Power of the Retail Investor

In recent weeks, and more notably recent days, shares of GameStop [GME] and AMC Entertainment Holdings [AMC] have been gobbled up hordes of retail investors. So much so that prices have gone up 320%, and 161% just since Monday, respectively. In “GameStop Mania Reveals Power Shift on Wall Street—and the Pros Are Reeling”, a recent article published in the Wall Street Journal, journalists Gunjan Banerji, Juliet Chung, and Caitlin McCabe explain how this has been happening and the culprit behind these mammoth price movements.

What started as a general conversation about the potential value of GameStop on popular platforms like Reddit, Facebook, Twitter and Discord has turned into an all-out war “between professionals losing billions and the individual investors jeering at them on social media.” So much so that regulators within the SEC are beginning to look into the potential of market manipulation.

 

Market Predictions

“The only function of economic forecasting is to make astrology look respectable.”  – John Kenneth Galbraith, Economist

 

THE 2021 MARKET PREDICTIONS ARE IN, AND THEY’RE PROBABLY WRONG.

 

Every year, the top investment banks, research institutions, and market analysts make their predictions on where the S&P 500 (stock market) will close the year. They have mountains of research at their disposal, a slew of economic indicators, and they still get it wrong most of the time.

Take 2008 when the markets fell 38% as an example:

• “Stocks will reach new record highs at some point during the upcoming year.” – Robert C. Doll, Vice Chairman and Chief Investment Officer of Global Equities at BlackRock (January 2009)
• “It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of these [credit default swap] transactions.” – Joseph Cassano, AIG financial products head (August 2007)
• “The Federal Reserve and Congress have delivered a ton of economic stimulus, and that stimulus is set to juice up an economy that has been weak, but not terrible. If everything goes according to plan, the economy will grow faster in the second half of the year, and a recession will have been avoided.” – Kevin Hassett, American Enterprise Institute (June 2008)