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StockBeat: GameStop Frenzy and the Great Stonks Revolt of 2021

Published 01/28/2021, 06:02 AM
Updated 01/28/2021, 06:07 AM
© Reuters

© Reuters

By Geoffrey Smith 

Investing.com -- This is a historic moment in stock markets. As such, historians will recognize what is happening right now better than those trained in the math-based disciplines that are more normally required for success in financial markets.

They will not be enjoying it much.

The victories chalked up by exuberant retail traders against short-selling hedge funds are recognizable from any number of revolts and revolutions through the ages. All of them have their signature moment when the downtrodden and disadvantaged suddenly become aware of the power they have when they come together and organize.   

This week's winners in GameStop (NYSE:GME), AMC Entertainment (NYSE:AMC) were also seen storming the Bastille in 1789, dumping tea in Boston harbor in 1773 and chasing European monarchs from their palaces in 1848. 

This is a social and a cultural moment as much as a financial one. Take this example, one of countless such, from the Twitter account WallStreetBets Intern: “A reminder to everyone holding. #WSB $GME $AMC $BB Not a single Wall Street executive got punished for the 2008 financial crash. F*** em.”

Or this one from another Twitter account with the handle AOC’s Stonk Daddy (the revolt is nothing if not bipartisan):

“I’ve never seen a better opportunity to f*** over the people I hate so passionately Every protest, every direct action I’ve been to. Pales in comparison.”

It’s very obviously a desire for revenge above all else. Grievances can be specific, such as those from those who have been on the wrong end of sharp practises from short-sellers, high-frequency traders, or just Main Street brokerages. Or they can be general, directed against the Wall Street establishment (which, unsurprisingly, includes a Securities and Exchanges Commission that is only just waking up to the mob outside its doors).

“EAT. THE. RICH.” “F*** the Suits” and so on, and so on. This is a moment fueled by anger.

We know from history what happens next. More often than not, the mob, intoxicated by its own success, goes on to commit excesses that stiffen the resolve of its opponents, who are almost always better resourced and - when the chips are down - just as desperate.  The ruling caste regains its nerve, the solidarity of the rebels cracks under pressure, and the status quo is restored by a vicious repression. The narrative is the same from antiquity (the Jewish Revolt of 70 AD) through the middle ages (Paris 1358, London 1389) through the age of Empire (Scotland 1746, the Volga in 1775, Prussia 1849, India 1857) and to the modern day. The list is literally endless.  

Even the more successful uprisings generally turn sour as the victors turn against each other. The unity of the mob - the source of its strength - is strictly time-limited. Any answer to the question “when do I sell GME/AMC/BB?” will produce losers, who will turn their rage away from the establishment to the sell-outs and turncoats. 

None of this is to denigrate the origins and the realities behind the grievances driving this moment. It is not our job to gloss over the inequalities created by the last boom and bust cycle, or the injustice implicit in today’s market structure. It is just to say that moments like this generally end with heads on pikestaffs, or bodies strapped to cannon muzzles. Make sure that yours isn’t one of them.

Latest comments

Levi & Korsinsky, LLP, National Class Action Law Firm, Announces Class Action Investigation Against Robinhood and other Brokers on Behalf of Investors of KOSS, EXPR, NAKD, and other stocks Who Were Prevented from Trading.
Robinhood founders must go to the prison!
why? because you bought a 100x stock die to a dork on reddit and fomo?
due
Haha who was right
will close in the red today
You can struggle with GME or go to SENS before is too late
U can’t buy AMC, GAME STOP OR NOKIA any more. Robinhood blocked the accesc. You can’t buy but you can sell. Thats a fix!!! Hooooooold
You can buy on Tradstation and TD Ameritrade
If the institutions are covering their short when they pull the trigger to get out, everything is going to drop so fast the retail trader will be looking on and adding more to their losses, classic bubble hyped up for no reason,...let's see in 3 months
speculators have to swalow their lose and move. Thr Stock Market becamenjust another game field where math, valuations and statistics don't count anymore.
I hope this is the beginning of the end of shorting, when a "professional" company like Melvin Capital is being exposed as a house of cards!
Sounds like a classic trap to me, who do think they are kidding when the institutions decide to pull the rug let's see where the retail trader is then
Gamestop AMC Dogecoin to the moon! Fk Wall Street!
AMC ALL THE WAY
when it's gonna end?
Soon
I feel sorry for all the naive kids sucked into this; hope they don't lose too much while learning their lesson!
not to worry about them. They are mostly trust fund kids.
i think corporate america planning to succk all the kids' fresh money in eventually...
its like watching 9 people play poker and the casino rate aka RACK is slowing reducing all the pots. ...  i like the story, but it wont end well for the small time traders.. I JUST WONDER who are the big billionaires doing this.. there HAS TO BE bigboys doing this!! retail traders GME lovers would not jump to amc and others.. something bigger is happening . MAYBE ITS A BAIT the invisable hand it doing on purpose to ******out the wealth
The lesson in all of this...never, ever, ever even think of shorting a stock!
No.  Lesson is - never, ever, ever even think of shorting more than 10-15% of a stock.
Never use leverage
A stock certificate framed dated and notarized will be worth more on eBay than the actual stock in a few months. An I was there momento . Buy and hold forever.
Soros broke the bank of England decades ago....
Good article. Honest and historically accurate. Exactly what whill happen between today and monday
should I sell GameStop cfd ?
I backed away when I learned the main cause of this was to raise money for Q and other groups .
where in the world did you hear that? I've been invested in this for a couple of weeks now and it has always been about short interest in GME being well over 100%, paired with recent bullish news regarding Ryan Cohen from Chewy and rumored changes he will bring to the business, such as a pivot to PC gaming. This has never been about raising money for any group, except the retail investors who are tired of short sellers ruining businesses with impunity to make a quick buck.
its unfortunate because I was all in on it. but apparently certain group(s) are still upset about election and need funds.
I love how people can just spread propaganda or read something and believe it. Go in the forums themselves. No one has a secret agenda. People who lost jobs, homes, had to change school and lose their friends are the ones doing it. Do your research more in my opinion.
Good lord, look up the Porsche short squeeze.  This happens with some regularity.  I thought this was a financial site.  You should know about these things.  This isn't revolutionary.  Sheesh.  And, fyi, another site is reporting that the short interest on GME is still well over 100%.  That's why this can keep going.   And, as long as it's orderly, the government should not be involved.  Hedge Fund investors are "sophisticated" and sign documents claiming to be so.  They know the risks going in.  Let the players play. One last thing, for all those who say this is "coordinated".  This looks no more coordinated than any of the hedge-fund "pitch dinners".  Ironically, something similar has been reported to be the catalyst here.    It's a bunch of traders squeezing a bad short, nothing more, happens all the time.  Go get some if you've got the wherewithal.  Otherwise enjoy the show, it's gonna be lit.
This comment should be. mandatory reading before access to any articles related to these "shortseller" whining's reads can begin.
I think the whole point of this article is that this thing isn't coordinated, and this is the reason all movements like this fall apart in the end...
Is USD or Yen?
Good lord, look up the Porsche short squeeze.  This happens with some regularity.  I thought this was a financial site.  You should know about these things.   And, fyi, another site is reporting that the short interest on GME is still well over 100%.  That's why this can keep going.   And, as long as it's orderly, the government should not be involved.  Hedge Fund investors are "sophisticated" and sign documents claiming to be so.  They know the risks going in.
Yes, short-squeezes happen all the time, yes the shorts on certain stocks are paying for their own greed. I'm not here to defend them. But I wouldn't push the Porsche/VW analogy too far. That was the result of one strategic buyer with a clearly defined long-term goal. The Redditors are a very different crowd, with wildly differing levels of financial education and disparate motivations, as can be seen from their posts. They're also going pursuing their goals in a very different way. as can also be seen. Also - please note that Wendelin Wiedekind, the man behind the VW short squeeze, was still facing criminal charges 9 years later.
read that bull they know nothing of the French Revolution.
« the status quo is restored by a vicious repression » like 1776 in the US, 1789 in France or 1917 in Russia?
stonks gonna get bonked. big time. lets see what the little darlings do when it go BOOM!
The latter two instances didn't end well for most of the people directly involved...Danton & Robespierre both guillotined, most of the old Bolsheviks shot by Stalin. I do think this movement will fall apart when people start taking profits. But I'll grant you that the revolt of slave owners and tax dodgers in 1776 succeeded! (Dons tin hat, hides under table.)The Swiss and Dutch managed to eject the Austrians and Spanish too, but they are the exceptions that prove the rule.
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