Who actual won?
So, as we look at the market today, we see what had to be expected, another big selloff in Gamestop(GME) shares. Apparently, the jig is up and people are looking for an out. My question is: Who actually is buying this stock at 95 dollars a share? Is it the Reddit Mob that thinks there might be some sort of second wave, like Covid, or is it day traders playing around with the stock and trying to make a couple of bucks? Probably a little, or a lot of both. Time to pick up your ball and go on to the next thing I say.
The reality is that Gamestop is not and never was worth what the pricing said. The story never changed and their business model still needs a lot of work so at the end of the day, or week, or month, Gamestop will return to trading at whatever the company is actually worth and there will be stories to tell our grandkids or at least, our drinking buddies.
There has been talk that there will be changes, big and small, and it really is about time. This fiasco was decades in the making and it sucks that there are funds suffering billion dollar losses, but they knew the risks, they created the exotic hedging strategies that failed and they will go back, lick their wounds and live to short another day.
The other side of those trades may not have realized the risks they were taking and I am sure that there are plenty of retail investors who got burned. These investors will be the biggest voices for reform in the markets but the reality is that their stupidity should not be rewarded with some comprehensive overhaul of financial markets. Plus, there is that possibility of firms making them whole for some of their trades. I don’t think that will happen but I am sure there will be some substantial fines and maybe some sort of restitution to these retail neophytes. I hope not.
If you have chosen to open a trading account and you decide to fund it with your Bar Mitzvah money, you should be wholly responsible for the actions you take with that money. Your ignorance or inexperience is not an excuse. Why write an options strategy when you have no clue what that even means? I obviously have little tolerance for people blaming others when they are the ones responsible for the decisions they make. Fortunately, if you follow these things on Twitter and other social media, the losers are an exception to the rule and everyone made money. Yeah, OK.
There is a positive to all of this and I think it’s more about this being a learning experience. The Hedge Fund guys don’t need a lesson, they learned early on the risks, but the retail Millennial that thinks riches await when you become part of a mob, may have learned that understanding the risks and the rewards from investing is more important than following someone else lead.