GameStop & Meme Stocks Galore
I’d be remiss if I didn’t acknowledge the GameStop saga that’s been dominating headlines over the past two weeks. As the situation continues to unfold, there has been no shortage of prognostications on what this all means for the future of financial markets. Based on who you speak, to or what you read, this situation could either result in long-lasting systemic changes, or it will blow over and be an afterthought in a month from now.
From my perspective, I get the sense that we’ll land somewhere in the middle. I think the past few days have been the most telling on how things will ultimately shake out. Since peaking at $483 less than two weeks ago, GME closed out on Friday at $63.77. In tandem with the stock collapsing over the past week, a wealth of high-quality information emerged raising questions to the public narrative of how the price ran so wild in the first place. Was it reallyRedditor’s and retail traders writ large that drove this rally, or were there other, less headline-worthy, forces at play here? The data
will tell you that it was most likely the latter and the hedge funds actually had the last laugh.
That said, and regardless of the true impact that retail traders had on the price moves, there are real societal implications here. No matter if GameStop and other related meme stocks quickly fall into obscurity, the cat is out of the bag on many of the disparities that currently exist in the equity markets. While I support the push towards further democratization of finance, I don’t necessarily believe that hedge funds and institutional traders should be cast as the villains they’re made out to be. Given I recently spent nearly three years working at D. E. Shaw, I can attest firsthand that much of the narrative painted by the media about hedge funds is far removed from reality.
With that in mind, as I’ve spent more time trying to get a better feel for what this all actually means, a few key takeaways have emerged for me. Most notably, are the forces of reflexivity
, the exposure
of Wall Street’s double standard, and the importance of discipline. Related to discipline, I don’t mean staying disciplined in the traditional sense that you may be thinking of.
My understanding of discipline has changed since coming across Venkatesh Rao’s working definition of the word in his excellent essay, Daemons and the Mindful Learning Curve.
In it, Rao shares the following,
“I used to think discipline was about machine-like predictable performance. Now I believe discipline seems to be about showing up like clockwork, and accepting whatever happens: peak performance, trough performance or anything in-between. And then showing up again.”
Through this lens, discipline becomes more about the process itself rather than a rigorous means to an end for achieving some goal.
Tying this back to GameStop, I believe viewing discipline in this sense helps gives clarity to how Investors, both professional and retail, can apply learnings from this situation going forward. Realizing, and accepting, that some days you’ll hit peak performance and others the opposite, makes it easier to establish and follow a chartered course. This ultimately allows you to better avoid the hype and distractions that abound with situations like Gamestop. To that end, you can dismiss the noise associated with these types of events, like Redditor’s minting (paper) millions on YOLO options, as exactly that—noise.
Now that I’ve shared my view and takeaways on this whole ordeal, I want to reiterate that they are just that—my views. It’s not my goal to try and persuade anyone else to think about this situation in the same way that I do. Rather, I implore you to come to your own independent conclusions. And I’m sure many of you already have.