to do something. It’s a scam.
Someone better tell them the same mantra they repeat to all retail traders/investors:
The market can remain irrational longer than you can remain solvent.
That applies to hedge funds, too.