Jaime Rogozinski always knew WallStreetBets, the Reddit the forum he founded was part of something big – but even he was not prepared for how big.
This week, WallStreetBets was at the center of a full-scale war between Wall Street and an army of small investors GameStop, an awkward video game store that has shaken financial markets, upset billionaire bankers and made unlikely allies of political enemies.
“I’m surprised at how far it has gone,” Rogozinski told the Guardian from his home in Mexico City. Perceived around the time when social media has driven democratic movements around the world, WallStreetBets has played an important, if now controversial, part in lowering barriers to access to financial information.
The phrase has also taken on political overtones, as if the elective struggle of 2020 had simply been transferred to competing ideologies of wealth distribution. For some, the activity signals that the barbarians have reached the gates of the high finances; for others, it is a liberation from the control of entrenched masters in a corrupt system.
“I predicted it would go in this direction but I did not think it would go that far. I do not think anyone thought this was possible. To some extent, coronavirus has helped increase the speed and direction of the changes that are taking place, he says.
Rogozinski, 39, is still trying to address the role that his creation in 2012, now with more than 3.5 million subscribers, is playing in shaking up the financial markets. In part, he sees it as repayment for how financiers have behaved.
“Wall Street has always been away from its original purpose, which was to provide capital to society. Eventually, it has turned into a casino, a place for speculative gaming, he says.
This casino mentality was fully demonstrated this week when GameStop – a 37-year-old struggling retailer – became the world’s hottest investment. Small investors tied together on the Reddit forum, strained by members with names like Roaring Kitty, to take on some of Wall Street’s biggest investors who they thought had made a bad bet that the company was collapsing.
The professional investors had “short-circuited” GameStop – an investment that the price will collapse – along with other companies that have since increased, including the cinema chain AMC and BlackBerry.
Incredibly, the WallStreetBets audience won the round, costing hedge funders up to $ 70 billion, forcing some out of the trade and causing dismay and fear of an electronic economic uprising on Wall Street.
On Thursday, popular trading executives – Robinhood and Ameritrade – squeezed down retail investors’ investments in several very popular but volatile stocks, which locked traders out of the market and drew sharp criticism from some users and politicians from conservative Texas Senator Ted Cruz and the self-described Democratic Socialist congresswoman Alexandria Ocasio-Cortez, a long-standing sparring partner.
Rogozinski could not say whether the brokers had the right to go in to restrict trading, only that given the scale of the disruption, authorities could be expected, rightly or wrongly, to find a channel to restrict operations. “Whether part of this trade is legal or not, what we see is not normal, so there is pressure from outside on brokers to do this to their clients because it does not make business sense.”
Rogozinski started WallStreetBets as an antidote to reassuring advice on trading forums and insider-focused commentary on financial news cable stations such as CNBC. What individual investors needed, he thought, was something reverent, home-grown and inclusive. WallStreetBets got tagline: “Just like 4Chan found a Bloomberg Terminal.”
At the time, Rogozinski was single and working as an IT consultant at the Inter-American Development Bank in Washington DC, a job he has since traded for family life in Mexico and a job in financial technology. “I started WallStreetBets when I had the time and money I could afford to lose. Now I am a family man and my appetite for risk has decreased. I have passed that step. ”
Rogozinski has not been associated with the chat platform since April and has removed a subforum on Discord that he felt had been infiltrated with extremist views and offensive comments that had nothing to do with finances.
The decline in Discord removal was rapid, and it may be about the moment that Rogozinski, who had published a book, WallStreetBets: How Boomers Made the World’s Biggest Casino for Millennials, was expelled by other moderators, who at one time included the disgraced drug lord Martin Shkreli before he was convicted of securities fraud.
Some have seen WallStreetBets as the offspring of the 2010 Occupy Wall Street protests – a popular uprising against capitalism’s exaggeration and the bailout of banks following the recent financial crisis. Now armed with effective tools to register their accident with the system, the peasants have revolted. It is a connection, he says, which does not have to fit.
“I can see parallels and appreciate the story of a feelgood story, but we are not in the same moment. In 2010, the complaints were different. I am convinced that those who do this did not start with an agenda. This probably happened because people were trying to make money and happen to be organizing around this type of trade.
The great entertainment value of WallStreetsBets is that there should be a nemesis and that someone should be on the other side of the industry. A year ago, they were short sellers. It just so happens that card sellers are now on the landing page. They are flexible and when the time comes they will put it on. ”
Not resisting the overall purpose of making money, Rogozinski says it is correct to interpret the forum as part of an attempt to democratize Wall Street, just as other forms of social media have played a role in democratizing politics. They have also come up with unpredictable results.
“These are natural forces that come as a result of lowering barriers to entry. I can not take credit for Robinhood, but they fulfilled the ability of anyone to participate in this. They take advantage of the asset. ”
But Rogozinski acknowledges the dangers of placing sophisticated option games in the hands of individual investors who exploit and take advantage of a lack of exotic investments “so complex that they are virtually inexplicable to non-professionals.”
“It’s democratic, yes, but giving amateurs access to such sophisticated plays can be extremely dangerous. Changes in the composition of the markets in combination with the speed of shifts describe the fragility of the system. “Unintended consequences,” he says, “should not be ruled out.”
Joshua Mitts, an expert on hedge fund activism, short-selling and securities, at Columbia University, believes that private investors have been victims of trading strategies by sophisticated investors. “You can see systematic price declines that often hurt what is often a loyal dedicated group of retail investors in a company. These investors have now decided to take matters into their own hands, he says.
Mitts, recently quoted in an institutional investor report, The Dark Money Secretly Bankrolling Activist Short-Sellers, says that From a political point of view, the Securities and Exchange Commission, the United States’ leading financial watchdog, has taken little action to protect individual investors and “no regulatory information on social media trading rules”.
GameStop drama, he adds, “can be a dangerous consequence of lack of regulation”.
But Mitts questions the story of a different, populist uprising. “We do not know if this is being constructed. Individual investors may be deceived on these forums. That is an open question. It may well be that this bubble could have been a contrived misinformation campaign, and the need to know is very urgent. ”
Rogozinski does not discount the timing of the GameStop rise, effectively pushes politics and the pandemic aside and arrives as soon as possible after a resolution to the political turmoil of 2020.
“The timing is interesting, absolutely,” Rogozinski said. “But it is natural that an event that receives so much attention becomes political. It has been brought to the attention of the White House, major senators in Congress, and there is no way to avoid it. But within the forum itself, politics is almost never discussed. ”
Rogozinski is as clueless as anyone about how this will play out, but he’s sure someone will be made a scapegoat. “You know that they are going through statutory statutes that are looking for something to apply to this – one, to put pressure on brokers and, secondly, to get new legislation drafted.”
Inevitably, he says, regulators will “come in and find at least one person who is obligated to release someone or violate a statutory charter.”
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