Let’s start with GameStop ($GME) shall we? What we are witnessing here has never been seen at this scale before and it should scare the shit out of the legacy equity markets and provide the rest of us with an infinite supply of popcorn.
It has become fairly apparent that GME stock prices have jumped from around $30 per share to around $310 per share in a few days. Why? Because Reddit is pissed, that’s why!
It seems that Melvin Capital had a lot (and I mean a LOT) of short positions on GME and the guys over at r/WallStreetBets decided to torpedo the company. Makes sense as their boat had so much ballast on one side that it was listing and easy prey for the 2.9 million ‘degenerates’ (their word not mine) who make up the subreddit. When the weapon’s safeties were released and the warhead made contact Melvin Capital required $2.75 billion in cash (yes, with a ‘B’) to remain afloat. This cash infusion was provided by hedge fund companies Citadel and Point72. Melvin got lunched.
As near as I can tell the subreddit got wind of the gigantic short positions and decided they were rather tired of this type of Wall Street chicanery and purposefully “sent a message” in the form of a tactical nuclear launch demonstrating the power of a real-time, singular communications channel and the organization of millions of human minds and their bank accounts, trading accounts and social media accounts. This is a message against the pervasive and ongoing ‘noise’ Wall Street traders and the like inject into market pricing making it impossible to know what a stock is actually worth which is no different than what the Fed and other Central Banks have been facilitating for decades: Price Occlusion.
And now it seems that it’s $AMC’s turn for a rocket ride. Why? Because traders have massive short positions on this company as well. Why? Because COVID-19 shutdowns are destroying everything it touches, especially if it has anything to do with going out and a theater needs to make money selling physical tickets to real people and that hasn’t been happening since March. Hence ya short that sucker and make billions on the woe and suffering right? WRONG, at least that’s what WallStreetBets is saying.
Along these lines I wonder what the short positions on Darden Restaurants ($DRI) might be considering they own Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, Seasons 52, Eddie V’s and Yard House brands totaling north of $8 billion in sales and that was in 2013.
It would appear that BlackBerry ($BB) and Express Inc. ($EXPR) have short positions out on them as well and both companies are up 16% and 214% respectively. Caitlin Long suggests that some of these shorts display the fact that entities are holding more paper than actual, provable stock in at least the GME case.
I can’t see this as anything other than a savage, coordinated attack on those who thought they could make out like bandits doing what they always do: short the living shit out of the dying but this time the tables are turned. This will not stop and I do not think the contagion will remain in the asset class of equities. Time will tell what happens after this but some speculate this could be a reason governments try and shut down social media, a highly dubious proposition at best.
The implications are myriad: If you are looking to put money somewhere any stock that has a large short against it (even though the company should be dead already) is becoming a scary proposition. Going long? on what?, with what money? Commercial real estate? Bloodbath. Other legacy financial instruments? With WallStreetBets out there? Just wait until they find a game-able feature that could only be exploited by 3 million people working together in a collective fashion. Shitcoins? REKTage awaits. Only Bitcoin makes any sense at this point so if you ain’t Daily Cost Averaging in you might want to start throwing $10, $20, $50 a week at it. You certainly don’t need the money to buy popcorn. We got that in spades.