Announcing My New Hedge Fund

by JDH on January 30, 2021

No, I’m not actually going to start a Hedge Fund, but I should, eh?  I’ll buy nothing but Gamestop.

For those of you hiding under a rock for the last week, a bunch of dudes on Reddit decided to crush the short selling hedge funds, and Gamestop was one of their targets.  Gamestop owns retail stores that sell video games, and given the lack of retail activity due to the pandemic, and since you can download many video games and don’t need to go to the store to buy them, Gamestop’s shares have had lackluster performance for many years.

The shorts were shorting.  Apparently more than the entire float of shares was being shorted.  That doesn’t seem mathematically possible, or legal, but there you go.

So, as the story goes, the dudes who are living in their parent’s basements and are using their stimulus checks to daytrade decide to start buying.  They posted it on Redditt, and off it went.  They use trading platforms like Robinhood that charge no trading fees, and that allow you to buy non-board lots, so you can “invest” a very small amount of money, and buy small quantities of share.

But if a million people buy 1 share each, that’s a million shares, and it adds up.  And so it did.  The little guys inflated the price, and the shorts had to cover.

But the shorts didn’t want to cover at a loss, so the big institutional short-traders called Robinhood, and the other online brokerages, and said “help”, and they said okay, we’ll prevent our customers from buying.  That should do it.  And it did, for a while, but when trading resumed Friday morning, up went the shares, so Gamestop, which started the year at less than $10 closed on Friday at $325.  The little guy won!

Or did they?

Is that really what happened here?


This is not a story of David against Goliath.

It’s a story of Goliath against Goliath.

Robinhood is not a platform to help the little guy.  The reason Robinhood trades are free is so that the big guys can front-run those trades, and make a profit.

Robinhood is owned by Citadel.  Citadel was founded by billionaire Ken Griffin.  Robinhood is not the “little guy”.

How will this end?

I don’t know, but if I had to guess, I assume the big guy will win, and the little guy will get steamrolled because that’s what always happens.

You’ve been warned.  Buyer beware.  Observe from a distance.  This is not a game you want to play.