St. Paul resident Cody Swede has traded stocks mostly for fun since he was in his mid-20s, mostly making a few trades per quarter with relatively modest sums.
But in December, the now 34-year-old Swede decided to purchase shares of video game chain GameStop as part of a collective of small investors who banded together, many emboldened by posts on one of Reddit's online forums, to help push up the stock price.
Not only have initial investors reaped large financial benefits as the stock climbed more than 1,700% in January, but they felt vindicated by the squeeze they put on hedge funds that had bet against the struggling retailer.
The resulting chaos has grabbed headlines for the past few weeks like any typical David vs. Goliath story would, complete with billions of dollars of money lost by institutional investors, lawmakers pushing for regulation and cameos by Elon Musk.
Some of the hype has died down over the last few days as GameStop and other stocks that saw a rapid upticks in price such as AMC theaters are now seeing large declines.
As the dust begins to settle, Minnesota financial experts are taking stock of what lessons — if any — can be learned from this latest retail reckoning as local traders have hailed the recent frenzy as nothing short of a cultural movement.
"It went from being a meme to almost the French Revolution of finance," said Swede, about the run on GameStop stock.
Swede, who works in sales, has made several trades over the years that have paid off, sometimes netting him a few hundred dollars here or there.
Day trading for many of the people he sees on Reddit is like betting on fantasy football teams. People like to win, but they don't take themselves too seriously, he said.
"I never invest more than I can stand to lose," he said. "It's fun. It's a casino."
He has been a member of Reddit's "WallStreetBets" page where people have shared war stories on trading, insights and a whole lot of internet memes since 2018. Swede noticed last year discussions by members about how GameStop's stock was undervalued and the potential for a "short squeeze."
When buyers short a stock, they essentially borrow shares from a broker and then sell them at market price, betting that the price will fall. When they have to buy back the shares to return them, they hope they are at a lower price so they can pocket the difference. A lot of money can be made if the price actually falls, but it can be considerably risky.
Speculation about GameStop has existed on the forum for quite some time, but Swede decided to take it more seriously after Ryan Cohen, co-founder of online pet supplier Chewy.com and a large shareholder in GameStop, became more vocal about ways the retailer could improve, including leaning more heavily into e-commerce.
Swede bought shares in December and then sold them in mid-January after more than doubling his money.
"I want to see GameStop succeed, but this is more about gaming the hedge funds than gaming itself," Swede said.
Swede's story was similar to other traders who agreed to talk to the Star Tribune: young, male, with limited experience in investing. But similar to sports enthusiasts who religiously check game or athlete statistics, the local investors said they research and comb through analysis and social media reports numerous times a day for insight.
Another common denominator was that while they all wanted to make money in some regard, they were inspired to buy shares in big part because of an anti-establishment sentiment and to push against the traditional Wall Street heavyweights that control the market, aka sticking it to the man.
Alex Malen, 21, never imagined himself as a corporate suit-and-tie kind of guy.
The college senior learned about day trading while in high school from watching YouTube videos and has invested small amounts in popular stocks like Amazon for about a year to get the lay of the land. He uses Reddit as his main social media outlet, but Malen attests that he would never take financial advice from the WallStreetBets Reddit page despite the recent media interest in the forum.
"People just did this as a joke," he said. "It's basically just gambling to them."
But as momentum grew and he saw the effect the movement was having on the market, Malen reconsidered. Two weeks ago, he bought $1,000 worth of GameStop shares with his father and then $100 worth of AMC Entertainment stock and continued to add a few shares here or there last week.
Then he decided to cut his losses and sold all but one GameStop share. He lost about 20% of his GameStop investment, though he made a gain of about 40% on AMC.
The college rugby player said he plans to hold onto his remaining GameStop share as a memento of sorts.
"To me, it's a little bit more than just trying to make a dollar," Malen said. "To me, it's about being part of something that's going to be talked about for a long time."
Zach DeWitt, 30, of Coon Rapids said he was able to buy $2,000 worth of shares of GameStop in late January and then sold them later for a total profit of a few hundred dollars.
He had similar results with shares he bought of BlackBerry. He is normally more conservative with how he invests, but he thought he would try to "ride the wave."
DeWitt is constantly monitoring the two screens he keeps up in his home office that are filled with financial charts and chat rooms on the Discord platform. He wants to make sure he isn't missing out on a potential investment opportunity.
The general public after reading about the Reddit investors, he said, assumes they are uneducated and aren't doing their homework.
"I think the general assumption is that these people on Reddit, they don't know what they are talking about," DeWitt said. "That it's a bunch of kids. … There's a lot of research going on."
University of Minnesota finance professor Tracy Yue Wang said what first struck her about the trading mania was how social media was used to help coordinate the actions of so many, even if it wasn't easy to sustain with different investors having competing goals.
"I think it's just the beginning of a new era," Wang said.
Wang, who is an expert on behavioral finance, said she believes technology and digital message boards will empower more individuals to participate in the stock market.
However, digital accessibility also could have a downside as some inexperienced people get obsessed with trading repeatedly on apps, which can be unhealthy financially and mentally, Wang said.
"It's so easy. … People cannot help it," she said. "It's almost like an addiction."
Robert Bonine, a financial adviser and partner at Lifelong Wealth Advisors in Minneapolis, said he is worried some people who end up holding onto their shares too long and lose money might be scared from investing in the stock market in the future. Others who won big, he said, might get a false sense of security about the economic viability of short selling.
"I worry that some people have started to view the stock market more like a casino rather than a way to get ahead over time by saving early and often," Bonine said.
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Minnesota GameStop traders on why they dipped into stock market - Minneapolis Star Tribune
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