I’m talking about the Reddit-inspired “buying attack” by an army of regular investors on struggling video game retailer GameStop (GME).
I (Chris Lowe) covered this extraordinary saga in Thursday’s Daily Cut. And the saga keeps rolling on this week… as other groups learn from GameStop insurrectionists.
As Bloomberg columnist John Authers put it, “GameStop isn’t a history lesson, it’s a syllabus.”
But as you’ll see, not everything is as it seems with this story.
And if you’re looking to turn the tables on Wall Street… and bag outsized profits… there are far better strategies than piling into overvalued stocks with a stampeding crowd.
So stick around for more on these strategies below.
Earlier this year, an army of retail investors… mad at how Wall Street has been rigged against them… hatched a plan on Reddit and other online forums.
They agreed to drive up the price of loss-making video game retailer GameStop with a coordinated wave of buying.
It worked… and then some.
GME is up 1,195% since the start of the year.
Even more startling was the retail investors’ stated motive. It wasn’t to make money. It was to stick it to Wall Street.
This is from the manifesto of one Redditor (Reddit user), which references the 2008 crash…
We have a once in a lifetime opportunity to punish the sort of people who caused so much pain and stress a decade ago and we are taking that opportunity. […] Your ilk were rewarded and bailed out for terrible and illegal financial decisions that negatively changed the lives of millions.
Folks on Wall Street were betting against – or “shorting” – GME.
And an internet army – many of them millennials who were only teenagers when these 2008 bailouts happened – set out to teach them a lesson.
As one Redditor with the screen name TheHappyHawaiian put it, “GME needs to go to $1000 and these people need to go to jail.”
Nobody has gone to jail over the 2008 crash. But TheHappyHawaiian, and the rest of his posse, made their point.
Take Melvin Capital, a hedge fund that had bet big against GME. It lost 53% of its value in January, according to media reports. And since the start of the year, it’s hemorrhaged $4.5 billion thanks to being on the wrong side of the angry Redditors.
But GameStop isn’t the last of this kind of coordinated buying…
Take a look at this next chart.
After soaring 13% over the last three trading days, the price of silver is at its highest since August 10.
You can trace this climb back to the same Reddit group that spawned the frenzied buying of GME, WallStreetBets.
One user’s post there last week called the precious metal the “biggest short in the world.” This user then encouraged others to pile in by way of an exchange-traded fund (ETF), the iShares Silver Trust (SLV).
But the buying frenzy has spilled over into the market for silver bars and coins. Silver dealers say they’re overwhelmed with demand. Many stopped processing online orders due to dwindling inventory.
This is sending the “premium” – or extra charge – on physical silver to at least 30% over the quoted market price.
Take a look at this next chart. It’s of the fourth-largest crypto by market value, Ripple (XRP).
On Saturday, the price of XRP jumped as much as 73% after more than 200,000 users joined a group called Buy & Hold XRP on messaging app Telegram.
XRP had plunged from $0.55 to $0.20 after the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against the company behind it.
But the folks coordinating through the XRP Telegram group helped push the crypto as high as $0.75.
I got my start as an analyst 20 years ago in the City of London. It’s Britain’s equivalent of Wall Street.
I’ve never seen an investment go parabolic, like GME, without falling back to Earth – fast.
I get that the folks that make up this Reddit army are angry with how the game has been rigged against them. I really do.
Everything we do here at Legacy Research is about leveling the playing field between everyday investors and Wall Street elites. (More on that below…)
But this is too dangerous a game to be playing with your hard-earned savings. And a lot of people are going to end up with black holes where their brokerage accounts used to be.
Providing they get out early, the ringleaders of these “buying attacks”… and folks who are among the first in… will make money.
This seems to have already happened in the case of GameStop. One of the instigators of the coordinated buying of shares is a 34-year-old ex-MassMutual employee who goes by the name of Roaring Kitty.
According to rumors online (which I haven’t confirmed), his bets against GME netted him $33 million.
But this will come at the expense of thousands of newer, more naïve investors who are just following the herd and don’t understand the risks.
I don’t want you to end up as cannon fodder in one of these charges. So I urge you not to get involved with these trending investments.
Besides, there are much smarter, more lucrative ways to turn the tables on Wall Street.
Yes, the GameStop posse wounded a bunch of hedge funds.
But as I’ve been showing you in these pages, bitcoin threatens to disrupt the entire financial system.
That’s been the message of our resident crypto expert here at Legacy, Teeka Tiwari, since he first started recommending crypto to his readers in April 2016.
And it’s been a wildly profitable ride for folks who took action on his recommendations.
Teeka has handed them the chance to make 9,699% on the world’s largest crypto asset by market value, bitcoin (BTC)… 16,209% on the world’s second-largest crypto asset, ether (ETH)… and even 156,753% on NEO (NEO), the Chinese version of ether.
I know I’ve been banging the drum on this a lot lately… but it’s part of my job as editor of the Cut to spur you into action.
And this is one of the biggest ideas on my radar right now.
Pre-IPO shares are shares in companies before they “go public” and list on a stock exchange for the first time.
Because most investors haven’t gotten in yet, and these companies are still in their early stages… shares are still extremely cheap.
That’s why, with these types of shares, you can invest a small grubstake… and earn 10x… 100x… or even 1,000x your money.
But get this… Up until recently, this market was exclusively the playground of ultra-wealthy venture capitalists.
They locked regular investors out because they wanted to keep the supercharged returns on offer all to themselves.
It’s why, last week, Teeka held his first big event of the year all about this opportunity.
He explained the difference between what he calls Hype Hole IPOs – ones that can financially ruin investors – and what he calls Blueprint IPOs – ones that can generate potentially life-changing returns.
So if you’re interested in learning more, make sure to watch the free replay here.
Regards,
Chris Lowe
February 1, 2021
Bray, Ireland