- TH EPOCH TIMES - Feb 1, 2021 -
After small investors organized online to squeeze billions of dollars from Wall Street hedge funds, some establishment actors have come out against the investors.
The investors, mainly organized on the online Reddit forum “r/wallstreetbets,” have been buying en masse stocks of the video game retailer GameStop in the hope that hedge funds that have apparently borrowed large quantities of the stock to “short” it will be forced to buy it back at exorbitant prices in what’s dubbed a “short squeeze.” Some media, pundits, politicians, and financiers have decried the GameStop rush as irresponsible market distortion and argued that authorities need to step in for the small investors’ own good.
“What is dangerous, amid this trading frenzy, is that retail investors have been chasing prices so far above any sane valuation and that many will end up nursing losses,” said Jack Inglis, head of the Alternative Investment Management Association (AIMA), a hedge fund association, in a letter to members who have managed $3.7 trillion as of the third quarter of 2020.
He said the organization will help regulators with investigations.
And for the hedge funds, “those exposed will have taken it on the chin and will have executed steps to contain losses for their clients, whose savings they manage,” he said.
William Galvin, Massachusetts top financial regulator, also advised an intervention.