When Markets Become a Pop Culture Phenomenon

The stock market became a pop culture phenomenon this week with the GameStop saga.

This could be dangerous because now everyone has a take (many of them bad).

Friends, relatives and co-workers were talking about it non-stop.

Politicians waded into the fracas.

Sports podcasters were commenting on it and stoking the flames of outrage.

Social media personalities were jumping in to score clout points with the masses.

Billionaires were investing in Gamestop or complaining about short-sellers.

The hottest investing app ever may have left a permanent stain on their brand.

It’s wild to think the Great Depression turned an entire generation into frugal misers while the Great Pandemic has turned an entire generation into rabid speculators but here we are.

I never thought we would get to the point where all corners of the internet would be cheering on a group of day traders on a message board but here we are.

A group of message board traders taking down a group of hedge funds like this is so impressive.

We taped our podcast this week on Monday afternoon. It feels like it was 3 months ago in terms of the news cycle on this thing.1

On that episode, I made the comment that the SEC could potentially go after the WSB traders for pumping the stock on their message board. That doesn’t mean I think it’s right for them to do that but I was assuming the hedge funds would complain and going after the little guys is easier than going after the big guys with expensive lawyers.

But now I don’t think there’s any way they can go after them. People would lose their minds if that happened (and rightly so).

I’m also not worried about the hedge funds involved in this. This is what they signed up for. If you’re going to charge 2&20 you better understand the risks involved in your strategies. I don’t worry about the markets being broken either. Markets adapt. Investors learn. Volatility is nothing new.

I am, however, worried about young people losing trust in the markets and never coming back because they perceive (rightly or wrongly) the system is rigged against them. I’m worried the gamification of investing is here to stay and people will learn the wrong habits about how to invest for the long-term. I’m worried social media allows information and outrage to spread at such a fast pace that it becomes easier for people to believe things that simply are not true.

And I’m worried there will be a number of unsophisticated investors who get left holding the bag on some of these stocks when the dust settles on this thing.

I’ll have some more thoughts on the lack of trust in the system tomorrow.

In the meantime, here’s the video from this week’s show for more thoughts on GameStop and how young people are taking over the markets:

Subscribe to The Compound for more of these videos every week.

Now here’s what I’ve been reading this week:

  • I didn’t want people to know I’m bipolar — I’m from the hood (Independent)
  • The Michael Scott theory of social class (Alex Danco)
  • The most ancient black hole is bafflingly big (Science News)
  • Density, Algos & Gamestop: This time it’s different (ETF Trends)
  • When they start to lose they change the rules (Dollars and Data)
  • Keith Gill drove the GameStop mania (WSJ)

1Next week’s Animal Spirits might be 3 hours long.