** 28-Jan-2021 World View: Reddit Pump 'n' Dump
I spent a little time on Reddit today to see what's going on.
I'm not familiar with Reddit, but the first thread I stumbled on was a
joke thread:
https://www.reddit.com/r/funny/
I spent 10-15 very enjoyable minutes reading this thread. If you need
a break, I recommend it.
Then I finally figured out where the stock market thread is:
https://www.reddit.com/r/wallstreetbets/
Reading through this thread was definitely not enjoyable. The
following is a fairly typical post:
> "I will be acquiring more shares today. I have 17.7k
> liquid money in my TD. Bought 15 shares @327. Waiting for
> another dip to yolo 12.7k into the rest. I have 18 shares holding
> on RH with average cost of $112. 10000EOD Boys. Fuck the shorts,
> fuck the establishment. Melvin and friends can such my fat
> diamond encrusted cock."
There is a lot of this hostility by children like this towards their
parents' generation on this thread. However, I believe these children
are actually criminals.
There are a lot of posts encouraging people to buy, buy, buy. Some
commentators say that it looks like a "pump and dump" scheme, and I
would have to agree with that. The way that normally works is that
the criminals buy up lots of shares of worthless stock for almost
nothing, then send out thousands of e-mail messages saying that this
stock will be the next big winner, and that you should buy while you
have the chance. That's the "pump" phase. Once the stock is at a
plateau high, they enter the "dump" phase and sell all their worthless
stock at the inflated price. The criminals make a great deal of money
at the expense of the suckers who acted on the e-mail messages, and
the suckers lose all their savings.
So that looks like what going on at Reddit. There seem to be a few
people posting similar messages encouraging people to buy, not only to
make a lot of money, but also to screw the establishment. I assume
that these messages are being posted by a small group of criminals
with multiple Reddit accounts, pumping up the price of the stock.
They purchased a lot of Gamestop stock when it was at a low, and at
some point they'll dump everything, and cause the price to crash to
its former low level.
A pump and dump scheme normally does not affect the market as a whole,
but this one seems to be a pump and dump scheme on a grand scale.
It's even possible that the criminal activity extends beyond simply
waiting to dump stock. The criminals may be targeting the hedge funds
that shorted the stock, in order to gain further results, or perhaps
even force some hedge fund to close. I'm not sure how this would
work, but there's certainly a suspicion that something more is going
on.
After you finish reading this, go back to the joke thread. It's much
more enjoyable.