Rage Against The Machine
"The Matrix is a system, Neo. That system is our enemy. But when you're inside, you look around, what do you see?" - Morpheus
It's been the biggest story of the week...Yes, GAMESTOP otherwise known as GME for all you financial gurus and r/wallstreetbets. So what's this story of the public out running hedgefunds and Wall Street? Well, I have been saying this stuff for years; institutions f**k up at some point too and the playing field is much more level than it was 30 years ago; information asymmetry that existed back then, is just not the same any more. What does this mean? It means that, the power of crowd collaboration is here and the finance space is about to get disrupted like AirBnB disrupted real estate, like Bitcoin disrupted currency issuing, like Facebook and Twitter disrupted media and Clubhouse will soon disrupt the social media space in ways we can't even imagine. What's obvious to me is, disruption is here to stay and institutional boomer investment managers need to sit up and take notice.
Whoa! Whoa! Hold it there mate... This is just a glitch in the matrix, they are about to get this s**t under control, I hear you say. Well, yes, they can raise margins, yes, they can block your options trades, they can even shut down the system but that will lose them billions in revenue. Take Robinhood, they are about to face congress on claims of market manipulation, they had to draw down their credit reserves by $200m to cover the GME trades from their clients, to make matters worse they cost their clients millions by restricting access to GME shares. There is no world in which they can pretend they are the big boys anymore.
So we have entered a brave new world, a world where the herd has started a mindless stampede, a world where protest can be played out on any stage and nothing is off limits. How governments respond to the new threat of crowd behaviour will set the stage for the institutional future of finance. So yes, Melvin Capital needed a bail out and yes, it is likely Elon Musk, Scion and so many others where manipulating the crowd but the fact remains, the crowd just realised it's potential and the system is the enemy. To end this note, I'd say, watch this space because it won't be long before the war begins.