Penn Wealth Publishing

2021.03.21 Penn Wealth Report Vol 9 Issue 02

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6 penn wealth Report voluMe 9 issue 02 21 Mar 2021 Copyright 2021. All Rights Reserved. tactical Awareness There are so many great lessons to be gleaned from the GameStop GME $223 trading frenzy that we hardly know where to begin. Actually, let's begin here: ere was nothing new in the narrative other than the players, and the David vs Goliath notion is tenuous, at best. One more overarching point: e millions of young traders who got pulled into the frenzy are no different from the millions who got sucked into the dot-com bubble two decades ago, other than being a generation younger. e truth is that, for attentive students of the market, these les- sons were out there just waiting to be consumed, all for the price of an e-book or two. I was a young broker during the dot-com frenzy, and I remember the exact same level of enthusiasm surrounding the "new economy" names like eToys, Pets.com, and even telecom giant WorldCom—the last one being the "safest" of the bets on the rapid- ly-changing economic landscape. I recall one market expert (he was really just a slick marketer poising as an investment guru) telling business channel view- ers—like me—that the rules had been rewritten, and that we wouldn't see another major correction until the early 2030s based on his study of demographic trends. His "brilliant masterpiece" came out in 1998 and sold like hotcakes. Followers flocked to him. ere is nothing we love more than the democrati- zation of the stock market. e idea of young people who formerly had zero interest in investing suddenly putting money to work—perhaps even in an IRA they won't touch until it has grown large enough for them to live off the withdrawals—is a success story in and of itself. at being said, there are some universal laws of investing which were embarrassingly ignored in the GameStop story, just as they were in the dot-com era. Why were they ignored? Because they involved putting forth the effort of performing some basic research, and who has time for that? Just pick your team...er, stock...and jump in! While the story is far from over (many of the traders have since moved on to pot stocks), let's dissect what happened with the goal of becoming smarter investors. How the reddit army got its marching orders Reddit—technically spelled with a lowercase "r"—is a social news aggregation and discussion site. Posts are organized into subreddits based on topic. e subreddit r/wallstreetbets, which we will subse- quently refer to as WSB, is a group known for its aggressive trading strategies and salty language. ough we doubt many WSBers have heard of it, we A quick-and-dirty method for leveraging the reddit army to gain advantage. A few classic short squeezes. Graph courtesy of Penn Wealth/YCharts. Behavioral Finance e GameStop Short-Seller Smackdown e contents of this report reflect the personal views, opinions, and research of Penn Wealth Publishing. While measures are taken to help assure the accuracy of data, no guarantees can be made and the firm is not liable for any losses incurred by subscribers. is is not a solicitation to buy. Always consult your investment professional before investing any money.

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