Old-timey investors and traders will be familiar with the story of the Hunt Brothers. As the official story goes, they tried to corner the silver market, made some powerful enemies, and ultimately got squashed by the finance-government machine. They were dragged in front of Congress and officially scolded so that the people would know without a doubt who the real villains were.
Of course, the official story and the true story are two different things. Plenty of people think the Hunt Brothers were the victims of the whole event, not the villains. But even if that's true, it doesn't matter, because that "truth" didn't help the Hunt Brothers. They still went down. In the end, all that matters is who gets bailed out and who gets squashed.
We're now seeing a similar setup with GameStop. There's a short squeeze on, and someone will end up paying the piper on Friday when the options expire. The longs are confident that they'll come out on top, but I'm not so sure. History shows that being on the right side of a trade isn't enough. You also must be on the right side of those who make the rules, because the powers that be will change those rules on a whim if that's what it takes for them to protect themselves from the unwashed masses.
I think there's going to be a lot of bitterly disappointed investors next week, and I don't think they'll all be on the short side.
But perhaps I'm wrong and this time will be different.
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