WEBVTT - How A Profane Subreddit Moved The Market 0:00:10.560 --> 0:00:14.640 Hello, and welcome to another episode of the Odd LODs podcast. 0:00:14.680 --> 0:00:19.479 I'm Joe Wisenthal and I'm Tracy alliwit Uh, Tracy. It 0:00:19.640 --> 0:00:24.120 really feels like, from a market's perspective, this is the 0:00:24.200 --> 0:00:29.120 closest we've been lately to uh sort of two thousand 0:00:29.160 --> 0:00:33.160 and eight financial crisis vibes well since the financial crisis, 0:00:33.200 --> 0:00:35.880 wouldn't you say? I would say so, and I would 0:00:35.880 --> 0:00:39.720 certainly say the statistics back you up. Biggest weekly sell 0:00:39.760 --> 0:00:43.319 off since the financial crisis. We've just seen, right right, 0:00:43.479 --> 0:00:48.440 massive sell off and risk assets, an extraordinary amount of 0:00:48.640 --> 0:00:52.920 repricing of expectations for central banks all around the world 0:00:53.000 --> 0:00:57.640 to come in and intervene. And we've had other periods 0:00:57.640 --> 0:01:01.760 of sort of semi crisis, um uh since the Great 0:01:01.760 --> 0:01:05.680 Financial Crisis, during periods to say the Eurozone, but it's 0:01:05.720 --> 0:01:10.119 just never felt as extremely uncertain as it does right now. 0:01:11.240 --> 0:01:14.280 I don't know, I sort of remember late two thousand fifteen. 0:01:14.800 --> 0:01:17.520 Uh yeah, I mean late two thousand and fifteen you 0:01:17.600 --> 0:01:19.720 had all the issues going on with credit and you 0:01:19.840 --> 0:01:23.880 had one big fund blow up. So I'm still waiting. 0:01:24.400 --> 0:01:27.479 I'm still waiting for the second order effects of the 0:01:27.520 --> 0:01:30.640 market sell off that we've seen to emerge. That's true, 0:01:30.680 --> 0:01:35.319 Like we haven't actually seen any sort of major liquidations 0:01:35.480 --> 0:01:39.160 or institutions of various size like truly go bust yet 0:01:39.200 --> 0:01:42.840 amid the volatility. Obviously nobody, uh, you know, we're not 0:01:42.920 --> 0:01:46.480 hoping that that happens. For now. It's mostly been like 0:01:46.520 --> 0:01:49.560 a sort of markets reaction. But as you say, there 0:01:49.600 --> 0:01:52.320 hasn't really been a second order effect just yet. Ye, 0:01:52.680 --> 0:01:59.360 very true. So obviously the coronavirus is um you know, 0:01:59.680 --> 0:02:04.520 the leer contributing factor. It's people are gripped, my panic 0:02:04.720 --> 0:02:08.480 all around the world. It started in China late last 0:02:08.560 --> 0:02:11.240 year and now it seems to be spreading to countries 0:02:11.760 --> 0:02:15.440 basically everywhere. But I also think that there is another 0:02:16.280 --> 0:02:20.760 contributor to the top. It's not just the virus that 0:02:20.880 --> 0:02:23.880 caused the top. Well, I mean, the virus didn't cause 0:02:23.960 --> 0:02:27.120 the top. The virus was the catalyst for the top 0:02:27.240 --> 0:02:30.680 to no longer be the top and for markets to 0:02:30.800 --> 0:02:35.320 sell off. But but what are you thinking about, Joe, Well, 0:02:35.360 --> 0:02:39.040 I mean, obviously it's our recent Business Week cover story 0:02:39.120 --> 0:02:42.680 that our colleague Luke Cowo wrote about when the bull 0:02:42.760 --> 0:02:46.560 market got weird and uh about all these traders and 0:02:46.639 --> 0:02:49.880 online forums making crazy big beds, and I think in 0:02:49.960 --> 0:02:54.200 retrospect many people will see the recent cover as what 0:02:54.360 --> 0:02:57.880 really did the bull market in? Yeah, it was good timing, 0:02:58.400 --> 0:03:01.840 but in the history of of market crashes, people always 0:03:01.880 --> 0:03:05.200 go back and sort of look for retail investors who 0:03:05.280 --> 0:03:09.359 start to become really overconfident. Some people actually look at 0:03:09.440 --> 0:03:13.720 retail investor participation in the market as evidence of the 0:03:13.760 --> 0:03:17.680 top coming. And so some of the behavior that we 0:03:17.800 --> 0:03:21.800 have seen embodied in places like um what Luke was 0:03:21.880 --> 0:03:25.440 talking about, Uh, you could maybe see that as an 0:03:25.440 --> 0:03:29.600 indication that markets were a little frothy. Yeah. So for 0:03:29.600 --> 0:03:33.120 those who actually haven't been paying attention to this particular subplot, 0:03:33.360 --> 0:03:35.880 which is probably most people, because there's bigger things going 0:03:35.920 --> 0:03:39.680 on in the world. Over the last several weeks, prior 0:03:39.840 --> 0:03:42.840 to this extreme bout of selling in volatility that we saw, 0:03:43.680 --> 0:03:46.400 there was a lot of attention paid to the behavior 0:03:46.520 --> 0:03:49.680 of people on a certain Internet web page or chat 0:03:49.760 --> 0:03:52.280 room or message board, whatever you want to call it, 0:03:52.760 --> 0:03:55.600 in which there was an extreme subreddit. It was on Reddit, 0:03:55.800 --> 0:03:59.760 an extreme level of speculative activity, particularly the options market, 0:04:00.120 --> 0:04:03.480 the likes of which we haven't really seen, arguably since 0:04:03.880 --> 0:04:06.760 the glory days of the Ahoo message boards back during 0:04:06.880 --> 0:04:10.360 the dot com bubble, and it's a really fascinating story. 0:04:10.400 --> 0:04:14.480 It's really uh interesting look at how the markets work, 0:04:14.920 --> 0:04:19.360 um and how retail players can really make a dent 0:04:20.000 --> 0:04:24.039 in publicly publicly listed equities. Yeah. So this is the 0:04:24.080 --> 0:04:27.839 thing that I find the most fascinating about this sub breddit. 0:04:27.920 --> 0:04:32.640 It's called Wall Street bets, and in recent months or 0:04:32.680 --> 0:04:34.440 over the past year or so, a lot of the 0:04:34.480 --> 0:04:37.839 people on it don't just think that they found good 0:04:37.880 --> 0:04:41.440 ways to make money through investing in the market. They 0:04:41.480 --> 0:04:43.800 think that they found a good way to sort of 0:04:43.880 --> 0:04:48.080 force the market into or force the market to do 0:04:48.200 --> 0:04:50.359 what they wanted to do. So they actually think that 0:04:50.400 --> 0:04:54.640 they're impacting how Wall Street functions and pushing up the 0:04:54.680 --> 0:04:57.599 stock price. And that's where it gets really really interesting. 0:04:57.640 --> 0:05:01.880 Are they in fact having this impact on the market? Right? 0:05:01.960 --> 0:05:06.560 And I remember the message boards, the Raging Bull message 0:05:06.600 --> 0:05:11.839 boards Silicon Investor Yahoo message boards from nine and two 0:05:11.880 --> 0:05:15.160 thousand and I think they were far less ambitious than 0:05:15.160 --> 0:05:18.520 what people are doing uh these days. So for more, 0:05:19.040 --> 0:05:22.360 for more on this, let's start by bringing in uh 0:05:22.400 --> 0:05:26.119 Bloomberg's own Luke Kala, who did have the cover story 0:05:26.200 --> 0:05:30.440 that cursed the market overall. Uh luke, thanks for joining us. 0:05:30.440 --> 0:05:34.040 So first of all, it just basically describe what it 0:05:34.160 --> 0:05:37.880 was that was worth covering here about this uh about 0:05:37.880 --> 0:05:41.320 this subread Well, I think for so long we've been 0:05:41.360 --> 0:05:44.680 waiting for the return of the retail investor, and you know, 0:05:44.720 --> 0:05:47.599 it's been this kind of long awaited thing that's never 0:05:47.640 --> 0:05:50.719 really happened throughout any time during this bullmarket. And this 0:05:50.800 --> 0:05:52.880 is kind of like the be careful what you wish 0:05:52.960 --> 0:05:56.599 for story, because what became quite interesting is how you 0:05:56.640 --> 0:06:01.120 were seeing retail enthusiasm get to express in the markets. 0:06:01.240 --> 0:06:03.279 And so I remember there was one day, it was 0:06:03.360 --> 0:06:06.440 January eight, and this is when Tesla was still below 0:06:06.480 --> 0:06:08.800 five hundred, if you can imagine a day in which 0:06:08.839 --> 0:06:11.680 that existed. But it was a Wednesday, and you saw 0:06:11.720 --> 0:06:15.640 a lot of bidding for the Tesla seven hundred strike 0:06:15.760 --> 0:06:18.360 call options that would expire at the end of that week. 0:06:18.440 --> 0:06:21.880 Tesla had already been up like that week, as was 0:06:21.920 --> 0:06:24.800 its want earlier this year. But it just seemed like 0:06:24.839 --> 0:06:28.159 this is this is such a ridiculous bet. Why would 0:06:28.200 --> 0:06:30.760 anyone do this? This doesn't make sense as a hedge. 0:06:30.839 --> 0:06:32.680 There's got to be a better way to express a 0:06:32.720 --> 0:06:34.559 hedge if you're you know, if you're short the stock 0:06:34.920 --> 0:06:37.200 or if you sold calls like what's going on here? 0:06:37.240 --> 0:06:39.640 And someone said, you know, this is just a yolo bed. 0:06:40.000 --> 0:06:41.960 And the second I heard, you know, yolo bed, I 0:06:42.279 --> 0:06:44.679 went to Wall Street bets and tried to see what 0:06:44.680 --> 0:06:47.720 what they were in. You only live once, why not 0:06:47.800 --> 0:06:51.760 make a huge exactly? And you know when I when 0:06:51.800 --> 0:06:53.200 I went there, I saw you know a lot of 0:06:53.240 --> 0:06:56.320 people just uh that were seemingly enjoying a lot of 0:06:56.320 --> 0:06:59.680 success on Tesla. And then that spiral to kind of 0:06:59.680 --> 0:07:03.320 other story stocks where they, you know, thought the it 0:07:03.360 --> 0:07:05.120 would do nothing but go up and up and up. 0:07:05.160 --> 0:07:07.480 And you know, Virgin Galactic is the you know, the 0:07:07.520 --> 0:07:10.960 next example. Plug Power another one that had its kind 0:07:11.000 --> 0:07:13.640 of time and the headlights, and then lumber Liquidators is 0:07:13.640 --> 0:07:16.040 one I find very interesting because it's not like it's 0:07:16.080 --> 0:07:18.360 not that fun of stock, like Lumber Liquidators compared to 0:07:18.400 --> 0:07:20.840 Virgin Galactic, compared to Plug Power, like it's it's really 0:07:20.840 --> 0:07:26.320 hard to wrap an enthusiastic you know, big story around it. Uh. 0:07:26.360 --> 0:07:27.960 And yet you know a lot of the ones of 0:07:28.000 --> 0:07:30.880 the three ones I've lastlisted, they have in common. It's 0:07:31.240 --> 0:07:35.640 relatively low float relatively high amount of short interest. So 0:07:35.680 --> 0:07:37.880 when you got a group of people together, that thought, 0:07:38.000 --> 0:07:39.960 you know, if we're all interested in the same thing, 0:07:40.240 --> 0:07:42.320 and if we are all kind of you know, combining 0:07:42.400 --> 0:07:45.280 buying power, where can it have an impact. Well, in 0:07:45.600 --> 0:07:48.280 names like this, it can. And you were seeing at 0:07:48.360 --> 0:07:51.880 least the volumes go up like crazy in it. Uh, 0:07:52.160 --> 0:07:55.960 it became too much to call it coincident, coincident timing, 0:07:56.040 --> 0:07:59.600 or coincidence after a certain amount of time, So luke 0:07:59.680 --> 0:08:02.800 to things here. Can you walk us through exactly what 0:08:02.920 --> 0:08:07.120 the options trading strategy was here, because you know, Joe 0:08:07.120 --> 0:08:09.080 and I kind of alluded to this in the intro. 0:08:09.280 --> 0:08:12.520 But it wasn't just that they could push the stock up. 0:08:12.600 --> 0:08:15.720 It was that they could actually exploit a loophole in 0:08:15.760 --> 0:08:19.160 the way certain financial contracts or Wall Street actually works 0:08:19.280 --> 0:08:22.480 in order to make the stock go up. And then secondly, 0:08:23.000 --> 0:08:27.240 would you say that Wall Street bets is representative of 0:08:27.280 --> 0:08:32.120 the average retail investor? So on the on the first part, 0:08:32.520 --> 0:08:35.079 the and this this relates to I'm not sure if 0:08:35.640 --> 0:08:38.720 if people actually believe this or this just becomes a 0:08:39.400 --> 0:08:42.760 you know, very happy supporting evidence and something that makes 0:08:42.760 --> 0:08:45.240 you feel a lot better about making your moon shot 0:08:45.320 --> 0:08:47.160 at the you know, the fact that someone might be 0:08:47.240 --> 0:08:50.560 there to help accentuated and help bail you out. So 0:08:50.640 --> 0:08:53.439 the thinking here is that when you like, say you're 0:08:53.480 --> 0:08:56.080 buying a call option on on the other side of that, 0:08:56.120 --> 0:08:59.480 if it's a fresh option, there's going to be a dealer, 0:08:59.640 --> 0:09:02.760 and dealers are not in the business of taking directional exposure. 0:09:02.800 --> 0:09:05.520 So when they're selling that call, what are they doing. 0:09:05.559 --> 0:09:08.240 They're also you know, buying a certain amount of stock 0:09:08.679 --> 0:09:12.319 to hedge their exposure. That's called delta hedging. And as 0:09:12.480 --> 0:09:15.000 if the stock does continue to go up from there, 0:09:15.280 --> 0:09:18.480 it you know, resetting your delta hedge your which would 0:09:18.480 --> 0:09:20.480 be kind of gama hedging, but it's really just resetting 0:09:20.480 --> 0:09:24.120 your delta hedge would entail that as the stock goes up, 0:09:24.640 --> 0:09:26.440 you would be required to kind of buy more and 0:09:26.480 --> 0:09:29.920 more to make sure that your directional exposure to the 0:09:29.920 --> 0:09:33.439 stock hasn't changed. So when we describe this dynamic, when 0:09:33.440 --> 0:09:36.640 we were talking about the Tesla calls, the testas see 0:09:36.760 --> 0:09:41.920 one thousand straight calls, and I believe late January, someone 0:09:41.960 --> 0:09:44.040 on Reddit latched onto this and said, you know, l 0:09:44.080 --> 0:09:47.200 O L. Bloomberg is admitting that the stock can only 0:09:47.280 --> 0:09:49.439 go up if we continue to buy calls because of 0:09:49.480 --> 0:09:52.199 the hedging algorithms, which is, you know, it's it's very 0:09:52.280 --> 0:09:55.800 much an overstatement of of what can actually happen. Can 0:09:55.840 --> 0:09:58.920 I just step in real quickly, because you mentioned delta 0:09:58.960 --> 0:10:02.760 hedging and gam hedging and all this stuff just for 0:10:02.800 --> 0:10:05.839 people who need a little bit of time to catch up, 0:10:06.480 --> 0:10:09.520 walk us through very simply. The idea is people buy 0:10:09.559 --> 0:10:12.760 a lot of call options. The dealer who sells it, 0:10:13.320 --> 0:10:17.640 sells the call options, are then on the hook if 0:10:17.640 --> 0:10:22.040 the call options essentially are become in the money right, 0:10:22.320 --> 0:10:24.679 and so in order to avoid that risk of having 0:10:24.720 --> 0:10:27.520 to pay out a big wager, just like a casino, 0:10:27.679 --> 0:10:30.400 they have to sort of balance their own books, and 0:10:30.440 --> 0:10:33.920 that requires them to purchase the underlying stock. Yeah, dealers 0:10:33.920 --> 0:10:36.240 are trying to make money from from the bid ask 0:10:36.320 --> 0:10:38.720 spread and making you pay both sides of it during 0:10:38.720 --> 0:10:42.600 your transaction. They're not in the business of really making 0:10:42.600 --> 0:10:45.840 sure that or or hoping that tesla goes down. They'd 0:10:45.880 --> 0:10:47.839 like to be, you know, cover their butts in all 0:10:47.920 --> 0:10:50.600 contingencies in all cases. So that's what's kind of going 0:10:50.640 --> 0:10:52.640 on there, and it's just you know, with some Greek 0:10:52.720 --> 0:10:55.839 letters surrounding it. But that's the that's the basic kind 0:10:55.880 --> 0:11:00.440 of scenario and mechanism you described perfectly. So trying to 0:11:00.559 --> 0:11:03.200 exploit the fact that dealers are big banks on Wall 0:11:03.240 --> 0:11:06.640 Street need to maintain a neutral position when they're writing 0:11:06.679 --> 0:11:09.400 all these contracts doesn't strike me as something that your 0:11:09.440 --> 0:11:13.559 average retail mom and pop investor is really doing. So 0:11:13.920 --> 0:11:16.640 is Wall Street beats a little bit different? I'd say 0:11:16.640 --> 0:11:21.400 there are a lot more aggressive about certain tactics being 0:11:21.520 --> 0:11:24.720 used and the kind of the hurting behavior. I don't 0:11:24.800 --> 0:11:28.480 think the average retail trader is really trying to think of. Okay, 0:11:28.520 --> 0:11:31.280 like if I get together with Jim down the street, 0:11:31.360 --> 0:11:33.920 and you know, Marry across the road, who I play 0:11:33.960 --> 0:11:36.679 bridge with, if we really get together and start, you know, 0:11:36.960 --> 0:11:40.920 stockpiling our potential buying power that we can kind of, 0:11:41.200 --> 0:11:43.720 you know, maybe maybe lift some bids here, maybe get 0:11:43.840 --> 0:11:47.040 some dealers offside, maybe cause some kind of a gamma chase. So, yeah, 0:11:47.040 --> 0:11:49.199 it does seem from that from that point of view, 0:11:49.200 --> 0:11:52.920 a lot more sophisticated and ambitious than you know, some 0:11:52.960 --> 0:11:56.720 people others speculating options might be. On the other hand, 0:11:56.800 --> 0:11:59.839 just because it sounds more sophisticated, doesn't mean, it's a 0:12:00.040 --> 0:12:03.080 our strategy doesn't make what's being said more true, because 0:12:03.120 --> 0:12:06.760 if we've learned anything about kind of the recent market dynamics, 0:12:07.320 --> 0:12:10.240 presuming you are the only actor in the market and 0:12:10.360 --> 0:12:12.360 able to move it is kind of it's it's a 0:12:12.360 --> 0:12:15.200 fool's errand. And that's why you know, if some if 0:12:15.280 --> 0:12:17.920 there's power out there too to buy all these options, 0:12:18.000 --> 0:12:19.680 you have to recognize it. On the other side of it, 0:12:19.720 --> 0:12:23.160 there's going to be uh, potentially a desire to sell, 0:12:23.240 --> 0:12:25.240 and we've seen you know, a lot of selling pressure 0:12:25.280 --> 0:12:29.080 come into the market that's completely overwhelmed whatever retail buying. 0:12:29.640 --> 0:12:32.480 The markets probably, I mean the markets kind absolutely clover 0:12:32.520 --> 0:12:36.080 rejuice to your article came out and presumably if you 0:12:36.120 --> 0:12:38.320 had been buying a bunch of call options ahead of that, 0:12:38.800 --> 0:12:41.520 you are one is not doing particularly well this week 0:12:41.559 --> 0:12:43.600 with that strategy. Yeah, Like we we saw a bunch 0:12:43.600 --> 0:12:46.720 of ten thousand percent updates for a lot of these 0:12:46.720 --> 0:12:49.600 mood shot options, but most out of the money and 0:12:49.800 --> 0:12:52.880 very low delta options are going to expire worthless. It's 0:12:52.960 --> 0:12:55.520 just the kind of the name of the game. Okay. 0:12:55.559 --> 0:12:58.640 So on that note, in addition to having Luke join 0:12:58.800 --> 0:13:02.240 us for our episode. Today we have another guest. Luke 0:13:02.640 --> 0:13:05.680 has said, uh set the stage, but we actually have 0:13:05.800 --> 0:13:10.400 the founder of the subreddit Wall street Bets joining us now, 0:13:10.520 --> 0:13:15.080 Jamie Ugazinski. He uh founded the page, got it launched 0:13:15.160 --> 0:13:18.319 in twelve. Jamie, Thank you very much for joining us. 0:13:18.800 --> 0:13:20.880 Thank you for having me. Okay, so I want to 0:13:20.920 --> 0:13:24.760 obviously get to everything that Luke talked about and this 0:13:24.880 --> 0:13:28.240 sort of crazy phenomenon and force in the market that 0:13:28.280 --> 0:13:30.920 Wall street Bets has become. But you started it in 0:13:32.400 --> 0:13:34.280 what was the purpose? What? What do you're like, Okay, 0:13:34.280 --> 0:13:36.520 I'm gonna start a new page on Reddit called Wall 0:13:36.520 --> 0:13:39.880 street Bets. What what were you thinking? Well, I mean 0:13:39.880 --> 0:13:42.320 back when I started it, I was looking for a 0:13:42.400 --> 0:13:46.960 forum where we can discuss high risk trades, um work 0:13:47.040 --> 0:13:52.080 into day trading, or high risk or active investing. All 0:13:52.160 --> 0:13:54.720 the forums that I found on my both on Reddit 0:13:54.720 --> 0:14:00.640 and off wridit we're traditional, diversified, long term, long time 0:14:01.280 --> 0:14:04.560 time horizon type investing, and so I since I couldn't 0:14:04.559 --> 0:14:07.840 find find it, I decided to found Wall Street Bets 0:14:07.840 --> 0:14:11.400 and has evolved a bit from what they originally intended, 0:14:11.400 --> 0:14:15.240 but that was the original idea behind it. Can you 0:14:15.320 --> 0:14:19.880 describe the Wall Street. That's demographic like who is your 0:14:20.000 --> 0:14:23.080 average user on Wall Street bets? And why are they 0:14:23.160 --> 0:14:29.080 on that subpreddit versus something like the investing subreddit. So 0:14:29.480 --> 0:14:33.000 the I don't actually have access to the specific demographics, 0:14:33.000 --> 0:14:34.960 but I'm going to take a very educated guest and 0:14:35.000 --> 0:14:42.400 say it's going to be mostly males young probably eighteen uh. 0:14:43.320 --> 0:14:45.120 I mean, obviously there are old enough to open a 0:14:45.160 --> 0:14:48.240 brokerage account and and have enough of an income so 0:14:48.320 --> 0:14:51.480 that they can, um they make the type of bets 0:14:51.520 --> 0:14:53.360 that they're trying to make. And why are they hanging 0:14:53.360 --> 0:14:57.520 out on Wall Street bets? I mean, for I have 0:14:57.680 --> 0:15:00.040 various reasons or various ideas as to why they I 0:15:00.160 --> 0:15:04.200 want to be doing it, but for uh, probably similar 0:15:04.240 --> 0:15:06.760 motivations that got me in the first place. Right, I 0:15:06.800 --> 0:15:10.480 was single at the time, out of disposable income, had 0:15:11.040 --> 0:15:13.760 a reason to be a little bit more aggressive. When 0:15:13.840 --> 0:15:18.320 when people are older and they have a family and 0:15:18.360 --> 0:15:20.040 they have to be a little bit more cautious, well 0:15:20.040 --> 0:15:23.200 defin whally they want to start taking um more of 0:15:23.240 --> 0:15:25.600 a precautious person to investing. But when they're younger, thing 0:15:25.640 --> 0:15:27.360 can afford to take the risks, and so you know, 0:15:27.400 --> 0:15:30.160 all Street Bets is a place where what we welcomes 0:15:30.200 --> 0:15:32.480 that type of behavior, and the welcome welcomes the type 0:15:32.480 --> 0:15:38.560 of you know, on some capacity it's aggressive investing, active investing, 0:15:38.600 --> 0:15:42.440 and you know, oftentimes it's straight of gambling. So um, 0:15:42.480 --> 0:15:45.040 I'd say it's people that are just in that demographic 0:15:45.120 --> 0:15:48.200 that they're looking to make some quick money. Yeah, we 0:15:48.240 --> 0:15:51.280 haven't really talked about this aspect. But in addition to 0:15:51.320 --> 0:15:53.760 the demographic, and you mentioned people who are willing to 0:15:53.800 --> 0:15:58.200 take more risk, there's a certain like Wall Street Bets mindset. 0:15:58.320 --> 0:16:01.040 And I've been reading the page off and on for 0:16:01.120 --> 0:16:05.120 several years, and it's not it's not only that it 0:16:05.320 --> 0:16:07.400 seems like there is a high degree of sort of 0:16:07.400 --> 0:16:10.600 like risk taking or thrill seeking. There seems to be 0:16:10.640 --> 0:16:14.000 also like a certain amount of nihilism associated with it, 0:16:14.080 --> 0:16:18.000 in which people seem just as excited to massochism. To 0:16:18.400 --> 0:16:22.240 people seem just as excited about posting screenshots of them 0:16:22.280 --> 0:16:25.360 losing a hundred thousand dollars or losing a fortune in 0:16:25.400 --> 0:16:29.200 a single day, um, as they are as excited about 0:16:29.280 --> 0:16:31.280 making a bunch of money. There's a lot of egging 0:16:31.360 --> 0:16:34.360 people on to take more and more risks. What talk 0:16:34.440 --> 0:16:37.040 to us about that mindset, just the sort of the 0:16:37.080 --> 0:16:41.360 thrill seeking, massochistic, nihilistic aspect that we see on Wall 0:16:41.400 --> 0:16:43.920 Street Bets and why you think that's that emerges. I'm 0:16:43.920 --> 0:16:47.880 not sure necessarily that I've people egging people on to 0:16:48.160 --> 0:16:50.280 take on more risk. I think that the peer pressures 0:16:50.320 --> 0:16:53.560 certainly exists. Uh, you know, I see where you're coming out, 0:16:53.560 --> 0:16:54.920 but I have have yet to see somebody to say, oh, 0:16:54.920 --> 0:16:59.040 I think you should increase your possession position. I think 0:16:59.040 --> 0:17:02.000 it's more of a peer PRESSU your type scenario that 0:17:02.120 --> 0:17:04.520 people try to maybe just attention. People want to impress 0:17:04.560 --> 0:17:06.480 each other, right, is that kind of what you're saying, 0:17:06.560 --> 0:17:09.200 They just want to be cool and impress each other 0:17:09.320 --> 0:17:11.840 for to who took the wildest riscue. Yeah, it would 0:17:11.880 --> 0:17:14.960 probably be more of motivation like that. But um, you know, 0:17:15.000 --> 0:17:18.320 as far as the massacre is, I think it's more 0:17:18.920 --> 0:17:21.800 it's a very honest forum. Right. If you go outside 0:17:21.800 --> 0:17:24.080 of Wall Street Bets, for you know, you go on 0:17:24.119 --> 0:17:27.200 Twitter or finn Twitter, you go any of the other areas, 0:17:27.240 --> 0:17:29.520 you have a lot of people that have just these 0:17:29.600 --> 0:17:32.760 huge egos that show these really impressive trading track records. 0:17:32.800 --> 0:17:35.240 You know, look at my fancy car that I'm driving. 0:17:35.240 --> 0:17:38.359 I know, you know, check out this impressive statistics for 0:17:38.520 --> 0:17:42.320 my uh, you know, trading history and whatnot. And so 0:17:42.480 --> 0:17:46.320 you you have these glorified people that it's almost impossible 0:17:46.440 --> 0:17:48.199 to become them, whereas in Wall Street, bets are just 0:17:48.320 --> 0:17:50.199 very honest with each other and to say no, no, houn, 0:17:50.840 --> 0:17:53.760 it's very difficult to actually recreate what they're talking about 0:17:53.760 --> 0:17:58.280 in some cases statistically very improbable. Some people obviously can 0:17:58.280 --> 0:18:00.960 do it, but most people cannot. I'm the statistics also 0:18:00.960 --> 0:18:03.040 backed that up. People who want to actively beatreud most 0:18:03.080 --> 0:18:05.199 of them to. So I think that it's more of 0:18:05.240 --> 0:18:08.359 an honest approach to it, where they say, okay, I 0:18:08.400 --> 0:18:10.560 know that I'm likely going to lose money into it, 0:18:10.720 --> 0:18:13.320 so let's just be honest about this. Let's let's not 0:18:13.920 --> 0:18:17.200 try and pretend that I'm something that I'm not. And 0:18:17.359 --> 0:18:19.320 uh and I think it's would celebrate it is more 0:18:19.400 --> 0:18:23.160 the honesty behind that more so then hey, check it out, guys, 0:18:23.200 --> 0:18:24.760 I lost a lot of money. Go ahead and give 0:18:24.840 --> 0:18:27.680 me some some up votes. In karma, it's hey, guys, 0:18:27.720 --> 0:18:30.240 look I try this. I put my money online. I 0:18:30.280 --> 0:18:32.760 said this was gonna happen, and I failed and so 0:18:32.960 --> 0:18:36.440 people celebrate that follow up honesty and they say, wow, 0:18:36.480 --> 0:18:39.280 this is a genuine conversation that we're having. So I 0:18:39.280 --> 0:18:42.359 think that's more the motivation that that you and it 0:18:42.440 --> 0:18:46.000 comes off more as the celebratory law. I mean, i'd 0:18:46.000 --> 0:18:48.720 agree totally in my in my time very good because 0:18:48.800 --> 0:18:51.440 you know, thinking about all of these stocks that were 0:18:51.520 --> 0:18:53.239 you know, going up, there's there are people on all 0:18:53.240 --> 0:18:55.920 street that's going, no, no, I'm I'm selling Tesla calls, 0:18:56.119 --> 0:18:58.040 I'm doing I'm doing this, I'm doing that, and then 0:18:58.080 --> 0:19:00.119 you'd see them come back, you know, a week, two 0:19:00.160 --> 0:19:03.200 weeks later and go okay. So yeah, all those positions 0:19:03.240 --> 0:19:05.960 I was talking about earlier, I'm getting completely completely host. 0:19:06.000 --> 0:19:07.600 If you want to know how much I'm going to 0:19:07.640 --> 0:19:10.400 get host in the future. Here's the other strikes. I'm 0:19:10.480 --> 0:19:13.280 short out of the money, have fun ruining my life 0:19:13.480 --> 0:19:17.280 type of thing. But it's it's very much a an unpretentious, 0:19:17.359 --> 0:19:21.480 honest conversation and it's, uh, it is refreshing for those 0:19:21.520 --> 0:19:24.240 who have spent uh, you know, their their lifetimes are 0:19:24.240 --> 0:19:26.959 most of their waking hours on finance Twitter. But you know, 0:19:27.000 --> 0:19:30.040 on the on the other side of things, the there 0:19:30.080 --> 0:19:33.159 the degree of you know, kind of willingness to go 0:19:33.280 --> 0:19:37.000 in with no information. On the other hand, the I 0:19:37.000 --> 0:19:39.560 think the best example would be, you know, one person posting, 0:19:39.760 --> 0:19:41.560 you know, I don't know what I don't know what 0:19:41.600 --> 0:19:43.600 options are, and I don't know what l L is, 0:19:44.080 --> 0:19:47.159 but I'm up ten thousand this morning and thank you. 0:19:47.240 --> 0:19:49.000 This is my lunch break, coming on to post it. 0:19:49.040 --> 0:19:50.800 Thank you very much. And then you know one person going, 0:19:50.960 --> 0:19:53.120 you know what, what the hell can you expect? It's 0:19:53.200 --> 0:19:55.920 lumber liquid it or they liquidate lumber. It's right there 0:19:55.920 --> 0:19:59.240 in the name, and uh yeah, it's it's fun, it's entertaining, 0:19:59.240 --> 0:20:03.119 and it's definitely it's definitely a different scene from what 0:20:03.160 --> 0:20:05.600 I've been used to on the internet. Right. One can 0:20:05.640 --> 0:20:08.240 never admit on finance Twitter that they made a mistake, 0:20:08.359 --> 0:20:11.080 but on Wall Street Bets, it's almost a badge of 0:20:11.080 --> 0:20:14.679 honor if you have this big loss. Jamie, you actually 0:20:14.680 --> 0:20:18.200 wrote a book about Wall Street bets. And this is 0:20:18.240 --> 0:20:21.760 gonna sound really condescending, but I thought it was surprisingly 0:20:21.800 --> 0:20:26.119 thoughtful and kind of earnest, which wasn't what I was 0:20:26.200 --> 0:20:31.160 expecting because the subredit itself tends to be the sarcastic, jokey, 0:20:31.359 --> 0:20:35.679 macho place. But there was this one chart in your book, 0:20:36.400 --> 0:20:41.280 and it shows robin Hood account openings alongside the growth 0:20:41.400 --> 0:20:44.679 of users on the Wall Street Bets subbredit. Can you 0:20:44.680 --> 0:20:48.159 talk to us about the importance of this new crop 0:20:48.320 --> 0:20:51.720 of online brokers or the dynamics in the brokerage industry 0:20:51.760 --> 0:20:55.720 currently in fueling Wall Street bets. Yeah, I mean to 0:20:55.800 --> 0:20:57.359 be honest with you, when when I came up with 0:20:57.440 --> 0:20:59.320 that chart, I was not expecting that. I was very 0:20:59.320 --> 0:21:03.240 surprised and uh and even more so surprised when I 0:21:03.280 --> 0:21:05.560 broke down that chart a little bit further. So I'll 0:21:05.600 --> 0:21:09.080 first describe that chart. What I did is I superimposed 0:21:09.160 --> 0:21:12.000 the growth of Wall Street bets since the inception of 0:21:12.160 --> 0:21:16.120 robin Hood. Uh, you know, the growth in terms of subscribers, 0:21:16.200 --> 0:21:20.520 and then the growth of users of robin Hood, and 0:21:21.119 --> 0:21:24.480 those lines were pretty much right on top of each other, 0:21:24.640 --> 0:21:27.040 and you know, the growth right on part of the 0:21:27.040 --> 0:21:30.960 correlation was very easy to see. And the the what 0:21:31.160 --> 0:21:33.600 was even more surprising was, I think it was around 0:21:33.680 --> 0:21:36.400 two thousand eighteen, if I'm not mistaken, robin Hood introduced 0:21:36.400 --> 0:21:39.240 stock options as part of their offering, the product offering 0:21:39.240 --> 0:21:42.119 to their users, and they saw a very steep change 0:21:42.160 --> 0:21:45.280 in their growth, they ended up having a dramatic increase 0:21:45.560 --> 0:21:48.400 um and users and Wall Street bets had the exact 0:21:48.400 --> 0:21:51.520 same slope change, right, So the the adoption or increase, 0:21:51.560 --> 0:21:54.040 and so you know it does ask the questions, Okay, 0:21:54.119 --> 0:21:57.960 what is there a correlation here? And I obviously, I 0:21:58.000 --> 0:22:01.520 mean it's hard to um repeat those because both of 0:22:01.560 --> 0:22:04.920 those numbers are big enough to distally significant. I think 0:22:04.960 --> 0:22:07.800 the proliferation of not just robin Hood, but just all 0:22:08.400 --> 0:22:12.560 these low commissions now zero commission burke ridges are making 0:22:13.080 --> 0:22:15.560