Reddit traders may not have been the only ones boosting GameStop

Reddit’s army of retail traders might not have been only force behind the unprecedented GameStop rally that turned Wall Street upside down, new data show.

GameStop was “notably absent” from the list of 10 stocks that retail investors bought the most in January despite the video-game retailer being at the forefront of a supposed market revolution, according to JP Morgan analysts.

“Although retail buying was portrayed as the main driver of the extreme price rally experienced by some stocks, the actual picture may be much more nuanced,” Peng Cheng, the megabank’s head of machine learning strategies, wrote in a research note this week.

In fact, data from Citadel Securities — which executes stock trades for the investment startup Robinhood — show that retail traders overall sold more shares of GameStop than they bought from Tuesday through Thursday of last week, CNBC reported.

That leaves open the possibility that institutional investors played a larger role in GameStop’s explosion than one might have guessed from reading the foul-mouthed posts on Reddit’s WallStreetBets forum.

For instance, the hedge fund Senvest Management made a nearly $700 million profit from the GameStop stake that it started accumulating in September and exited after Tesla CEO Elon Musk tweeted about the stock on Jan. 26, according to The Wall Street Journal...

[babble-on wrote:
I have been hearing this as well. The volumes that were being traded were not little retail accounts. There were momentum accounts, too, and while that’s not illegal per se, if they were also participating in the chatrooms on reddit, there could be criminal prosecutions.]

Figures. It was never credible to me that tiny retail accounts were trading tens of billions of dollars in a given stock per day. Sounded like institutions had found some overextended shorts and decided to force them out of their positions.

The funny thing about this whole game stop episode is that almost none of the reporters write about actually going onto reddit and reading what is going on.

It was very reminiscent of the day trading hot shops of the late 1990s during the dot com bubbles.

The language used is very similar top what snake oil salesmen used to use. If you’ve every seen that before you would recognize it. And now these kids (whether they are young or not, they act and sound like kids) are buying it hook line and sinker.

I could just imagine four or five of the ringleaders discussing this in the fall of 2019—looking at the numbers and suggesting the long play. And it worked out perfectly.

Its not a ponzi scheme per se. People DID make money. I doubled a very small investment in 24 hours. But it was nuts.

But Reddit never got behind the Silver thing. In fact, the WSB page was screaming NOT to buy silver. But...that is all you read for several days.

Of course others jumped in and out. Of course others climbed on the short/put train when the price went to $500. An idiot, without blinders on, could see thats where it was going.

And the shorts today are most likely NOT the shorts from before. Those guys doubled down as it went high and they made a fortune.

The losers here are the “kids” who think they are going to make a “statement” with their $400 investment into this mess.

The entire episode reveals a couple of thing that people are NOT talking about:

1. Smart money will always take money away from stupid people.

2. These days, there is so much capital around that companies like Robinhood—run my idiots—can raise billions to fleece the new investors.

3. No one ever goes broke underestimating a moron with a buck and what they are liable to do when a herd starts moving.

It is best to stand on the hill overlooking the pasture. Try to figure out why the herd is moving, and then be where they are going before they realize it.

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