The GameStop Affair: One Year Later

The origins of the GameStop saga…

If you’re here because you googled me after reading the Wall Street Journal article on GameStop – welcome! This wasn’t my first time in WSJ, but it’s always fun when that happens.

The article is well written, and it provides a balanced and nuanced look at the WallStreetBets subreddit’s evolution (some would say devolution) since the big GameStop affair exactly a year ago. I gave several hours of interviews for the article, and while I’m glad to see my experience described fairly, a lot was left unsaid. This post aims to provide more context, not in the least part due to all the roasting I’m currently getting in the WSJ comment section by people who think I’m a gambler or question my professional credentials. (Somehow, I can’t seem to reply to them – as a new subscriber, my comments are stuck in the moderation queue limbo. Heh.)

For example, I didn’t retire early solely because of the small fortune I made on GME over the course of 45 hours. That certainly helped, but the bulk of my 193.7% return between May 2020-May2021 came from being greedy when others were fearful, Buffett-style. Stocks that had been most affected by covid (travel, retail, energy) were on sale, and no one else wanted to buy them. I still remember the raw fear of possible failure when I sold all my Amazon shares and transferred the money into my investing account to buy a few handpicked and carefully selected stocks. (That key moment’s drama was a bit diluted by the fact that I had to click at least four confirmation pop-ups.)

When I did that, I’d been with Amazon for 10.5 years, most of them as an analyst of various kinds: a quality analyst, a business analyst in charge of fulfillment strategies in most of Canada, Midwest, and Mexico, an investigator, and finally the financial analyst at one of Amazon’s biggest fulfillment centers in North America. Long journey, many lessons, lots of opportunities to hone my skills. I’d read every single thing ever written by Buffett, attended his annual shareholder meetings, listened to every Q&A… I jumped on that once-in-a-lifetime investing opportunity when it presented itself in 2020. I write this now from my cozy apartment in the beautiful Quebec City, eight months and nine days into my early retirement, because all my preparations, and my ultimate choice to dive in, paid off beyond my wildest expectations.

If not for GameStop, I probably would’ve spent another year or so in the rat race: my early retirement (at the ripe old age of 34) was an eventual inevitability, not a lucky fluke. But since this is the one-year GameStop anniversary…

In January 2021, I made a rare discovery: I found a blind spot in my own mind. I was taking a detailed look at the previous decade (as one does) and asked myself, “Self, why did you overlook the raging successes that were Tesla and bitcoin?” And it occurred to me that I’d spent all my time making fun of those and other phenomena, and never even deigned to look at them seriously. Both Tesla and bitcoin were weird-sounding underdogs, and yet they prevailed. I realized there was a flaw in my cognition: I’d jump to conclusions and never give things another chance. That’s a bad trait to have as a human; that’s a dangerous trait to have as an analyst.

And thus a resolution was born: I would suppress my instinct to make fun of crazy ideas, no matter how strange they would seem. I would look into them without bias or prejudice, see what they were all about, check the math, and then make fun of them. Easy as pie – seemed like a fine compromise. I had no idea where that would lead me…

I curate my social media to follow only comedians or scientists: that way, I avoid political and religious drama, and every time I check my Twitter feed, I either laugh or learn something new. Some of the brainiacs I followed routinely made fun of Reddit’s r/WallStreetBets community. (Referred to as “WSB” from here on.) Despite being an avid Reddit user myself, I never once went to WSB: my exposure to that community consisted solely of cherrypicked funny screenshots people would share online. Those memes made it seem like the entire community was filled with idiots and/or gamblers. (And to be fair, that does describe a lot of them.)

I remember Friday, January 22, 2021. I remember logging on Twitter at the end of a monotone workday. I remember some Twitter brainiac I followed making fun of WSB – as I recall, he simply wrote, “those WSB idiots think they can resurrect GameStop!” Months earlier, in 2020, GME was one of the stocks I’d looked at – and recoiled from in disgust. The stock price was around $4 a share back then, and it seemed on the verge of bankruptcy. (My life would’ve been a whole lot different if I’d sought out other opinions on that day… Oh well.) But not this time: armed with my shiny new resolution, I went into the belly of the beast, and started reading what WSB had to say.

I still remember looking at the afterhours action that Friday, when it was still not too late to buy some shares: GME had gone up 51% that day, from $43.03 on Thursday to $65.01 on Friday. It was remarkable – but I didn’t want to make a move without learning more. And so I sat, and read, and learned all weekend long.

I looked at the arguments and theses of Keith Gill, aka Roaring Kitty, aka DeepFuckingValue. I looked at what had caused the 83.1% week-over-week increase from $35.50 to $65.01. I saw (and double checked, and verified) the strange claims that 140% (yes, one-hundred-and-forty percent) of the float had been shorted. I saw the beautiful, brilliant, brave trap WSB had laid out by buying up as many call options as they could, then nudging the stock price just high enough to trigger them at the end of the week. As hedge funds scrambled to buy more shares to fill the exercised call options, the stock price went higher in the afterhours, triggering higher call strike prices, requiring them to buy more shares, and so on. All that with the stock that was remarkably over-shorted and didn’t have a lot of available shares.

Thus started the chain reaction that changed the world. Someday, someone will make a big fancy movie in the style of The Big Short, and explain this chain reaction concept in great detail and in simpler terms. Until then, just take my word for it – it was brilliant. In the year that followed, people’s notions of GameStop became associated exclusively with cult-like followers, with ridiculous memes and screenshots, with naïve simpletons losing their shirts. Most of that happened later, long after the key event. Most of the people who mock GameStop and sneer at it (I’m looking at you, WSJ comment section!) probably share the same mindset I had prior to 2021: they don’t even bother to look for themselves, to see how all of that began…

That weekend, I checked and double-checked and triple-checked the math, the insane “short % of float” figures, the number of outstanding shares and the timeline for hedge funds to deliver said shares… Everything pointed to the same indisputable conclusion: the math checked out. On Monday, January 25, 2021, I liquidated some holdings (for a net gain, of course) and started buying GME as it experienced a particularly volatile trading day. Part of my research involved looking at the daily charts and patterns: I identified a specific time slot when the selling (or shorting) activity was usually at its peak: between 11:45am-12:30pm EST. (Don’t try this at home, kids – that shipped sailed a year ago.)

That Monday, in between writing weekly business reports and dealing with routine work, I kept a close eye on the price… GME opened at $96, went as low as $61 and as high as $159, and finally closed at $76. My tactic worked: buying in lots, I acquired a substantial number of shares at the average cost of $77.90 per share: not as low as it could’ve been but far better than many others fared on that day. The following two days were a blur of anticipation and looking at the price as the squeeze continued, just as planned. The stock closed at $147.98 on Tuesday. In the afterhours, Elon Musk (who hates short-sellers with fiery passion) tweeted “Gamestonk!!” followed by a link to WSB. The afterhours price shot up to $250 as Musk’s fans poured in. I have mixed feelings about Musk, but damn, that was some brilliant trolling.

And then there was Wednesday… I remember seeing the GME stock over $300 in the premarket trading, then acting incredibly volatile right as the market opened. I remember being torn: what if it really does go all the way to the moon, the way Volkswagen once did after a brilliant short squeeze? Would I be leaving a fortune on the table? A different, more pragmatic part of myself said, “This is too good to be true – just take the money and run.” And I did: I placed a market sell order, it got filled at precisely $293, and I ended up making 276.1% in both my taxable and my Roth accounts in less than 48 hours.

The stock hit $380 that day, and $483 on Thursday, just before the rug got pulled. I still think the sheer momentum would’ve been unstoppable if not for foul play. Robinhood literally disabled the “Buy” button because that was the only way they would’ve remained solvent. Stop and think about that for a bit: a major trading platform had to do the unprecedented, and that was the only thing that stopped the ongoing short squeeze. Meanwhile, the Apex clearinghouse (and all the brokerages under it) limited or disabled access outright. My own broker, Ally (hitherto Tradeking, hitherto Zecco) disabled the login page for three days, and never satisfactorily explained why. Later on, I moved my accounts to Fidelity directly because of that.

The blockade maneuver worked for a bit, and the price dropped to $193. GME recovered and ended the week at $325, a 399.9% week-over-week increase. But the momentum was gone: the following week, the stock price began the long drop to $38.50. (That happened on February 19, 2001.)

If you didn’t experience the GameStop mania firsthand, merely reading about it will not suffice. Tens of millions of Americans – having done zero research, of course – tried jumping on that train. Some made money. Many didn’t. Someone out there bought at the very top ($483) and never regained their cash unless they did a lot of averaging down. My estranged American step-brother contacted me for the first time in 15 years to ask how to set up a Robinhood trading account. I advised him not to, and I still don’t know if he lost any money. (He never contacted me again. So it goes.)

If you look at GME’s one-year chart, you’ll see how ridiculously volatile it was in the year that followed. It jumped to $483 in late January, then dropped to $38.50 in February, rocketed up to $348.50 in March (a nice 805% return if you’d timed everything perfectly, which no one ever does), down to $132 in April, up to $345 in early June, etc. It was a real rollercoaster of a year.

GameStop short squeeze Grigory Lukin letsretireyoung.com Let's Retire Young
GME’s one-year chart. (Source: Yahoo Finance)

I was never part of the “diamond hands ape HODL” legion: I fancy myself a strategist, and I always work on being a better tactician. I didn’t touch the stock again unless the chart showed clear support levels. Since the big spike and the plunge that followed a year ago, I’ve made 10 more swing trades: all successful, but never quite as profitable. I dabbled a bit with selling covered calls (a fine hobby when the implied volatility is so high) before selling my shares for a small profit during the final little price spike a few weeks ago. As I am writing this, at the end of a particularly choppy trading day, GME went as low as $86.29 before closing just a hair above $100.

I have no clue what the future will bring: perhaps GME will fall below $20, perhaps it will rally to $300 again. At this point, there are too many forces at work, and it’s among the most irrational stocks in the market: fun to observe, but from a very safe distance.

And as for me… A year ago, I made myself a promise: henceforth, forevermore, I would celebrate the anniversary of those three days (January 25, 26, and 27) with food, and drink, and revelry, and dance. Those 45 hours were a remarkable experience, and I’d celebrate their anniversary forever. Right now, Quebec is in the midst of a strict covid lockdown, with all the restaurants and clubs on indefinite hiatus, so there’ll be limited revelry and dancing. And yet, there’s still champagne, and cake, and the oddly cheap caviar at the local grocery store. (Very fishy, I know.)

The next three days will be a bit of a blur as I celebrate the first anniversary of the time a bunch of peasants armed with math broke Wall Street’s nose. It may have healed, but it will never be the same again. A year ago, we executed a brilliant plan, in pursuit of a beautiful dream, and we made history.

I’ll drink to that.

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