Is the $GME over or is this a billion dollar shift in power?
Time for a thread 👇👇👇
1/ RETAIL RENAISSANCE
“Prior to 2020, retail activity stayed flat for 20 yrs. Now households, active/passive mutual funds & ETFs represent 63% of the market ($36 Trillion). Hedge Funds own 3% of the $57T US equity market - so "Retail" is 12x more important than hedge funds.”
2/ RETAIL RENAISSANCE
There’s a new important investor at the table and Wall Street will have to adjust.
*Now 8.4MM followers under management 👀
3/ RETAIL RENAISSANCE
Let’s dive into ‘The Rise of the Retail Investor’ in <2 mins:
- DEFINING MOMENT
- COMMUNITIES
- PLATFORMS
- LEADERS
4/ DEFINING MOMENT 👉 Crowd-Sourced Squeeze
This story is easily told through:
- A Dog
- Two Wolves
- Pack of Lions
5/ DEFINING MOMENT
Dog: Video $GME retailer with an underwhelming track record.
Two Wolves: Hedge fund Melvin Capital & short-seller Citron Research. Believed $GME “brick & mortar” stores were a liability in an increasingly digital world & they could profit by SHORTING
6/ DEFINING MOMENT
Pack of Lions: +8 Million retail investors on Reddit group r/Wallstreetbets. Plus influencers like @elonmusk , @chamath, @tyler and even politicians like @AOC — who ‘piled-on’ the trade and/or Tweeted about it.
7/ DEFINING MOMENT
In nutshell this is what happened
8/ DEFINING MOMENT
“All the math you need in the stock market you get in the fourth grade.” — Peter Lynch
$GME had a HUGE short interest of 140%. Retail investors saw this and believed they could make a profit by taking the other side of the bet.
9/ DEFINING MOMENT
Further encouraged by activist investor Ryan Cohen buying +$76MM of stock looking to turn the company around like he did with Chewy.com sold to PetSmart for $3.5B.
10/ DEFINING MOMENT
Retail started buying stock & tons of “out-of-the-money” call options, driving the stock price way up!
They also ordered dozens of pizzas to some of the short sellers’ homes, LMFAO!
11/ DEFINING MOMENT
Next, a Black Swan event happened, not accounted in anyone’s ‘risk models.’
TWO simultaneous SQUEEZES:
1) Short Squeeze: related to offside short positions 2) Gamma Squeeze: related to offside option positions
12/ DEFINING MOMENT
Without going into CFA mode, trust me this led to a perfect parabolic ‘buying storm’ sending the stock from $40 to +$480 last week. Closing at $325 on Friday.
Now, back down below $100
13/ DEFINING MOMENT
Next:
- Hedge Fund Gets $2.7B Bailout
- Reddit Group Gets Mysteriously Taking Offline (now back online)
- Trading on $GME & other stocks & options halted (for retail only)
- Hedge Funds Announce Covering Their Shorts
- Robinhood Raises Billions & Gets Sued By Its Own Customer, delays IPO
And this... 🙄
15/ DEFINING MOMENT
“It was a smart trade. Retail saw it and Wall Street missed it.” @chamath
The reason “retail saw it” is because they are incredibly powerful in numbers, tools & community. They are now armed with much of the same information as professional investors.
16/ COMMUNITIES
“Hedge fund ‘Idea Dinner’ with +8 million guests”
For decades, Wall Street has been hosting fancy ‘ideas dinners’ behind closed doors where they discuss investment strategies.
Retail investors created their own version: Reddit, Discord, Twitter & TikTok
17/ COMMUNITIES
It would be easy to dismiss them as unsophisticated.
But it’s simply NOT true.
For example, one of the influencers from r/WallStreeBets “DeepF—ingValue” has CFA and was a financial advisor.
18/ COMMUNITIES
My fund manager friends tell me their firms ‘scrape the group for trading ideas.’
I have also personally seen investment banks email research from WallStreetBets Reddit group to get their own institutional clients to trade the ideas.
19/ COMMUNITIES
Also, I am seeing lots of finance groups proliferating on the wildly NEW popular audio-only app @joinClubhouse.
Launched during the pandemic, it now boast +2MM users and a $1B valuation.
20/ PLATFORMS
'Do-It-Yourself' (DIY) investor is on the rise.
Retail, high networth, corporate executives, small business owners and even ex-Wall Street bankers have billions in DIY accounts.
21 / PLATFORMS
"Robinhood and the other zero commission brokers that everyone used didn't have enough capital to fund the fight" @mcuban
Some have capital and some have confetti.
Now, we need trading platforms that have both ; )
22/ LEADERS
There are BIG influencers who move markets with Tweets:
Also, there are thousands if not MILLIONS of small micro influencers with engaged communities like Sara Well, a nurse by day who talks stocks by night in her discord group with dozens of investors.
24/LEADERS
BUT the community FAVOURITES are the “MEME-AS-A-SERVICE” army: