Knowledge and Insights
Ken Kamen, Mercadien Asset Management President, is featured in USA Today’s news article, GameStop-Robinhood revolution: Stock frenzy echoes anti-establishment anger behind Trump rise, Capitol riot by Michael Collins, Jessica Guynn and Sarah Elbeshbishi.
Small investors banding together on social media are taking on big investment firms by running up the stock price of GameStop, a struggling video game retailer whose shares were trading at around $4 at the start of the coronavirus pandemic. By Thursday, the stock price had surged to more than $480 a share before leveling off and closing at $193.
Analysts see parallels between what’s taking place on Wall Street and the streak of populism that powered Donald Trump’s rise to political power and fueled a pro-Trump mob of insurrectionists who stormed the U.S. Capitol three weeks ago in a failed bid to overturn his election loss to Joe Biden.
Just like the protestors who stormed the Capitol, many small investors are buying GameStop stock without stopping to consider the consequences, Kamen said.
“How many of the protesters that stormed the Capitol actually thought the FBI would be hunting them down and threatening them with 20-year jail terms?” Kamen asked. “They were just going with the crowd. Everyone was doing it.”
The GameStop investors have fallen victim to the same kind of group thinking, Kamen said, without considering or fully understanding that huge, easy profits can just as quickly turn into a major financial loss.
“Who doesn’t want to make money when everyone else is making money?” he said. But, “rookie investors make rookie mistakes. In many ways, people are playing with dynamite. And they might blow their fingers off.”