For all of you who were looking forward to 2021 being better than 2020, January has been a rough start. From the new strain of the coronavirus, to the storming of the U.S. Capitol Building, to the financial industry’s push back market manipulation January came in as a lion and… well it definitely hasn’t went out like a lamb.
However, how great is it that we finally have something which both the right and the left can agree on? Think about it. When have Donald Trump, Ted Cruz, AOC, and Bernie Sanders all agreed on something? That’s as close to a modern day miracle as one could hope for!
Yet, from RobinHood to Wallstreetbets, to Citadel, and so many other players in this recent stock market drama, we have witnessed what appears to be market manipulation in real time. I don’t mean by those individual traders on Wallstreetbets. As I outlined in my last article, from everything I can tell, all of the information on Wallstreetbets is public information, there hasn’t been any inside trading on their side, and they are doing with thousands what hedge funds do with a couple hundred investors. More to the point, I am not sure how the clinger ons in the Reddit forum are any different than those who trade stocks based on what Kramer or Money Magazine say they should do.
But, this is all ancillary to the movement that we are witnessing. No, it’s not something totally new.
“History never repeats itself, but it does often rhyme.”
From Tulip Mania to the 49ers, humans have a knack for exciting themselves en masse. What is new, is the ability to coordinate large numbers of individuals towards a similar purpose. This capability will reshape trading strategies and through that the markets.
If I was a betting man…. or a hedge fund trader…. I’d put my money on the use of more dark pools for trading by professionals.
Unlike the advent of high frequency trading, which while increasing the volume of shares transacted doesn’t have an impact on the price per shares paid by investors, the ability of Reddit forum readers to move en masse when spotting opportunities has shown its impact on the stock market.
The mentality of these Wallstreetbets traders is also different than the normal every day investor who trades based on what Kramer or some financial magazine tells them to do. Their motto isn’t diversification.
It’s Leroy Jenkins!!!!
While not everybody on Wallstreetbets is risking their life savings, a lot are. The influence of “Gain Porn” is something that all of us are used to. Everytime you see some video of someone showing off their mansion or Ferraris to highlight their success you are seeing a form of “Gain Porn”. But, what you don’t often see is “Loss Porn”. Yet, on wallstreetbets, people proudly post both types of porn. However, even though you would think that ‘Loss Porn” would put off these Reddit traders, it doesn’t.
Because while in real life you feel the pain of loss more than the joy of gain, in the world of Reddit posts, people only live vicariously through the wins.
Only time will tell what’s in store for us. Hold on to your seats….. and your money, cause it wont be a smooth ride.
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