GameStop FOMO? 9 Investment Sages Explain Meme Stock Mania

le Eliza Haverstock, Chris Helman, Halah Touryalai, Sergei Klebnikov, Matt Schifrin

Despite the Covid-19 crisis, presidential impeachment and continued stimulus angst, a failing video game retailer stock took a high level last week. Famous for their slow rolls, Texas-based GameStop Grapevine became the hub for the angry movement of millions of young investors on a Reddit community called r / WallStreetBets. Their rally, powered by new Robinhood traders and incentive money, could have raised the stock by over 600% in just over a week, making a fortune for some but also effectively bankrupt hedge fund investors were similar in the process. Their influence triggered similar bullish attacks on other declining companies now known as “meme stocks”, including Blackberry and AMC Entertainment.

To make sense of the madness, Forbes reach out to some of the most respected minds and consumers in the market who have provided the insight and prediction.

Burton Malkiel

Professor of Economics, Princeton University, author, Random walk down Wall Street

“This is the same thing when the Dutch went mad in the 1600s buying tulip bulbs. It has happened over and over again. These speculative manias are likely to be a reality of life forever … Somehow like a game of musical chairs, there is someone who is about to be left standing. ”

“It seems to me that it is very similar to the attack on the Capitol building. It’s a speculative issue inspired by social media. We certainly value free speech highly. Nevertheless, I clearly think that we are seeing some things happen with the wonder of social media that raised many issues … As a country, we have to think carefully about how we’re dealing with this. ”

Jeremy Siegal

Professor of Finance, Wharton School, Co-Founder of WisdomTree Investments, author, Stocks for the long run, the future for investors

“GameStop is not as close to value as it used to be but it is a good example of that bigger fool theory where it is possible to make money on something if it is overused as long as there is someone who is willing to pay a higher price… I hope these are [Reddit] investors can be turned into long-term investors where the opinions are strange to you and not against you. We want them to get money from investing rather than profiting, because you don’t have to speculate to make money in the market. ”

Albert Edwards

Global Strategic, Société Generale

“The Fed is caught by a monster it created itself because the financial economy would crash if stocks fell …Feeding liquid has washed away the pressure device and left just the voting machine standing, along with its printing press. ”

Michael Steinhardt

Philanthropy, founder of Steinhardt Partners, co-founder of WisdomTree Investments

“What has been really happening is a reflection of the quality of analysis, the quality of the work, the quality of the input that is coming to Wall Street. And it’s a sad story, that something like this can happen. ”

“It does not appear to be [stocks like GameStop] he could sort of [systemic] problem [that we saw in 2008]. And then, even if some random breakout company would feel troubled by these subtle moves, so what? Eventually GameStop and some of those others are going down a lot. And, it’s that surprise that’s going to create pain for investors who can’t afford it. ”

Patrick Garber

Retired professor of economics, Brown University, former Global Strategy, Deutsche Bank, author, Famous first bubbles

“It’s not about the topic of profiteering (GameStop, in this case), it’s about funding of both sides. Who has access to credit and money to resist the war. The Panic of 1907 was provoked by an attempt to corner sections of the United Copper Company. The price went up. Summaries went into view. And then an attempt was made to crush them. Players sank. A large number of banks were involved. There was a bank run, a shortage of money, and John Pierpont Morgan had to step in to bring money to market. It became a de facto central bank. As a result the Federal Reserve was created. ”

“Who’s the mob? People appointed by the government fiat. And they work from home and get money to spend. They killed him and had nothing to do with him. Someone just had to comment.”

Ciamac Moallemi

Professor of Business in the Department of Decision, Risk & Action, Columbia Business School

Principal, Bourbaki LLC

“If I were a short seller, I would be very worried. And I would be constantly monitored [social media] for the names in which I am interested. I’ve heard of quantitative investors who went on to scour these forums and try to mine them and build signals. I think this will change things. ”

“They are [hedge funds] they are solemn investors, and they are not going to establish themselves for anything. I think people just didn’t realize this was possible. But now that you’ve seen it once? So after 9/11, people didn’t think you could take over planes or crash into buildings., you know, now, that’s not happening anymore. ”

Mohnish Pabrai

Founder and Managing Partner, Pabrai Investments Fund

Much of this is human in nature, it’s like lemming. When you see your dumb neighbor making money you think ‘gee, I’m softer than him, I should get into that’. Everyone wants to go to the party. And now this has overtaken Reddit because it is international. There is a housewife in New Zealand who sees all this and wants to be a part of it.”

“In the past if your organization beat the SEC they could come in and use its rules and regulations to end it. But this is a group of people on Reddit who don’t know each other on a public forum, and it may not just hit but it has the same effect on moving stock. It is a network without a central nervous system, without heart. ”

Beinn Inker

Head of Asset Administration, GMO

“What we are seeing now is far beyond the 2000 internet bubble. People who buy GameStop don’t care about the underlying company. The future is incongruous for them. Instead, with GameStop we can see a strong element of anger. ‘I’m going to scratch this guy. Wall Street has been taking advantage for too long. That was Occupy Wall Street. ”

“The end of Covid’s locks could be the reason for this bubble to pop. People have been buying the companies that protect Covid. When the world can go back to normal these stocks are no longer worth their price. ”

Ron Baron

Founder and CEO, Baron Funds

“Robinhood is a joke. This is gamification on the stock market. They say no commissions – but that’s also a joke, they sell a stream of customer order … Sooner or later, people who invest in that fashion will going to lose a lot of money. ”