Spencer Jakab is the editor of The Wall Street Journal's Heard on the Street column and the author of a fascinating new book called "The Revolution That Wasn't: Gamestop, Reddit, and the Fleecing of the Retail Investor."
In January of 2021, a large group of small investors from the WallStreetBets subreddit rallied around the stock of video game retailer GameStop, which they believed had been unfairly attacked by short-selling hedge fund Melvin Capital. The subsequent and totally unexpected rally in the stock made millions for several WallStreetBets members and crippled Melvin Capital, which lost up to a billion dollars per day during the worst of the short squeeze.
On this episode, Spencer and I talk about:
The perfect storm of market, societal, and technological factors that catalyzed the GameStop phenomenon
Why the Robinhood stock trading app, which played a major role in this whole scenario, was designed to function exactly like a sports gambling app
How WallStreetBets and Robinhood “investors” are different from boring old E*TRADE or Schwab customers like me
The difference between investing and gambling
What Melvin Capital’s profound losses mean for hedge fund managers in the future, including the need to consider the potential madness of crowds in addition to market, political, and climate-based factors
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