First, Wall Street is once again the source of disorderly volatility in global financial markets.On the one hand, the “forced short” trend is spreading to other markets around the world, and the stocks of other listed companies that have been shorted by heavy positions have become retail investors “hunting” targets, and even the “hot spot” can make the stock price “turn over”.On the other hand, short institutions appear huge losses after the choice to sell high quality weight company stocks for “blood”, drag down the global stock market.
Second, the image of Wall Street as a proxy for greedy capital has strengthened.Many media compared this “forced empty space” incident with the “Occupy Wall Street” movement nearly a decade ago, once again highlighting the polarization of wealth in the United States, the deepening of social division.In stark contrast to the huge profits Wall Street’s short sellers made during the new recession, U.S. unemployment remains stubbornly high.
Finally, the Wall Street “forced empty” drama once again exposed the United States financial regulation difficult to meet public expectations.US financial regulators, including the Securities and Exchange Commission, have been under fire for days.Short sellers suffering huge losses claimed that retail investors were suspected of manipulating stock prices by “rallying” through social media, but regulators hesitated to do so.Retail investors have complained that regulators have turned a blind eye to the platforms’ efforts to restrict trading, helping institutions to short.
The entire U.S. financial market would collapse
The butterfly effect of the GME squeeze is leading to the worst short squeeze on US stocks since the financial crisis, with Goldman Sachs warning that if the squeeze continues, the entire financial market will collapse.
Over the past 25 years, there have been a number of severe market squeezes, but none as extreme as the recent one.
Over the past three months, the most heavily shorted basket of U.S. stocks has risen 98%, surpassing the 72% and 56% gains seen in 2000 and 2009, respectively, when the basket was jacked into the air.
But overall shorting of U.S. stocks is at historically low levels.At the start of the year, the median short interest on S&P 500 stocks was just 1.5% of market capitalization, the same level as in mid-2000 and the lowest level in at least the past 25 years.