Excellent points Wheels. The arrogance of these hedge funds is almost beyond belief. They could have put a stop-loss on these positions for pennies, yet they were so certain of their success in destroying this company that they did not bother. I have no sympathy for them whatsoever.1.
A. A hedge fund manager buys up a massive short position. Encourages his buddies to do the same. Then goes on CNBC and touts how pathetic the company is to drive the price down, so he and his buddies can make a nice profit.
B. An ordinary Joe finds a company in a dying industry niche with a decent amount of cash to weather a storm. Finds that hedge funds have shorted the stock to the tune of 140%. He goes on Reddit and shows the crowd that the hedge funds have screwed up royally and if they drive the stock up they should have a good profit.
Why is it ok for the hedge fund manager to do "A", but not the ordinary Joe to do "B"?
Will much of the Robinhood crowd loose money long term? Possibly. Don't they have the right to make financial decisions for themselves even if they might be wrong?
The government encourages the poor and working class to buy lottery tickets and gamble. At least the stock market is more than zero sum since there is a long term upward trajectory with it.
3. "Accredited Investor" is such a joke. Regulation is a way of limiting access to those that don't have the ability fight it. Regulation always helps those already in the system to limit competition.
You are probably correct, government regulations will probably be enacted to stop this type of things and further protect the elite from the prototeriate.
I also agree with you on the 'accredited investor' classification. I was on the trading strategy committee of one of the largest energy systems in the world (you know which one) years before I hit the 'accredited investor' threshold. There is no way you could argue that I did not have the knowledge or sophistication to participate in 'accredited investments' before I hit the threshold. The tools you have access to as an accredited investor dramatically increase you ability to manage risk and, in a volatile environment, significantly improve your ability to outperform the market. The fact that these tools are restricted to those with a certain level of accumulated financial wealth is mind boggling. I'm not a socialist, but I take serious exception to this.