I do not pretend to understand the ins and outs of Robinhood.com and how online investor-activists worked this scheme to damage the “internal cartel of elites,” that is Wall Street short-selling. But it is incredible to “watch these people lose their minds,” Krystal Ball observes, at this rare, “actual transfer of wealth from Wall Street to Main Street.” Saagar Enjeti is enjoying Wall Street’s pain.
If QAnon is a “game that plays people,” a group of small investors on Reddit’s r/wallstreetbets forum decided to “play” Wall Street gamblers and take them for, if not all, much of what they are worth:
Short sellers have been called a lot of things. Bloodsuckers. Parasites. Other words not fit to print. Now in the vortex engulfing GameStop Corp., they have a new name: the establishment.
It’s a role cast for them with relish by their chat-room usurpers, the tens of thousands of average Joe day-traders whose fervor for a left-for-dead retailer has become a self-fulfilling prophecy in its 245% rally this year. GameStop has become a money geyser for the options-obsessed crowd that gathers in Reddit’s WallStreetBets forum. For those wagering on a decline, it’s been a catastrophe.
By small online traders agreeing to snap up fading GameStop shares to screw over Wall Street, they’ve driven the price so high that hedge funds that bet on it losing value are themselves losing billions. The small fry both made money and screwed the big kids doing it.
For once, Main Street is beating Wall Street.
In a matter of weeks, two hedge-fund legends — Steve Cohen and Dan Sundheim — have suffered bruising losses as amateur traders banded together to take on some of the world’s most sophisticated investors. In Cohen’s case, he and Ken Griffin ended up rushing to the aid of a third, Gabe Plotkin, whose firm was getting beaten down.
Driven by the frenzied trading in GameStop Corp. and other stocks that hedge funds have bet against, the losses suffered over the past few days would rank among the worst in some of these money managers’ storied careers. Cohen’s Point72 Asset Management has declined 10% to 15% so far this month, while Sundheim’s D1 Capital Partners, one of last year’s top-performing funds, is down about 20%. Melvin Capital, Plotkin’s firm, had lost 30% through Friday.
Now that regular people are making money betting against them, entitled free-traders are being hurt. Wall Street billionaires are screaming for regulation.
“Most are playing with little skin in the game, making a political statement with money they can afford to lose,” Hullabaloo alum David Atkins observes of wallstreetbets investors. Billionaire stock gamblers’ comeuppance is overdue.
For those who really want to understand how this all works, Aaron D. has a long explanatory thread. For those who would rather enjoy the follies, actress Avalon Penrose offers a less-technical analysis.