Wall Street Bets

What we have seen this week is a prime example of what this site was founded on. A reddit sub-thread, r/WallStreetBets successfully bet that 138% short interest in GameStop (GME) would be sustainable if they all piled in. The turmoil that followed included a hedge fund getting bailed out by their superiors, retail trading platforms banned opening trades of the stock, and we saw bi-partisan outrage at the double-standard being applied to Main Street.

The hypocrisy is deafening. Wall Street has been front-running retail since the Dutch put up those palisades. Specifically with the trading app Robinhood, which closed trading allegedly because they were running out of money to temporarily hold the GME stocks to fulfill all the contracts that were in the money, the irony of Robinhood vs. the Rich/Wall St vs. Main, is that Robinhood makes its money from selling the information of all the trades the users make. Hedge funds, like the ones shorting GME 138% over float, buy that information to gain an edge over the little guy. This week we saw the little guy hold one over them for once.

What have we learn from this? We learned the big guys play by different rules. We learned that the little guy in large numbers is more powerful. We learned that shorting more stock than is out there is probably a bad idea (though I thought we learned naked short selling was bad in 2008?). What I hope this doesn’t bring is more regulation. More regulation will signal to Main St that they play by different rules and to not ever question that. Sound parallel to anything else that’s happened in the last 12 months?