Reddit user explains short-seller squeeze inception

to discuss where all this came from of course we've been covering how it came from reddit's forum wall street bets want to bring on a member of that forum to chat about this now uh lewis rossman joins us on the show louis thanks for coming on here man i i know that you were you were kind of watching what was playing out in wall street bets for for quite some time the last couple days you joined as a as a formal member uh talk to me about what it was like to see this theory in gamestop play out and what made you want to jump in and play along as well well the first two things i want to make clear is that i am a member but no one individual member or group represents it it's a group of at over this point over 4 million people so i'm just a person that clicked the join button when i started reading the actual due diligence on it is when i realized why they were buying in which was that there is over 120 of these shares shorted which means that at some point the hedge funds that made this very risky bet are going to have to jump in and rather than short it this much to where they could cover at a reasonable price they shorted more than the actual available shares which would mean that they would then have to cover and i i was honestly i didn't actually read the whole due diligence i just saw people buying gamestop in the beginning and i thought this is an obsolete retailer and then it went from 4 to 14 and i said okay whatever it went to 20 to 30 the 40. and then when i was once in at 40 that's when i actually started reading the due diligence section because that is they do have a due diligence section that is very separated from the part where people post things in a humorous fashion and there is sometimes some fairly good stuff there and that's when i realized now i see what you're doing this isn't this is not a meme anymore this is there are there's actual fundamentals behind the reason that you are doing this and at some point i said you know once it got to 104 i said fine i will put in like less than one percent of my portfolio so that if it goes to zero i won't care but if it does continue to go up i can say i was part of this moment in history luis you've probably heard there's a lot of debate that's happening right now about what this all means you know what the motivation is behind some of these traders and to your point you're right there are millions of traders that are on this forum everybody doesn't speak with the same voice but how much of this do you think is really about sending a message to the institution how much of it is really just about being able to play the same game and make money the same way a big part of it was being able to play the game and make money the same way and again i'm just purely interpreting what i think other people are doing i do not speak for them but a lot of people were put out of work by the pandemic over the past year you combine that with a lot of people that are not able to work or not able to make a living don't have a job and there's going to be more interesting people getting into investing as a way to make money they have eight hours free a day that they didn't before so a lot of people now have time to sit there all day and read up on these things and all of this information that they used to make the stock trade was public the short the the amount of shares that were short this is all publicly available information that now that you have eight hours a day that you didn't have before where you can just sit there and read through this stuff a lot of people are finding that information so they're just deciding okay why don't we make trades based on this information and they did and they made money at it when the the point at which it started to become a real middle finger to the establishment i believe it was when the finance when the press started covering it them in a negative manner when when uh brokerages decided that have ownership in in the companies that shorted the stock by the way decided we're going to stop trading on gme we're not going to allow you to buy anymore because it's in our financial best interest that you not be able to do that that's when it started to become a full-blown war in in a sense i think between people who are incredibly incredibly aggravated at a financial sector that appears to always win while normal people lose there's a lot of aggravation over what happened in 2007 and 2008 there's a lot of underlying resentment for these things that have not necessarily been addressed and what what they're doing is this is a way to beat them at their own game using their own greed against them that is what's happening i think that's a big part of the movie oh and to your point too i mean we're talking about things that were publicly out there and these these are things that anyone can look up and trade on but specifically i think the thing that's new here is you're grouping together a bunch of people who might not have a lot of capital to work with who knows what the individual players are but might not have a lot here to team up and take on some very big institutions on the front of the anger you're addressing though when you look at that i'm looking at wall street bets right now a lot of chatter about this new lawsuit filed against robin hood and there are i assume a lot of people who who may point to the fact that once we saw that announcement of trading getting you know not not allowed to buy shares in these companies it kind of triggered the negative price moves we saw what's the sentiment you're hearing among traders in the forum now about kind of that anger now targeted towards those brokerages that's market manipulation that is at best immoral at worst illegal the sec should investigate it entirely so they are claiming that when normal average everyday people decide that they are going to look up research on how a stock is shorted and then purchase that stock at retail price that that is market manipulation but when a company that has a financial interest in a firm that is shorting the the stock says we're not going to allow you to buy it anymore that's not market manipulation that's where the anger is coming from and i think it is righteous anger at people who are skirting the rules in a way that we would not be able to skirt the rules would trading be halted on a stock because i was losing money would agile therapeutics get halted on december 22nd 2017 because the fda issued a crl i didn't think was coming no that doesn't happen but it happens when they make risky trades and i think that there are a lot of people that are aggravated at people who make these risky trades who do things they're not supposed to not being held accountable and this is an important moment because we're gonna find out who is held accountable and who is to blame and a big part of why i've been making the videos i've been making is because i saw it start to tip to the point where normal old media outlets were blaming the kids who caught the adults breaking the law rather than the adults that were breaking the law yeah i want to be very clear too because that was not what we were doing here at yahoo finance for viewers who might be tuning in to hear what you're talking about here with us today and i appreciate that very much i appreciate that and i i was kind of blown away by the technical analysis shown there in the reddit thread because it was very deep and we saw our charts featured in those videos as well which made us happy but when you think about maybe where we go from here obviously as you said you didn't throw a lot of money into this but you did see it run up you jumped in you want to be part of a movement i wonder how many people join you in that feeling here as we see gamestop now at 263 whether or not they're going to be holding whether or not they might say look i don't care about profiting anymore now it's more about sending that message you're talking about well what's very interesting is that it is currently holding the price that it is holding in spite of the fact that people are literally not able to buy in so the whole concept of supply and demand is that when demand goes up and supply is down price goes up but when demand goes down and supply is the same that the price is then going to go down so you have demand that has been artificially decreased by brokerages that have decided and that may wind up being illegal to not allow you to purchase the stock and in spite of that this is holding over 200 which i think is absolutely insane when i read that they were not going to allow per people to purchase this stock that you could not purchase even if you wanted to i was looking at that thinking ah this is going to go down to 10 bucks the fact that it's holding over 200 is a real sign of solidarity between the people that just want to see the individuals that may took this corrupt action burn louis you said that the anger against the establishment stems all the way back to the financial crisis and you could argue at the time there was a lot of anger directed at sort of the institution largely because individual investors individual homeowners were the ones that were sort of left with the bag and the argument this time around has been you've heard it from the institutional investors who say look these individuals should be warned about the risk they don't know enough about the risks going in how much of that do you think should be a part of the discussion should the regulation be able to regulators be able to step in and say there needs to be more protection for the individual i'm curious how you see that conversation playing out given that that's been the large argument on the institutional side well there is the argument that i've heard that apps like robin hood try to glorify trading you know you'll have the little confetti and things fall down at the end of the screen when you make a trade and that they may they make it a little bit too easy to get into trading stock and i i understand that argument but at the same time i don't think that your average person is saying you know what i wasn't going to put a hundred thousand dollars into a penny stock but since i saw confetti falling on my screen i'm going to do it i think that we need to have really i mean i that that is the argument that usually that's the same kind of argument as well you know you can't let your kid play street fighter because he's going to try to use it on kids at school kind of thing and i think that there does need to be a certain level of education involved here regarding you know someone that you may be someone that you speak to or something but at the end of the day if someone wants to make these trades if someone wants to put a hundred thousand dollars into a penny stock they're not going to not do that because you give them a eula they're not going to not do that because you put something in front of them and the real question that needs to be asked is what free what freedom are we willing to limit in the name of this because what i would say is if you really want the market to be more stable limit the freedom of the individuals that shorted a stock over 120 of the available shares because i'm fairly certain i'm not a lawyer i'm not a financial services professional but that type of naked short selling is illegal use the laws on the books and enforce the laws that are currently on the books to stop this from happening rather than create new laws because you're the whole reason that retail traders are jumping in is because someone else did something illegal and they want to catch them on it yeah no question the conversation is about regulation on both sides of the trade uh lewis rossman it's it's great to get your perspective today reddit's wall street bets user uh thanks so much for joining us thanks so much for having me and spelling my name with two ends you have a nice day we make sure to get it right

Channel: Yahoo Finance

Views: 1,038,325

Rating: 4.9094067 out of 5

Keywords: Yahoo Finance, Personal Finance, Money, Investing, Business, Savings, Investment, Stocks, Bonds, FX, Currencies, NYSE, Equities, News, Politics, Market, Markets, Yahoo FInance Premium, Stock market, Reddit, Gamestop, AMC

Id: m-b3opvdYL4

Length: 10min 32sec (632 seconds)

Published: Thu Jan 28 2021

Reddit Comments

[u/SolAureusAstra]

Louis Rossmaan, Apple Repair Expert Reddit's wsb User