The Short Squeeze

The whole GameStop short squeeze thing has been a big deal lately. Obviously it has been a really smart move by the people who orchestrated the whole thing because they have more than likely made a killing out of the whole deal and are probably multimillionaires now. This is not the first and definitely won’t be the last time a short squeeze happens (which makes me laugh when I see posts saying the market will never be the same because this won’t do anything but maybe make short sellers a little more tentative until this hype dies down). I personally have no issues with the short squeeze itself, you can bet on a team to win or lose and you should be able to do the same with stocks, and the whole point of investing is to make money. Personally I have not gotten involved in the movement at all and don’t really plan to get involved. I would be interested to see if anyone shorts Gamestop as the movement dies down to make money on the likely major drop the stock price will take as everyone closes out their positions though.

I do have a few issues with the whole movement though. The first is the whole stick it to the man thing. To me that whole thought process is ridiculous and a broken mentality. When did people stop looking at people they think are successful and going I want that how do I get there? To being like screw that guy let’s try and bring him down to my level? When did it become a crime to make money and be successful? Are all the people who got rich off this short squeeze the enemy now too? The funniest part of that whole thing is that almost every rule there is with stock trading is to eliminate any advantages one person or firm might have over any other. The only real advantage hedge funds have is that they do it for a living and will likely know where to look to get the information they want where a small trader might not. The other thing the big guys get a bad rap for is market manipulation, but I would be willing to bet day traders manipulate the market far more than large funds do and that is almost exclusively middle class and semi rich people playing that game. It gets too difficult for large sums to be moved in and out of the market quickly for the truly rich to do it and why would you when you can just buy and hold a stock and make hundreds of thousands or millions in dividends. That and the fact that large funds aren’t out to screw the little guy, the little guy doesn’t even cross their minds. They have buy and sell points and are trying to make money just like everyone else. They are just better at it than most small investors are.

The other issue that I have is that there are a ton of new investors who joined for the movement that are likely going to get burned badly. I hope that this won’t cause them to give up on investing and leave before they even learn how the market and investing really work. I hope this doesn’t happen, but the reality is that the list of people who lose money on the short squeeze will be much larger than the list of people who made money off of it.

The last issue that I have with the whole deal is with the investing platforms that put limits on how much people could buy of certain stocks. I understand that the firms are just covering their own asses and protecting some of their biggest investors (at least in Robinhoods case, not sure about the other platforms), but that should not be allowed to happen in a free market. That is a form of market manipulation that should not be allowed and I hope there are some repercussions for theses trading platforms. No one should be prevented from participating in the market regardless of how much money they do or don’t have or their experience level when it comes to trading.

That’s my opinion on the whole thing anyway. I don’t think it’s really going to change anything in the market (and hasn’t for me so far), and isn’t really any ground breaking movement just a great money making play by the guy who started it. A few hedge fund managers might be looking for new jobs and Robinhood will probably lose a ton of clients but that’s about it. It has definitely been interesting to watch though.

Disclaimer: I do not hold positions in any of the stocks that are part of any short squeezes currently going on