A wave of excitement and giggle has hit the investment world. In January 2021, retail investors joined forces to take positions in heavily shorted stocks like Game Stop Corp. (NYSE: GME) and AMC Entertainment. (NYSE: AMC) to make money and teach hedge funds a lesson. These retail investors intended to turn a profit by artificially boosting the share price of these two stocks, which would prompt hedge funds like Melvin Capital to cover their short positions at a higher price before the expiration dates to prevent further losses.
The Reddit forum WallStreetBets became known as the initial community of retail investors to drive the prices of GME from around $10 a share in September 2020 to $483 on Jan 28, 2021. The collective effort enabled a company that had a discredited business model (brick-and-mortar video game and electronics seller), has been called the blockbuster of video game,[1] and was at a 5-year low valuation to enter the Fortune 500 list.[2] Less than a month later, the GME price closed at $51. As many things in life, it started fast and winded up like a breath.
Albeit this was the case, Christians should not miss the opportunity to learn some lessons about human nature from a story that has consumed the news in the last several weeks and is likely to become part of finance textbooks in the coming decades. Before offering the three lessons, we have to understand when, where, and how the GameStop story began.
The onset of the GameStop Phenomenon
In September 2020, four months before GME price skyrocketed, a Reddit user named Jeffamazon (not the real Jeff Bezos) wrote in the WallStreetBets forum a bombastic post entitled: “The Real Greatest Short Burn of the Century.” In it, the author greeted the Reddit crowd with the following words,
Sup (What’s up) gamblers. Feel bad about missing the gain train on TSLA (Tesla)? Fear not – something much greater and stupider is here. You know Citadel? The MM (Market maker) that took all our money today? Well now we finally won’t be at the mercy of the MMs. Instead, we’re going to temporarily join forces with the Galactic Empire and hijack the death star.
Our choice of weapon… $GME.
What follows in the post is a detailed description of the “setup” that offers an opportunity for the forum members to understand the huge potential returns they would have by making GME soar. The author explains that the hedge fund shorts—who were betting against GME— had a limited time (16 days) to cover the short interest ratio. The problem for the large institutional investors would gradually mount due to the low volume of shares available for trade, since Game Stop insiders were buying the stocks, while hedge funds were “trapped in their position.”
In sum, this is the logic: the more investors buy call options and shares, the more Wallstreet shorts would be squeezed—as they would be pressured to repurchase the shares from the retail investors, who were unwilling to sell. The continuous growing demand from small and large investors would almost create an unending buying cycle, which would take GME up and up like a rocket going to the moon. After explaining the steps and the process, Jeffamazon warned the reader, “To tell you the truth, I don’t even know how far this is going to blow up, since there is literally no historical precedent for this. I just know things are about to get very very insane.”
To further persuade the forum members, Jeffamazon evoked an authority that was also betting on Game Stop: Ryan Cohen, who was an expert in e-commerce, had the ability to make Game Stop “compete against Amazon and Walmart” and was going to be involved in restructuring the company. Moreover, the author alluded that the Game Stop healthy balance sheet and the additions of two other activist investors, Kurtis Wolf and Paul Evans strengthened the Game Stop turn around narrative. What else did retail investors need? They had visionaries surrounding the company, rich Wallstreet managers to be trolled, and the promise of huge returns. The post not only sparked curiosity but gave birth to a different movement.
Understand the Wallstreetbets
The main challenge to understand the WallStreetBets community is that it is not formed by a homogeneous aggregate group of qualified analysts that daily appraise the stock market and cryptocurrencies. Instead, it is mostly characterized by people coming from different backgrounds, education, ethnicities, goals, motivations, and even seriousness that see in the world of finance a new horizon to explore.
As anyone scrolls down the lengthy forum pages, it is evident that some paragraphs explained and exhorted the community about holding stocks until a particular date to squeeze Wallstreet; however, the rest or majority of the posts may be summarized as a surplus of jokes, photos, and entertainment, but usually for a reason.
As the price of Game Stop began to climb in January, members of the community contributed in any way they could to ensure the movement would persevere. The daily posts with words like “Hold!”, “Diamond Hands!”, or “To the moon!” created a collective imagination that served as the main fuel to keep the engine moving. People used their skills to create numerous Tiktok videos and memes that painted the cause as noble and heroic in a humorous manner.[3] All of this seems to have contributed to the ecstatic confidence and sense of power among the members.
I have heard from an early investor in the movement who confessed, “I have never been so excited about the stock market before, and I feel that I’m part of something bigger.” If people were bored by the pandemic, now they have something going on to distract themselves or give them a purpose.
Although at first glance this description sounds like a story of young folks having a blast, yet as one pays closer attention to the language and content shared a different picture can also be painted. Little effort is needed to find members calling each other “apes,” “retarded,” and “idiots.” Mocking each other and poking fun at everybody seems to be an intrinsic element of the culture. It is not the only element, but it is part of it. As Elizabeth Lopatto commented about Gamestop “the internet is real life.”[4] People comment about what they think, and they think about what they comment. On February 10, the new topic trending on WallStreetBets was weed stocks and memes about how cool and fine it is to smoke weed; for if promoting the company is fine, what is the problem about promoting the product? That is an inevitable association. It’s hard to convince anyone that the ticker symbol of a stock and a chart are the only things that matter, even for day traders.
Thus, Christians should be cautious to attempt to legitimize the WallStreetBets cause as a whole or mitigate the conflicting moral issues by only focusing on the narrative of the little man having a good time and legally taking money from the big man wearing a suit and tie. Even though the idea of using the market as a response against hedge fund managers that were over shorting (GME: 140% short) does not violate the law of the land, there are multiple dimensions that Christians should ponder about before taking a side. The more one investigates popular forums and study how big players have historically manipulated the markets in their favor, the more one needs to conclude that rarely we find righteous sides that we as Christians should categorically defend.
Three Lessons about human nature from the Game Stop Phenomenon
The first lesson believers should recognize from the Game Stop story is that humans are naturally followers. Even Jeff Amazon, the member behind the post that sparked the movement is following his leader: Ryan Cohen. The WallStreetBets speculator made that clear in a response to a user who noted, “u/JeffAmazon (the reason most of us original guys got into it in the first place) never talked about $500, $1000+, etc. as far as I know,” with the words “I won’t talk down on bagholders, but betting on another squeeze is misguided. Bet on Cohen. It’s always been about Cohen.”[5]
No one is in fact an autonomous thinker. We take clues from each other and from those we admire. The books we read, the podcasts we hear, and the conversations we have are all like bricks that we use to build our intellectual homes and often our investment strategies. Learning and human development happen in community, whether that will be the local church, the school, or forums, are for the most part a matter of personal choice.
If that is true, then reflecting on Solomon’s wise instruction on association has a great value as Scripture affirms, “Whoever walks with the wise becomes wise, but the companion of fools will suffer harm.” (Prov 13:20). The implication is that whoever we decide to follow and walk with will influence how we think and how we act. It is then for our good that we should remember to saturate ourselves with the presence of wise godly man of the past (although they are dead, they still speak) and present that will help us to seek Christlikeness and to pursue whatever is good and true.
The second lesson is that humans desire to be prosperous. Danger arises when to become prosperous (in the monetary sense) one chooses the easy path. No one is immune from the tempting tentacles of the octopus of instant gratification and quick gains. Even a brilliant intellectual like Isaac Newton has fallen prey of such a monster. In 1720, the physicist bought shares of the South Sea Company. Ben Graham called it “the hottest stock in England,” [6] which monopolized the trade in Spanish colonies in South America. Newton made 100% profit of £ 7,000 on his initial investment, but after selling the stock it kept moving up and he repurchased the shares at a higher price and lost £20.000 pounds (around 3 million dollars today).[7] Malcom Balen named that event a national lottery that created the first international crash and bubble.
It is factual that some early GameStop speculators made a fortune like the Youtuber Roaring Kitty, but how many people used money destined to pay bills to buy overpriced shares with the assurance of having huge returns? That remains unknown. But I know at least one person who started buying GME when it reached the $200 mark, $150 more than the current price. Unwise speculation can lead to astronomical loses and tragic ends like the story of a Robinhood user who lost 90% of his savings over the past six years and contemplated suicide,[8] or worse, the college student who in fact committed suicide after seeing a negative balance of $730,000 in his account and for being unable to contact the broker.[9]
Scripture offers an important reminder about chasing after patterns of quick gain, “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.” (Prov 13:11) Diligence, prudence, and patience are indispensable life principles. To ignore Biblical wisdom in pursue of alternative financial strategies can be problematic in other dimensions too. For example, a person that decides to go after quick gains will neglect his vocation in favor of seeking different manias that promise humongous returns like The Tulip bubble that happened once in the Netherlands. That was perhaps the only opportunity for a florist to become rich almost instantly, but how about the many other professionals who never had a similar fortuity? Would it be wise to cease to be a baker just because a florist for a period of time got lucky? No, because manias cannot always be predicted and to chase after them would distract an individual from exercising the gifts God granted him to glorify the Creator and to contribute to the common good.
The third lesson is that humans yearn to be relevant, a part of a greater cause, and to be religious. That reflects part of who we are created as image bearers. Jeffamazon motivated the Reddit users not only by offering them the gain promise but also the chance of being relevant and part of history. Prosperity and recognition go hand in hand. Since God created humans to live in community, the desire for acknowledgement and recognition became part of the equation.
The impetus to seek after something and to worship will always surround our communities and our inner selves. However, in man’s current fallen state what the man’s factory produces is idols 24/7. It matters little whether the new thing or idol will come in the form of a hot stock, a political allegiance to a political party, or an environmental cause. The human heart “is deceitful above all things, and desperately sick; who can understand it?” (Jer 17:9) Christians should not be surprised when another enticing narrative comes up, they just need to be prepared to approach and interact with it from a biblical Christocentric framework.
[1]Anders Bylund, “Is GameStop the Next Blockbuster?” The Motley Fool, Dec 17, 2019, Is GameStop the Next Blockbuster? | The Motley Fool, Accessed on Feb 10, 2021.
[2]Lee Clifford, “Yes, GameStop is actually a Fortune 500 Company” Is GameStop a Fortune 500 company? Yes, GME ranks at 464 on the 2020 list of companies | Fortune Jan 28, 2021, Accessed on February 10, 2021.
[3]$GME – End Game, $GME – End Game 🚀🚀🚀🚀🚀 : wallstreetbets (reddit.com)
[4]Elizabeth Lopatto, “How R/Wallstreetbets Gamed the Stock of Gamestop,” How r/WallStreetBets gamed the stock of GameStop – The Verge The Verge, Jan 27, 2021, Accessed on February 11, 2011.
[5] the squeeze has not yet sqouze. lets discuss!!! : wallstreetbets (reddit.com)
[6]Ben Graham, Intelligent Investor, 13.
[7]Ben Graham, Intelligent Investor, 13.
[8] I was addicted to Robinhood and Wall Street Bets. I spiraled out of control, wiped out my $70,000 savings, and contemplated suicide. Here’s my message to Robinhood and new investors. I was addicted to Robinhood and Wall Street Bets — and lost everything (businessinsider.com)
[9]“A 20-year-old died by suicide, thinking he’d lost more than $730,000 on Robinhood. Now his family is suing.” February 11, 2021 Robinhood sued by family of Alex Kearns over options traders’ suicide – The Washington Post Accessed on February 12, 2021.
