Eat the Rich: The GameStop Saga (2022): Season 1, Episode 1 - Episode #1.1 - full transcript
This GameStop situation is
the craziest I think I've ever seen.
I didn't know anything about it.
I had just come through
some unbelievably bad back surgery.
I had been under the knife and then
deeply sedated for the whole week, okay,
so I put on the network.
…not think about
upside possibility,
because when's the last time you walked
into the store GameStop yourself?
What the hell is GameStop doing?
That's like a 20 dollar stock,
and it's at 400.
Give me the phone.
I asked for the control room.
Here's the deal, guys.
There isn't anyone
who's involved with GameStop,
who'd accept the fact
that this company should be at 338.
People are thinking, "This is a home run."
Take the home run,
don't go for the grand slam.
You've already won. You've won the game.
It was at that very moment that I became
the target of 10 million people.
I don't even understand what I did.
What did I do?
Like, why do they put my head
on top of different things?
They think guys like me
who are trying to help people
are the enemy.
I mean, what is their mission?
What are they determined to do?
Change the face of capitalism?
♪ Do you like that? Do you like that?
Do you like that? ♪
♪ Do you like that? ♪
♪ Wow! Wow! ♪
♪ Wooooh! Wow! ♪
This is not financial advice.
Underemployed,
sitting at home,
using the power of the Internet to
destroy the kings of American finance.
We have seen
a massive surge in the stock price...
…on a company called,
"GameStop."
GameStop is a store at a mall.
They sell video games,
like Pong or Frogger.
Check-out shares of GameStop
surging another 51%.
Three hundred percent.
A band of Redditors
forced those hedge funds
to liquidate
billions of dollars in losses.
It's always fun to see
hedge-funders getting screwed, isn't it?
It was supposed
to power people,
when push came to shove,
it took power away.
David versus Goliath.
The ultimate David
and Goliath story.
We have come
dangerously close
to the collapse of the entire system.
♪ Look at all these slave masters
Posin' on yo' dollar ♪
♪ Look at all these slave masters
Posin' on yo' dollar ♪
♪ Look at all these slave masters ♪
There are two ways
to make money in life.
There's the slow,
steady path to prosperity,
or there's getting rich quick,
like, really quick.
Well, this is the story
of how a lucky few made that happen
by buying up shares of GameStop,
and believe it or not,
it could happen again.
So, let's go back to the beginning,
the year 2020,
back when Covid was fresh in our brains,
and some brave folks discovered
there was gold to be mined
in a broken-down video game store.
Be careful, okay? Be very careful.
Okay, I'm gonna put the pancakes on, okay?
- Then I put the chocolate chips.
- Yes, sir.
- Hold on.
- But you're the boss.
Yeah?
Sometimes I feel like you're the boss.
I'm Eddie. I'm 38 years old.
Actually, wait, how old am I now?
Don't even know, I'm losing track.
I'm 39, actually.
Yeah, 39.
What else do you want to know?
Me and my wife both work,
but after Covid hit with young toddlers,
um, it's, you know, been challenging
balancing work and childcare.
- Good job.
- Is that enough?
That's plenty.
Around the middle of July 2020,
my wife received notice that
she was getting laid off due to Covid.
It's rough, you know?
He had more fun.
A lot of thoughts crossed my mind.
Do I have to take a second job?
Do I have to bartend on the weekend
or be an Uber driver?
But, with two young kids,
I want to be there for them,
be a good parent, right?
Let's wash it over here.
We had to figure out
what we were gonna do.
There you go.
Historically, when we look
at financial crises,
who are the big losers?
You think about the 2008 mortgage crisis,
it was the households.
I remember my dad lost his job,
and we lost the house.
My parents lost their house.
House went into foreclosure, had to move.
So, that was a big one.
I was in high school at the time,
and I distinctly remember
at that Thanksgiving,
the talk at that point was just how much
money everyone was losing.
My dad lost his job.
I mean, he went to work one morning,
and the doors were chained up,
and his house got foreclosed.
He had lost everything.
The Wall Street banks,
they did poorly for a little bit,
but then they recovered.
It seems that the system worked for you,
but it didn't seem to work
for the rest of the country.
Stay here! Stay here! Stay here!
I get this picture in my mind when
the media was downtown on Wall Street.
And those motherfuckers
were standing up there on the balcony,
like, popping champagne bottles,
and laughing,
taking pictures of these people down there
that have lost their houses to this crash.
Turns out, it was actually
guests at a restaurant up on that balcony,
but it didn't matter.
Everyone looked like a villain.
My first job right out of college
was working at Morgan Stanley.
I remember asking my boss at the time,
how will the public
ever forgive us for the bailout?
And he sort of was, like,
"Well, here's the thing."
"Eventually, the public will forget,
and everything will go back to normal."
"We'll go back to getting
the same bonuses we were getting."
"It will just be the way that it was."
People saw those bailouts,
and then the stock market rallied
for a decade after the financial crisis,
and a lot of individual investors
did not participate
in the stock market's gains.
When you get a wider
and wider gap between haves and have-nots,
there's going to be people that are upset.
I actually don't think
it's necessarily bad.
I think it's an outcome of a system
that has worked incredibly well.
My name is Jason Mudrick,
founder and Chief Investment
Officer of Mudrick Capital Management.
We're a sophisticated,
multi-billion dollar hedge fund.
While there's always stuff to do,
there's a lot to do following a recession.
So, while 2007 and 2008 may have been
a quote, unquote, "scary time,"
for our strategy, it was a great time.
And then you have this pandemic,
and again, the little guy
lost their jobs, their retirement,
but the people that were running the firms
that made the decisions,
a lot of them didn't suffer as much.
It's very Darwinian,
there's winners and losers.
Are we trying to profit?
Absolutely.
Folks pay me
to invest capital on their behalf
because they believe
that we're really good at this.
And hedge funds
are very good at it.
But what is a hedge fund, exactly?
Let's ask this guy.
My name's Peter Sasaki.
I was in the hedge fund business
for 20 years.
I enjoy the fact
that markets are like a chess game,
but it can be a very lucrative chess game.
It's not just finance and valuations,
it's history, it's market psychology,
it's understanding how the world moves.
It is incredibly difficult
to beat the market.
So, the idea behind hedge funds was
you'll have an investment portfolio
that is less subject to market swings
and should outperform the market.
That's what investors are looking for,
that's what managers
are trying to deliver.
Hedge funds have ways
to cash in
if the stock goes up,
down, or even sideways.
They do this by
pooling together money from investors.
Not small potato investors,
but high net-worth individuals.
And then hedge fund managers will find
creative ways to invest that money.
One of these strategies
is called short selling.
Short selling is a bet
that a security is going to go down.
Say you own a share of IBM, okay?
I say, "Can I borrow that share?"
You say, "Sure, I don't need it right now,
I'm not planning on selling it."
So, I take it, I sell it for $10.
Let's say the stock goes down,
20% next month, and is now at $8.
Okay, I buy it back at $8,
give you your share back.
You're in the same place
you would've been.
You have your share of IBM,
but I made two dollars,
and that's how short selling works.
Now, take that two dollars
and slap a whole lot of zeros on the end.
Now we're talking.
That's the kind of money
a hedge fund can make
when they short shares of a dying stock.
Shorting is just a way of saying,
"We think that
the stock price will go down."
"And we're going to bet
that the stock price goes down."
That tells you that
that stock is in trouble.
Usually they're right.
What happens then is that
the company can't get any more capital,
and it becomes insolvent.
Then it will be
a self-fulfilling prophecy.
The fact that it's done by hedge funds,
who tend to be really wealthy,
it kind of looks like a cartoon villain.
But there's one big catch
to shorting.
If the price suddenly starts to go up,
then hedge funds could take a hit.
And lose a yacht-load of money.
If we buy a stock at $50,
we know that if the stock goes to zero,
how much can I lose?
Fifty dollars. Right?
If I short a stock,
the stock can go up to infinity.
I can actually lose more money
than I placed in that bet.
So, it can be picking up nickels
in front of a freight train,
and it sort of
works until you get run over.
So, a lot of times what they'll do is
they'll find a really big struggling
company like, Toys "R" Us, for instance.
Toys "R" Us has filed for bankruptcy.
The retailer's reportedly
about five billion dollars in debt…
They're like, "We know
this company is about to go under."
"So we're going to short
the ever-living shit out of it,
until no investor is going to come in
and try to save it anymore."
Whose idea was that?
It was Brad's.
I can't take my kids
to Toys "R" Us and see Geoffrey
because you're an ass
and wanted a new boat.
Aw, sad. Oh, what a sad day.
Let him cross the street, stop your car.
Aw!
We met when he was in the Army,
and it just kind of evolved from there.
I actually started investing back in 2007.
And my friend at the time was like,
"GameStop is a really good stock,
'cause, like, you know,
they're a big World of Warcraft provider."
I was a big World of Warcraft-er.
I was addicted to it.
I was, like, "Buy me some of those."
So, they were actually
my first stocks that I bought,
so it has sentimental value to me.
GameStop was known
for pre-owned games.
So, you buy Grand Theft Auto,
play it for a year,
and you're like, "I'm tired of this game.
I'll slip back to GameStop."
On average, GameStop would resell
the same game six times
which was very profitable.
And things started
to go downhill when, effectively,
you saw publishers like Microsoft
selling their games directly online.
All right, guys,
heading into GameStop.
Look at this place.
It looks like a complete ghost town.
So I bought.
And I watched the price just tank down.
Today, we're at another abandoned GameStop
in Cranberry Township, Pennsylvania.
Everyone thought
GameStop was the next Blockbuster.
A lot of people thought,
"GameStop's overvalued."
"No one's going to these stores buying."
They just thought
that the stock should go down.
Video game retailer GameStop
is not doing so well.
GameStop looks to be heading down the same
path as Blockbuster and Sam Goody.
If there's money to be made,
Wall Street is all over it, like…
And GameStop was no exception.
While GameStop stores were shutting down,
Wall Street was looking
to make stupid money
off someone else's bad fortune.
It felt like 2008, all over again.
You buy companies
that are doing good things,
executing on business plans,
and you short companies
that are missing earnings.
That's the concept
of normally being a good investor.
There's companies that are
clearly going out of business
that larger hedge fund managers
will become comfortable,
and they'll be in it together.
Various hedge funds,
including Citadel and Point72,
were all betting that GameStop's
stock price would go down.
The big one was Melvin Capital.
They were betting against GameStop.
Gabe Plotkin runs
a hedge fund called Melvin.
He's an extremely intelligent person.
He's very thoughtful, cautious, compliant.
Everything someone wants
in a hedge fund manager.
And he has a track record
that's unparalleled.
He also had a track record
of shorting gaming companies,
including taking a huge short position
against Nintendo in 2018.
Move over Bowser,
Nintendo has a new villain.
Gabe Plotkin was at SAC, a star trader.
He left and formed
his own firm, Melvin Capital Managements,
and apparently has
a massive short position in Nintendo,
a 400 million-dollar short.
And the stock over
that time has declined almost 30%.
You know, I look at the size of my funds,
and where we are in the industry,
and it's kind of shocking to me.
I hate that guy.
He's betting on people's failure.
Why would you not short
GameStop if you're going to short stocks?
We all know that they haven't innovated,
stores aren't doing well,
haven't hit the numbers.
If you look at it
from Melvin's point of view,
shorting GameStop
was like profiting off a sinking ship.
Every time GameStop hit another iceberg
or took on water,
the stock dropped and Melvin made money.
But while Melvin was
too busy watching GameStop's demise,
they failed to see
what was on the horizon.
Not another iceberg,
but a lifeboat sent out
by a new school of investors
ready to swoop in
and start buying up the stock.
None of the risk models
account for extreme events
that aren't within
a normal standard distribution.
It is the thing that, you know,
the probability of happening
is infinitesimal,
but it can still happen.
All right. Who wants to do a show?
Who's ready?
You want to know
what disruption really looks like?
Well, you're looking at it.
I think it's Robinhood.
It's a privately-held operator
that launched its commission-free
brokerage platform in 2015.
This company's growing like a weed,
ten times since we saw them last in 2016,
threatening legacy operators,
forcing them to play by
a new, good set of rules!
Robinhood is a brokerage
web-app/phone-app
that facilitates trading.
Make an account on it,
you can buy and sell stocks.
It's pretty popular because it's free,
it's free to trade,
and the interface is super easy to use.
You know, using Robinhood is less like
using a traditional financial product
where you have paperwork,
you have to wait.
It's more similar
to using a technology product,
like an Uber or an Instagram.
Your phone is everything, right?
And what happened is that
Robinhood makes trading really easy,
and that has changed everything.
When we first started Robinhood,
we had, you know,
lived through
the financial crisis of 2008.
And, from the very beginning,
our mission has been
to democratize the financial system.
We all know the story of Robin Hood,
the story of robbing
from the rich and giving to the poor.
That's what
Robinhood the brokerage was.
They were trying to help people
get into the world of stock trading,
and help them make money
within the world of the stock market.
It could be a game-changer
for an entire industry.
Robinhood's got a handle
on what millennials want.
The median age of the customers is 30,
and about half of them are
first-time investors. I love that.
Um, I decided, "Okay, I'll just sign up
for Robinhood and see where it goes."
Pretty intuitive.
You search up a stock ticker,
and click, swipe, and send it off.
Eddie is what is
traditionally known as a retail trader.
What is a retail trader?
It's someone like this.
I just, you know, buy stocks
that I think will have a good future,
and I just leave it alone.
I am notorious for day trading.
- He's like, "buy and hold."
- Or this.
I thought you have to go
to an office or a bank,
say, "Hey, I want to buy this."
Or even this.
What up? I'm Mikey Guggenheim,
I'm a rapper, filmmaker,
entertainer extraordinaire,
and huge dinglebop.
And these are my friends,
Rachael and Derik.
Erik with a "C."
I am a writer, producer,
kind of helping manage
the Mikey Guggenheim thing.
Assistant.
I'm not an assistant. I am…
I'm stepping into a management role.
- More like intern.
- I'm not an intern.
Traditionally, retail was
disconnected from one another.
Because there are millions of
retail traders just buying
$10 here, $50 there.
And they're really
not large movers in the market.
So, who was the herder of, like, retail?
What's the most popular show
on television for retail?
Hey, I'm Cramer. Welcome to Mad Money.
I'm trying to be "Jimmy Chill,"
but I keep seeing people
saying the dumbest things,
and it is beginning to drive me nuts.
I've always been a fan of Jim Cramer.
Jimmy Chill, man.
If I can find people stocks
that can make them money,
or if I can help them,
teach them how to find stocks.
Now, that's what I do.
Now on YouTube,
you can find so much information,
but prior, there wasn't as much.
I had some kid
take a selfie with me yesterday,
I said, "Why are you doing that?"
And he goes, "You taught me investing."
My job's not just to entertain,
but educate, teach,
put in context. Call me.
The house always wins
if you're unprepared,
and they're playing against the house.
Now they want to tear down the house,
they want to burn the house down,
but they don't have a clue,
and they keep thinking
you can beat the house.
The retail investor,
they have trouble getting the best data
because data's expensive.
There's the Bloomberg Terminal.
It has information you can't get if
you just have a brokerage account.
Bloomberg takes prices
from the banking community
posted on a central aggregation point,
and make it available
to their subscribers.
Things that are published
on a Bloomberg Terminal
would be verified
to journalistic standards.
There's checks and balances
in that process.
Our Bloomberg Terminal,
I believe, is 20,000 a year,
we have 25 of them.
Yes, it's expensive,
but the value you get out of it
is worth every penny.
I don't think you can be a member
of the financial community without it.
If you're trying
to play the same game
with the same strategy
against Wall Street,
it's not going to be easy to win.
So, you're just at a disadvantage,
which means you have to play
a different game.
My family and I moved from Nashville
a month before the pandemic hit,
and I want to be
self-sufficient as possible.
I really enjoy growing CBD.
I started getting into that hobby,
keeps me sane.
My name is Austin Tobitt.
I am known as atobitt on Reddit.
All these people were
all of a sudden interested
in making money in the stock market.
That's what got me into Reddit.
Reddit allows Internet communities
to kind of convene around
niche-specific interests.
All of a sudden there's this centralized
place for things I'm interested in.
There's a community for photography,
there's a community for astrology.
I can go on right now and make one on…
And anybody that
wants to join that is free to join that.
You don't need your real name.
Not like Facebook.
I like Reddit because
my face is not in there.
I can be anyone I want to be.
People develop pretty tight bonds
through Reddit communities,
real deep friendships,
and real deep camaraderie.
My friends were already
trading stocks.
I had no idea how to buy and sell.
That's how I discovered /wallstreetbets.
There's a community
called WallStreetBets.
There's like this crazy group of
people that just are bouncing around
posting about
how much money they're losing,
bursting through doors.
Oh, yeah!
Like, it's going up, going down!
- Yeah, big dick energy, like…
- Yeah.
Wildness.
I've been on WallStreetBets,
fucking around on there
for the last two and a half years.
I mean, you saw people
losing tons of money
and making tons of money.
They're, like,
degenerate gamblers, basically.
They love the game.
Even these guys that hit big,
they keep going, and they bet bigger.
People are commiserating
about their losses
as much as they're
boasting about their wins.
That's what makes
this community so interesting.
I'm on Reddit, but not even
remotely in the same way.
I'm a lurker, for sure.
In real life too.
No, not in real life,
I'm regular. Stop it.
Outside bushes, know what I mean?
- No, I don't lurk in real life.
- Exactly what a lurker would say.
- I don't want to explain I'm not a lurker.
- Not many people are going to see this.
They have a lot of
their own, sort of, lingo that they use,
inside jokes, memes, things like that.
People think of retail investors as stupid
or, you know, uneducated,
so we've embraced that,
we're just dumb apes.
"Diamond hands" means
you hold, you don't sell.
You know, you have such strong hands,
they're made of diamonds.
The alternative to that is paper hands,
which means you wimp out
and sell as soon as
you start to get a little fear.
There's also "tendies,"
which is basically profits, like money.
"HODL" is a big one.
That actually happened from a typo.
Instead of writing, "hold,"
they wrote "H-O-D-L,"
and it just stuck.
WallStreetBets was
a bunch of foul-mouthed people
that were throwing away
their entire life savings into one stock.
Whether it was 300,000 or 3,000,
I'm going to take the money right now
and dump it into something
and make a crazy bet.
I wonder if some of this
does have to do with
the nature of people's, sort of, outlook
in terms of their
financial future in general.
A lot of us can't afford to buy a house.
You know what I mean?
We don't have the same kind
of investment opportunities
maybe that our parents' generation did.
So…
But you know, what do I know?
Just a couple of douche bags
from New Jersey,
like, I don't know.
By the summer of 2020,
WallStreetBets had over
one million subscribers.
It became the place to watch others
make crazy, outsized bets
on the stock market
that might be crazy stupid,
or crazy genius.
And one of the craziest of these bets
was a wager in GameStop made by
a Redditor named, "DeepFuckingValue."
DeepFuckingValue, "DFV."
You know, The Dude.
Tell him I said, "What up?"
He's the original ape.
The original, diamond-handed hodler.
His original GameStop bet
was around $50,000.
I remember looking at it,
and to me,
it's pretty akin to being in the casino.
If you were to see someone put up, like,
a massive stack of chips,
you almost have to watch it play out.
And they did watch.
DFV had been posting since 2019,
and he kept posting updates about GameStop
almost every month since then.
It didn't matter, though.
Very few retail traders on WallStreetBets
agreed with him.
Well, that is until August of 2020,
when out of nowhere,
something unexpected happened
that caused
people to sit up and pay attention.
Ryan Cohen, the founder
and former CEO of Chewy.
- Great to have you here.
- Thank you for having me.
Chewy founder, Ryan Cohen,
began quietly
buying up shares of GameStop.
In just over two weeks,
he purchased almost 10% of the company.
Chewy, the biggest
online retailer of pet products.
It's a great company.
I had to euthanize my cat
back in the fall.
Like, Chewy sends flowers.
You know, stepping away
from Chewy, what is next on your docket?
I'm looking at lots of different things.
Talking to lots
of different entrepreneurs,
looking at different businesses.
You know, I'll see, maybe
I'll build another business.
Cohen's investment didn't cause
hedge funds like Melvin Capital
to abandon
their short positions in GameStop.
But it did catch the attention
of a number of retail investors,
including one Redditor in particular.
Wow,
you turned $25,000 into $8,000,000.
How does that feel?
Um…
It's… it's okay, I guess. …
It's a good starting point, yeah.
My name is Alvan Chow.
I'm Jeffamazon on Reddit.
Our former president…
he addressed
the CEO of Apple as "Tim Apple"
in one of his meetings.
Appreciate it very much, Tim Apple.
I thought that was hilarious,
and so I picked Jeff Amazon
as just sort of poking fun at that.
My mom is from Beijing,
my dad is from Hong Kong.
I don't have a finance degree.
I'm not in Wall Street.
I don't have any such connections,
and I've applied to many different
hedge funds and stuff like that,
but, you know,
never got a response.
So there was no other way
for me to get on the map.
This was my only way.
Most of the picks that you make
are going to fail and not do well,
so you need to do
a tremendous amount of research,
usually something that's ignored
by a lot of other people.
For example, GameStop.
After I saw Ryan Cohen invest,
I saw GameStop pop, like,
maybe 30% or something in a week.
I was like, "What just happened?"
I thought this was
a dying brick-and-mortar store.
I looked into Ryan Cohen,
looked at, you know, his past successes.
He competed toe-to-toe with Amazon.
They won because they provided
better customer service.
So, I thought Ryan Cohen
was the person to transform this company.
At that point, I started doing
a tremendous amount of research.
I looked up all the terms,
and I tried to understand it very deeply.
And there I found the issue
of 140% true interest.
I didn't really understand, like,
how something could be over 100% shorted.
It's possible because a share
can be lent out more than once.
So, that share of stock
that a hedge fund borrows
can be lent out
again to another hedge fund
in the hope of buying it back later
for even less money.
What does this mean?
It gets kind of complicated,
but all you need to know is
that the higher the percentage,
the more things can blow.
The way we calculate it,
anything 7 to 10% is kinda normal.
Things start ticking around 20%,
it gets on a watch list.
Thirty…
Forty, 50, that's very, very high.
So, if the stock price
begins to rise unexpectedly,
then nervous short sellers
may start buying back their shares
to stop their losses,
but that can drive
the stock price up even more,
which can be like pouring fuel on a fire.
Everyone's going to be scrambling
to try to buy back shares,
and it's just going to make
the price go higher and higher.
So, with everyone piling in,
from panicked short sellers
to swarming retail traders,
a hedge fund with a short position
can get squeezed from all sides,
which is why they call it
a "short squeeze,"
and it can put a hedge fund
out of business.
Whenever there's groups of people
moving in the same direction,
and you have to move with them,
you're exacerbating the move,
and that is the greatest fear
for a hedge fund manager.
A true short squeeze
is a rare event.
There are probably a hundred predicted
for every one that occurs.
There needs to be
an unexpected positive event
to start to drive the stock price higher.
This could be a huge earnings surprise
or a takeover offer.
Or maybe this Ryan Cohen guy
had bigger plans than he was letting on.
All these things combined
was just a, sort of, freak of confluence
that would lead to
an extremely high stock price.
That was sort of the crux of my thesis.
I just wrote a long post outlining
what I thought was going to play out
over the next few months
and published it on WallStreetBets.
People on WallStreetBets,
they write these posts
that are kind of like manifestos.
These big DD articles.
DD is due diligence.
Which is where you basically write out,
like, your theory and your research
of why you think something
in the market is going to happen.
It's not, like, flippant.
They spend a lot of time
looking into this stuff.
People would research, just deep.
Some of those people are
the smartest people
I've ever encountered, hands down.
I'm just like a new guy
who entered the field.
I'm gonna slam dunk on some hedge funds,
but I still respect them tremendously,
and it's just part of the game.
And WallStreetBets,
they didn't really agree with me,
but I know I've done the research
to make sure that what I'm saying is true.
And it's up to other people
if they believe it or not.
The thing is,
the believers were out there.
They just hadn't discovered Alvan
or put their money behind GameStop… yet.
My name is Joe Fonicello,
and I live in a van with my girlfriend.
My name is Abbe Minor.
I built the van, I designed it.
For me, it's always about
work smart, not hard.
That's the epitome of who he is.
My parents
were hard-working farmers.
I see the labor they put in,
literal back-breaking labor.
I just can't do it.
And slowly, as I'm getting older,
I'm creating opportunities
that allow me to transition out of that.
Last year, we decided
we were going to take a short trip.
Covid happened and school got cancelled,
so we took off.
We really had no reason to come home.
Abbe and I were in the van,
going up and down the West Coast,
and I was looking for ways
we could make money while traveling.
And I started to look towards investing.
And, I had joined WallStreetBets,
probably five, six years ago.
And I hopped on, and I saw a post
by Jeff Amazon that talked about GameStop.
The post starts off by saying,
"Sup gamblers."
"Sup gamblers. Feel bad about
missing the gain train on Tesla?"
"Fear not, something
much greater and stupider is here."
"We're going to temporarily join forces
with the Galactic Empire
and hijack the Death Star."
"Our choice of weapon, GME."
Obviously, that is compelling.
You know,
GameStop's not too sexy a company,
but when you talk about
this massive short squeeze,
I thought, "Maybe they're onto something."
I decided to start putting some money in.
A few weeks passed…
That's when we came across
Roaring Kitty streams.
I remember the first time we
tuned into a Roaring Kitty stream,
this weird guy had
a headband on sometimes.
It was fun.
You think of a stock market analyst,
you don't think of him.
It wasn't ten minutes, we got hooked.
So, first, let's just discuss why
GameStop is the first video
of this Kitty Corner series,
and that's because it is
now the largest position
in the Roaring Kitty portfolio.
Roaring Kitty was really interested
in stocks that had deep fucking value.
People didn't know
Roaring Kitty was DeepFuckingValue.
The cat guy, what's his name?
DeepFuckingValue?
No, the cat guy.
- Roaring Kitty.
- Roaring Kitty, yeah.
DeepFuckingValue is
almost a trade blotter on WallStreetBets.
And then his Roaring Kitty channel
had this three-hour livestream.
The GameStop stock,
it epitomizes value investing.
It's value investing at its finest.
So, feel free to grab a beer,
though, if you've been
long GME the past year,
you probably have one,
how else you gonna get through this?
I'm kidding.
That's where his personality comes through
and he was this revered figure.
We'd already invested our money,
but that's when it started
becoming really fun.
Yo, what up, everybody?
Sorry I was a bit late today,
my daughter skipped her nap,
delayed everything.
Roaring Kitty started posting
his live streams in the summer of 2020.
Nobody knew his real name.
It didn't matter, though. He was charming,
funny, knowledgeable,
and he loved cats.
For the WallStreetBets community,
he was their Jim Cramer.
Yo, what up?
The GameStop thesis is super simple,
but it's often misunderstood.
Everyone classifies it as a "cigar butt"
and then just moves on.
To add to this, GameStop is the most
heavily shorted company in the market.
So, this has led to an opportunity,
that's what I think.
Ryan Cohen,
Alvan Chow, Roaring Kitty.
It was like they had all seen
into the future somehow,
and recognized the retail investor world
was sitting on top of a GameStop volcano.
And that volcano, as it found
more and more true believers online,
was about to blow.
What happened was,
GameStop started to dominate
the WallStreetBets subreddit.
I started scouring "Hot" posts.
So I kept seeing posts about GameStop.
By then, you know,
I researched what short interest was,
so I decided to purchase
a bunch of GameStop shares.
The beautiful part about Reddit
was it is a hive mind.
It is a legit hive mind.
Knowledge sharing is always good.
You know, if I have knowledge on GameStop,
and I share it to you,
now we both have it.
The Reddit community felt like,
hedge fund managers can go on CNBC,
they can talk about their stocks.
This is our way of doing that.
This is our megaphone.
There started to be a fervor,
so I went "fuck it."
And I went and bought shares.
These hedge funders
are like the bullies at the playground.
No one's saying it's a better business.
None of that.
It's nonsense.
It's just, look at the stock price.
I take shit personal.
Like, Toys "R" Us, like, you wrecked that.
Oh, what a sad day.
I just want to do what
I can to fight these people.
Before the Internet, there wasn't
this ability to mass mobilize people,
and the whole power of the Internet
is connecting people at scale.
The sheer amount of people involved in it,
it's thousands, tens of thousands,
millions of retail investors.
Either we're wrong,
or everyone's looking at the wrong stuff.
If they've gotten the wrong impression
which I've seen happen,
but this is one of the biggest
misperceptions I've seen in a while,
I think, ever, maybe, I don't know.
Maybe not ever. I don't know.
I need a drink,
I'm just going nonstop, you know?
In the fall of 2020,
for the WallStreetBets community,
it felt like all the pieces were now
adding up to something much bigger.
All that was missing was
a critical mass of interest in the stock
to send it to the moon.
There were so many
little things that lined up.
It almost felt like
the perfect storm of events.
Right now,
the stock is so heavily shorted
that all that may be needed
is a shift in sentiment.
One of the things that
we understand in this soap opera
is that someone's going to get killed.
We just don't know who it is.
It's just like, "YOLO," you know?
"Let's destroy the economy."
Ticktock. Ticktock.
the craziest I think I've ever seen.
I didn't know anything about it.
I had just come through
some unbelievably bad back surgery.
I had been under the knife and then
deeply sedated for the whole week, okay,
so I put on the network.
…not think about
upside possibility,
because when's the last time you walked
into the store GameStop yourself?
What the hell is GameStop doing?
That's like a 20 dollar stock,
and it's at 400.
Give me the phone.
I asked for the control room.
Here's the deal, guys.
There isn't anyone
who's involved with GameStop,
who'd accept the fact
that this company should be at 338.
People are thinking, "This is a home run."
Take the home run,
don't go for the grand slam.
You've already won. You've won the game.
It was at that very moment that I became
the target of 10 million people.
I don't even understand what I did.
What did I do?
Like, why do they put my head
on top of different things?
They think guys like me
who are trying to help people
are the enemy.
I mean, what is their mission?
What are they determined to do?
Change the face of capitalism?
♪ Do you like that? Do you like that?
Do you like that? ♪
♪ Do you like that? ♪
♪ Wow! Wow! ♪
♪ Wooooh! Wow! ♪
This is not financial advice.
Underemployed,
sitting at home,
using the power of the Internet to
destroy the kings of American finance.
We have seen
a massive surge in the stock price...
…on a company called,
"GameStop."
GameStop is a store at a mall.
They sell video games,
like Pong or Frogger.
Check-out shares of GameStop
surging another 51%.
Three hundred percent.
A band of Redditors
forced those hedge funds
to liquidate
billions of dollars in losses.
It's always fun to see
hedge-funders getting screwed, isn't it?
It was supposed
to power people,
when push came to shove,
it took power away.
David versus Goliath.
The ultimate David
and Goliath story.
We have come
dangerously close
to the collapse of the entire system.
♪ Look at all these slave masters
Posin' on yo' dollar ♪
♪ Look at all these slave masters
Posin' on yo' dollar ♪
♪ Look at all these slave masters ♪
There are two ways
to make money in life.
There's the slow,
steady path to prosperity,
or there's getting rich quick,
like, really quick.
Well, this is the story
of how a lucky few made that happen
by buying up shares of GameStop,
and believe it or not,
it could happen again.
So, let's go back to the beginning,
the year 2020,
back when Covid was fresh in our brains,
and some brave folks discovered
there was gold to be mined
in a broken-down video game store.
Be careful, okay? Be very careful.
Okay, I'm gonna put the pancakes on, okay?
- Then I put the chocolate chips.
- Yes, sir.
- Hold on.
- But you're the boss.
Yeah?
Sometimes I feel like you're the boss.
I'm Eddie. I'm 38 years old.
Actually, wait, how old am I now?
Don't even know, I'm losing track.
I'm 39, actually.
Yeah, 39.
What else do you want to know?
Me and my wife both work,
but after Covid hit with young toddlers,
um, it's, you know, been challenging
balancing work and childcare.
- Good job.
- Is that enough?
That's plenty.
Around the middle of July 2020,
my wife received notice that
she was getting laid off due to Covid.
It's rough, you know?
He had more fun.
A lot of thoughts crossed my mind.
Do I have to take a second job?
Do I have to bartend on the weekend
or be an Uber driver?
But, with two young kids,
I want to be there for them,
be a good parent, right?
Let's wash it over here.
We had to figure out
what we were gonna do.
There you go.
Historically, when we look
at financial crises,
who are the big losers?
You think about the 2008 mortgage crisis,
it was the households.
I remember my dad lost his job,
and we lost the house.
My parents lost their house.
House went into foreclosure, had to move.
So, that was a big one.
I was in high school at the time,
and I distinctly remember
at that Thanksgiving,
the talk at that point was just how much
money everyone was losing.
My dad lost his job.
I mean, he went to work one morning,
and the doors were chained up,
and his house got foreclosed.
He had lost everything.
The Wall Street banks,
they did poorly for a little bit,
but then they recovered.
It seems that the system worked for you,
but it didn't seem to work
for the rest of the country.
Stay here! Stay here! Stay here!
I get this picture in my mind when
the media was downtown on Wall Street.
And those motherfuckers
were standing up there on the balcony,
like, popping champagne bottles,
and laughing,
taking pictures of these people down there
that have lost their houses to this crash.
Turns out, it was actually
guests at a restaurant up on that balcony,
but it didn't matter.
Everyone looked like a villain.
My first job right out of college
was working at Morgan Stanley.
I remember asking my boss at the time,
how will the public
ever forgive us for the bailout?
And he sort of was, like,
"Well, here's the thing."
"Eventually, the public will forget,
and everything will go back to normal."
"We'll go back to getting
the same bonuses we were getting."
"It will just be the way that it was."
People saw those bailouts,
and then the stock market rallied
for a decade after the financial crisis,
and a lot of individual investors
did not participate
in the stock market's gains.
When you get a wider
and wider gap between haves and have-nots,
there's going to be people that are upset.
I actually don't think
it's necessarily bad.
I think it's an outcome of a system
that has worked incredibly well.
My name is Jason Mudrick,
founder and Chief Investment
Officer of Mudrick Capital Management.
We're a sophisticated,
multi-billion dollar hedge fund.
While there's always stuff to do,
there's a lot to do following a recession.
So, while 2007 and 2008 may have been
a quote, unquote, "scary time,"
for our strategy, it was a great time.
And then you have this pandemic,
and again, the little guy
lost their jobs, their retirement,
but the people that were running the firms
that made the decisions,
a lot of them didn't suffer as much.
It's very Darwinian,
there's winners and losers.
Are we trying to profit?
Absolutely.
Folks pay me
to invest capital on their behalf
because they believe
that we're really good at this.
And hedge funds
are very good at it.
But what is a hedge fund, exactly?
Let's ask this guy.
My name's Peter Sasaki.
I was in the hedge fund business
for 20 years.
I enjoy the fact
that markets are like a chess game,
but it can be a very lucrative chess game.
It's not just finance and valuations,
it's history, it's market psychology,
it's understanding how the world moves.
It is incredibly difficult
to beat the market.
So, the idea behind hedge funds was
you'll have an investment portfolio
that is less subject to market swings
and should outperform the market.
That's what investors are looking for,
that's what managers
are trying to deliver.
Hedge funds have ways
to cash in
if the stock goes up,
down, or even sideways.
They do this by
pooling together money from investors.
Not small potato investors,
but high net-worth individuals.
And then hedge fund managers will find
creative ways to invest that money.
One of these strategies
is called short selling.
Short selling is a bet
that a security is going to go down.
Say you own a share of IBM, okay?
I say, "Can I borrow that share?"
You say, "Sure, I don't need it right now,
I'm not planning on selling it."
So, I take it, I sell it for $10.
Let's say the stock goes down,
20% next month, and is now at $8.
Okay, I buy it back at $8,
give you your share back.
You're in the same place
you would've been.
You have your share of IBM,
but I made two dollars,
and that's how short selling works.
Now, take that two dollars
and slap a whole lot of zeros on the end.
Now we're talking.
That's the kind of money
a hedge fund can make
when they short shares of a dying stock.
Shorting is just a way of saying,
"We think that
the stock price will go down."
"And we're going to bet
that the stock price goes down."
That tells you that
that stock is in trouble.
Usually they're right.
What happens then is that
the company can't get any more capital,
and it becomes insolvent.
Then it will be
a self-fulfilling prophecy.
The fact that it's done by hedge funds,
who tend to be really wealthy,
it kind of looks like a cartoon villain.
But there's one big catch
to shorting.
If the price suddenly starts to go up,
then hedge funds could take a hit.
And lose a yacht-load of money.
If we buy a stock at $50,
we know that if the stock goes to zero,
how much can I lose?
Fifty dollars. Right?
If I short a stock,
the stock can go up to infinity.
I can actually lose more money
than I placed in that bet.
So, it can be picking up nickels
in front of a freight train,
and it sort of
works until you get run over.
So, a lot of times what they'll do is
they'll find a really big struggling
company like, Toys "R" Us, for instance.
Toys "R" Us has filed for bankruptcy.
The retailer's reportedly
about five billion dollars in debt…
They're like, "We know
this company is about to go under."
"So we're going to short
the ever-living shit out of it,
until no investor is going to come in
and try to save it anymore."
Whose idea was that?
It was Brad's.
I can't take my kids
to Toys "R" Us and see Geoffrey
because you're an ass
and wanted a new boat.
Aw, sad. Oh, what a sad day.
Let him cross the street, stop your car.
Aw!
We met when he was in the Army,
and it just kind of evolved from there.
I actually started investing back in 2007.
And my friend at the time was like,
"GameStop is a really good stock,
'cause, like, you know,
they're a big World of Warcraft provider."
I was a big World of Warcraft-er.
I was addicted to it.
I was, like, "Buy me some of those."
So, they were actually
my first stocks that I bought,
so it has sentimental value to me.
GameStop was known
for pre-owned games.
So, you buy Grand Theft Auto,
play it for a year,
and you're like, "I'm tired of this game.
I'll slip back to GameStop."
On average, GameStop would resell
the same game six times
which was very profitable.
And things started
to go downhill when, effectively,
you saw publishers like Microsoft
selling their games directly online.
All right, guys,
heading into GameStop.
Look at this place.
It looks like a complete ghost town.
So I bought.
And I watched the price just tank down.
Today, we're at another abandoned GameStop
in Cranberry Township, Pennsylvania.
Everyone thought
GameStop was the next Blockbuster.
A lot of people thought,
"GameStop's overvalued."
"No one's going to these stores buying."
They just thought
that the stock should go down.
Video game retailer GameStop
is not doing so well.
GameStop looks to be heading down the same
path as Blockbuster and Sam Goody.
If there's money to be made,
Wall Street is all over it, like…
And GameStop was no exception.
While GameStop stores were shutting down,
Wall Street was looking
to make stupid money
off someone else's bad fortune.
It felt like 2008, all over again.
You buy companies
that are doing good things,
executing on business plans,
and you short companies
that are missing earnings.
That's the concept
of normally being a good investor.
There's companies that are
clearly going out of business
that larger hedge fund managers
will become comfortable,
and they'll be in it together.
Various hedge funds,
including Citadel and Point72,
were all betting that GameStop's
stock price would go down.
The big one was Melvin Capital.
They were betting against GameStop.
Gabe Plotkin runs
a hedge fund called Melvin.
He's an extremely intelligent person.
He's very thoughtful, cautious, compliant.
Everything someone wants
in a hedge fund manager.
And he has a track record
that's unparalleled.
He also had a track record
of shorting gaming companies,
including taking a huge short position
against Nintendo in 2018.
Move over Bowser,
Nintendo has a new villain.
Gabe Plotkin was at SAC, a star trader.
He left and formed
his own firm, Melvin Capital Managements,
and apparently has
a massive short position in Nintendo,
a 400 million-dollar short.
And the stock over
that time has declined almost 30%.
You know, I look at the size of my funds,
and where we are in the industry,
and it's kind of shocking to me.
I hate that guy.
He's betting on people's failure.
Why would you not short
GameStop if you're going to short stocks?
We all know that they haven't innovated,
stores aren't doing well,
haven't hit the numbers.
If you look at it
from Melvin's point of view,
shorting GameStop
was like profiting off a sinking ship.
Every time GameStop hit another iceberg
or took on water,
the stock dropped and Melvin made money.
But while Melvin was
too busy watching GameStop's demise,
they failed to see
what was on the horizon.
Not another iceberg,
but a lifeboat sent out
by a new school of investors
ready to swoop in
and start buying up the stock.
None of the risk models
account for extreme events
that aren't within
a normal standard distribution.
It is the thing that, you know,
the probability of happening
is infinitesimal,
but it can still happen.
All right. Who wants to do a show?
Who's ready?
You want to know
what disruption really looks like?
Well, you're looking at it.
I think it's Robinhood.
It's a privately-held operator
that launched its commission-free
brokerage platform in 2015.
This company's growing like a weed,
ten times since we saw them last in 2016,
threatening legacy operators,
forcing them to play by
a new, good set of rules!
Robinhood is a brokerage
web-app/phone-app
that facilitates trading.
Make an account on it,
you can buy and sell stocks.
It's pretty popular because it's free,
it's free to trade,
and the interface is super easy to use.
You know, using Robinhood is less like
using a traditional financial product
where you have paperwork,
you have to wait.
It's more similar
to using a technology product,
like an Uber or an Instagram.
Your phone is everything, right?
And what happened is that
Robinhood makes trading really easy,
and that has changed everything.
When we first started Robinhood,
we had, you know,
lived through
the financial crisis of 2008.
And, from the very beginning,
our mission has been
to democratize the financial system.
We all know the story of Robin Hood,
the story of robbing
from the rich and giving to the poor.
That's what
Robinhood the brokerage was.
They were trying to help people
get into the world of stock trading,
and help them make money
within the world of the stock market.
It could be a game-changer
for an entire industry.
Robinhood's got a handle
on what millennials want.
The median age of the customers is 30,
and about half of them are
first-time investors. I love that.
Um, I decided, "Okay, I'll just sign up
for Robinhood and see where it goes."
Pretty intuitive.
You search up a stock ticker,
and click, swipe, and send it off.
Eddie is what is
traditionally known as a retail trader.
What is a retail trader?
It's someone like this.
I just, you know, buy stocks
that I think will have a good future,
and I just leave it alone.
I am notorious for day trading.
- He's like, "buy and hold."
- Or this.
I thought you have to go
to an office or a bank,
say, "Hey, I want to buy this."
Or even this.
What up? I'm Mikey Guggenheim,
I'm a rapper, filmmaker,
entertainer extraordinaire,
and huge dinglebop.
And these are my friends,
Rachael and Derik.
Erik with a "C."
I am a writer, producer,
kind of helping manage
the Mikey Guggenheim thing.
Assistant.
I'm not an assistant. I am…
I'm stepping into a management role.
- More like intern.
- I'm not an intern.
Traditionally, retail was
disconnected from one another.
Because there are millions of
retail traders just buying
$10 here, $50 there.
And they're really
not large movers in the market.
So, who was the herder of, like, retail?
What's the most popular show
on television for retail?
Hey, I'm Cramer. Welcome to Mad Money.
I'm trying to be "Jimmy Chill,"
but I keep seeing people
saying the dumbest things,
and it is beginning to drive me nuts.
I've always been a fan of Jim Cramer.
Jimmy Chill, man.
If I can find people stocks
that can make them money,
or if I can help them,
teach them how to find stocks.
Now, that's what I do.
Now on YouTube,
you can find so much information,
but prior, there wasn't as much.
I had some kid
take a selfie with me yesterday,
I said, "Why are you doing that?"
And he goes, "You taught me investing."
My job's not just to entertain,
but educate, teach,
put in context. Call me.
The house always wins
if you're unprepared,
and they're playing against the house.
Now they want to tear down the house,
they want to burn the house down,
but they don't have a clue,
and they keep thinking
you can beat the house.
The retail investor,
they have trouble getting the best data
because data's expensive.
There's the Bloomberg Terminal.
It has information you can't get if
you just have a brokerage account.
Bloomberg takes prices
from the banking community
posted on a central aggregation point,
and make it available
to their subscribers.
Things that are published
on a Bloomberg Terminal
would be verified
to journalistic standards.
There's checks and balances
in that process.
Our Bloomberg Terminal,
I believe, is 20,000 a year,
we have 25 of them.
Yes, it's expensive,
but the value you get out of it
is worth every penny.
I don't think you can be a member
of the financial community without it.
If you're trying
to play the same game
with the same strategy
against Wall Street,
it's not going to be easy to win.
So, you're just at a disadvantage,
which means you have to play
a different game.
My family and I moved from Nashville
a month before the pandemic hit,
and I want to be
self-sufficient as possible.
I really enjoy growing CBD.
I started getting into that hobby,
keeps me sane.
My name is Austin Tobitt.
I am known as atobitt on Reddit.
All these people were
all of a sudden interested
in making money in the stock market.
That's what got me into Reddit.
Reddit allows Internet communities
to kind of convene around
niche-specific interests.
All of a sudden there's this centralized
place for things I'm interested in.
There's a community for photography,
there's a community for astrology.
I can go on right now and make one on…
And anybody that
wants to join that is free to join that.
You don't need your real name.
Not like Facebook.
I like Reddit because
my face is not in there.
I can be anyone I want to be.
People develop pretty tight bonds
through Reddit communities,
real deep friendships,
and real deep camaraderie.
My friends were already
trading stocks.
I had no idea how to buy and sell.
That's how I discovered /wallstreetbets.
There's a community
called WallStreetBets.
There's like this crazy group of
people that just are bouncing around
posting about
how much money they're losing,
bursting through doors.
Oh, yeah!
Like, it's going up, going down!
- Yeah, big dick energy, like…
- Yeah.
Wildness.
I've been on WallStreetBets,
fucking around on there
for the last two and a half years.
I mean, you saw people
losing tons of money
and making tons of money.
They're, like,
degenerate gamblers, basically.
They love the game.
Even these guys that hit big,
they keep going, and they bet bigger.
People are commiserating
about their losses
as much as they're
boasting about their wins.
That's what makes
this community so interesting.
I'm on Reddit, but not even
remotely in the same way.
I'm a lurker, for sure.
In real life too.
No, not in real life,
I'm regular. Stop it.
Outside bushes, know what I mean?
- No, I don't lurk in real life.
- Exactly what a lurker would say.
- I don't want to explain I'm not a lurker.
- Not many people are going to see this.
They have a lot of
their own, sort of, lingo that they use,
inside jokes, memes, things like that.
People think of retail investors as stupid
or, you know, uneducated,
so we've embraced that,
we're just dumb apes.
"Diamond hands" means
you hold, you don't sell.
You know, you have such strong hands,
they're made of diamonds.
The alternative to that is paper hands,
which means you wimp out
and sell as soon as
you start to get a little fear.
There's also "tendies,"
which is basically profits, like money.
"HODL" is a big one.
That actually happened from a typo.
Instead of writing, "hold,"
they wrote "H-O-D-L,"
and it just stuck.
WallStreetBets was
a bunch of foul-mouthed people
that were throwing away
their entire life savings into one stock.
Whether it was 300,000 or 3,000,
I'm going to take the money right now
and dump it into something
and make a crazy bet.
I wonder if some of this
does have to do with
the nature of people's, sort of, outlook
in terms of their
financial future in general.
A lot of us can't afford to buy a house.
You know what I mean?
We don't have the same kind
of investment opportunities
maybe that our parents' generation did.
So…
But you know, what do I know?
Just a couple of douche bags
from New Jersey,
like, I don't know.
By the summer of 2020,
WallStreetBets had over
one million subscribers.
It became the place to watch others
make crazy, outsized bets
on the stock market
that might be crazy stupid,
or crazy genius.
And one of the craziest of these bets
was a wager in GameStop made by
a Redditor named, "DeepFuckingValue."
DeepFuckingValue, "DFV."
You know, The Dude.
Tell him I said, "What up?"
He's the original ape.
The original, diamond-handed hodler.
His original GameStop bet
was around $50,000.
I remember looking at it,
and to me,
it's pretty akin to being in the casino.
If you were to see someone put up, like,
a massive stack of chips,
you almost have to watch it play out.
And they did watch.
DFV had been posting since 2019,
and he kept posting updates about GameStop
almost every month since then.
It didn't matter, though.
Very few retail traders on WallStreetBets
agreed with him.
Well, that is until August of 2020,
when out of nowhere,
something unexpected happened
that caused
people to sit up and pay attention.
Ryan Cohen, the founder
and former CEO of Chewy.
- Great to have you here.
- Thank you for having me.
Chewy founder, Ryan Cohen,
began quietly
buying up shares of GameStop.
In just over two weeks,
he purchased almost 10% of the company.
Chewy, the biggest
online retailer of pet products.
It's a great company.
I had to euthanize my cat
back in the fall.
Like, Chewy sends flowers.
You know, stepping away
from Chewy, what is next on your docket?
I'm looking at lots of different things.
Talking to lots
of different entrepreneurs,
looking at different businesses.
You know, I'll see, maybe
I'll build another business.
Cohen's investment didn't cause
hedge funds like Melvin Capital
to abandon
their short positions in GameStop.
But it did catch the attention
of a number of retail investors,
including one Redditor in particular.
Wow,
you turned $25,000 into $8,000,000.
How does that feel?
Um…
It's… it's okay, I guess. …
It's a good starting point, yeah.
My name is Alvan Chow.
I'm Jeffamazon on Reddit.
Our former president…
he addressed
the CEO of Apple as "Tim Apple"
in one of his meetings.
Appreciate it very much, Tim Apple.
I thought that was hilarious,
and so I picked Jeff Amazon
as just sort of poking fun at that.
My mom is from Beijing,
my dad is from Hong Kong.
I don't have a finance degree.
I'm not in Wall Street.
I don't have any such connections,
and I've applied to many different
hedge funds and stuff like that,
but, you know,
never got a response.
So there was no other way
for me to get on the map.
This was my only way.
Most of the picks that you make
are going to fail and not do well,
so you need to do
a tremendous amount of research,
usually something that's ignored
by a lot of other people.
For example, GameStop.
After I saw Ryan Cohen invest,
I saw GameStop pop, like,
maybe 30% or something in a week.
I was like, "What just happened?"
I thought this was
a dying brick-and-mortar store.
I looked into Ryan Cohen,
looked at, you know, his past successes.
He competed toe-to-toe with Amazon.
They won because they provided
better customer service.
So, I thought Ryan Cohen
was the person to transform this company.
At that point, I started doing
a tremendous amount of research.
I looked up all the terms,
and I tried to understand it very deeply.
And there I found the issue
of 140% true interest.
I didn't really understand, like,
how something could be over 100% shorted.
It's possible because a share
can be lent out more than once.
So, that share of stock
that a hedge fund borrows
can be lent out
again to another hedge fund
in the hope of buying it back later
for even less money.
What does this mean?
It gets kind of complicated,
but all you need to know is
that the higher the percentage,
the more things can blow.
The way we calculate it,
anything 7 to 10% is kinda normal.
Things start ticking around 20%,
it gets on a watch list.
Thirty…
Forty, 50, that's very, very high.
So, if the stock price
begins to rise unexpectedly,
then nervous short sellers
may start buying back their shares
to stop their losses,
but that can drive
the stock price up even more,
which can be like pouring fuel on a fire.
Everyone's going to be scrambling
to try to buy back shares,
and it's just going to make
the price go higher and higher.
So, with everyone piling in,
from panicked short sellers
to swarming retail traders,
a hedge fund with a short position
can get squeezed from all sides,
which is why they call it
a "short squeeze,"
and it can put a hedge fund
out of business.
Whenever there's groups of people
moving in the same direction,
and you have to move with them,
you're exacerbating the move,
and that is the greatest fear
for a hedge fund manager.
A true short squeeze
is a rare event.
There are probably a hundred predicted
for every one that occurs.
There needs to be
an unexpected positive event
to start to drive the stock price higher.
This could be a huge earnings surprise
or a takeover offer.
Or maybe this Ryan Cohen guy
had bigger plans than he was letting on.
All these things combined
was just a, sort of, freak of confluence
that would lead to
an extremely high stock price.
That was sort of the crux of my thesis.
I just wrote a long post outlining
what I thought was going to play out
over the next few months
and published it on WallStreetBets.
People on WallStreetBets,
they write these posts
that are kind of like manifestos.
These big DD articles.
DD is due diligence.
Which is where you basically write out,
like, your theory and your research
of why you think something
in the market is going to happen.
It's not, like, flippant.
They spend a lot of time
looking into this stuff.
People would research, just deep.
Some of those people are
the smartest people
I've ever encountered, hands down.
I'm just like a new guy
who entered the field.
I'm gonna slam dunk on some hedge funds,
but I still respect them tremendously,
and it's just part of the game.
And WallStreetBets,
they didn't really agree with me,
but I know I've done the research
to make sure that what I'm saying is true.
And it's up to other people
if they believe it or not.
The thing is,
the believers were out there.
They just hadn't discovered Alvan
or put their money behind GameStop… yet.
My name is Joe Fonicello,
and I live in a van with my girlfriend.
My name is Abbe Minor.
I built the van, I designed it.
For me, it's always about
work smart, not hard.
That's the epitome of who he is.
My parents
were hard-working farmers.
I see the labor they put in,
literal back-breaking labor.
I just can't do it.
And slowly, as I'm getting older,
I'm creating opportunities
that allow me to transition out of that.
Last year, we decided
we were going to take a short trip.
Covid happened and school got cancelled,
so we took off.
We really had no reason to come home.
Abbe and I were in the van,
going up and down the West Coast,
and I was looking for ways
we could make money while traveling.
And I started to look towards investing.
And, I had joined WallStreetBets,
probably five, six years ago.
And I hopped on, and I saw a post
by Jeff Amazon that talked about GameStop.
The post starts off by saying,
"Sup gamblers."
"Sup gamblers. Feel bad about
missing the gain train on Tesla?"
"Fear not, something
much greater and stupider is here."
"We're going to temporarily join forces
with the Galactic Empire
and hijack the Death Star."
"Our choice of weapon, GME."
Obviously, that is compelling.
You know,
GameStop's not too sexy a company,
but when you talk about
this massive short squeeze,
I thought, "Maybe they're onto something."
I decided to start putting some money in.
A few weeks passed…
That's when we came across
Roaring Kitty streams.
I remember the first time we
tuned into a Roaring Kitty stream,
this weird guy had
a headband on sometimes.
It was fun.
You think of a stock market analyst,
you don't think of him.
It wasn't ten minutes, we got hooked.
So, first, let's just discuss why
GameStop is the first video
of this Kitty Corner series,
and that's because it is
now the largest position
in the Roaring Kitty portfolio.
Roaring Kitty was really interested
in stocks that had deep fucking value.
People didn't know
Roaring Kitty was DeepFuckingValue.
The cat guy, what's his name?
DeepFuckingValue?
No, the cat guy.
- Roaring Kitty.
- Roaring Kitty, yeah.
DeepFuckingValue is
almost a trade blotter on WallStreetBets.
And then his Roaring Kitty channel
had this three-hour livestream.
The GameStop stock,
it epitomizes value investing.
It's value investing at its finest.
So, feel free to grab a beer,
though, if you've been
long GME the past year,
you probably have one,
how else you gonna get through this?
I'm kidding.
That's where his personality comes through
and he was this revered figure.
We'd already invested our money,
but that's when it started
becoming really fun.
Yo, what up, everybody?
Sorry I was a bit late today,
my daughter skipped her nap,
delayed everything.
Roaring Kitty started posting
his live streams in the summer of 2020.
Nobody knew his real name.
It didn't matter, though. He was charming,
funny, knowledgeable,
and he loved cats.
For the WallStreetBets community,
he was their Jim Cramer.
Yo, what up?
The GameStop thesis is super simple,
but it's often misunderstood.
Everyone classifies it as a "cigar butt"
and then just moves on.
To add to this, GameStop is the most
heavily shorted company in the market.
So, this has led to an opportunity,
that's what I think.
Ryan Cohen,
Alvan Chow, Roaring Kitty.
It was like they had all seen
into the future somehow,
and recognized the retail investor world
was sitting on top of a GameStop volcano.
And that volcano, as it found
more and more true believers online,
was about to blow.
What happened was,
GameStop started to dominate
the WallStreetBets subreddit.
I started scouring "Hot" posts.
So I kept seeing posts about GameStop.
By then, you know,
I researched what short interest was,
so I decided to purchase
a bunch of GameStop shares.
The beautiful part about Reddit
was it is a hive mind.
It is a legit hive mind.
Knowledge sharing is always good.
You know, if I have knowledge on GameStop,
and I share it to you,
now we both have it.
The Reddit community felt like,
hedge fund managers can go on CNBC,
they can talk about their stocks.
This is our way of doing that.
This is our megaphone.
There started to be a fervor,
so I went "fuck it."
And I went and bought shares.
These hedge funders
are like the bullies at the playground.
No one's saying it's a better business.
None of that.
It's nonsense.
It's just, look at the stock price.
I take shit personal.
Like, Toys "R" Us, like, you wrecked that.
Oh, what a sad day.
I just want to do what
I can to fight these people.
Before the Internet, there wasn't
this ability to mass mobilize people,
and the whole power of the Internet
is connecting people at scale.
The sheer amount of people involved in it,
it's thousands, tens of thousands,
millions of retail investors.
Either we're wrong,
or everyone's looking at the wrong stuff.
If they've gotten the wrong impression
which I've seen happen,
but this is one of the biggest
misperceptions I've seen in a while,
I think, ever, maybe, I don't know.
Maybe not ever. I don't know.
I need a drink,
I'm just going nonstop, you know?
In the fall of 2020,
for the WallStreetBets community,
it felt like all the pieces were now
adding up to something much bigger.
All that was missing was
a critical mass of interest in the stock
to send it to the moon.
There were so many
little things that lined up.
It almost felt like
the perfect storm of events.
Right now,
the stock is so heavily shorted
that all that may be needed
is a shift in sentiment.
One of the things that
we understand in this soap opera
is that someone's going to get killed.
We just don't know who it is.
It's just like, "YOLO," you know?
"Let's destroy the economy."
Ticktock. Ticktock.