‘’We take wall street from the corrupt! The rich! The oppressors of generations who have kept you down with myths of opportunity, and we give it back to you… the people. Wall street is yours. None shall interfere. Do as you please. Start by storming the stock market, and investing in the bankrupt! Step forward those who would HODL. For and army will be raised. The powerful will be ripped from their decadent nests and cast out into the real world that we know and endure. Courts will be convened. Spoils will be enjoyed. Money will be consumed. We the Redditors will survive, as we learned to serve true justice. This great initiative… it will endure. Gamestop will survive!”
I took the liberty of substituting some words from Bane’s charismatic speech given to the people of Gotham, so I can give it to the people of the free world.
Despite Bane being one of the bad guys, his message went through and influenced the action of many. The same way the inherent message of Reddit’s Wallstreetbets community moved hundreds of thousands of retail investors to buy shares from obsolete and nearly bankrupt companies.
Let’s use our brains a bit and try to speculate about the aftermath of such a historic move…
There are a lot of articles talking about who ultimately benefited from last week’s event; giving major credits to r/WallStreetBet’s retail investors, some lucky professional investors, and the companies they invested in (Gamestop, AMC, Nokia…). The losers? Some hedge funds and professional traders who find enriching to bet against companies (short-selling) — which can be perceived as an implicit way of promoting a company’s underperformance and failure — and some trading apps such as Robinhood who decided to play God by deciding who is allowed to play and who isn’t.
What happens next?
Winning and losing is time-dependent, in other words, the winners of today will be the losers of tomorrow. Indeed, short-sellers have lost a lot but it shouldn’t be difficult for them to go green again this week onwards by doing the very same thing they did that got them in the red; short sell shares from Gamestop and its counterpart’s inflated stock. This means hundreds of millions will be lost from last week’s winners.
Yet when an argument focuses on monetary gains and losses alone, superficial/short term conclusions arise. Instead what we want in this article is to think long-term which naturally leads us to regulations.
In regards to any system’s natural evolution, precedence is needed to either change the rules or set new rules. The r/wallStreetBets’ bullish investment initiative did just that, calling attention to business inequalities present within financial service corporations and the irregularities of some trading strategies ( Irregularities mentioned adequately by Elon Musk’s tweet a few days ago).
What happens next?
I believe Gamestop and companies within the same contextual qualifications will be the first ones amongst many this year to have their shares inflated by the masses — and for the first time in history — not for monetary purposes but to make a statement. All this suggests an uprising of the people against the financial institutions at a scale never seen before, since it is the trading fundamentals themselves who are targeted.
What will probably happen is additional restrictions and forevermore regulations, which once again will prove that the excess of anything will almost every time provoke a downside effect. Yet one needs to understand that the accumulation of regulations within a certain industry is but a natural reaction to negative and chaotic events. Financial Corporations need to understand that setting the example is their job, and behaving ethically is their responsibility. By not doing so, the action of some will force regulatory organizations to suffocate and cripple the newly formed fintech companies as well as the upcoming ones.
2020 showed us, Humans, that anything can happen at any time, and that what was once crazy is now normal. 2021 will be all but a continuation of last year’s ups and downs, with the stock market bound to be more volatile than ever before.
One piece of advice… Get your popcorn ready!