It is clear that the market narrative was seized by a young populist horde. They didn\u2019t rampage through the Capitol in Viking horns, but instead through r\/wsb and other social media postings. While the concepts of pumping stocks and preying on short sellers are as old as markets themselves (I imagine this occurring in the coffee houses of London and Amsterdam, and under the mythical buttonwood tree in Manhattan), the current activity captured the public\u2019s imagination in an unprecedented manner.
The million-dollar question is why and why now? Some of the answer lies with factors that we\u2019ve discussed before in this space. We recently underwent another huge democratization of investing. Free commissions and fractional share trading made it even easier for individuals to trade, just as the advent of web-based brokers did in the late \u201890s. An old economic adage is \u201cif you want more of something, make it free.\u201d The industry made trading free and got a lot more of it in return.<\/p>\n\n\n\n
But there is another unifying factor that links GameStop, BlackBerry and the other \u201cmeme stocks\u201d (and it\u2019s not simply that their names squish two capitalized words together). There is a nostalgic element that appeals to the exact type of investors who are most active in these names. My 23-year-old son Charlie, while noting that his friends are consumed with day trading, texted me the following observation:<\/p>\n\n\n\n
\u201cThe short squeezed WSB stocks all have one thing in common besides being short squeezed. They\u2019re all things a 20-something person would be nostalgic for. GameStop, AMC, Nokia, Build-a-Bear \u2013 things that would make you sad to hear are failing business because it means that you\u2019re old.\u201d<\/p>\n\n\n\n
I had been trying to figure out why a seemingly ragtag list of brands had such staunch advocates all of a sudden. There was an emotional chord behind the mania, beyond even the desire to get rich and the latest expression of the age-old desire to \u201cstick it to the man\u201d. There is a real sense of advocacy behind many of the posts, and this would explain it. Beyond the names mentioned in Charlie\u2019s text are other popular \u201cold-school\u201d brands like Express, Koss, Bed Bath & Beyond and Tootsie Roll. All household names, all places that they went to as children or brands that they asked for on those shopping trips. I certainly can\u2019t verify this being the only cause of the recent mania \u2013 it was undoubtedly made combustible by short covering \u2013 but it seems like a reasonable explanation for the type of names that were chosen.<\/p>\n\n\n\n
And like all manias, this one seems to be abating today. As I write this, all those names are sporting double digit percentage losses \u2013 some after showing double or triple digit gains earlier today or in the pre-market. Bubbles usually burst. This one happened to inflate and deflate in a remarkably quick time frame. <\/p>\n","protected":false},"excerpt":{"rendered":"
It is clear that the market narrative was seized by a young populist horde. The current activity captured the public\u2019s imagination in an unprecedented manner.<\/p>\n","protected":false},"author":4,"featured_media":74062,"comment_status":"closed","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[14700,6,8,9,22,26,3],"tags":[4262,3351],"contributors-categories":[13576],"class_list":["post-74055","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ibkr-market-insights","category-north-america","category-region","category-securities","category-stocks","category-text-articles","category-traders-insight","tag-blackberry","tag-gamestop","contributors-categories-interactive-brokers"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\n