Wall Street vs The Internet.

Is the $GME over or is this a billion dollar shift in power?

Time for a thread

1/ RETAIL RENAISSANCE

“Prior to 2020, retail activity stayed flat for 20 yrs. Now households, active/passive mutual funds & ETFs represent 63% of the market ($36 Trillion). Hedge Funds own 3% of the $57T US equity market - so "Retail" is 12x more important than hedge funds.”

2/ RETAIL RENAISSANCE

There’s a new important investor at the table and Wall Street will have to adjust.

*Now 8.4MM followers under management

3/ RETAIL RENAISSANCE

Let’s dive into ‘The Rise of the Retail Investor’ in <2 mins:

- DEFINING MOMENT
- COMMUNITIES
- PLATFORMS
- LEADERS

4/ DEFINING MOMENT Crowd-Sourced Squeeze

This story is easily told through:

- A Dog
- Two Wolves
- Pack of Lions

5/ DEFINING MOMENT

Dog: Video $GME retailer with an underwhelming track record.

Two Wolves: Hedge fund Melvin Capital & short-seller Citron Research. Believed $GME “brick & mortar” stores were a liability in an increasingly digital world & they could profit by SHORTING

6/ DEFINING MOMENT

Pack of Lions: +8 Million retail investors on Reddit group r/Wallstreetbets. Plus influencers like @elonmusk , @chamath, @tyler and even politicians like @AOC — who ‘piled-on’ the trade and/or Tweeted about it.

7/ DEFINING MOMENT

In nutshell this is what happened

8/ DEFINING MOMENT

“All the math you need in the stock market you get in the fourth grade.” — Peter Lynch

$GME had a HUGE short interest of 140%. Retail investors saw this and believed they could make a profit by taking the other side of the bet.

9/ DEFINING MOMENT

Further encouraged by activist investor Ryan Cohen buying +$76MM of stock looking to turn the company around like he did with http://Chewy.com  sold to PetSmart for $3.5B.

10/ DEFINING MOMENT

Retail started buying stock & tons of “out-of-the-money” call options, driving the stock price way up!

They also ordered dozens of pizzas to some of the short sellers’ homes, LMFAO!

11/ DEFINING MOMENT

Next, a Black Swan event happened, not accounted in anyone’s ‘risk models.’

TWO simultaneous SQUEEZES:

1) Short Squeeze: related to offside short positions
2) Gamma Squeeze: related to offside option positions

12/ DEFINING MOMENT

Without going into CFA mode, trust me this led to a perfect parabolic ‘buying storm’ sending the stock from $40 to +$480 last week. Closing at $325 on Friday.

Now, back down below $100

13/ DEFINING MOMENT

Next:

- Hedge Fund Gets $2.7B Bailout
- Reddit Group Gets Mysteriously Taking Offline (now back online)
- Trading on $GME & other stocks & options halted (for retail only)

Only 2 platforms (I can confirm) didn’t halt trading are @Fidelity & @Wealthsimple

14/ DEFINING MOMENT

- Hedge Funds Announce Covering Their Shorts
- Robinhood Raises Billions & Gets Sued By Its Own Customer, delays IPO

And this...

15/ DEFINING MOMENT

“It was a smart trade. Retail saw it and Wall Street missed it.” @chamath

The reason “retail saw it” is because they are incredibly powerful in numbers, tools & community. They are now armed with much of the same information as professional investors.

16/ COMMUNITIES

“Hedge fund ‘Idea Dinner’ with +8 million guests”

For decades, Wall Street has been hosting fancy ‘ideas dinners’ behind closed doors where they discuss investment strategies.

Retail investors created their own version: Reddit, Discord, Twitter & TikTok

17/ COMMUNITIES

It would be easy to dismiss them as unsophisticated.

But it’s simply NOT true.

For example, one of the influencers from r/WallStreeBets “DeepF—ingValue” has CFA and was a financial advisor.

18/ COMMUNITIES

My fund manager friends tell me their firms ‘scrape the group for trading ideas.’

I have also personally seen investment banks email research from WallStreetBets Reddit group to get their own institutional clients to trade the ideas.

19/ COMMUNITIES

Also, I am seeing lots of finance groups proliferating on the wildly NEW popular audio-only app @joinClubhouse.

Launched during the pandemic, it now boast +2MM users and a $1B valuation.

20/ PLATFORMS

'Do-It-Yourself' (DIY) investor is on the rise.

Retail, high networth, corporate executives, small business owners and even ex-Wall Street bankers have billions in DIY accounts.

21 / PLATFORMS

"Robinhood and the other zero commission brokers that everyone used didn't have enough capital to fund the fight" @mcuban

Some have capital and some have confetti.

Now, we need trading platforms that have both ; )

22/ LEADERS

There are BIG influencers who move markets with Tweets:

@APOMPLIANO BITCOIN
@CHAMATH SPACS
@RAYDALIO CASH IS TRASH
@STOOLPRESIDENTE STONKS
@ELONMUSK ANYTHING #Signal, $Etsy, $DOGE. This week he even changed his bio to #Bitcoin , sending it +15%

23/ LEADERS

Also, there are thousands if not MILLIONS of small micro influencers with engaged communities like Sara Well, a nurse by day who talks stocks by night in her discord group with dozens of investors.

24/LEADERS

BUT the community FAVOURITES are the “MEME-AS-A-SERVICE” army:

@wallstmemes
@parikpatelcfa
@Litquidity
@leveredlloyd
@trustfundterry

and many more!

25/ FOR MORE !

Subscribe to my (free) weekly newsletter https://gritcapital.substack.com/welcome 

Just dropped YouTube Video Version