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As Gravity Comes For Reddit Trades, Market’s Focus Shifts
The pain trade for stocks is probably higher. And by "stocks," I mean real stocks.
For all the fanfare, last week's tumult looks to have largely passed as the "stars" of the show were slammed back to reality. That, in turn, means the much ballyhooed long/short gross-down may be in the rearview.
It's worth mentioning (and that's an understatement) that all nefarious narratives aside, there's usually a reason why beaten down stocks are beaten down.
"Short-interest, quite logically, [is] correla
I suspect that r/wsb’s influence peaked last week and there will not be another GME. Too many voices have piled in to r/wsb, from opportunists trying to call the crowd over to their trade, hedge funds using aliases to steer or disrupt the narrative, celebrities, and trolls. The bulk of today’s 8 million members are late comers who are likely to have lost a dispiriting amount of money, or just spectators. The dealers, brokers, clearinghouses and regulators will be on alert for a repeat of systemic stress. The hedge funds will keep shorting, with better risk control.
Retail investors will remain a significant factor, as long as markets are trending. There will be episodes of crazy action in micro cap stocks and brief r/wsb-driven blips in larger asset classes. Paying close attention to Reddit will be one way to make money; but investors who don’t want to spend their time down that rabbit hole will not need to.