We need a new word for what’s going on in the capital markets. “Mania” just doesn’t cut it anymore. The stocks of nearly bankrupt companies are acting like vapid viral tweets, or the next video of an unlucky cat swinging from a ceiling fan and flung into a wall. A vast army of Robinhood day-trading high-school graduates living in their parents’ basements are flush with their Robinhood cash advances for opening a trading account, supercharged with their stimulus checks handed out by Congress, and add on top of that enhanced unemployment benefits to be renewed by the new Biden Administration, and then shifted into ludicrous speed with another $1,400 per person in additional direct payments soon to be passed.
If you’ve enjoyed gaming and casinos all your life, loved the atmosphere, the excitement, the colors, the adrenaline, the ring of a jackpot, then the way stocks have been behaving the last 9 months may be familiar to you, but in a haunted funhouse-mirror sort of way. Aside from the standard tech companies that now pretty much rule the world, the craziest and most widely covered absolutely wild upside action has been in isolated gaming companies of all things. GameStop (GME) just experienced one hell of a historic short squeeze, up about 900% in three weeks to a high of $159.18. Not bad at all for a company that was a penny stock just a few months ago and that has managed to lose $1.15 billion over the last two years.
This is what happens when bored, locked-down, inexperienced day traders with no rent to pay, armed with the right Twitter feed and thousands of dollars in free money coming from every direction, all pile in to squeeze giant hedge funds out of their short positions. It is completely bizarre, a blurring between reality and fantasy, sort of like watching a wrestling match that starts off staged but then gets out of control by accident and you no longer even know if you’re watching an act or something extremely dangerous. So you just sit there awkwardly watching, wondering, waiting.
GameStop may be getting all the coverage now, like some circus freak show that people just can’t turn away from even though they know this is just not right. But GameStop is not the only gaming stock that reached absolutely ridiculous highs yesterday. Penn National Gaming is right on its tail, hitting a new all time high of $111 yesterday at around the same time that GameStop was reaching its own transdimentional peak. What do the two have in common, and can we use the data to try to triangulate the next freak show?