I'm watching but not buying anything, however I'm seeing tons of people on social media putting their life savings into this and posting about it and very clearly don't understand what's happening. This is also something that I could see people make a bit of money off and then decide they can easily repeat it (because they dont understand it) and bet it all on something again and lose it. WSB is inundated with people wanting to know what the next GME is to they can dump their life savings into it.
Yes, that part scares me. There will not be another GME. Other stocks might see some small jumps because of GME (like AMC), but people putting their life savings at this...no bueno. Worst case is a bunch of people with 0 experience make a ton on GME, get overconfident, then get suckered into "this is the next GME" type crap and then lose everything.
Hopefully the proportion of people throwing money at this for the memes/to bleed HF is greater.
I'm with you both.
While WSB has historically been a place to see wild memes mixed with wild bets, the huge influx of users has brought a lot of regular people unfamiliar with the landscape. Like you said, I've seen a ton of "I'm putting my rent check in $GME and paying rent with a credit card" posts that are
heavily upvoted. And as you said, it's not just WSB—plenty of folks on social media are saying similar things.
It's always hard to separate fact from fiction on WSB, but I'm worried people are really doing it.
I wrote something up about just this—
why I'm worried about Gamestop stock.
Here's the sort of concern I have:
There is an ever-increasing number of commenters on /r/WallStreetBets saying they’re paying their rent with a credit card and buying a share or three of GameStop. Others have taken downpayment money or college funds and put it in. Many, many people suggest they’re paycheck-to-paycheck and are doubling-down on GameStop with any funds they can come up with.
As another poster mentioned, I think it's likely that institutional investors are riding the hype train bubble up...and will probably get out before regular joes and janes do:
Might individual long investors now just be selling to each other to keep the price going higher?
Is it instead today’s Tulipmania?
I don’t know. There’s not enough data to be able to analyze this. The folks who do have the data or at least an inkling of it are almost certainly taking advantage. Are the hedge funds now riding the stock price up, making a killing on the backs of regular Joes and Janes that have been trying to put the screws to them?
Probably. Sadly.
While I'm sad to think of what is likely going to come at the end of this for a ton of individual retail investors with large chunks of their savings in GME—especially in the context of someone who tries to promote financial independence—I also hope it leads to a less toothless SEC that might be able to even the playing field. I'm not sure how, but it's the sort of silver lining I'm hoping for. Anybody have some specific thoughts on that topic?
From a less emotional perspective, it's
terribly interesting watch from the sidelines. It seems like a giant behaviorial economics experiment running in front of our eyes.
How long will the diamond hands last? How long will they fight rationality? Are the shorts already out and they're really just trading amongst themselves (a case of the "greater fool")? Or is there still plenty of short money to go around if they continue to hold?
On the experimental side, it makes me think a lot of the Public Goods Game:
Here’s a simple example:
Let’s say there are 4 players given $10 each and the pot multiplier is 2x. If everyone contributes their full $10, the total shared pot is $40. It’s multiplied by 2 and the total is $80 which is then divided amongst the 4 players.
Everyone walks away with $20 instead of the $10 they started with.
Let’s say this experiment is run again with the same players.
Having seen how things worked out, a player might rightly see that in their own self interest they could contribute none of their initial $10 and assume other players will contribute their full $10 again. Assuming so, the pot will be $30, multiplied by 2 to become $60 and divided amongst all players so each receives $15.
The player who contributed nothing will walk away with $25 (more than when they contributed in the first iteration). Other players only receive $15.
You can imagine how a third iteration may result in no one contributing anything and everyone getting just $10.
In fact, that’s what experiments in this game often show—different multipliers and group size affect the result but subsequent iterations tend to decrease contributions.
If GameStop investors continue to hold, they won’t see any monetary value from the increased share price. They’re effectively keeping as much money “in the pot” as they can.
Their self-interest pushes them toward selling as each day passes and more shares change hands in a sort of iteration of the public goods game.
Will our “players” in this game be able to hold through more iterations that have been found to be experimentally “normal”?
These Public Goods Games experiments, the classic "Prisoner's Dilemma", Game Theory... it all suggests that individuals still invested in GME at the moment
should follow their own self-interest and get out.
But what happens if their self-interest isn't profit...and it's actually an ideological fight?
I'm not sure what's going to happen here, but as Mustachians...it's terribly interesting to watch and learn.