The r/wallstreebets madness

I have not written for the past month and it is a new year, but I’ll save any ‘New Years’ resolution stuff because it is overdone, I have my goals and systems setup but I’ll keep that to myself for now and it is February. Quite some time has past and for 2021 many things have happened.

The thing that popped off that I really want to talk about and work through is the whole r/wallstreetbets phenomenon. That gained real steam mid January. I was even swept up in this craze. Befor then, I didn’t think I would have… because I try to think and assess things carefully before I act.

So it was a personal failure of mine to have devolved into this tribal mentality.

Stepping back here for light background context:

My blogging has content regarding personal finance and investing. My personal strategy is the very low effort ans passive style of dollar cost averaging into Index Funds/ETF’s in a risky asset allocation. So my investments follow and track the general stock market and instead of individual stock picks the ETF’s are a big catch-all bucket.

It is unlikely of me before this to select stocks myself.

Before this amazing digital populist movement of mid January I was made aware of the rumours around these memestocks with side conversations with friends. At the time, I didn’t know what to make of it at first because anyone would brag about their investment gains and never divulge on their failures.

However this intrigued me more because this was in conversation with a friend who only verrrrryyyy recently opened up an investment account and moved money to make these specific picks. Before this he was financially aware but had no interest in the market, what was up with that? Above all that why start off your investment learnings with a blind leap of faith with what you read off reddit?

If you’ve ever heard of r/wallstreetbets it is definitely no r/investing or r/personalfinance.

It’s culture is summed up quite well from their headline: “If 4chan users found a bloomberg terminal”, it is a funny forum to read through at times.

They frequently call eachother profanities: degens, retards, autists… you name it. I find it pretty respectable that they are super transparent, they show picture evidence of their huge life changing wins or even more amazing, their huge life changing losses.

I would never invest into something unless I fully understand what I’m getting into.

What makes the situation around GameStop different?

At a high level there are two points to this story. Earlier in a year the user u/DeepFuckingValue published his verbose research and analysis on why this would be a good pick, his underlying thesis was that GME was undervalued and would come around aftere some changes to its organization and business model…. On the other side traditional Wall Street are not very confident that an old brick and mortar style game store would survive the digital/ecommerce/pandemic age. They took a very bearish position and short (Bet on the company to fail) the stock well over the actual number of available shares.

Shorting usually is a hyper risky strategy, whenever the stock price goes down. The short position makes money, if the stock price goes up they lose money. Deeper explanation here: Short selling explained

So in this circumstance wallstreet was overly shorted and the redditors found that out late last year. That reddit community saw that as an opportuntiy to make a quick AND huge buck by buying up as many shares and call options as possible. This got out to a more wider audience and things took an interesting turn… We as regular people saw this as a way to also hurt Wall Street, as we all knew commonly how many systems of our society are rigged against the average Joe/Jane. It became a momentum movement to make money but also spun the great classic narrative of sticking it to the man as the little guy. Stemming back from the original housing financial crisis of 2008.

This was the perfect storm. Last year the world was shut down due to the virus, a stupid amount of money was flooded into the economy with nothing to spend on, people had lots of free time and built up anxiety and unrest due to losing their jobs and normal way of life. Couple that with an easy way to get information (Reddit) and access to the market (RobinHood) This brewed an unforeseen Black Swan event. A successful digital revolution, if you will.

Whatever happened was so huge and unprecedented, still I am in awe that I signed up in this revolution. In fact, in the middle of this I didn’t know I had this rebellion energy inside me. This authoritarian lockdown, bombardment of social media, dread and anxiety loomed over my head over the past 11 months that I felt hopeless. Especially over thee weekend before this all popped off. We all needed some outlet to let out our frustrations. r/wallstreetbets, GME and Wallstreet mae this all too convenient and all encompassing for me.

This was probably the only movement I would support anyway, coming down to issues that effect the 99% this was more uniting and addresses real issues. Fuck those BLM, SJW, ANTIFA, QANON Capitol Hill protests that happened through 2020 and early 2021. Those conspiratorial issues were convenient topics the elites used to control us, the peasants. This was the first time the regular people had a chance to fight the establishment, at their own game and with their tools.

Thankfully whatever I put in to participate in this wave was only an amount I was comfortable losing. Once I signed up I became personally invested and before I realized it, I was in a ‘mob’, a digital one. I felt all the properties of a worldwide movement, despite this all happening at the comfort in front of my computer screen.

It was a moment where like in many moments in the 4/5 years we saw a noticeable glitch in the matrix. Looking deeper in myself I can’t help but grin a little acknowledging that I have many ways to go controlling my own mind and actions. As I saw the mob mentality in myself, I was de-individualized. Took any information I saw as fact or confirmation bias to continue riding the movement out. Usually this is a pretty dangerous train of “lack of” thought.

Even with this situation which I believe was very Just I could have wound up doing things I that would damage my future. I bought into this late, whatever gains or losses I had were peanuts compared to my friend who noticed this trend early. I knew fully well that I would not have gained too much from this legitimate transfer of wealth. The worse scenario would be buying into this movement at the top, but with a huger portion of money. There are many people who did that and are still holding after the friday squeeze. I still had the send of self-awareness to break out of this groupthink before suffering worse consequences.

Even with my measly pocket change in this pot I was still fixated on any news around Reddit, GME, Wall Street and its conspirators for that whole week. Which I could have used that time and energy on many other things.

Frankly, this is a good lesson to learn about myself… That I could easily be swept up in the mob like any other. I don’t know how to work on this but that whenever I do find myself in some wide mob movement I have to try very hard to break out of that.

From an investment point of view this was not the way to go. Though after this fiasco I am interested to invest in individual stocks or companies, only in those that I understand. For those I actually should do my research and analysis based on the fundamentals. I should make those decisions based on solid principles over what other people are doing. Hah, definitely have to think twice before jumping on the memestock train.

At least it was a fun moment in history in mundane and continued uneasiness of the start of the year.