The Reddit rampage is a sign of market turmoil ahead

The Reddit story — in which a ragtag army of small investors have executed a spectacular short squeeze against hedge-fund goliaths — can be interpreted two ways. Some say it’s another populist citadel–storming in the spirit of the moment, but this time an admirable one because its target is ‘Wall Street’, which everyone hates: the so-called ‘stick it to the man’ version. Others see a fever of price-chasing, part-driven by lockdown despair, akin to crypto-mania and the surge in online gambling; in this version, it has nothing to do with serious investment but is a sure signal of more market turmoil ahead.

To recap: several million retail investors connected via chat groups such as WallStreetBets on the Reddit social media platform collectively decided to buy stocks that hedge funds, anticipating price falls, had been short-selling. Most famously, Reddit players drove the shares of a US video games retailer called GameStop from $15 to $500, forcing funds such as New York’s Melvin Capital to incur billion-dollar losses on short positions.