[IgorPartola]

That’s a really interesting take. The way they seek the lowest common denominator of communication does seem to create a strong sense of community.

What I mean by dangerous is this: as more people flock there more capital will enter the market through that gate. And that’s a lot of money to be directed by whims of a fickle and undereducated community that tends to ride whatever is popular at the time. This time they pump and dumped GME, AMC, and BB. What happens when they do this to a different company like say Amazon? Anything good/bad?

[sillysaurusx]

Their counterargument would be "How can we have insider knowledge when we have no knowledge?"

I get what you're saying, and it's a valid perspective. But, this gets back to the root of the issue: the older I get, the more it seems like there is a class division in society, and the upper class will do whatever it takes to ensure the lower class stay low.

I hate phrasing it like that, because you can't even say it without sounding like a loon. But think carefully about what you're saying. You're essentially saying that it's dangerous for uneducated, unsophisticated people to band together.

I'm not saying you're wrong. I'm saying, rich people aren't so different, and they are equally dangerous. Moreso, since they have the resources. So I personally find it hard to worry about some people collectively throwing around a few hundreds of millions.

My effort here is to try to convince you -- only you, not whoever's reading this -- to aim your worry "up the chain," so to speak, and to take a hard look at how the rest of the industry acts, and why the structures are in place. It seems false to say that these protection mechanisms are to prevent another 2008 from happening; after all, the 2008 crash wasn't caused by unsophisticated investors.

[IgorPartola]

I think I wasn't clear in what I was saying. I made it sound like them being dangerous was a bad thing. I am placing no value judgement on WSB, just acknowledging that they are on the way to becoming a serious player in this game, with the ability to cause serious damage to other players (hedge funds, public companies, etc.). This is a quality that I already attribute to the hedge funds, the SEC, the big corps, etc. as inherent. Whether WSB becoming a serious player is a good thing or not is really not clear to me. I would expect that it results in a lot of collateral damage, first and foremost to some percentage of retail investors. At the same time, the fact that you can short stocks in the manner that GME got shorted is a much clearer and much more immediate problem, IMO. And I share your view that the haves seem to want to keep the havenots out of their clubhouse and will do all manner of things to keep the separation.

But overall, no I don't think that we should do anything about WSB. The GME situation is at best a symptom of a broken system, it's just that this time hedge funds got (theoretically) hurt not by other hedge funds but by retail investors so everyone noticed. If anything, let's fix the rules of the game so it's closer to fair for the little guy, and fix the SEC to keep those rules properly enforced.

[quickthrowman]

> What happens when they do this to a different company like say Amazon? Anything good/bad?

What do you mean? AMZN has 3 million of 500 million shares sold short, less than 1% short interest. It would take one day for shorts to cover at average volume. Shares are also $3,277 as of Friday’s close, a lot of WSB people can barely afford one or two shares.

They cannot do this to a company like Amazon because the short interest isn’t there and the share price is too high. A weekly at the money call is $3,250 right now. WSB doesn't have enough capital to buy the shares or options.

[IgorPartola]

They can’t do this particular thing to Amazon. But that doesn’t mean they can’t do something else. What if Amazon’s supply chain is found to be dependence to heavily on some other publicly traded company that can be manipulated more easily? What if they find some pattern in how hedge funds trade Amazon that is exploitable? It’s like saying that we found and fixed a bug so the attacker who exploited that particular bug can never find another one.

[bsanr2]

A market so susceptible to mania is maybe in the need of brakes that are used judiciously and without bias. We clearly do not have that, and in fact have been stripping them away since the 80s.

You can't blame this on "unsophisticated" investors breaking norms but ultimately playing by the rules.

[IgorPartola]

I’m not blaming anyone. I think it’s an interesting situation in the same way that oxygen rich atmosphere becoming a thing on earth led to interesting results. The market system is clearly broken. You need not look further than GME for evidence of that. Either GameStop has been undervalued by everyone for years at $5/share and is really worth $50/share (where it is today), which would mean the market is broken. Or GameStop is currently worth 10x what is its true value which means the market is broken. Its sole purpose is to help us efficiently determine how much each company is worth and allow us to trade them. And here we have a situation where nobody can argue (I don’t think) that the market is doing a good job at efficiently determining how much GME is worth, and trading it has a decidedly one-sided advantage towards hedge funds vs retail investors.

My only observation is that while I don’t know what long term effect WSB will have on the market, I think in the short term a lot of retail investors will lose their shirts as collateral damage.