This week, we spoke with Spencer Jacob of the Wall Street Journal, the author ofThe revolution that was not there: Gamestop, Reddit and the flirting of small investors“Jacob, who edits the journal It was heard in the street Column, also wrote “Heads I Won, Tails I Won: Why Smart Investors Fail and How Adversity Can Tilt You“
We discuss how Keith Gill (aka Deep F *% King Value + Roaring Kitty) started speculating with Gamestop (GME) in late 2020 by buying a $ 53,000 non-long-dated call. He posted a screenshot in the subredited Wall Street bet, with the phrase YOLO. The incredibly long shot was widely ridiculed before his stupidity.
Brokerage firm Robinhood has made it a lot easier with its gamified – and free – trading app.
Then Michael Burry (Big Short fame) identified GameStop as a deep value game – a classic “cigar butt” stock. As stock prices soared, Gill’s “Hail Mary” trade suddenly reached one, then two million dollars. Shortly afterwards, Ryan Cohen, founder and chairman of Chewy.com, took an employee position, and the share price ran out.
Jacob explains how Reddit boards suddenly discovered Gill’s trade and started an online chatter about orchestrating a short squeeze. Explain how a “gamma squeeze” works – purchase calls that force alternative dealers to hedge by buying more stock. Soon, the mall-based retailer that looks more like a blockbuster than Amazon is suddenly skyrocketing in price.
Here is a list of his favorite books; A transcript of our conversation is available here later this week.
You can stream and download our entire conversation, including podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All our previous podcasts on your favorite pod host can be found here.
Be sure to check out our Masters in Business next week with Antti Ilmanen, co-head of AQR Capital at Portfolio Solutions Group. Ilmanen is highly respected in market theory and research, and has won multiple awards, including the Graham and Dodd Awards, Harry M. The Markovitz Special Distinction Award, multiple Bernstein Faboji / Jacobs Levy Awards, and the CFA Institute’s Leadership in Global Investment Award. His latest book “Invest in less than expected returns“
Spencer Jacob’s latest book
The revolution that was not there: Gamestop, Reddit and the flirting of small investors By Spencer Jacob
Spencer Jacob’s favorite book
Freezing Order: A true story of money laundering, murder and the wrath of the surviving Vladimir Putin By Bill Browder
Red Notice: A True Story of High Finance, Murder and One Man’s Fight for Justice By Bill Browder
The Contrarian: Peter Thiel and Silicon Valley’s Pursuit of Power By Max Chuffkin
Bad blood: secrets and lies in Silicon Valley startups By John Carreyrou
Just keep shopping: Proven ways to save money and build your wealth By Nick Maguly