Gamestop… madness or method?

HOSTS Adam & Thomas|3 February, 2021

Meet your hosts

  • Adam

    Adam is the funniest and most successful comedian in his family. He broke onto the comedy scene as a RAW comedy national finalist before selling out solo shows at two Adelaide Fringe festivals. He’s performed stand-up to crowds all over Australia as well as enjoying stints on radio with SAFM and most recently as a host of the Ice Bath on Triple M. Father of two and owner of pets, he may finally be an adult… almost.
  • Thomas

    Thomas, the economist, is the brains of the outfit. He studied economics and game-theory at the University of Queensland and cut his teeth as an economist at the Reserve Bank of Australia. He now runs his own economics consultancy, with a particular focus on the property market. He lives with his wife and two kids in the hills outside Byron Bay.

The news this week in markets was all about darling little retro company, Gamestop, which was driven 400% higher on a short-squeeze. How does that work? Was there an investment thesis at play or was it pure hype? And why is Elon Musk getting involved?

If you’ve got a question for Thomas… or Adam… then go ahead and send them to cve@equitymates.com

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Adam Keily: [00:00:53] Hello and welcome to comedian versus economist, we demystify the world of money and help you get a handle on the bigger picture. My name's Adam and I'm joined, I should say, as always, by my little brother and real life economist, Thomas. Welcome, Thomas. [00:01:07][14.3]

Thomas Keily: [00:01:08] Hey, how are we doing? [00:01:09][0.7]

Adam Keily: [00:01:10] Good, thank you. [00:01:11][0.5]

Adam Keily: [00:01:13] Man what a week. What a week. I think I think Twitter summed up my thoughts this week with this quote where they said, in my three days of trading, never have I seen anything like this. But that is exactly how I'm feeling. I am, of course, talking about the the GameStop read it Wall Street madness that that we saw this past week where share prices of GameStop went through the roof. So they started I think they ended the week 400 per cent up, but at one point they were 1600 percent up from where they started the week. Absolutely ludicrous scenes. Now, Thomas, if I could if you will indulge me, I'm going to try and give a recap. I'm going to try and recap exactly what we're not exactly what happened, in my view, what's going on on Wall Street this week. You fill in any gaps where I got it wrong. All right. So basically, there's a company called GameStop, right? There are bricks and mortar video game store. They've just been generally sucking as most bricks and mortar stores have been not not dissimilar to a blockbuster video store tanking for a long time. And so all the hedge funds are all the hedge funds in the US. They are they all started going, all right, this company's going nowhere. We're going to short GameStop and they will get into what shorting is in a minute. But essentially they are saying we're going to take a punt, that this stock is going to go down in value. And so all these hedge funds got together now or not got together. They all started shorting the game stock share, share price. So the share price to go down and then seemingly out of nowhere, a sub read it on the Internet forum. Read it. Started some murmurs around GameStop and some that this was like a really shorted fund and maybe this wasn't the best thing for GameStop and maybe not the best thing for if you believe Redit the best thing for humanity. So they said, you know, what we should do is we should see if we can just push that, get that stock up a bit. So they got a little bit of momentum. They started pushing the stock up. They all started buying into it to push the stock up, using the platforms like Robin Hood and other other sort of retail trading platforms that got a little bit of momentum. And then Elon Musk decided he was going to get involved and he sent out a tweet which said the game stunk. And at that point the game stopped. Share price has just skyrocketed based on one Elon Musk's tweet, who I'm pretty sure he's just decided to get involved just to mess with people because he's. [00:03:55][162.5]

Thomas Keily: [00:03:55] Why wouldn't you? He's the richest man in the world. [00:03:57][1.6]

Adam Keily: [00:03:58] He's sitting around. He's like, I'm going to have some fun. I bought some hats for my dog and now I'm going to get involved in this in this Wall Street. But read it for him. So he sent out a tweet. The share price of GameStop has gone through the roof. Everyone's cheering on Reddit because now these hedge funds have been caught in what's known as a short squeeze, where they're now looking at debt to the tune of like billions. Right, absolute billions of dollars. And now there's a stand off. From what I can tell, there's a stand off between I guess we'll call it Main Street, which is the retail investors and Wall Street. So Wall Street need to kind of they need the share price to go down. Right, because they need to cover off their shorts. Some of them, I think, have already had to cover off and have lost a packet in the process. But Main Street are kind of holding the line and they're like, we're not selling. We're just going to leave our stock there in the hope that it just screws over more and more of Wall Street. So first of all, did I miss anything? [00:05:01][63.2]

Thomas Keily: [00:05:02] Know, that's a pretty good summary. You probably add there that that Robin Hood in the middle of the week stopped its users from buying any more GameStop or a bunch of companies in that sort of like the short. [00:05:15][12.8]

Adam Keily: [00:05:16] Yeah, they did. Yeah. [00:05:16][0.7]

Thomas Keily: [00:05:18] Which then sent it and people into into a frenzy saying it's sort of there they were at the doing the bidding of Wall Street and shutting down legitimate trade just to protect Wall Street and which was the whole way it goes against the thesis of Robin Hood. So that was a big story. And then but then two days later, they let people start trading them again. So. Yeah. [00:05:42][24.0]

Adam Keily: [00:05:42] So, well, was that the case? Did Robin Hood shut it down at the behest of Wall Street or did they. There was some other like it turned out a couple of days later, there was like there was some technical reason, right? [00:05:54][12.2]

Thomas Keily: [00:05:54] Yeah. Yeah, that's right. So the clearinghouse that they use, which I think is they use in-house, it's a little bit complicated. Didn't use to be, but now it's in-house. But they needed so much volatility in the share price that they needed more capital to cover that. And I think it was like ten times as much. And so Robin Hood kind of as I said, although you literally can't process this much GameStop trade. And I think you sent me a link saying, like half of Robinhood users have a whole GameStop right now. [00:06:25][30.9]

Adam Keily: [00:06:26] So, yeah, it's insane. You know, the funniest thing, though, with the whole Robin Hood thing. The funny thing was that it's a Robin Hood is like a retail trading app. Right. It's kind of brought the whole stock market to you, to your iPhone. You know, in app form, you can just buy and sell stocks like you're ordering from Amazon or whatever. Well, now there's a now that now there's another app on the scene which is called Do Not Pay. And it's described [00:06:54][28.5]

Adam Keily: [00:06:55] as the world's first robot lawyer. And all the people, all the people who are using Robinhood that paved the class action against Robin Hood is being run through the world's first robot lawyer app called Do Not Pay This this app. [00:07:17][21.9]

Adam Keily: [00:07:17] It's described as the world's first robot lawyer on their website. I said you can use it to. And bullet points, fight corporations, beat bureaucracy, find hidden money, sue anyone and automatically cancel your free trials. Oh, the things you want a robot to do very well. Incredible. So, yeah, it's just this kind of thing. All right. [00:07:47][29.6]

Adam Keily: [00:07:47] It's come full circle where Robin Hood lured so many people onto this through this slick app interface. It's so rich in irony that now they're being sued by the world's first robot lawyer. The state will pay for anything. [00:08:04][17.2]

Adam Keily: [00:08:07] All right, so getting back to the story, so and well aware this has been coming. If you've been in anywhere on the Internet in the last few days, then you're going to see this story everywhere. So by the time this episode gets dropped, it's probably going to be even more well covered. We're going to try and bring some bring maybe some a few different angles to you. But first of all, I just want to cover off what is a short squeeze. [00:08:30][23.7]

Thomas Keily: [00:08:31] Yeah. So, well, assure is, as you're saying, is a punt that a stock is going to go down. You're taking that bet. And the way that works in practice is that you borrow the stock from a broker and then you sell it straight away. So you've now sold the stock at the price of the current market price and you owe your broker one stock. And if the trade if it goes in your favor and the price goes down, you then rebuy the stock at the lower price. Give give your broker back the stock that you've borrowed and pocket the difference. Right. The danger is obviously that it goes against you and the price goes up. And so, like, if you if [00:09:19][47.3]

Adam Keily: [00:09:19] you it goes up one thousand six hundred in the big risk. Yeah. [00:09:25][6.2]

Thomas Keily: [00:09:25] So like, if you. Yeah. If you bought it, you'd borrowed the stock, sold the stock at the time at ten dollars and it goes up to 12 and then you've now you still owe the broker stock so you've got to buy it back at twelve dollars, give the broker back the stock and you've lost two dollars. The thing with it is that there's no, there's no upside, there's no upside limit to how much you can possibly lose if a if a short trade goes against you. So as you say, if it goes up six hundred percent, um, you know, they probably were shorting the stock when it was back around eight dollars eight, ten dollars or something now. Yeah. Have sort of borrowed the stock that they owe their broker or a stock, but the stock price now is five hundred dollars or whatever they think is three twenty five us at the last time I looked but so yeah. So they're losing, you know, three hundred dollars on every, every stock that they owe their broker. So you get, you get huge. What can happen? Like they can get margin called in the same way that leverage traders can get a margin call. The bank says hey, you've got a lot of liabilities here and not a lot of cash held against it. We're getting nervous. You need to top up your capital here or something and give us a bit of extra money or close out your position. That can happen to short traders as well. But then what happens is that they then need to go and buy buy stock to close out their position. So they become they start adding heat to the demand side of that equation. So they're out there in the market trying to buy more stock. And if people aren't selling the stock, then that just bids the price higher and higher and then more short sellers get squeezed and have to start to close out their positions. So they start needing to buy more and more. And you kind of create this sort of avalanche dynamic where more that they're trying to close out more and more and the prices going higher and higher. And that's why people were saying, hold the line. What is the sort of the things they don't sell to them? Don't let them close out the position because it just keeps pushing the price higher and higher. [00:11:24][118.8]

Adam Keily: [00:11:25] Right. They said a lot of things there. [00:11:27][1.6]

Thomas Keily: [00:11:27] They did. There was the one I like, everyone started yelling, I like the stock, [00:11:34][6.6]

Adam Keily: [00:11:35] which I think was to try to avoid being caught by the SEC for collusion. They were like, no, this is just we're not we're not ganging up on. We all like the stock. Yeah. I mean, that's also [00:11:48][12.9]

Thomas Keily: [00:11:48] really fascinating because, you know, collusion and pooling, investing, like to get together and to buy stuff is illegal. And I think is it Jordan Belfort, the wolf of Wall Street was on there saying, like, this is exactly what my company used to do, is to get together and try and push it, push the price higher. Um, so. Yeah, so there's a question about whether it's illegal and if someone if, you know, if there was a ringleader behind this if that gets uncovered and they had gone long a year ago and then had sort of somehow instigated this movement, that would be collusion and they could do jail time for that. But it's also sort of an irony, because what is a hedge fund? A hedge fund is an organization that pulls together investors money and then goes and takes positions in the market. [00:12:36][47.2]

Adam Keily: [00:12:38] So it's a little bit like where we draw the line here, like, well, I get well, I guess. But then maybe the hedge fund, like the managers of the hedge fund, aren't that get into trouble if they like, bought the stock and then went out to their hedge fund members and said, now we're all going to buy the stock. I'm sure it's. Sure would be the first time that's happened. [00:13:03][25.0]

Adam Keily: [00:13:03] Yeah, so it's interesting, so we're talking about shorting in the short squeeze. What I have found interesting is there's been a lot of ill sentiment towards short-sellers like his short-selling somehow kind of immoral. Is it unethical or is it the kind of share market equivalent of Trevor Chappell bowling under armor and a one-day game is that people seem to be like, yeah, we got those nasty short-sellers like but they're just picking up direction, aren't they? [00:13:35][31.9]

Thomas Keily: [00:13:36] Yeah, that's right. They are. They are. I mean, there's another angle to it. There are some agencies who will go and research a stock, short the stock and then publish a bunch of research that trashes the company. Right. With an F, you know, with A to say like this company's rubbish. It's, you know, it's defrauding its customers, whatever. And then the price crashes. And if they successfully you know, and if they're if they can do that through publishing their research, there's nothing to stop anyone publishing research. Then they the company price tanks and they make a Mozza, you know, so there's like a question about how like sometimes that's a really useful thing to be doing in the market. Like sometimes those sellers have uncovered companies that were actually just doing dodgy stuff. Sometimes the short sellers themselves are doing dodgy stuff and are just trashing a perfectly good company. And so it's seen as a bit funny. And it's interesting that Elon Musk is getting involved in this because there's been a lot of short-sellers of Tesla, Tesla shares, and a lot of people writing reports about how Tesla's overhyped and not worth anything like what it should, what it's currently trading at and the company's crap. And Elon is an idiot and all this sort of stuff. So Elon like having a time of his life, I think, like he published a tweet saying Get Shorty [00:14:53][76.9]

Adam Keily: [00:14:55] I thought was cute, [00:14:56][1.0]

Thomas Keily: [00:14:58] you know, but I think that's why he's on his pick this side of the fight. One, he's you know, he's positioning himself as a countercultural hero. But to he's like he's got he's happy to see short sellers take a bath. But the other thing is that is what we're talking about. Hedge funds and hedge funds are typically the biggest fish in the pond, um, making billions of dollars and, you know, playing both sides of the trades. And no one's heard a lot of love for them. They're they're always making a monster typically. Right. [00:15:26][28.1]

Adam Keily: [00:15:28] I mean, yeah, because this is interesting, like I mean, it just seemed to me like people were having a go at these hedge funds because they were trying to make money. And I just feel like there's very few people surely that are in the stock market for any other reason than to make money, whether you're buying a stock to go long, to hope it will go up. You're not doing it as some philanthropic adventure to, you know, gee, I really hope Coles sell lots of groceries. [00:15:51][23.5]

Thomas Keily: [00:15:52] Um, I just generally support capitalism. That's my position. [00:15:55][3.2]

Speaker 3: [00:15:59] Yeah. I mean, [00:15:59][0.8]

Thomas Keily: [00:16:00] yeah, but I guess if if they're shorting and they're and then they're like, oh no, we're about to be caught out and they've got enough weight in the market to be then going and releasing research and then flooding the Internet with stories about how this company that they've shodan trying to keep it down, then. [00:16:16][15.9]

Thomas Keily: [00:16:17] Yeah, that's that's not cool. So I mean, I think it did get a little heated because Melvern Capital, which was one of the big companies that had big short positions in GameStop and got hammered, as you know, seems to have lost billions of dollars. There was some good news that came out for GameStop that they got a new CEO, um, a new board, sort of good management team in place. And on the day of that announcement, doubled down on their short selling. And so it seemed to be right. It kind of started to look like the company's fortunes were changing. The short bit was looking less favorable. And so they doubled down in an effort to sort of like, you know, throw out a bit of FUD. [00:17:00][42.8]

Adam Keily: [00:17:01] Right. [00:17:01][0.0]

Thomas Keily: [00:17:02] kind of create muddy the waters, make it look like, you know, when there are people taking big bets that the stock's going to price, it makes other investors stop and think like, oh, maybe, you know, maybe I shouldn't get involved here. So that was I think created some of the heat in the rivalry that emerged. But it's also like I mean, it's interesting because the where it came from, the original thesis was put together by someone with a handle called deep fund value. And it was a really solid investment thesis. He was looking at GameStop. He said, look at this new management team. They the CEO was the former CEO of Chewey, which is like a dog online, dog food, things that had a lot of experience in online retail. He got his management board in place. They were taking. Yes, although they're good, good prospects for taking a digital um. Their online sales are up 300 percent in the December quarter. Things were sort of on the up and up. So there was a good thesis there for why the short wasn't going to play out. Plus you had 130 percent of the shares shorted, which means like there was it was very likely you could get a short squeeze, dynamic kick in. And so there was a really good investment thesis in place before the second round of short selling came. Came in. [00:18:23][81.0]

Adam Keily: [00:18:23] Yeah, right. Right. So let's just pause there for a second. We'll take a break here, grab a quick word from our sponsors and we'll be right back with more after this. [00:18:31][8.1]

Adam Keily: [00:18:59] Hey, welcome back here and comedian versus economist, we are talking hedge funds, Wall Street bets readit short squeezes and time as the company at the center of all this is a company called GameStop, which we were talking about. GameStop share price has rocketed after it was heavily shorted. But you're saying maybe there is some kind of investment thesis for GameStop? [00:19:23][23.8]

Thomas Keily: [00:19:24] Yeah, yeah. I think I think that was definitely the case. And that was put forward. And I think it's it's interesting. Like, there's this almost two plays happening here. The first is a value play and the second is a short squeeze. And so there were people there was a good investment thesis building like they had the company had a few things, good things going in its favor. It signed some sort of distribution deal with Xbox. So it was starting to turn around. It's starting to look like maybe it was undervalued. So there's a difference between value investing and growth investing and value investing is when you get down into the nuts and bolts of the company and its financials and its prospects and kind of really unpack the value held in the company. And so it was it was shaping, as you know, and it's always there's an art to picking a value stock. But there were some people, particularly in the tech community, that were saying that GameStop was of value, a value stock, that it also then had it was heavily shorted. [00:20:22][57.5]

Adam Keily: [00:20:25] I wouldn't go too much about what people were saying in the Wall Street bets Reddit community as investing advice. I mean, I take this in this scenario, there was a thesis. These are the same people that picked Hertz and a bunch of other stocks that have absolutely gone nowhere. The community is known for speculative, just wild pitches that at whatever stock takes their fancy. [00:20:50][25.3]

Thomas Keily: [00:20:51] So, yeah. Yeah, but yeah. And it's interesting because the media, when they latched onto this story, so this is just another hertz. They're backing a bricks-and-mortar retailer like it in a dying industry. Gaming's going online, bought a bunch of idiots. They're just they're having a laugh. But while that does happen, I don't think that was the case. That wasn't what's driving GameStop. And, you know, Scott Galloway talks about like physical stores are moed, like you look at Apple stores or Nike like they've really built the what he calls, like the brand temple into their business case. And so for a digital retailer, as they've already got the bricks and mortar there, maybe that makes sense. Maybe that's a good thing that they've they've got all these bricks and mortar outlets, I don't know, but whatever. Okay, so there was a value play there that then combined with the short squeeze and then we got into a sort of to really sort of high P territory, you know, and the short squeeze has that potential to send things, you know, the price exponential. What's interesting, I think, is you've then got people looking at like, OK, what's the next GameStop? And they're looking at AMC, the cinemas, they're looking at Bed, Bath and Beyond. They're looking at Tootsie Rolls [00:22:06][75.3]

Adam Keily: [00:22:07] Industries or something not here at Nokia. And BlackBerry came into it as well. [00:22:11][3.7]

Thomas Keily: [00:22:11] Yeah, that's true. That's true. [00:22:12][1.1]

Adam Keily: [00:22:13] They said someone I read somewhere, some guy was like it's like people were like walking around the mall 20 years ago and just buying whatever stocks or whatever stocks were at the mall 20 years ago. [00:22:29][15.8]

Thomas Keily: [00:22:29] The great idea for an ETF, 1994 [00:22:30][0.9]

Thomas Keily: [00:22:36] You had Nokia stocks about five years ago and got rid of them because they were worth nothing. [00:22:39][3.0]

Adam Keily: [00:22:39] But yeah. Yeah, yeah. [00:22:41][1.5]

Thomas Keily: [00:22:41] But essentially. But I think you're lucky if you look at those the activity around those, none of that's being driven by a value story. As far as I can tell. That's purely speculative. Let's get on the other side of a bit of a short squeeze kind of kind of play, [00:22:54][13.4]

Adam Keily: [00:22:55] because they've all kind of gone up and then down again, [00:22:57][2.7]

Thomas Keily: [00:22:58] have they? This week is way past week. Yeah. [00:23:00][1.9]

Adam Keily: [00:23:00] So they sort of pumped up a bit and then just fell off. Whereas GameStop is seemingly holding pretty high. I mean we're recording this on Sunday night, 31st of January. And so we haven't really we haven't had any action since Friday or Saturday morning, Friday night, US time. And so it's hard to say what the next kind of a couple of days is going to bring. But it seems like there's at least some motivation there from the retail, from Main Street, as you call them, to hold the stock. [00:23:32][31.3]

Thomas Keily: [00:23:33] I mean, it's interesting on that that, you know, there was one hundred and thirty percent of the tradable stocks were shorted. Yeah. You know, before this really took off, I think I saw some guys saying, look, as of Friday, 102 percent has been shorted and seen. Like what's happening, he thinks, is not the hedge funds. Haven't they got burnt badly, haven't closed out their positions. They've said that they have. Whether they have or not, you know, who knows? But there are other hedge funds coming in to take their place, so when they were, of course, GameStop gets the five hundred dollars this company is going. There is absolutely no way GameStop is worth five hundred dollars. I'm going to short it at that price. [00:24:11][38.4]

Adam Keily: [00:24:12] So they've got the bricks and mortar, though. [00:24:14][1.8]

Speaker 3: [00:24:14] I think it's pretty solid growth. Yeah. [00:24:19][5.3]

Thomas Keily: [00:24:21] Yeah. But yeah. So the idea that um, Main Street has defeated the short sellers or defeated the hedge funds in this is just not true. Like there have been some like hedge funds that have got seriously burned in all this. But hedge funds are still there. They're still shorting the stock. Yeah. Still the market still working like it normally works like it's meant to. Yeah. And the other thing that's interesting, I think in this Main Street versus Wall Street narrative that's emerging is that at some point, you know, imagine the main street wins the battle wins the war that people are talking about and all the hedge funds get out of GameStop. And so they're out and you're only left with retail investors. What are the shares actually worth? My bet it's not three hundred and twenty five us. My bet is definitely not five hundred dollars us. What is it. So like definitely sub 100, you'd think like who knows. Probably, you know, it was trading at eight, maybe it's 20. Maybe the thesis is awesome. And what are the short sellers are going to. Maybe it's 20. But what happens to everyone who bought in in the last week, who bought in at two hundred three hundred us like they're going to take a bath on that. And so yeah, I'm just saying, like there are casualties on four Main Street as well. Once this is over, like, you know, the people who got in early, like anything, it's like the people who got in early in this sort of this bubble run, they'll they'll walk away with the money. But it relies on some people at some point losing money. [00:25:49][87.8]

Adam Keily: [00:25:53] I have heard this a lot. Everyone's like, oh, it's not going to end well. It's all going to end in tears for Main Street. I don't know what they're doing. They're just going off of the Internet. Um, but I think there's a large chunk of people at least and I've seen people that I know in my Instagram feed, Facebook feed that is like, yeah, I'm getting on board. I'm just going to buy because you can buy partial shares. Now, you don't have to buy GameStop. You don't have to buy a whole share even at three hundred and twenty-five dollars US. You can buy I guess go buy ten dollars. There are people who are just excited to be part of the movement and just like what are we doing, we're kicking it to the one percent. [00:26:30][37.1]

Thomas Keily: [00:26:31] I mean, all right. [00:26:32][0.7]

Adam Keily: [00:26:35] Like I went to Mooresville Racecourse once and I, I put ten points on Black Caviar to win Black Caviar, one of the greatest race horses in the history of horse racing. Black Caviar was paying a dollar and eight cents. So I put ten dollars on Black Caviar to win. And I didn't put it on to win in the sense that I wanted to go and collect my winnings at the end because, well, what do I get? Eighty cents. Like, I'm not going up to a well-respected, self-respecting bookie and saying eighty percent profit plays. I did it because Black Caviar is one of the greatest horses to ever exist. And I just wanted to have a ticket that I could put in a box in my house and so I could show my kids one day, which is never going to happen then I'm interested in horse racing, but I thought it was like a little souvenir. And I reckon there's a there's going to be a heap of people that are just like, yeah, we're like part of a movement. We're like it's a fundamental change in the whole market. We're all part of this thing and I want to be involved. So how do I do it? I mean, I know like you had steak was offline for a while. So it's like the US trading servers that crashed or were offline due to all the volatility. Robinhood stopped trading like those, just like I think GameStop was the most traded stock in the US stock market last week. And that's sure that's just way the numbers of people just going, I'm getting in, I don't care. And so so I don't I don't necessarily buy the narrative that people are going to be left crying. I mean, there are some people who have done some stupid stuff like, you know, they're like taken leverage to buy stuff and whatever. Like, that's not that's. [00:28:18][102.9]

Thomas Keily: [00:28:19] Yeah. I mean, again, I guarantee at the end of it, the press will be running the story about someone who's lost their house because they bought GameStop at the wrong time because they've got an agenda to sort it out as well. [00:28:29][10.3]

Adam Keily: [00:28:29] And there will be people who have gone crazy and bought in at the wrong time. But I think they'll be a lot of people that I think and we underestimate the number of people that might just be happy to be involved in something like this at whatever price that's comfortable for them. Like I will, I'll chuck fifty bucks in. [00:28:45][16.0]

Thomas Keily: [00:28:46] So it's like people with no idea what they're doing, believing in some kind of revolutionary overthrow of the capitalist system. Happy to be involved. Sounding a little bit like crypto. I don't know if you've seen what Dogecoin is doing,. [00:29:02][16.0]

Adam Keily: [00:29:06] Didn't Elon tweet about Dogecoin as well. [00:29:07][1.7]

Thomas Keily: [00:29:08] Yeah, Elon has fingerprints on that one. [00:29:10][2.2]

Adam Keily: [00:29:10] I don't even know how to say it. Is it Dogecoin or dodecoin. I don't know, going up. It's an Internet meme that turned into a coin, for God's sake. [00:29:18][7.3]

Thomas Keily: [00:29:18] Yeah. The Aussie Aussie was behind that one. Oh, really? Yeah, you go. [00:29:22][4.1]

Adam Keily: [00:29:24] All right. So I guess to wrap it up a little bit, so what is I am interested in I get your thoughts as an economist on what this means for the share market as a whole. So on Friday, we saw the ASX drop two per cent seemingly in response to the ASX. It seems to do whatever the US market does. Right. And the US market dropped two per cent like is this just like a whole bunch of nervousness? Like, is everyone sitting in like, you know, if you ever been at the footy and like the games really tense and then a fight breaks out, like, I feel like this might be the first but not the last fight that's going to break out. And this then. Come on, kids, let's let's pack it up and let's get out of here. Like, is it just that kind of thing? Is that what's going on? [00:30:10][45.5]

Thomas Keily: [00:30:11] Is there's an interesting I mean, I feel like I've picked up a turn of the weather in the commentary, a lot more referencing 1999, just before the dotcom bubble burst. A lot of people saying, you know, like it's sort of like it's the hallmark of of of a bubble is the stuff just gets really crazy and really wacky. Things are happening and everyone's got like, okay. And kind of like for the I think for the serious money, they're like they're riding that up. They're happy to ride for a while. But at some they're watching it and going, like, OK, I'm going to get out when things start to get a bit crazy. Like you like your punter at the creek. It's kind of exactly that. And I reckon people starting to look at this and go like this is pretty nuts. [00:30:52][41.7]

Adam Keily: [00:30:56] If you were waiting for crazy, if you're like, I'm going to use crazy as a signal that I'm going to get out. This is the way. This is the signal. [00:31:04][8.6]

Thomas Keily: [00:31:06] But I actually think that was overhyped. I think the media like took it as a Wall Street Spetz comedy play, like, let's do something crazy. Let's put up this rubbish retailer. And I don't think it was that there was an investment thesis at the start of it. We did definitely get into hype territory. It's definitely overblown. But, yeah, there was a solid thesis behind that. There was a good explanation for why the price went exponential because of the short squeeze dynamics. Um, I think, you know, once things settle down a bit this week, I mean, whenever this story like it could run another week, like maybe the hedge funds haven't closed out their position, they're just trying to ride it out. Maybe it could run another week or two. But I think at the end of it, I think my feeling is we'll look back and go like, oh, yeah, people will look back and go like, oh, yeah, that there's stuff that made sense in that it wasn't all just crazy, wasn't just pure and ludicrous behavior. Um, because, you know, there was there are some unusual dynamics in there, like the revolutionary flavor of it that's coming into it, the way that it's acting as a lightning rod for this discontent with the way capitalism funnels money to the one percent, to the hedge funds all the way. It's become a lightning rod for that is really interesting. But I think I think it will settle down after this. And it's all right. But you never know. Like maybe there's a tipping point. Everyone's nervous. Everyone there is a lot more commentary saying, like, the market is looking pretty bubbly. Valuations look stretched. When's the right time to get out? Is it time to get out like that? That's not a scientific question. That's an art question. And it's the when the herd turns, you can always look back and explain it after the fact. But at the moment, you never know what the tipping point is going to be. Hmm. [00:32:52][105.9]

Adam Keily: [00:32:53] Yeah, it's interesting. So. Some people said this is kind of this is the blueprint now, we've proven the model, we're like, you know, is this a repeatable thing now or can I hedge funds able to defend against it in the future somehow? I mean, they could just not take short positions. But is this a proven model now or is this just the kind of flash in the pan, one off? [00:33:17][23.6]

Thomas Keily: [00:33:17] I tend to think it's flash in the pan. I think I think hedge funds, we will see there's a new where there's a new player on the block, which is the unpredictable social media-driven investor heard. That's a new phenomenon. We haven't had that before. Um, and it's going to and it's a real wildcard, like when that herd moves, it does really weird and unusual things that the markets like is difficult to protect against. So I think I think short sellers will be very nervous now. Like, you know, I think I think you might they might start screening on you know, I think GameStop the I think games had going for it is that there was a lot of nostalgia for GameStop and for the world that it represented and for, you know, for a lot of traders probably had spent a lot of time and game at GameStop and were trading games and so had a connection with that brand. [00:34:10][52.4]

Adam Keily: [00:34:10] One guy, one guy said he made more money from GameStop this week than in all his years of trading in games at GameStop. [00:34:16][5.6]

Thomas Keily: [00:34:22] I think that was another factor. It had a little bit of nostalgia element. People were willing to go into bit to bat for it and to, like, throw a bit of money at a guy like I. Yeah, good. On your GameStop. [00:34:30][8.7]

Thomas Keily: [00:34:31] I still like you go on after you go game. So, yeah. [00:34:38][6.9]

Thomas Keily: [00:34:38] Whereas like I. Yes. I don't know, I wonder if that's going to be a factor for hedge funds going forward like and like, oh I'm not going to take on Nintendo in case all like the like a Nintendo heads come after me, you know, like I know maybe that's going to be a factor but yeah. But there's definitely a wild card now with these players in the market. So it'll be interesting to see how how the market adjusts to that. Yeah, it's hard to know. [00:35:04][25.7]

Adam Keily: [00:35:05] Crazy times indeed. I think. I think absolutely. Watch this space would be the only advice that we could give at the moment because it seems like the story is just changing every day. And I think once the markets open again on Monday, I would I'm no expert, but I would expect to see some crazy times resume once again. So. All right. As always, Thomas, thank you for your insight again this week. Mm-hmm. Thank you. Uh, we did kind of. We did. We did. Where does this episode in there, because it was such an interesting topic and such a kind of funny and topic to get our heads around. We enjoy getting our heads around. I hope you enjoyed listening to the show this week. Tune in next week. We're going to be talking Google and having a look at what's happening with Google potentially pulling out search from Australia, which is, you know, talk about crazy. Who would have thought we might say that one day. So thanks again for listening. Don't forget, you can send us your comments, questions, feedback to the cve@equitymates.com or of course, visit the website equitymates.com/cve. Thanks again. We look forward to you joining us again next time. [00:35:05][0.0]

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