The dollar touched a five-week high before trimming gains and there was a discernible sense of angst in markets even as US equities clawed back losses. Long story short, investors and traders have been forced to ponder the prospect that triple-digit surges in what Bloomberg described as “fringe, oddball stocks,” may be proof that they do ring bells at the top after all.
Many of those stocks were crushed Thursday after a hodgepodge of platforms implemented trading restrictions prompting outrage, scrutiny from lawmakers, and legal action.
This week “should” have been dominated by earnings reports from the most important stocks on the planet, the Fed meeting, and GDP, but instead, the news cycle was hijacked by a Reddit message board and its users’ efforts to make mountains of molehills and ash heaps of short positions.
That forward operating base briefly went dark on Wednesday evening as members reportedly fretted over how to police content. Another board, “Wallstreetbetsnew,” garnered 350,000 members.
This is all kinds of silly (whether the participants realize it or not) and it won’t end well. Janet Yellen is watching as is the SEC. Congressional hearings are in the works.
“A portfolio of the top 5% most shorted stocks has doubled since the end of October – 40% of that gain was this year,” SocGen’s Andrew Lapthorne wrote Thursday. “And this top tranche has now broken away from the next one, implying that the level of short interest itself is the target for much of this activity.”
Elizabeth Warren and Alexandria Ocasio-Cortez are interested. Both were sympathetic to the Reddit traders’ “cause,” even as they stopped short of explicitly condoning the situation.
“For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price,” Warren said. “It’s long past time for the SEC and other financial regulators to wake up and do their jobs – and with a new administration and Democrats running Congress, I intend to make sure they do.”
“Gotta admit it’s really something to see Wall Streeters with a long history of treating our economy as a casino complain about a message board of posters also treating the market as a casino,” Ocasio-Cortez remarked.
That’s all duly noted, but I would simply reiterate my point from Wednesday — namely that this is not the kind of attention you want if you believe you may be involved in something that regulators might construe (however unfairly) as unscrupulous or collusive. Your actions are now being discussed by some of the most prominent politicians in the United States.
The Twitter account for WallStreetBets moderators (which is verified) cited the “in tents” load the forum was under Wednesday for the decision to go dark momentarily.
I assume (and hope) that “in tents” was a ubiquitous and intentional misspelling and/or some reference to the Occupy movement, rather than an attempt at phonetic spelling gone horribly awry.
The forum is apparently unconcerned about what is sure to be “in tents” scrutiny over the next several weeks. The same tweet featured a picture of Leonardo DiCaprio as Jordan Belfort with the all-caps caption “The show must go on.”