GameStop affair: small investors strike back

A text by Jean-Francois Theriault

On the contrary, some argue that there is a well-calculated strategy behind this movement. It’s a new generation of investors who are taking the stock markets by storm these days.

Tom Chabot is a programmer employed in the public service. For the past few months, he has taken a little interest in the stock markets. The pandemic happened, and I found myself in between jobs, with a big vacation pay and nowhere to spend it, he says.

He chose to invest in Tesla first, through the online brokerage site Questrade. Because it is a company which innovates, which is focused on the future and which respects my values, he specifies. It is fundamental for me to put my values ​​forward, even on the stock market.

In spare time, Tom frequents the Reddit platform, and particularly the WallStreetBets forum, on which small independent investors like him exchange tips.

Last week, I saw the name of GameStop appear all over the place [sur le forum]. We had to sort through all the messages, because people often speak without saying anything. But I eventually found people who were clear on what was going on with the action. Monday I bought.

Tom Chabot, independent investor

Members of the forum observed that GameStop’s stock was not only devalued by brokerage firms, but that certain hedge funds (hedge funds) had bet en masse on his fall. Result: a large part of the offered shares was sold discovered (short), up to 120% of the real value of the company.

The calculation is simple, explains Mr. Chabot. hedge funds would not have the choice to buy back the shares at a higher price than the one at which they had borrowed them. Just like that, we would increase the value of the security even more. “,” Text “:” If we succeeded in raising the share price enough, these hedge funds would not have the choice of buying back the shares from a a higher price than they had borrowed them from. Just like that, we would increase the value of the title even more. “}}” Lang = “fr”>If we managed to raise the share price enough, these hedge funds would not have the choice to buy back the shares at a higher price than the one at which they had borrowed them. Just like that, we would increase the value of the title even more.

This is exactly what happened and the action of GameStop has been propelled to unparalleled heights in what experts have called perfect storm.

Is Mr. Chabot thinking of withdrawing his marbles and cashing in his winnings? No, not for the moment. I want to see how far it can go. I have the impression that it can continue to rise.

He does not hide his satisfaction at the situation. He says he is happy to have shown that the stock markets are accessible to everyone, not just the big financiers on Wall Street. hedges funds, it will always be won. “,” text “:” If, at the end of all this, we can force them to change the financial rules to improve them and shed light on the aggressive tactics of hedge funds, it will be always won. “}}” lang = “fr”>If, at the end of all this, we can force them to change the financial rules to improve them and shed light on the aggressive tactics of the hedges funds, it will always be won.

But Tom Chabot cannot see himself becoming a full-time investor. If I can make some money, good, but my goal is eventually to buy land and get into permaculture.

He says he is not afraid for his investment: I already have a good retirement fund. What I want is to change things my way, starting with myself.

Young people invade the markets

Richard Lacasse, spokesperson for Desjardins, is categorical: young people like Tom Chabot have been very numerous to take an interest in the stock market lately.

2020 were between 18 and 30years. However, young people do not represent 38% of the demographic pie “,” text “:” Thirty-eight percent of our new customers in 2020 were between 18 and 30 years old. However, young people do not represent 38% of the demographic pie “}}” lang = “fr”>Thirty-eight percent of our new customers in 2020 were between the ages of 18 and 30. Yet young people do not represent 38% of the demographic pie, he emphasizes.

And the separation between genres is marked. According to Mr. Lacasse,% of investors under 30years are men “,” text “:” 80% of investors under 30 are men “}}” lang = “fr”>80% of investors under 30 are men.

This week, Desjardins was caught in a real tidal wave. [mercredi]. We look at the numbers and we see that we are currently up by 193% from last year “,” text “:” We broke a transaction record [mercredi]. We look at the figures and we see that we are currently up 193% compared to last year “}}” lang = “fr”>We broke a transaction record [mercredi]. We look at the figures and we see that we are currently up 193% compared to last year, explains Mr. Lacasse.

Without wanting to comment on the current situation, he wishes to send a message to young people who would be tempted to see stock market investing as a way to make a lot of money quickly: Money doesn’t grow on trees. Today is an opportunity to realize that we do not play on the stock market. It’s not a game. Investing is a strategic asset management decision that requires knowledge and rigor. It is work, to be an independent investor. It is not an open bar.

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Relativize revolt and think about the rest

The information on short sales is public, and you can immediately see which security the investment funds take the most risk on., notes Jean-Paul Giacometti, vice-president of Claret Management.

He believes that independent investors have turned their tactics against them. They saw a potential investment, and they went in droves, he says. But, for me, they played by the rules.

This is not a battle againstestablishment nor against hedge funds. These are people who want to make a lot of money quickly. But we must not forget that many will also lose.

Jean-Paul Giacometti, vice-president and portfolio manager at Claret Management

However, he expressed concern about the current state of the markets. I think there is too much money flowing right now, and that portends an upcoming contraction in the economy., he says. He cites as an example the year 1999 and the frenzy around the year 2000 bug, a period when governments put a lot of money into circulation to reassure their populations. The markets were packed, before collapsing a few months later, in March 2000.

It’s probably not going to happen tomorrow morning or maybe even next year. But we might end up in a situation where people will have a lot to lose, he predicts.

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