If you’re a retail investor or otherwise count yourself among the multitudes of market participants perpetually at a disadvantage not just vis-à-vis billionaire hedge fund managers and institutional whales, but also in relation to legions of Terminator robots that can pull the trigger faster than you can refresh your favorite Reddit forum, don’t worry.
Because the SEC will protect you.
This week’s epic farce in “markets” (and the scare quotes are there for a reason) came full circle Friday, when the regulator issued a statement “regarding recent market volatility.”
Doubtlessly prodded by lawmakers on Capitol Hill (which had to be reclaimed from Trump’s army earlier this month), the SEC said that while it’s “evaluating the extreme price volatility of certain stocks’ trading prices over the past several days,” citizens shouldn’t panic. Because “our core market infrastructure has proven resilient under the weight of this week’s extraordinary trading volumes.”
If you’re not laughing now, then you need to check your pulse. Remember, we’re talking about GameStop, AMC, Bed Bath & Beyond, BlackBerry, and Build-A-Bear, just to name a few.
I’m not sure what it says about America’s capital markets when the SEC has to reassure an already frazzled nation (which just three weeks ago looked on in astonishment as thousands of people, including a man wearing a dead beaver and plastic horns on his head, briefly seized the Capitol) that the financial system is capable of withstanding double-, triple-, and quadruple-digit rallies in the shares of stores that sell used Xbox games, bath towels, and customized teddy bears.
In its Friday statement, the SEC promised to “closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”
So, that’s just the SEC promising Reddit that the US government is going to ensure that no broker or trading platform will be allowed to illegally inhibit the capacity of individuals to buy shares of companies that operate businesses which virtually nobody cares about anymore.
When was the last time you texted someone on your BlackBerry and said “Meet me at Build-A-Bear”?
Still, it’s impossible to deny that the game has changed.
“WallStreetBets has shown that the right-tail risk is infinitely higher than many professionals previously believed,” professional trader Kevin Muir said Friday.
“In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws,” the SEC added. “Market participants should be careful to avoid such activity.”
At the risk of extrapolating from what I imagine was deliberately vague language, that seems like a euphemistic way of the SEC saying something like this: You might be engaged in collusive activity even if you don’t realize it.
“I have no prejudice that the WallStreetBets crew is somehow inferior to other investing classes,” Muir went on to say, in his Friday missive to subscribers. But he echoed my cautionary remarks from earlier this week regarding the inherent perils of touting what regulators might (fairly or not) deem to be collusive behavior in a public forum. “There are sharks in the hedge fund community [but] the difference is that the hedge funds are more subtle in their touting,” Muir remarked. He implored folks to consider that while that “seems crazy,” all you have to do is “look at Reddit” to see how blatant it is.
In some respects, the Reddit crowd is unwittingly attempting to play the “Whataboutism” card. “Well what about Libor?” Or, “Well what about all those chat transcripts showing how nefarious and collusive Wall Street can be?”
As a friendly reminder to WallStreetBets (and I mean “friendly” sincerely): “Whataboutism” is fatally flawed. The logic doesn’t work. If I break into your house and steal your television, would you accept the following as an excuse: “Well what about all the times other people have stolen televisions?” Of course you wouldn’t. The fact that televisions get stolen all the time doesn’t make it legal for me to steal yours.
To be clear: I’m not suggesting that anyone is in legal jeopardy. I’m not a lawyer. I took the LSAT. But I went to business school instead.
In any event, it’s hard to imagine things getting any more absurd. But I can’t count the number of times I’ve said that over the past four years. And America has proven me wrong at every turn.