By now, you must have read (or at least heard) about the rebellion of normals against the Wall Street Hedge Funds. A collective of Redditers nearly took down one of the biggest hedge funds, Melvin Capital, by what amounted to a massive short squeeze. “What we are witnessing this week is a civil war (or war of attrition) between a socially-linked and large class of small investors against a small and exclusive circle of Wall Street short-sellers, like Citron Research or Melvin Capital,” notes Matt Piepenburg, a former hedge fund manager and now an investment advisor.
“What’s happening with GameStop looks less like a speculative bubble and more like a contemporary, internet-mediated version of the ‘bull raids’ that were characteristic of the stock market in the early 20th century, when organized pools of investors would combine to drive stock prices up,” writes James Suriowecki, a veteran writer on all things finance and markets. “In an odd way, it’s a remarkable testament to the internet’s ability to facilitate collective action.”
Dan Ramsden, a Wall Street professional who has been writing about networks and markets for over a decade, published a piece this week pointing out that markets are always driven by sentiment, but now “the extent to which pure sentiment drives market moves has shifted far towards the max.” The reason we are seeing (and will see) more of this kind of collective behavior is because that society is so hyper-connected that sentiment can become a cancer that metastasizes really fast — be it in stock markets or in politics.
For good measure, here’s an alternative viewpoint: “Goliath vs Goliath, with David as a fig leaf”