Benzinga
WallStreetBets around the world: past, present and future
The subreddit forum that led to the short press of a professional hedge fund was well covered by various media covering the origins of moderators, the leaders of short press, the operation of short press, the impact on Melvin Capital and any other possible area investigated. What the reporters are missing, however, is the global perspective of the event and what has happened (or is going to happen) with the global capital markets. Past: WSB in Asia Total market capitalization: $ 10 billion Average retail portfolio: $ 1,202 People investing in equities: 167 million (12% of the total population) Retail capital market share: 85% This is a little known fact, but what happened in the US capital markets is not a completely new thing in the world. Exponential retail-led bull-run was first populated in China, as was democracy (during the Qing Dynasty in 1636). However, the structural differences between the Chinese stock market and the US market are such that in China it is effectively not possible to short a share. While this is possible for large mega funds via OTC or privately organized transactions, ordinary investors or even small funds usually cannot do so. Therefore, unlike developed capital markets with Buy-Hold-Sell-Short opportunities, Chinese investors only stand by Buy-Hold-Sell. In the course of the development of the Chinese financial market, many people left a significant loss of stocks or other financial instruments, which resulted in only a few groups or most risks people traded financial instruments. Therefore, people usually refer to themselves as ‘leeks’ (韭菜 – Jiǔcài), which means that they have little or no power in the capital markets as opposed to professional funds. As a result, the remaining group of traders and investors were very committed and established a relatively closed community of people. Chances are, if you are a retailer with a substantial portfolio, you are likely to get to know another retailer on the other side of China through some friend. These groups obviously have their own COPDs (important opinion leaders) and whales that many people try to follow in their actions. Apart from the above, people learned their lessons due to many historical scams and failures of companies in capital markets, before the Chinese government started taking serious steps to clean up the market. The most important of these can be summed up as ‘not investing in something you do not know’. And mostly people only know the big names (Alibaba, Tencent, Meituan, etc.), so when such a company is listed, the above factors play together, leading to an astronomical price increase over a relatively short period of time. . Fig.1: The shares of the Chinese short video company Kuaishou ($ KUASF) rose by almost 200% at the open during its debut in Hong Kong. In addition, there are some groups of people within the overall trading community who are more organized and more interconnected. They are the ones who collectively have enough wealth to push the shares up, and are usually called the “Wendzhou Gang” which historically started from the real estate market in Shanghai (when everyone would take a train from Shanghai together to buy) . all the apartments they could find in Shanghai, and later to speculate about it), then moved to stocks and recently also entered crypto markets. Although one might mistakenly assume that due to the population of China, there are more individual active and financially savvy traders, the chances are likely to be that there are fewer of them in China as opposed to the US, but those who are actively involved. in the market has much larger capital at their disposal (and yet it is not HNWI or UHNWI), so it has the power to influence markets. Therefore, in conclusion, yes, WSB is nothing new to Chinese people. But yes, the methods used in China and the type of people involved differ. Current: WSB in the West Total market capitalization: $ 50.8 billion Average retail portfolio: $ 12,000 People investing in equities: 54 million (16.5% of the total population) Retail share of capital market: 25% Due to the reason the WSB with GME , AMC and others, have been well described by many journalists, and it is not so much necessary to repeat what has been said before. However, we can briefly discuss what the event itself means in the social context. On the one hand, we have a relatively small group of MBA, CFA and other flashy professionals who run money for large institutions and international UHNWIs. At the same time, it is ironic that the employees of the funds can hardly be considered as HNWIs themselves, except for a few MDs or VPs. On the other hand, we have a large group of relatively “poor” people by Wall Street standards, who still represent the majority of the low to middle class population. The people who have lost hope in society, government and faithful world. These are the same people who are usually ignored by the mainstream media, who are ignored by the main politicians who serve the generous paying financial institutions, and people who have missed or participated in the rise of Bitcoin. While WSB is by no means an entirely American or Western community, the majority of people still represent Western society. For decades, people had no hope because they were forced to follow the rules of the “big boys” who were lucky enough to attend prestigious MBAs, but the COVID-19 pandemic and Trump’s stimulus investigations played their part together . With the global virus, many people lost their jobs, and without the coming economic recovery, they had no prospects but to bet their future on the capital markets, which constantly went up with the fact that the Fed was still pumping money into the markets. has. Fig.2: Retail funds are at historically high levels that exceed previous crisis levels. Although many participants in the WSB are financially more skilled than the “average Joe”, they simply had no idea of the power they jointly possess. With the stimulus tests, no more hope, the markets continued to increase, and Keith Gill clearly laid out the possible process of short pressures, leading us to where we are now … Now, as soon as the people ‘tasted the blood’ , they will not give up anymore. Given the reactions of brokers and other fund managers, the situation has only gotten worse – everyone is now on the radars of ordinary people. All participated in financial crimes against people and society. And everyone betrayed the hope of ordinary people. Therefore, GME was one of the first notable examples in the West, but will not be the last. The future: WSB in Russia Total market capitalization: $ 576 billion Average retail portfolio: $ 1,183 People investing in equities: 7.6 million (5.3% of the total population) Retail capital market share: 1.6% The Russian stock market is one of the most mysterious to outsiders. While most people of blue chips like Gazprom, Rosneft, Sberbank, etc. Hearing, the majority of Russian equities remain unknown to outside investors. The Russian market, like the other markets, has seen “WSB” -like events (though not short press, but rather Pump & Dumps (P&D)) over its history of growth. Fig.3: Stocks of Beluga ($ BELU) – one of the best vodka brands in Russia that suddenly went up during February 2021, without any clear event, market or sentiment change. None of the events, however, even had a relatively comparable resonance with WSB, neither from the capital, nor from the media’s attention. This is mainly explained by the unique structural differences in the Russian stock market, which go beyond what is commonly read in reports of “other Russian stock market research”. To begin with, the Russian stock market is 17x times smaller than the Chinese, and 88x times smaller than the US. What is different on the face of it is the average portfolio size of Russian traders amounting to $ 1.1 million, which is a significant amount for the average Russian citizen, but not for others. And by the way, this measure is very skewed for the Russian market, because according to the Central Bank of Russia, more than 75% of retail market participants have assets of about 10,000 RUB, representing 869 CNY – lower than the official poverty line in China. and less than the minimum weekly wage in the US. However, what is not mentioned in the general reports of the market is that Russian investors are more individualistic due to the cultural differences, therefore it is much more difficult for them to raise a significant amount of money to move medium to large capital stocks, such as the Chinese investors do. But a more frightening truth (for anyone who does not know Russian stocks) is that it is an ‘internal market’. This means that while insiders in a type of market have a competitive advantage over outsiders, there are those in the United States who try to prevent insider trading and punish anyone who benefits from it. In China, there are CCPs with financial regulators who do take the best measures to ensure the well-being of the general public and markets, and therefore insiders must also illegally benefit from their own benefits. In Russia, well … This is Russia 🙂 If you were to talk to an experienced Russian stock market trader, you would learn that banks (ie large brokers) usually notify their own top employees of shares held by senior executives (usually HNWIs) or large customers will buy, and the employees will buy them jointly. While someone who’s not ‘in’ will be left behind to see stocks rise and wrongly also try to participate, only to later discover that he / she is left with illiquid stocks, only to another P&D. Although officials, regulators and institutionalized market participants will clearly reject such acquisitions, all those who have traded for more than a year will confirm that such practice does exist in the market. This situation has led to many retailers becoming as angry (if not more so) for the market, as the WSB with Wall Street. However, due to the limited capital available, people had no hope of repeating the WSB story. Although many people have raised the possibility of repeating WSB in Russia over Russian forums (as here: Сила SMART-LAB). That’s why Russians have recently started turning to Western markets hoping to join Western movements (sorry China, but Russians can barely register in WeChat apart from language barriers, so they are not trying to join rallies in Chinese stocks . 🙂 However, the WSB has given great hope to Russian traders, and with that in mind, all people in Russia will remember WSB, and they will clearly expect any whale or local “Robinhood” (not the broker) that they would target and help repeat American history. Final thoughts WallStreetBets was clearly not the first, nor the last one to take advantage of inefficiencies in the market created by the “mainstream” institutions. However, WSB and the success of the “average Joe” group in taking down the financial giants have inspired many others in different parts of the world. While some of them would rather try to do so sooner, others will take their time to raise the required capital and wait for the market-wide sign. But what’s clear is that WallStreetBets is a global symbolic phenomenon that indicates that Wall Street is not alone in the room, and as they call it in Russia – ‘hamsters’ (to describe retail investors) actually have the ability to catch the whales. to kill. Benzinga’s Related Links: Cohen in charge: GameStop rises as retailer seeks e-commerce transformation Why this NFT token rose 200% in a week Elon Musk and his rise as a FinTwit influential CEO expect more states to legalize sports betting for IRS for the crypto you are hiding, start ‘Operation Hidden Treasure’ © 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.