Is The Retail Mania Over?

Is The Retail Mania Over?

At various intervals over Q1, analysts and commentators suggested the pandemic-era "retail mania" evident in, for example, surging daily average trades at online brokers and small-lot options activity, was likely to abate. In the 12 months following the initial COVID lockdowns in the US, retail investors "gone wild" were credited with driving all manner of dubious dynamics, including nonsensical rallies in shares of bankrupt companies, a melt-up in mega-cap tech that ultimately buckled under it
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8 thoughts on “Is The Retail Mania Over?

  1. Well, its quite a last gasp for the meme stocks.

    AMC trading at 19.45 today. ($8.7 billion market cap)

    Call options at 40 strike price, expiring on June 18, are trading at $`1.26.

    Over 97,000 contracts traded today at just that strike one price.

      1. My reply came across as overly abrasive (it happens occasionally). My thing is this: I’ve done enough gambling in my life. And if I gamble today, it’s not in capital markets or at least not beyond the gambling inherent in any investment decision. Bottom line: If I don’t want to own it, I wouldn’t put any money into it. These aren’t poker chips. I don’t want to own a GameStop location or a movie theater in an era where both physical video games and movie theaters are arguably going the way of the dinosaur. So it’s bizarre to me why this is still going on. I can understand getting swept up in the mania initially and still participating in it if all you’ve got is a few thousand to bet, but the idea of putting any sizable amount of money behind these stocks is ludicrous (to me anyway) when there’s an entire universe of companies out there I actually would want to own. That’s really all I’m saying.

        1. This makes sense, and its the kind of simple analysis readers come here for.

          I wanted to lay out the Reddit case for these stocks though, since I don’t think that there is any reason to be confused. This isn’t a fundamental play, instead Reddit believes that:

          -Citadel and other market makers fabricated shares of GME and AMC to sell them short.
          -Retail traders now own many times the float in these companies
          -By holding onto these shares retail stands to become very rich when Citadel needs to cover.

          I don’t own these companies, but I’m closely following the story since I’m interested in what will happen, and since I teach some of the people who are actively involved. Is there any good way to understand whether this story is true? I can’t work it out on my own.

          1. Retail doesn’t stand to “become very rich,” because relatively speaking, retail doesn’t have enough starting capital to matter. They don’t understand what “very rich” means. “Very rich” to them is $20 million. That’s a joke.

            This is a patently ridiculous narrative and speaks to the alternate reality Reddit traders live in.

            It doesn’t matter if a bunch of “Roaring Kitties” make $5 million or $10 million or even $20 million. That’s pennies to the people they imagine they’re “sticking it to.”

            In June of last year, Ken Griffin bought a Basquiat for $100 million. What does he care about Roaring Kitty’s seven-figure GameStop score?

            The point is: It’s quixotic in the extreme. Even if WallStreetBets manages to put a dent in a hedge fund, the manager can just go out and raise more capital from people with $100 million to throw around at fine art auctions and rare wine sales.

            Reddit’s perception of their place in the world is ludicrously out of step with reality.

  2. The frenzy certainly feels like another gamma squeeze, but I’m interested to hear from more knowledgeable people about whether there is any chance that these stocks actually were “naked shorted” in such size that market makers will need to cover and will buy from retail investors at comical prices.

    It seems unlikely, and I can’t really believe that someone short so much wouldn’t have tried to cover over the last 4 months, but I just don’t know enough about how markets work behind the scenes to be sure.

    1. Interesting read given today’s events on GME. it seems like a bunch of redditors know something the rest don’t or don’t want to explain or don’t want to believe.

      It’s clear that the elite are nervous. How is it that every media headline reads exactly the same “forget GameStop”. If they weren’t nervous they wouldn’t have paid for those articles. If they weren’t nervous they wouldn’t have the lights on at all hours of the night. Yes Kenny can buy a 100 million dollar house. I bet he bought it mostly on credit though.

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