Gamestop. AMC theaters. Hedge funds. Reddit. Robinhood.
Who is trustworthy and does it matter?
Gamestop as a company shouldn’t be doing all that well, honestly. With a ton of brick & mortar stores in a pandemic and an audience who has largely shifted to online playing and buying, I’m kind of surprised to see them still in business. [Interesting side note, they’re headquartered right here in Grapevine, Texas but I’m kind of happy that doesn’t get a lot of airplay.] Their stock price was probably on target at $5/share.
Mob mentality is weird. And scary. I don’t have a full knowledge of why a bunch of people on an internet forum decided to gang up and attack. The first reasons given (as I understand them) were that they were fighting against the system. It was a power play. But in the end, I think it was about greed. They figured out a way to beat the hedge funds at their own game.
I don’t like the fact that the markets shut it down. That doesn’t seem like a free-market economy; I also understand why they did it. It could have spiraled at a massive scale quickly and done some serious damage to an economy that already has some fissures in it. I have a feeling the occurrences from this week might cause some changes to the rules.
I like to play 42. Though I don’t play it all that often. It’s a game of dominoes. You play with a partner against another team of two. There are seven hands each round and your goal is to try and bid the right amount of hands (and points) you think you can get. Some times you just don’t have it and you are mostly just a filler, helping your partner or trying to trip up your opponent.
Other times you have good dominoes. And so you bid and work towards grabbing as many hands and points as you can to cover your bid.
There’s also a third way to play: Nello. If you play the card game Spades, it’s called nil. The goal with Nello is to lose every hand. Essentially you have a hand full of non-matching, low count, or generally bad dominoes. You estimate that you can make it through all seven hands in one round and not pick up a single one. It’s okay if your partner does but that doesn’t count against you. If you can make it through all seven without winning, you win.
I have a strategy though.
At the start of a hand, If one of my opponents seems fairly strong based on their bidding, I might come at them in reverse. I go Nello. I know they have good dominoes which increases the chances of them picking up a lot of hands.
It a fairly effective strategy and tends to work a decent amount. It also frustrates your opponent but it works.
I’m no stock market expert. I don’t understand the intricacies of the shorts, the options, the margins, the borrowing-of-stocks-only-to-sell-them-back at an undetermined date.
But I understand 42. And this week, I liken this stock market game to dominoes.
Melvin, Citadel, and the number of other hedge fund investors who lost billions this week, went strong on their bidding of Gamestop and the others. 31, 32, maybe even 33.
In their mind, they had the closest thing to a sure bet. Gamestop — as a brick and mortar company — seems like it had one foot in the grave. AMC still can’t let more than like six people into a theater at a time (and who wants to go to an in-person movie anyways!). Their hand was good.
But maybe, what they didn’t pay attention to, was their opponent. Their opponent didn’t have a strong hand. They haven’t ever had a strong hand in this game. In the past, maybe they’ve had a few dominoes that matched and thought, ”I’m going to bid 30 and see what happens,” but then they’ve either gotten out-bid or beat.
I think they got tired of getting beat… so they went Nello. And the game changed. Possibly forever.
“Internet thugs” are getting hammered for gaming the system. “Rich billionaires” are getting hammered for gaming the system. “The system” is getting hammered for changing the rules of the game mid-stream. Robinhood is getting hammered for seemingly wasting six years of brand reputation and ‘siding’ with the billionaires. The fact that they don’t have the ability to make all of the rules and that they have guidelines and standards that they’re held to so they don’t get shut down as a company don’t always get brought up in the conversation.
People lost money this week. Billionaires did. And people with pensions did. And the people who bought GME and AMC at $350/share trying to catch this crazy ride only to watch it fall to $170/share six hours later did as well.
There are some people who made money this week but I’m not sure if there are any winners.
Mob mentality, whether in physical force like we’ve seen regularly in the “news” the last 5 years, or now we’re seeing in digital force, is weird. And scary.
The good thing is, you don’t have to win every hand. You can win just enough to trip them up or you can lose them all and still win. You’ve got options, you don’t have to join the mob.