Sticking it to the Man

A certain Reddit group has recently become very popular. For many people, the group has emerged as the savior of humanity. With their collective might, this group has brought a few hedge-funds close to bankruptcy.

 

GME daily, log and linear view – a brief surge, but quite a painful one for hedge funds that were  short the stock in size. [PT]

 

Is this group going to save us from the greed and immorality of Wall Street?

The posts on the Reddit group are obscenity-ridden. They have no clue about valuations. They are trying to create short-squeezes, taking outlandish risks with their money, risks much worse than one takes in the casino. Of course, pumpers of all sorts are a part of that group, pumping what they want to get traction.

Do you think such a group can rescue us from the swamp of political and financial corruption?

Game Stop (GME) is now priced fifteen times what it was trading at earlier in the month. Until the greater fool theory keeps playing out and the Reddit group size keeps increasing, the market pricing will stay supported. [Ed note: as you can see from the chart above, this has in the meantime resolved as one would expect – PT]

Then the Ponzi scheme will come to a grinding halt, and the share price will fall to its natural level; actually, to a worse level as the emotional people of the Reddit group sell low what they bought high.

I have now been a member of the Reddit group. While they give market orders to buy garbage, I have been short-selling and then covering the same day and have already taken away many of their $600 checks. I see nothing wrong with short-selling — it plays an essential part in the market.

A few rules of thumb:

 

  1. If AOC, who is in love with the Reddit group, is making a moral argument, it has to be something genuinely perverted.
  2. Do not hinge your hopes on other people saving you.
  3. There are immorality and corruption in society, but an irrational group isn’t going to rescue you.
  4. The enemy of your enemy isn’t necessarily your friend.
  5. Being spiteful towards the rich, irrespective of how their wealth was generated, isn’t rational.
  6. Whenever the price of something goes higher than its underlying value, holding on to it becomes destructive to your wealth.

 

Overall, the Reddit group is bound to lose a lot of money. A minority of them will mint millions, but many will commit (financial) suicide. This understanding is hardly about financial literacy.

This group lacks what Christians understood two millennia back: Greed and lust make our thinking unstable, convoluted, skewed. Keep them out of financial calculations.

Of course, the Reddit group has little money, which will eventually get passed on to none other than those Wall Street moguls and rational investors.

 

A Silver Squeeze?

Exploiting the Reddit group situation, some people have been suggesting that a squeeze in silver is inevitable. As a result, naïve resource investors have been buying silver and silver companies in droves. In anticipation of a squeeze, the silver price is going up.

 

So far the Reddit rumors have resulted in a brief flurry of heightened volatility, not at all comparable to the action in GME and other targeted stocks with large extant short positions. [PT]

 

Maybe silver will get some traction with the Reddit group, although I seriously doubt it, for they do not have the wherewithal to move the silver market materially. Even if they could, any such move will be unsustainable.

As Warren Buffet says, “in the short run, the market is a voting machine. In the long run, it is a weighing machine.”

I prefer to invest based on what the weighing machine says, knowing fully well that I might not make all the unknowable upside while the feeding frenzy happens.

While silver companies go up for no good reason except a feeding frenzy, I will be a happy seller over the next few days.

I have no love for Wall Street, but I don’t see the irrational, emotional, obscenity-ridden Reddit group to be the savior of the financial sector. But they will hopefully be transferring more of their $600 (or $2,000) checks to me.

 

On Investments

I for one prefer forgotten, “boring” stocks. Here is what I hope to move my money to:

 

  • Eclipse Gold Mining (EGLD; C$0.475)
  • Atico Mining (ATY; C$0.48)
  • Novo Resources (NVO; C$2.20)
  • Irving Resources (IRV; C$1.94)
  • Gold X (GLDX; C$2.70)

 

Addendum: these are not recommendations – do your own due diligence!

This article appeared originally at Jayantbhandari.com – republished with permission.

 

Charts by stockcharts.com

 

Chart annotations and image captions by PT

 

Jayant Bhandari grew up in India. He advises institutional investors on investing in the junior mining industry. He
writes on political, economic and cultural issues for several publications. He is a contributing editor of the Liberty magazine. He runs a yearly seminar in Vancouver titled Capitalism & Morality.

 

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