| Before we begin… we’d like to announce that WYODC TV is up! Be sure to check it out if you haven’t. What’s up , I’ve been catching up on the saga between Wall Street Bets (WSB), GameStop and Institutional Investors… And I’ve to say… it’s freakin’ fascinating. Why? Because it’s the first time in history that Retail Investors actually DESTROYED the Big Wall Street Fat Cats who’re usually the ones winning. If this sounds interesting to you and you’d like to find out WHY… Kenneth explains it really well over here. That said… after watching several videos of the whole WSB vs Hedge Fund Fat Cats episode… I’ve a few observations. I’m not gonna explain everything in this email since it’s pretty long. You can watch Kenneth’s full analysis on Youtube if you want to find out more. But what I’m going to give you is an analysis of the whole story. These are not the financial side of things (I’m pretty sure GameStop is overvalued but that’s a story for another day)… But rather from a behavioural psychology standpoint. There are a few dark truths about behavioural psychology (This might not hold true for everyone but we do see these trends playing out time and time again). 1. Law of Karma: What goes around comes around… if you’ve screwed someone badly before, they might come back to haunt you in ways you’d never expect. Back in 2016, Wall Street Short Sellers targeted Tesla because they wanted to make a quick profit. Today, Elon Musk got his $weet revenge on his short-sellers by making them lose billions). Conversely, if you plant good seeds, you can expect to reap them sooner or later. 2. The Story of RobinHood Sells. (No… I’m not talking about the app.) I’m talking about if you’ve a fight between a Titan and an underdog. People would usually root for the underdog. In fact, there’s a good chance that 80% of people would root for the underdog because most people don’t have to courage to fight for whatever they want. In this case, it’s classic David (WSB) vs Goliath (Institutional Investors e.g. Citadel, Melvin Capital) playing out. You can see the same pattern playing out in blockbuster movies like Rocky and Karate Kid. Or even in Politics when Donald Trump won Hiliary Clinton in 2016. 3. Schadenfreude Happens. When a titan or a big dog in the industry falls (especially due to moral and ethical reasons)… there’s usually Schadenfreude happening. One where people around them might mock them or kick them in the nuts. In this case, retail investors are jumping onto the GameStop bandwagon… wanting to screw Wall Street. For two reasons. One, they feel that these Billion Dollar Hedge Fund Managers are constantly looking to rip off small time investors. Two, they think that these people do not get punished enough whenever they screw up. (It’s like they almost always get “Get Out of Jail Free Card” whenever they mess up.) 4. Phenomenon of “People vs Institutions” People have grown to be increasingly resentful of “The System” because of how institutions are skewed to be protective of their own and their client’s interests. In this case, we see that many of the retail investors are unhappy because of how Hedge Funds usually own an unfair advantage against them. In an exclusive interview, Jordan Belfort actually revealed managers would usually hold “Private Insider Dinners” where they’ll discuss which stocks to short and then collaborate to make a profit. And since most people aren’t qualified to become an accredited investor… they don’t have access to such money-making opportunities. Because of this, many of the common folks feel left out. Giving rise to a Proletariat vs Bourgeoisie alike clash. This is an escalation of the “Unravelling” phase into a potential “Crisis” as mentioned by the best-selling book “The Fourth Turning”. It’s not just happening in the finance and investment space as well. We can see this happening geopolitically in the USA Capitol Riots and also the Hong Kong Riots in 2019. And because technology facilitates increasingly democratic communications on platforms like Clubhouse and Parlor… people are going to be more vocal about whatever they’re unhappy with (especially if it’s things which aren’t supposed to be said in public). Which brings me to my very last point where I’m going to make a very bold prediction. 5. The Gradual shift of Democratic society to a Dictatorial one. Now, this is a pretty big claim. As Sh!t hits the fan, and we’re slowly seeing a descending spiral into a Crisis situation of The Fourth Turning… leaders and institutions will feel threatened. And they’d want to restore order in the fastest way possible. The best way to do this (I can think of) is to take away the democratic privileges of the people. Lemme explain… While democracy has benefitted America a lot (I’m not talking about the political definition of Democracy but the cultural one)… Because of the idea of freedom of speech where people get to say whatever they want. This brings about the free movement of ideas which has led to the growth of some of the biggest hotspots like Silicon Valley, Wall Street and Hollywood in their respective disciplines. Of course… there’s a hidden premise here. Nobody gets to decide whoever is right and whoever is wrong. Majority wins. And while it might be a good thing in the case of WSB against the Institutional Fat Cats… But it might not be such a good thing anymore when we’re slowly descending into a “Crisis” phase in The Fourth Turning… Because majority of the people are unhappy and will start taking action to fight against the incumbent leadership. And over the long haul… I’m talking about the next 10, 20, 30 years… If the masses have far more power to influence major decisions then that’s something to worry about… Putting big decisions in the hands of 80% of the people who are uninformed and highly susceptible to cognitive bias can be a very risky business… And if any of these democratic leaders have read about ancient history (especially China and India since they have one of the richest and oldest civilizations)… The most logical thing to do would be to “Consolidate Power”. This means re-writing the “books of the game” so as to restrict the people. We’re already starting to see this in bits and pieces of Democratic societies. Facebook and Twitter do this by banning accounts which go against their rules… In fact, I wouldn’t be surprised if Wall Street Bets gets taken down by Reddit. And if this really happens… it can go either way… People are gonna be even more pissed off at their leaders where they’d do irrational things. But if they don’t do it… They risk things getting out of hand. So that’s all for today. What’s your take on this? Cheers, Zach PS: I hope you like this issue of WYODC Confidential! It took me a while to consolidate all this information and piece everything together to make sense. If you like such thought-provoking content, you can check out WYODC’s Youtube Channel where you can check out Kenneth’s thoughts on the entire WSB vs Hedge Funds Fiasco. |
February 2
WYODC Confidential #11: Dark Psychology of WSB vs WS Fat Cats [Video Inside]
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