A lot of things have happened over the past 2 weeks since our last update! Of course, the most notable one being the historical short squeeze on the Gamestop stock which has become a global phenomenon now.
I’m sure readers would have came across this, so we won’t be explaining how it came about.
However, the cause of the short squeeze and eventual explosion of the Gamestop share price is quite an interesting and rare event that is happening right now – it’s basically retail investors banding together against hedge funds in a power play.
Other highly shorted stocks such as AMC BB NOK are also heavily pumped by the “reddit armies” who rallied all millennials to push up the stocks.
For those who are buying the stocks, I believe that everyone is in it in hopes of making a quick buck before the music stops and the prices come crashing down. With the prevalence of social media and how fast information are being spread nowadays, I think everyone knows that this is a gamble and less of actual investing.
I think if you are in a privilege position to be able to gamble, you can take part in the ongoing rebellion against the institution funds, especially since there is report that the hedge fund with short interest in Gamestop is actually behind Robinhood.
And since the short squeeze started, yesterday Robinhood halted the trading of the shorted stocks before resuming it – showing that the system is rigged and biased towards those with financial capability.
Initially I thought that the Gamestop squeeze is almost done, but now I have a feeling that Robinhood’s decision to stop free market trading is further adding more fuel to the ongoing fire. If the Reddit mob stop now, it will further reinforce the fact that hedge funds or big institutions will always win – so I doubt that Reddit will let them get away with this.
For Mr Budget, although we say we are in a “stock diet” now, I cant help but put some money into the market to be part of the ongoing historical process. If you cant fight them, join them!
I’ve initiated a speculative investment into AMC instead of GME because it feels like GME’s upside is quite limited now. Internally, I have written off this investment as a 90% loss, so any returns will be treated as a Chinese new year angpao.
In fact, I have already excluded the investment into AMC from our net worth tracking sheet and any gain from it will be treated as a windfall haha. Actually shouldnt even be calling this an investment – more of a gamble or a support for the message to be sent to established institutions.
Selfishly, we hope the reddit mob / retail investors win because we can win some money too! And of course, if the retail investors win, there will be a transfer of wealth from the hedge funds to the retail investors.
With the victory, I think fund managers will really need to relook into their fund management along with their fee structures – because new age retail investors are the ones who will eventually be the potential customers of these funds. It never pays to go against the general public especially since there is a strong mob and “cancel” culture among new age retail investors.
Increasingly too, these hedge fund should spend more time engaging with millennial retail investors and help them understand their product offerings.
Similar to what ARK Invest has done, they invested heavily into social media engagement, actively promoting and explaining the research and investment thesis, and I’d think most of ARK’s fund inflow are coming from retail investors around the world.
Anyways those are just some quick thoughts on the ongoing issue, but long story short, being part of the short squeeze is a gamble, and if you are in, be prepared to write off the full investment and make no mistake – it will all come crashing down eventually.
Take Volkswagen for example, which is one of the most popular short squeeze in recent history:
In the meantime, before the crash come, LONG $AMC.