Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Billionaires are blaming the GameStop surge on Covid stimulus checks

One also lashed out against funds on the other side of the Redditors’ bets

Josh Marcus
San Francisco
Saturday 30 January 2021 21:44 GMT
Comments
Stephen Colbert weighs in on Wall Street vs Reddit
Leer en Español

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

Billionaire “Bond King” Jeffrey Gundlach is the latest to blame government stimulus cheques for the massive surges in stocks like GameStop that’ve caused Wall Street firms huge losses.

“In this case thanks to primarily government policy there’s wherewithal among investors, if you want to call them that, with government money being sprayed all over the place, with checks to people, that they have the wherewithal to put it together into a real capital base,” told Fox Business on Friday. “In this case there were 2.1 million people that somehow got organized on Reddit and managed to get about $20bn in buying power, and they found an opportunity to pile drive these hedge funds.”

Mr Gundlach was equally critical of all sides in the dispute, where mainstreet investors organized on the social network and bet against big firms on stocks like GameStop, which Wall Street houses had bet would fail through a stock instrument called a “short.” The whipsawing share prices eventually led trading apps like Robinhood to temporarily limit stock-buying around the suddenly hot companies.

“I have no sympathy whatsoever for these hedge funds,” he said, while also chastising the Reddit warriors for their triumphant attitude. “There's a little bit of hubris that seems to be going on with this network that makes me less likely to view is as David vs Goliath. The hubris bothers me.”

Billionaire hedge fund manager Leon Cooperman has made similar comments about the stock surge. Mr Cooperman, who was convicted of insider trading in 2016, told CNBC on Thursday the $2,000 and $600 coronavirus aide checks were to blame for GameStop’s rocketing share price.

“The reason the market is doing what it's doing is, people are sitting at home, getting their checks from the government, basically trading for no commissions and no interest rates,” he said.

According to government survey data from the summer of 2020, the majority of Americans used or planned to use the first round of stimulus money on household expenses

While down from their peak in early 2020, over a million Americans have been filing unemployment claims each week throughout January. 

Not every mega-investor felt this way though. Billionaire and Shark Tank host Mark Cuban said he admired the hobby investors driving the stock saga.

“There are many hedge funds that have made a lot of money over the years targeting heavily shorted stocks. I don’t think this is anything different," he told CNBC. "It’s just the people who are making the push aren’t who we expect them to be and so that’s why I like it.”

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in