The U.S. retail vs. Wall Street movement seems to be making a comeback.
Recently, Keith Gill, the "top streamer" of U.S. stocks who led U.S. retail investors to "battle Wall Street" three years ago, reappeared on social media.
He posted an image on the social media site X - "The man lying in the chair sat up". This is his first update in 3 years and has been widely interpreted as a signal of his return to the market.
As a result, U.S. retail huddle stocks (also known as "MEME stocks") rose sharply. Video game retailer GameStop and movie group AMC Entertainment (AMC Cinemas) continued to soar by 60% and 32% respectively on the 14th after surging 74% and 78% on the 13th, posting the largest increase since June 2021 and January 2021.
Huge losses for short positions
In 2021, when the new crown epidemic was raging around the world, American retail investors have grouped together to long those low-quality stocks that were shorted and shorted by institutions, pulling the stock price up wildly, and becoming a force to be reckoned with on Wall Street overnight.
At that time, some well-known "retail stocks" such as AMC Cinemas and Game Station repeatedly staged stock price miracles, such as a one-day increase of more than 100% and a five-fold increase in stock prices in a week. As a result, Robinhood, a retail stock trading platform, also rose, and its IPO became a hot spot in the market that year.
Three years later, under the influence of Keith Gill's return, Game Station ushered in a long-awaited surge: on May 13, it hit the circuit breaker 6 times in the intraday, once soaring by more than 110%, and finally closed up 74.4% to $30.45, the highest single-day increase since March 2021, and on the 14th, it continued to rise by more than 60%.
AMC Cinemas, the protagonist of another "retail vs. Wall Street", has also soared by 78% and 32% in a single day recently.
In addition to GameStop and AMC, U.S. retail investors also pulled up the stock prices of stocks that were speculated three years ago: on May 14, the shares of headphone maker Koss rose 40%, BlackBerry shares rose 12%, Tupperware rose 17%, Reddit, the "home of retail investors" in the United States, rose 7%, and Robinhood, an online celebrity brokerage, rose nearly 7%.
Analyst firm Ortex Technologies said the paper losses of short positions amounted to $1.6 billion on May 14, bringing the total losses since May 13 to $2.4 billion.
The shoe is on the other foot
Despite the surge in activity at the start of the week for AMC and GameStop, these inflows were only a "fraction" of GameStop and AMC's daily cash inflows at the start of 2021, according to a May 14 report by Vanda Securities.
While retail investors have played a significant role in driving MEME stocks higher, Vanda analysts are skeptical that the MEME boom will reach 2021 levels in the coming days, and many hedge funds are better prepared to short now by learning from the experience of 2021.
Nicholas Colas, co-founder of DataTrek, agrees that the current market is different from 2021, "Today, retail traders in the U.S. are no longer just sitting at home and doing almost nothing but trading stocks. The federal government is no longer going to airdrop trillions of dollars in stimulus money."
At the same time, the Fed's interest rate is at a more than 22-year high of 5.25%-5.5%, which is different from the post-pandemic zero interest rate situation in 2021. For investors who don't have a lot of money, any borrowing can be a big burden.
Neil Wilson, chief market analyst at Finalto, said in a note, "It looks like retail investors are once again becoming more optimistic and willing to take more risks." But in reality, there is no fundamental reason for the stock price to rise – GME's latest earnings report was very bad. ”
Yang Delong, chief economist of Qianhai Open Source Fund, said that many retail investors like to invest in small-cap stocks and focus on stocks through social networking and other means, which leads to the liquidation of short-selling institutions. No matter what kind of capital, the amount is large and the amount of liquid disk is held, it may manipulate the stock price. As for GameStop itself, because it focuses on the game industry, it may also lead to differences between institutions and retail investors, such as young people who like and often use it. However, from a fundamental point of view, GameStop's stock price is untenable, and the long-term still depends on the real value, and only the short term is vulnerable to the influence of funds.