“The market drama surrounding GameStop Corp. is spreading ever further beyond Wall Street, whipsawing stocks from Amsterdam to Sydney as traders race to bet on where the flood of retail money might head next.” ~ Bloomberg

The story of the now infamous Reddit’ chatroom that roiled the financial markets isn’t unique.  After all, gobs of speculative capital banding together with other gobs of speculative capital to achieve a specific goal happens all the time.  The problem is this capital is attacking short sellers (i.e. hedge funds) and making a mockery out of the already outlandish financial markets.  And with profits from this outlandishness landing in small investor’s hands, it is clear that this is a “problem” indeed.

At the same time Blockbuster (yes, Blockbuster) was skyrocketing by 700+% Federal Reserve Chariman, Jerome Powell, was stating, “I would say financial stability vulnerabilities are overall moderate”.  These words are being uttered by a Fed that still owns junk bonds from last year’s crisis and mortgage bonds from the 2008 crisis.  In other words, financial stability is apparently in a perpetual state of “moderateness” because the Fed doesn’t want to be forced to buy even more junk.  Liken this situation to a monkey running around stealing candy from babies and the Fed – who has currency swap agreements with these monkeys – turning a blind eye and offering the babies a banana.  Confusing, yes, but that is the point to much Fed-speak… 

The so called “dumb money” mania gripping the markets today is largely the result of a rigged financial system that is being supported by ultra-loose monetary policies.  To be sure, Greenspan, Bernanke, Yellen, Powell and other central bankers helped create a financial environment wherein risk-taking is encouraged and savings is frowned upon. The concern for the powerful and connected today is whether the Reddit-craze is the type of risk taking that is desired.  

“Regarded by market professionals as “dumb money”, the pack of traders, some of them former bankers working for themselves, have become an increasingly powerful force worth 20% of equity orders last year, data from Swiss bank UBS showed.” ~ Reuters
 
While very entertaining and reminiscent of the ludicrous IPO mania of the 1990s, the current mania has attracted an “Occupy Wall Street” type feel and could expire very soon.  If not, it may have to be expunged by those parties that manipulate markets with much more sophistication and gravitas.

Robinhood restricts trading in stock and options of GameStop, other names involved in frenzy ~ CNBC