Source Title: retail investors in U.S. stock market: the game of capital or the carnival of populism?
No matter short sellers or retail investors, the main purpose is to earn money. No one stands on the moral high ground.
The battle between US retail investors and short investors has lasted for two weeks, and so far the smoke has not gone away. However, people have already confirmed the nature of this epic battle rarely seen in the history of US stock market from different angles. Some say it’s pure farce, some say it’s another “occupy Wall Street movement” that says “no” to Wall Street financial capital, and some say it’s the prelude to the impending collapse of US stocks.
So, what is the nature of the US stock market war? What impact will it bring? By combing the roles played in the war and the causes of the war, we may find a clearer answer.
In fact, the reasons for this battle are not complicated
The main roles of the retail investors in the US stock market are: retail investors, Robin Hood, a free trading platform, and Multi Strategy hedge funds represented by citron and castle. In the past, trading platforms and hedge funds were the main players in the three party relationship framework, while retail investors were insignificant. In fact, retail investors can be said to be the beneficiaries to a certain extent.
For example, the main weapon used by retail investors in this battle is Gamestop (GME). Robin Hood once implemented such a policy: whoever opens an account will get a free hand of GME. The reason for giving this stock away is, of course, that the market thinks GME is worth a little but not so much.
Retail investors with first-hand GME would not have had direct contact with trading platforms and hedge funds. But the highly developed capital game in the US stock market will make them love and hate.
Robin Hood is a free trading platform and naturally has to find ways to make money elsewhere. In recent years, Robin Hood has been under great financial pressure. So they chose to work with hedge funds. One of the unproven ways of cooperation is to sell platform retail investors’ trading streams to hedge funds. Robin Hood is said to have won $30 million in one deal.
In fact, the reason is not complicated: the direct conflict between GME retail investors and hedge funds originated from the WSB section (Wall Street casinos) of reddit website in the United States. Someone posted a post in this section, calling on everyone to implement a “potentially very profitable stock trading scheme”;. The plan includes GME and other cheap, short targeted stocks.
The scheme calls on forum users to purchase relevant stocks and options. If a large number of related stocks and contracts are held in the hands of retail investors, short sellers must buy the stocks and contracts in the hands of retail investors at a premium in order to avoid default. Then many forum users responded to the call.
After that, big investors found the opportunity and began to buy GME shares. Other institutional investors followed big investors. GME, which is regarded as a failure by short investors, has realized the reversal of the stock price rising 15 times in two weeks. Short sellers are almost & quot; hit & quot;.
The air war is a new outlet of social emotion
Looking back on this process, we can find that the battle of US retail investors is originally a capital game, and it may have some characteristics of performance art at first. However, no matter short sellers or retail investors, we are mainly trying to earn some money. No one is on the moral high ground. Today’s bulls may be the most determined bears tomorrow.
But I also agree that there is a certain kind of populist Carnival in this war. In times of crisis, someone needs to be responsible, and wall street can’t be more appropriate.
Wall Street was responsible for this social image during the 2008 financial crisis. When chamath, the retail investor at the helm of the incident, went to CNBC to discuss the issue, he also pointed the spearhead at Wall Street and put forward five “soul torture” such as why hedge funds are only open to big investors but not to retail investors, which is to be fair.
When it comes to fairness, things get complicated. Even the institutions that are most inclined to retail investors may be difficult to identify with. Retail investors and institutions should have a fair say in all aspects of the stock market. The amount of capital has its own credit characteristics, which is determined by the nature of the market.
But we have to admit that it is also very important to calm down social emotions. GME retail investors fight against the air, so that people find a new outlet for social emotions. Many retail investors are now looking for low-priced stocks that have been named by short reports like GME, hoping to see hedge funds bruised again.
This kind of catharsis is not on the street, but it’s also & quot; blatant & quot;, so that the U.S. regulators are beginning to guard against the full impact on U.S. stocks.
It’s not only a naked capital game, but also a carnival of populism. It’s not only the people’s simple dissatisfaction with Wall Street, but also the rent-seeking purpose of other political forces. This is probably the real picture of the battle of US retail investors. There are good reasons for this picture to appear in the United States today.
Xu Lifan (columnist)