The GameStop-style frenzy looks like a familiar case of speculative excess that will end badly for many
The squeezing of the hedge funds, or at least a few of them, is splendid entertainment. The pure bizarreness of the rise in GameStop’s share price since the start of this month – a 25-fold rise at the peak – beats anything seen in the dotcom mania at the turn of the century. But the lesson of 20 years ago should be remembered: when it looks easy for anybody to make quick money speculating in stock markets, the party is probably about to end.
This Reddit crew prefer a different narrative, naturally. For them, cranking up share prices and trying to create hell for short-selling hedge funds is about beating Wall Street at its own game. And give the traders credit, their loosely coordinated tactics worked like a dream at GameStop. The likes of Melvin Capital, the short-selling hedge fund forced into a bailout, never saw the rebel alliance coming.
