Washington – You say it’s a revolution?
Then look what’s on Wall Street.
Small investors who combine on social media are attacking giant investment firms by increasing the steady percentage value of GameStop, a problem-solving video game store whose constant percentages were quoted at around $4 at the start of the coronavirus pandemic. inventory value rose to more than $480 consistent with a constant percentage before stabilizing and final at $193.
“We are witnessing the French Financial Revolution,” said Anthony Scaramucci, a financier who was President Donald Trump’s communications director at the White House for 11 days in 2017.
Analysts say Scaramucci, also known as “The Mooch,” is right about the revolution, even though he quotes the wrong country.
They see parallels between what’s on Wall Street and the populism series that pushed Trump to political force and fed a pro-Trump mob that broke into the U. S. Capitol three weeks ago in a failed attempt to oppose his electoral defeat to Joe Biden.
“We’re starting to realize that classical regulations don’t have to matter,” said Frank Murtha, co-founder of MarketPsych LLC, a behavioral finance consultancy. “Regulations only work if many other people are willing to play with them. “
There is certainly no comparison between Reddit users who make legal transactions and the fatal insurgency on Capitol Hill, where troublemakers broke into congressional corridors with racist symbols and built a gallows and improvised rope just outside the building.
But experts said the two occasions illustrate, in other tactics radically, the strength of social media and mass psychology.
What happened on Wall Street and Washington “attests to a broader unsenchantment and a sense of injustice in society,” Murtha said. “It’s just an herbal resolution of those guys that I think is largely an attempt to retaliate against what they see. as unjust forces in society. And they figured out a way to do it. “
What they did is the same thing Trump supporters organized their attack on Capitol Hill: using social media.
Also: Why did GameStop and AMC’s shares explode?
Weeks before the crowd reached the Capitol, Trump supporters who refused to settle for the effects of the November election visited social media sites like Talk and other Internet forums and published plans for a mass protest in Washington that would coincide with Congressional vote count.
Similarly, small investors used the Reddit social media platform to launch their attack on Wall Street and raise GameStop’s percentage price. Reddit users on a forum called “WallStreetBets” took the topics into their own hands after the coverage budget began downloading the percentages of the problem retailer as a procedure. known as “short selling. “
In short selling, investors borrow an inventory and sell it in the hope of buying it back later at a lower value, and then they keep the difference.
Furious Reddit users will retaliate against the large coverage budget by launching an inventory purchase frenzy from GameStop, which raised the price.
Suddenly, a movement was born.
“I think this is a turning point,” Reddit co-founder Alexis Ohanian told CNBC on Thursday. “I don’t think we’re going back to a global past because those communities are a byproduct of the Internet connection. platform or another, it’s the new standard.
“We’ve been on the Internet now, for the last 10, 15 years, thanks to the rise of social media and all that infrastructure, bringing an upward revolution to so many industries,” he said. “We have noticed that in the media. We’ve noticed that in many areas. And now it’s about funding. “
Newsletter forums are full of retail investors who exchange unsustainable rumors, reckless hypotheses, and junk communications from the start of the Internet. But social media has given organized movements of retail investors and daily investors a genuine muscle.
They meet on Facebook, Instagram and WhatsApp, messages like Signal and Telegram and collaborations like Slack to exchange tips, but one of the main drivers of viral effort is Reddit.
Reddit forums, called subreddits, are embroiled in anonymity and driven by populist fervor, and developed the era of the free Internet where almost everything is allowed.
The company’s attitudes are replaced over time. Reddit has taken strong action against objectionable content, such as hate speech, and last month, when major social media platforms banned Trump, Reddit shut down a sub-reddit where tens of thousands of Trump supporters gathered.
But the activity in the monetary subtitles had not attracted much attention until now. Wall Street Bets is a trading forum of popular features where online day investors combine to increase their purchasing power. And that’s where GameStop’s action was born.
The cry: “Gather the troops, brothers. “
“Just take a look at the reviews on the Internet. C is a very non-public thing for many other people and a possibility for Joe and Jane America, the kind of retail inventory buyers, to bend over and defend themselves against those hedge funds,” Ohanian said. , who resigned from Reddit’s board in June.
“I think this is the beginning of a new era about how we’re going to understand government procurement and then customer interaction with them. “
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Not everyone is satisfied with the rebellion.
“If you need to call a crowd what happened at the Capitol, you can also call what’s on GameStop a crowd,” said Ken Kamen, president of Mercadien Asset Management in Princeton, New Jersey.
People involved in a giant movement, whether buying stocks or inciting an insurgency, have a tendency to get stuck at the moment and do things they wouldn’t do in a different way, said Robert Cialdini, a psychologist and expert in the science of persuasion and influence.
“People get carried away with this and most likely stick to the example of the crowd,” Cialdini said. “And what you see is that the crowd ends up buying these shares, which means it’s something of value. And then otras. la people buy it.
Like the troublemakers who broke into the Capitol, many small investors buy GameStop shares without preventing the consequences, Kamen said.
“How many protesters who assaulted the Capitol’s idea that the FBI would track them down and threaten them with 20 years in prison?”Kamen asked. ” They just went with the crowd. Everybody was doing it.
GameStop investors have suffered the same kind of organizational thinking, Kamen said, without fully contemplating or fully understanding that massive and simple profits can temporarily become a primary monetary loss.
“Who doesn’t need to make money when everyone wins?” he said. But “beginner investors make rookie mistakes. ” In many ways, other people play with dynamite. And they can just blow their hands off.
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