The Tables Turn
Over the past few days Hedge Funds, Wallstreetbets, and Brokerage companies have had quite the messy relationship. For recap, Wallstreetbets has been pushing up stocks that Hedge Funds have shorted to force them to lose money. A key incentive is the desire to give Hedge Funds a taste of their own medicine and pay back for events such as the financial crisis that destroyed the lives of so many middle-class Americans. Hedge Funds aren’t reacting to this kindly, however, in fact many believe they have pulled strings to get brokerages to place a halt to their losses and prevent investors from buying in.
Yesterday the battle took a new turn when brokerages such as Robinhood whose mission is to enable the average joe to invest, literally made investing impossible. That’s right brokerages removed the ability to purchase stocks such as GameStop and AMC in efforts to stop their insane runs caused mainly by retail investors at Wall Street Bets. The backlash to this has been greater than ever with users swearing to leave brokerages forever, filing class-action lawsuits, and writing scathing call outs explaining that they are sell outs for wall street. Even celebrities and politicians from both sides of the aisle alike chimed in with Ted Cruz retweeting AOC in agreement, now that’s something you don’t see every day. All in all, it seems as though the anger is far from gone and retail investors will continue to fight back for their right to send their stocks to the moon.
One question that remains unanswered is how much is this really helping? Sure, there are hedge funds shorting these stocks, but how many other hedge funds are going long and going to make billions? It’s a question that few are asking but is important when considering the motivation behind all this.
So, what do you think? Are retail investors really going to get hurt? Or will they come out on top like they always have?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.