Targeting GameStop — Spencer Jakab

Targeting GameStop — Spencer Jakab

Targeting GameStop — Spencer Jakab

Real Talk: The Charles Mizrahi Show podcast

Targeting GameStop — Spencer Jakab

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Many touted the GameStop short squeeze as a financial revolution … But Spencer Jakab says the true story is more complex than that. Jakab explores the unique twists and turns of this wild catastrophe in his book, The Revolution That Wasn’t: GameStop, Reddit, and the Fleecing of Small Investors. And he joins host Charles Mizrahi to discuss what everyone got wrong about Wall Street.

Topics Discussed:

  • An Introduction to Spencer Jakab (00:00:00)
  • Perfect Storm (00:04:57)
  • Short Seller Villains (00:14:17)
  • Targeting GameStop (00:24:50)
  • The Nasdaq Whale (00:28:31)
  • Robinhood’s Gamification of Investing (00:33:37)
  • Frenzy Sets In (00:40:52)
  • Overload (00:48:43)
  • Fallout (00:57:28)
  • Lessons Learned (01:00:49)

Guest Bio:

Spencer Jakab is an award-winning financial journalist and editor of The Wall Street Journal’s Heard on the Street column. After leaving a career in finance, Jakab wrote the Lex column for Britain’s Financial Times. And later, he wrote the Ahead of the Tape column on economic and business events. In addition, he is the author of two books on finance.

Resources Mentioned:

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SPENCER JAKAB: Their customers went crazy because this was saving the hedge funds. Then, the price of all these things started to go down. Within a week, GameStop lost almost 90% of its value. So, who knows how much higher it could have gone? There would have been a limit, but they cut the rally short. Maybe it would have been worth $200 billion. Who knows?


CHARLES MIZRAHI: My guest today is Spencer Jakab. Spencer is an award-winning investing columnist. He writes for and edits the Heard on the Street column at The Wall Street Journal. And he has previously written for the Financial Times and Dow Jones Newswires. His latest book is The Revolution That Wasn’t: GameStop, Reddit and the Fleecing of Small Investors.


CHARLES MIZRAHI: During one crazy week in January 2021, retail traders at Reddit’s WallStreetBets forum had seemingly done the impossible. They had brought some of the biggest, richest players on Wall Street to their knees. I recently sat down with Spencer, and we talked about how the meme stock squeeze unfolded and who the architects — and winners — were of the GameStop rally.


CHARLES MIZRAHI: Spencer, thanks so much for coming on the show. I greatly appreciate it. I’ve been looking forward to it.


SPENCER JAKAB: Hey. Thanks for having me, Charles.


CHARLES MIZRAHI: OK. So, the name of the book is The Revolution That Wasn’t: GameStop, Reddit and the Fleecing of Small Investors. Boy oh boy, this sounds like a counterintuitive book title. I read the book, and you know from what you speak.


CHARLES MIZRAHI: So, let’s get right to it. Last year, around this time, we went through what many called a revolution — the small investor taking on Wall Street and squeezing the shorts until they couldn’t breathe. They almost took down Melvin Capital — which we’ll get to in a second.


CHARLES MIZRAHI: But your book title starts off with The Revolution That Wasn’t. This wasn’t something that changed Wall Street at all. So, you are an accomplished guy and a Heard on the Street columnist at The Wall Street Journal. You are totally in touch with what’s going on. What is everyone missing?


SPENCER JAKAB: What everyone is missing is that Wall Street is a really big place. Let’s think about it in terms of gambling. Let’s say that you and a bunch of friends were really good card counters, and you went to Las Vegas. You figured out how to beat the casino — the house. And you went to a couple of big casinos and took them for tens of millions of dollars. It’s not illegal, but it’s something that the casinos frown upon. And you walked away. Then, people found out about it, and it was a huge deal.


SPENCER JAKAB: There are maybe 20 casinos on the strip. And two of them would have a bad week — a bad month, maybe, or even a bad year. Let’s say you took them for a lot of money. What would happen? You’d have a bunch of other people — less talented than you — showing up, trying to do the same thing, failing and paying a lot of money to the casinos where they played.


SPENCER JAKAB: You’d have all those people spending money on taxis, hotels, tipping the maid, tipping the bartender and going to restaurants. All the middlemen in Las Vegas wouldn’t have been hurt by what you did. They would have been helped a lot, because a lot more chumps are showing up to play in the casino.


SPENCER JAKAB: And that’s not a perfect analogy, but it’s a decent analogy for what happened. So, you had this handful of people who did very well. And you had thousands of people who did well. Then, you had thousands of people who actually wound up losing money. But the overall effect of it was a very good month on Wall Street.


SPENCER JAKAB: Because Wall Street is a big place, primarily comprised of middlemen — brokers, market makers, hedge funds that took the right side of this and investment banks that love volatility. And if you look up and down Wall Street — with a few exceptions, like Melvin Capital — people did quite well.


SPENCER JAKAB: So, it was a black eye for a couple of guys on Wall Street, but not for all of Wall Street. As I explain in the book, it was all gravy for Wall Street because these are people who are not usually there. It’s people who are a lot younger and have a lot less money and experience. They’re people who, 20 years ago, could have never afforded to be on Wall Street because the technology and pricing structure was not right for them. They came out in droves and mainly lost money — with some exceptions. And Wall Street is loving it.


CHARLES MIZRAHI: OK. Let’s take a step back and start from the beginning. Living through this last year, I remember everyone setting this up as David versus Goliath, smacking down the hedge funds, HODL, diamond hands — all of that stuff was talked about. What people didn’t get at the time — and what your book really captures — is the psychology that was playing on the players and media. And how a frenzy started to develop with all the psychological triggers such as social proof and posting your E-Trade account.


CHARLES MIZRAHI: So, let’s go back to where the book starts. Stimulus checks are going out to young, 20-something year old people who are getting paid to not work or do anything. We’ll start from there. Go ahead.


SPENCER JAKAB: It’s a fascinating story because so many things had to happen. And that’s a very important piece of it. Without the pandemic, this wouldn’t have happened. And without the way the government reacted to the pandemic, this wouldn’t have happened. And if you want to go back really far, without the global financial crisis in 2008 and 2009, this wouldn’t have happened.


SPENCER JAKAB: So, you have a generation whose formative financial experience is their parents struggling, maybe losing their homes or jobs and certainly losing a chunk of their investment portfolios — if they had one. And they were bitter about Wall Street’s role in that.


SPENCER JAKAB: The popular narrative is that Wall Street did it and got away scot-free. Actually, they got off making even more money. Because all the stimulus following the financial crisis has increased wealth inequality and made people in private equity, investment banking or what have you very wealthy.


SPENCER JAKAB: Obviously, it’s not all the same people, and some people did fare poorly. But there were no major prosecutions. There were not a lot of crimes. People weren’t legally raked over the coals for a variety of complicated reasons. So, they feel like there are two sets of rules.


SPENCER JAKAB: Then, in 2018, you had sports betting legalized in most states. Before that, it was only possible in Vegas. You had all these young men playing daily fantasy sports. And all of a sudden, they had these apps to gamble on their phones. Lots of them got into it. I have three sons; two of them are young men in this cohort. They don’t do it, but seemingly their friends all do.


SPENCER JAKAB: Then, they started trading stocks because there are these free stock-trading apps. They weren’t too interested in stocks yet, but some people were. Then, in late 2019, because of Robinhood — which had gained about half of the new retail brokerage accounts in the U.S. — everyone threw in the towel and said: “OK, we’ll make it free, too.”


SPENCER JAKAB: And they thought it would be terrible for business. You’re cutting the product of what you sell to zero. How could it not be bad for business? Of course, they had other ways of making money.


SPENCER JAKAB: But what they didn’t realize — and should’ve understood — is that cutting commissions to zero actually led to an explosion in business. Because for this young generation especially, trading stocks is fun. It’s a game. And when you take something that’s fun and make it free, they rush out and do it.


CHARLES MIZRAHI: And you give them capital to do it.


SPENCER JAKAB: Early in the pandemic, you gave them capital, or they had it themselves. I don’t want to say everyone was spending their stimulus checks. Although, a lot of people were, and they outright stated they were. But if you’re 23 years old, you get your money and spend it right away. You don’t save too much of it.


SPENCER JAKAB: So, all of a sudden, you can’t go out on Friday night. You can’t go out and go to McDonald’s, or whatever. You’re at home because there’s a pandemic. You’re bored at mom and dad’s house. And there are no sports to bet on either, except for Korean baseball. That was the only thing on, remember that?


CHARLES MIZRAHI: Yeah. You couldn’t write a better script for this to happen. Everything lined up: the gamification of trading, zero commissions, Robinhood, stimulus checks and the shutdown of any competition for young people’s gambling money. What did you expect? Something was going to happen. We didn’t know how, but it had all the seeds for its own disaster.


SPENCER JAKAB: And you had more than 10 million accounts opened during this time.




SPENCER JAKAB: That’s a huge number of accounts to open. And this is a generation that is not too interested in finance and investing. Even places where I work, you talk to some young people and say: “You’re putting money away in your 401(k)?” They say: “No, I’ll get to it.” It’s free money. The company matches. Even when you tell them that, for a lot of young people, it’s just a boring, dumb thing to them. And all of a sudden, investing was this cool, fun thing that everybody was talking about.


SPENCER JAKAB: The final ingredient that set the stage for this is social media. I’m sorry, the next to final ingredient. Social media today is not like the Yahoo Finance message boards that we remember from 25 years ago. Social media is much more potent in terms of getting you to do things and holding your attention because of the algorithmic nature. The people you’re likely to follow and the messages you’re likely to see — especially on Reddit, which was the epicenter of this — are likely to be very crazy and reckless. Because who are you going to pay attention to?


SPENCER JAKAB: Charles, if you go on Reddit right now, anybody’s post can go viral. It’s not like being on Facebook or Twitter, where you have to have followers. You can say something sober like: “I think that this is a really good stock. I put 5% of my whole portfolio into it for A, B, C and D reasons” and be very cerebral. You are not going to get any attention at all. I’m sorry to tell you, Charles. You might get it with our age cohort, but not with that age cohort and not on social media.


SPENCER JAKAB: Then, let’s say I go on there and say: “Hey, I mortgaged my house, and I bought deep, out-of-the-money call options on this one stock. I’m making a gigantic bet on it. And here’s a screenshot of my account.” I’m going to get a lot of attention.


SPENCER JAKAB: Now, a third person comes to that site. They are new to investing and of the generation that gets its advice on how to do things from social media. They’re not even going to see your post. It’s not that they’re not going to consider your post — which they might not because you’re being cerebral and boring. They’re not even going to see it because it’s not going to get upvoted. So, they’re only going to see my post and things like it.


SPENCER JAKAB: So, the ideas they get for how to invest — especially on WallStreetBets, which was the epicenter of this meme stock revolution — were reckless, crazy things. That sets the stage, too. And then, the last thing is what was going on in the stock market. The stock market had its most rapid descent from an all-time high to a bear market ever when the pandemic set in.


CHARLES MIZRAHI: That was in March 2020, right?


SPENCER JAKAB: Right, exactly. And then it had its most rapid recovery into a new bull market ever — by an order of magnitude. So, if you’re new to the stock market in March or April 2020 — as so many young people were — anything you bought went up. You had to be really unlucky not to buy something that went up. 96% of stocks from that pandemic bottom in the following year rose — which is unprecedented. They say success is the worst teacher. Well, it was a really bad teacher in this case because basically everyone felt like they were a genius.


SPENCER JAKAB: Then, all of a sudden, there are all these new financial influencers — they call them “finfluencers” — on social media who are telling people what to do. People with two or three months of trading experience are out there saying: “This is how you make money. This is what I bought. This is what you need to do.” And they had 200,000 subscribers.


SPENCER JAKAB: The funniest, craziest ones were the ones that took off the most. It wasn’t that they had a long track record. As a matter of fact, having a short track record was a real badge of honor. This guy, “Davey Day Trader” Portnoy, said: “I’ve traded one or two stocks in my life.” And then, he set up a live feed to his 2 million Twitter followers. And do you know how he picked stocks? He’d pick out tiles from a Scrabble bag. And people would go out and buy them.


CHARLES MIZRAHI: And he pissed on Warren Buffett.


SPENCER JAKAB: Right, exactly. He said: “I’m the captain now. Warren Buffett, I’m sure he’s a good guy. But I’m [the] captain now.” So, it was kind of funny but kind of sad. And all that set the stage for the amazing events of January 2021.


CHARLES MIZRAHI: OK. Now, before we get there, I want to add one more thing. You touched on it before. There had to be a villain. And the villain was already there. You’re looking at a cohort that saw their family struggle during the financial crisis of 2008, might have lost their homes, really terrible things during 2006 to 2009, maybe even evicted … All of that. And there had to be someone to blame. So, you had the villain, the means and the story. You had everything to make this happen.


SPENCER JAKAB: Yeah. And who’s going to be the villain? Because there are a lot of people on Wall Street. You’re not going to find Angelo Mozilo out there to blame — not that his name would necessarily mean anything to a 24-year-old on the internet today. But it was a guy on Wall Street who makes a lot of money, wears a suit and, especially, sells stocks short. And they conflate selling a stock short with wanting to destroy a company — which is not the same thing. I know you have a sophisticated audience, but I can explain the nature of short selling…


CHARLES MIZRAHI: Before you do that … When I was interviewed last year on several podcasts and TV shows, they kept saying: “Short selling destroys companies.” I’d say: “No, it doesn’t.” It’s like talking apples and oranges. The reflexive response was: “Short selling is anti-American, it puts companies out of business and people in the unemployment line.” And like you’re going to do in a few moments, I explained how the two have nothing to do with each other.


CHARLES MIZRAHI: What I kept seeing — and what your book points out with the social proof and influence — is that you needed a villain that everyone could agree upon, so much so that the media picked up on it. Shorts were the enemy.


SPENCER JAKAB: Yeah. Anyone listening to this, if you want to see something fun, pause the podcast for a minute and type into Google: “Short sellers are…” And see what comes up. They are reviled, and have been for centuries. Since stock markets have existed, short selling has existed. It happens to be a vital part of well-functioning financial markets. But short sellers have been flogged and jailed. They’ve been called carrion, vermin and vultures. And why? Because they do the opposite of what 99% of us do. We buy stock and hope it goes up. They sell the stock and hope it goes down — without owning it.


SPENCER JAKAB: Now, you’ve really got to pick your spots as a short seller because you are open to unlimited losses. It’s the opposite of us. You can make an infinite amount on any stock you buy. And you can only lose the money you invested. They’re not going to come for your house after you lost all your money on Enron. You just lost your money, right? If you shorted Enron, you made 100% because it went to zero.


CHARLES MIZRAHI: That’s your maximum gain, right?


SPENCER JAKAB: That’s your maximum gain.


CHARLES MIZRAHI: If you short something at $10, the best you can do is go to zero. If you shorted at $100, the best you can do is go to is zero. So, the other side of what you’re saying is that the trade can go against you to infinity. There is no limit. It’s an asymmetrical bet. there’s a minimum upside and an unlimited downside — which makes it such a risky venture. It’s best left to people who know what they’re doing and have ample capital.


SPENCER JAKAB: Yeah. Do not try this at home, kids. But if you think about short sellers — people who are betting against the stock — this happens all the time. The story that I tell in my book is a crazy, unprecedented story. But short squeezes are a pretty routine event on Wall Street — just plain, vanilla, run-of-the-mill short squeezes. It’s analogous to a bunch of people being in a theater and someone dropping a cigarette on the carpet. Then, there’s smoke and they all rush for the exit. But there’s only one exit door and a few people get trampled on the way out.


SPENCER JAKAB: This story is like that theater being packed to capacity — everybody’s sitting in someone’s lap — because there are so many bets against these loser companies that were involved. And then, not only did the theater catch on fire, but there are some people who poured gasoline on it. And they threw dynamite into the theater, and then threw nitroglycerin on top of the dynamite.


SPENCER JAKAB: They tried to create an absolute panic. And they did — the collective action of all these short sellers was off the charts. So, not only did they do it to make money, but they did it expressly to hurt the short sellers. And they did.


CHARLES MIZRAHI: They were on a mission to destroy these people. And they called people out, like Melvin Capital. But if you just back up for one second for our audience. As you mentioned, short selling and squeezes — where the stock starts to rise and the short sellers have to cover — are as old as Wall Street.


CHARLES MIZRAHI: The most famous one — which was the biggest one until Reddit — was with Northern Pacific Railroad in 1901. It pitted Jacob Schiff against J.P. Morgan — syndicate against syndicate. It started off with $150 and went up to $1,000. People were jumping out of windows. There were no shares to borrow. There were no shares to cover.


SPENCER JAKAB: And that is a fascinating era. I love financial history. When I saw what was about to happen to GameStop, I thought of that era. Because up until the 1930s, this kind of stuff happened. That’s why people didn’t trust the stock market as a place to invest money. Because it was just a plaything for people with a lot of money who were trying to mess each other up and do things that would be illegal today.


SPENCER JAKAB: So, when securities laws were passed, it became illegal. Let’s say, two or three rich guys or big funds see that a fourth guy is heavily short of stock. And they say: “Hey, let’s get him. Let’s quietly buy up all the stock and then show up. There won’t be enough stock for him to cover his position. And then, he has to pay us every last penny he has. We’ll bankrupt him.” That’s a corner, and you can’t do that anymore.


SPENCER JAKAB: But, the law says you can’t collude in secret to do it. It doesn’t say that you can’t get together out in the open on a social network and do it. And it was a social network that these Wall Street guys happened to not pay attention to. Because they think it’s a joke and full of funny memes. So, you go back into this message board and they were planning this thing out. And there were some sophisticated people there who knew the best way to do it.


CHARLES MIZRAHI: They were using options, leverage and a whole bunch of tricks — not tricks, but financial instruments — in order to maximize the magnitude of the move.


SPENCER JAKAB: Yeah, which is why it’s like card counting. It’s not illegal, but the casino usually figures it out pretty quickly. They did not figure this out until it was too late. They did not take it seriously. They didn’t see it coming. Some of them saw it … but thought it was a joke. And they weren’t laughing at the end of January 2020.


CHARLES MIZRAHI: Now, folks, you take a short position if your analysis tells you the company is worth way less than the stock price. So, it’s the inverse of a buy. When you buy something at $1, you hope it goes to $2. When you short something at $2, you hope it goes to $1. And investors were short-selling GameStop.


CHARLES MIZRAHI: Once again, you couldn’t write this script any better. I remember taking my 25-year-old at midnight to a GameStop —12 or 15 years ago — because a new game was coming out. And I thought I was the only guy. Well, all his friends’ fathers were also there. We were all looking each other like: “Would you believe this? At midnight, we’re all driving our kids to GameStop to buy something.”


SPENCER JAKAB: Charles, I’ve done that too. I’ve been there so many times. And I was just by there at a book event. It was a bookstore near the local GameStop. Game Stops went out of business. It’s closed. You have to have to drive a lot further away to get to one. It’s not a very good business today.


CHARLES MIZRAHI: It was a bad business. It was a business model that time had passed. And you had some professional investors — who had outstanding track records and did excellent research — showing that GameStop, as a viable business, didn’t have any hope. The market changed. No one was buying games in a store. It was done online. It was history. And the fundamentals of the company were just terrible. It was losing money.


CHARLES MIZRAHI: So, now, you have a stock that resonates with this young cohort. A lot of them have great memories of it. You have a connection there. So, you have many factors. And you have this stock start out … I don’t know the exact numbers. So, you fill me in on this. It’s around $3 or so when this starts?


SPENCER JAKAB: Yeah. During the worst days of the pandemic, it got down to $2.17. It was hovering around $3 or $4 during this time.


CHARLES MIZRAHI: So, these short sellers took positions at around $10 to $15. Some were fortunate to get a little higher. But I remember the $10 to $15 range. I don’t think any analyst on Wall Street had a buy rating on it. Nobody could see any sunlight on this company. It was Blockbuster in 2010.


SPENCER JAKAB: That’s pretty much what it was, yeah.


CHARLES MIZRAHI: So, this revolution starts. How do they find GameStop being so heavily shorted?


SPENCER JAKAB: So, a few different things happened. First of all, there’s a guy — and I tell the story through him. I start the story in 2019. I think 90% of people who pick the book up know what happened. So, it’s not like it’s a surprise. But there’s still a lot of suspense in the story because they didn’t see it through this guy. And he became central to the whole thing. His name is Keith Gill. He has a nickname, Roaring Kitty, on YouTube. That was a pseudonym. He had another pseudonym. I don’t know if this is a PG or R-rated podcast…




SPENCER JAKAB: OK. He was “DeepF-ingValue” on WallStreetBets. He was not unmasked until this was on the down slope. But he’s an interesting guy — a very disciplined, smart guy — and a chartered financial analyst. He was 34 years old when the story peaks.


SPENCER JAKAB: He decided that GameStop was a good value stock. And he made an all-or-nothing bet — not even just using stock but options. So, if he was wrong, he was going to lose all of his money on the stock. And if he was right, he was going to make a lot of money. He was making a really concentrated bet.


SPENCER JAKAB: He started making posts about why he thought it was a good stock, and he was laughed at. At one point, he doubled his money and people said: “Great. Dude, sell.” He said: “No. I wouldn’t be maximizing value. That’s not the way I think.” And a couple of other value investors were also sniffing around. Michael Burry — who’s one of the characters in Michael Lewis’ The Big Short — went and bought about 5% of the company.


SPENCER JAKAB: And then, people noticed and [the stock] went up for a while. And [Keith] was unhappy about it — even though he made about $50,000 on paper.


SPENCER JAKAB: When Michael Burry came in, Keith said: “I’m not happy because now he made it more expensive for me to buy more.” So, that’s a pretty sound way of thinking, by the way. That’s the way that long-term winners think. They’re not looking at what the market thinks in the short term. They’re saying: “This is my analysis. I want to buy it as cheaply as possible and see what happens.”


CHARLES MIZRAHI: If you want to buy it, don’t advertise it on a board. You do your accumulation quietly.


SPENCER JAKAB: That’s true. That was his first post, though. His first post was: “Thanks a lot, Burry, for jacking up my cost basis.” But then, he had his position, and he was talking it up. And he wasn’t a stock tout. He was just arguing his position. He had a lot of valid arguments. Maybe he was right, but maybe he was wrong. We won’t ever know because the crazy market situation overtook that reality.


CHARLES MIZRAHI: By the way, Mrs. Lincoln, how was the play?


SPENCER JAKAB: Totally, yeah. But for 90% of the story, he is ignored. And then, all these young people are rushing to the market and they’re buying Tesla, Nvidia and hydrogen garbage truck startups that have a fake product. They’re buying SPACs and bankrupt rental car companies and doubling their money. Some smart stuff, some dumb stuff. This is not the kind of thing that they’re interested in. So, it was a very bad year for short sellers — who are betting against shiny, overvalued stocks.


SPENCER JAKAB: But GameStop pretty much went back to being in the dumps. And suddenly, in the summer of 2020, you had somebody who was nicknamed “the Nasdaq whale” make this maneuver. And I don’t think this was carefully analyzed by the people on the board. But a few of them did notice. [The Nasdaq whale] went in and bought billions and billions of dollars of stock options in all kinds of stocks on Nasdaq.


SPENCER JAKAB: It looked like a great bet because those stocks were going up. And it was like a self-fulfilling prophecy. Because if you buy a lot of a certain type of stock option, the people who sold you those options — if the stock starts to go up — have to cover themselves. So, they’re open to unlimited loss. They sold you the right to buy the stock at a higher price. But if the stock actually gets to that price and starts surging, then they’re in big trouble. The little bit of money you paid them for the option isn’t going to cover what they have to spend selling you the stock at that high price.


CHARLES MIZRAHI: For our audience, this is basically the tail wagging the dog. It doesn’t work that way. It works the opposite way. So, this guy went through a totally legal [maneuver]. You’ll disclose who that was in a second, and you see how this plays out. But it was a very clever maneuver — by someone who’s extremely sophisticated and knew how the game was played — to have the stocks go up. This is the way to do it.


SPENCER JAKAB: That’s right. Although, maybe not. But it worked for a while.


CHARLES MIZRAHI: You were reporting at the time. I remember everyone was looking at this and could easily isolate it down to a handful of people. Because who could swing those billions of dollars so quickly? But go ahead, disclose who it was.


SPENCER JAKAB: The Financial Times — my old employer — unveiled who it was. It was Masayoshi Son, one of the richest men in the world and the CEO of SoftBank — which is a venture capital group. He was also buying the stocks at the same time. He was buying billions of dollars in stocks. He was basically swinging for the fences in the most aggressive way possible.


CHARLES MIZRAHI: Let me add one piece of color. For WeWork — one of the companies that he was investing in — the bloom was off that rose.


SPENCER JAKAB: Oh, yeah. That was supposed to be worth $47 billion. It was weeks away from an initial public offering. And then, it had an emperor-has-no-clothes moment. His company had lost $9 billion the previous quarter. So, he desperately needed a win.


SPENCER JAKAB: And for a while, it looked like this was going to be a big win. It did unravel, but it showed people how you can do this. It’s called out-of-the-money short dated call options. So, the call options cost pennies and can give you 1,000X your money — if you get it right.


CHARLES MIZRAHI: This is basically a lottery ticket. There’s a certain amount of time with an option you’re paying for. I didn’t know until I read your book that these things were expiring on Friday at market close. And Robinhood was giving until like 11 or 12 to place a trade?


SPENCER JAKAB: They were happy. It was all money for them. They don’t care. That’s why you don’t deal with people on Wall Street. Or you’re very careful dealing with people on Wall Street who make money on the front end.


SPENCER JAKAB: Robinhood didn’t care. Robinhood sold it to these people. They make a lot of money on options. They don’t charge you commission, but they make a lot of money because they sell the order.


SPENCER JAKAB: And they had customers going in buying options that were … I think only some people are going to grasp this immediately, but I’ll just tell you. It’s a guaranteed way of losing all your money. They would buy an option that was out of the money. So, it was like a contract for if this thing happens. And then, they would exercise it right away — which showed that they had no idea what they were doing.


SPENCER JAKAB: And they were still selling options to these people. So, they were selling options to people who had no business buying these sophisticated products. They had to approve them because that’s what the rules say. But they were approving people who clearly had no business doing this.


CHARLES MIZRAHI: Let me tell you something. In my newsletter, we have close to 100,000 paid subscribers. And I sent out an update in February or March 2020. I said: “Stay away from Robinhood. If you want to open an account, open up with a reputable brokerage firm.” And I didn’t know all the shenanigans that were going on.


CHARLES MIZRAHI: But I told them to stay away for one reason: the gamification of investing. To me, it was poison. Now, it’s a game just like DraftKings or betting. That’s not the right mindset one should have. And I remember getting emails from some of my subscribers saying: “They’re democratizing investing.” I said: “You’ve got to be serious, man. I was on Wall Street. There was no democratization there.” It’s a one-way street into their own pockets. It’s like the casino caring for the gambler — they don’t!


SPENCER JAKAB: Yeah. Well, to be clear, they deny it. They deny gamifying their app. That’s consistently been their message. They say: “We’re democratizing finance and giving people opportunity.” And how can you be against democratizing finance, right? It’s a strong argument.


CHARLES MIZRAHI: The confetti that dropped when you made money or something — that’s not gamification?


SPENCER JAKAB: I think it’s gamification. But they dropped that. I’m telling you their side of the story. They deny it. And they say they didn’t gamify and that they’re giving people opportunity. No, it’s a very colorful, intuitive app. It just happens to resemble some of these daily fantasy sports apps.


SPENCER JAKAB: Some people think its design is not a coincidence at all. When you open it up, what do you see? You see the stocks that have had the top moves. Do you think that’s an important piece of information? What should you show people? Should you show people a line chart of the Dow Jones? That’s what I might see if I open up Fidelity, where I have my 401(k). That’s what they show me.


SPENCER JAKAB: [Robinhood] shows the top moving stocks, the stocks that most people are talking about or the stocks that most people own. If you do that, one side effect is you’re giving people FOMO (fear of missing out). Young people always want to know what other young people are doing — where they’re hanging out, what video they’re watching or what’s viral. So, you’re showing people what’s viral.


SPENCER JAKAB: And it’s been shown that there are a lot of “crowding events” among Robinhood’s customers. They will crowd into a trade on a stock. And I think the way they display things likely plays a role in those crowding events. They all hear about the same stocks. They hear about them on social media, too — not just on Robinhood.


SPENCER JAKAB: But they open up the Robinhood app, and the first thing they see is what’s going on. And that’s a big reason that people treat it like Instagram. The active customers would open the app about seven times a day. There’s no reason to check your account seven times a day.


CHARLES MIZRAHI: What did you call it? “The Halloween candy effect,” right? Free money. Zero commissions. You have the Halloween candy effect. Everybody will take more. What was the age group of the Robinhood people? I think it was 20-something years old. And the average account size was $241.


SPENCER JAKAB: The median account size, but yeah. Exactly. They had a lot of young customers. I think the median customer was more like 31. So, on the younger side. But it definitely skews very young. Can you imagine in 1985 showing up at a stockbroker and saying: “I have $241, I’d like to open up an account”? You’re going to lose a fourth of your account in the first trade. And you’re going to lose another fourth of it when you sell your stock.


CHARLES MIZRAHI: At the time, mutual funds used to have $10,000 minimums. And I remember Dreyfus was $2,500 — which was considered a bargain. But $241?


SPENCER JAKAB: Well, let me be clear. So, I don’t think that’s a bad thing. I think that being able to interact more cheaply with Wall Street and getting on the financial ladder, as a young person, is not a bad thing. But you can make things too easy. You can take away the cost of something. And then, you can put up some guardrails, too. And there were no guardrails put up because it’s good business to bring these young people into the market.


CHARLES MIZRAHI: It’s like having a CPR course for recovering alcoholics at a liquor store. There’s redeeming factors there. But everything was set up in order to promote rampant speculation that was done impulsively. And all the bells and whistles were there to promote that and keep it going.


SPENCER JAKAB: Also, when you sign up with Robinhood, you can get an instant account — that’s the default — or downgrade to a cash account. What’s the difference? If you have an instant account…


SPENCER JAKAB: Let’s say your friend at college is like: “Dude, I’ve got a Robinhood account. If you open an account, I’ll get a free share of stock and you’ll get a free share stock.” It’s a mystery stock, so it’s like a lottery ticket. First of all, that’s gamified, in my opinion — getting that mystery free share of stock. Because it could be a valuable stock every once in a while.


SPENCER JAKAB: Then, you open up your account. If you open up a Schwab or Fidelity account right now, you can’t trade right away because you’re transferring money from your bank account. They still want to have the money before you can trade. But Robinhood would allow you to trade right away. It’s like: “OK, you’re good for the money. It’s coming in a few days. Why don’t you trade right away?”


SPENCER JAKAB: So, if you had some impulsive idea — if your friend was like: “You should open up a Robinhood account and buy some GameStop, Nikola or Tesla” — you wouldn’t have to wait. And if you only have enough to buy a fourth of a share of Tesla, that’s OK too. Because you could buy a fractional share and pay zero commission.


SPENCER JAKAB: So, you could do almost anything — and gain exposure to almost anything — without a cooling off period. And I believe that was important, too. You could be completely impulsive — going from somebody telling you about an account, to filling out the stuff, to being able to make your first trade — before your money has even reached the account through the wires of the banking system.


CHARLES MIZRAHI: How much would they front you? Say I open an account with $10,000. They wouldn’t give me $10,000 of credit, would they?


SPENCER JAKAB: I think there are limits to that. But like I said, the median account was $241. But the fact that they would front you the money … Now, that’s not margin. Margin is a different thing. And margin has certain requirements. So, they’d have to approve you for margin — although they did provide margin to a lot of their customers.


SPENCER JAKAB: They had something called Robinhood Gold. you would get the first $1,000 of margin borrowing for free if you paid for Robinhood Gold — which was $5 a month. So, they got a lot of their customers to sign up for margin. They also had an unusually large percentage of their customers default on margin loans compared to other brokers.


CHARLES MIZRAHI: That was the cost of doing business. Let’s move on from there. So, you have this situation. Let’s get back to where the story goes in January. You have GameStop — which is a $3 stock — on a quick ride to zero. Now, it starts getting pumped up for a whole bunch of reasons that you just mentioned. And the frenzy starts to take place in December, right?


SPENCER JAKAB: Yeah, between September and December. September is when Ryan Cohen shows up. Ryan Cohen is a very clever young guy who was the founder of


CHARLES MIZRAHI: I’m a customer. I love him.


SPENCER JAKAB: I love him, too. I’m a very loyal customer of Chewy.


CHARLES MIZRAHI: I used to place an order at 11 on Monday. And by Tuesday at noon, I’d have two 50-pound bags of dog food. Amazing.


SPENCER JAKAB: I’m a very happy customer. I’m happy to pay a little bit more if I have to because it’s very good. He’s no longer affiliated with Chewy, but he founded it. And he’s a very smart businessman. He showed up with 9.9% of GameStop. And he’s a young, cyber-savvy guy. He knows about retailing.


SPENCER JAKAB: So, all of a sudden, hopes really rose — and legitimately. He shows up. You’re not going to buy 10% of this company for no reason — so, he must see something. And he knows about e-commerce. So, maybe he’s going to come in and transform this company. He started agitating for change. Later on, in January, he got on the board — which kicked off another frenzy in the stock.


SPENCER JAKAB: And then, people discovered Keith Gill. They didn’t know him as Keith Gill yet. And they saw that, as early as the summer of 2019, he was touting the stock.


SPENCER JAKAB: And he had been very right. He became a mascot of WallStreetBets. People would go back, look at his posts, see what he was saying and watch his videos. And I think Keith Gill got a bit spooked because he was actually a financial advisor. He was not supposed to be doing this.


SPENCER JAKAB: So, he got quieter. He said fewer things explicitly and just started posting memes. To be clear, I don’t think he did anything wrong or illegal. But I think he was aware of his legal responsibilities. So, he certainly didn’t give away who he was or what he did for a living.


SPENCER JAKAB: He started getting interested in the possibility of a short squeeze. Because you have these hedge funds that were extremely short. So, they were starting to lose money. And Ryan Cohen was there — maybe he was going to do something else. They were talking openly about the possibility of a short squeeze.


SPENCER JAKAB: And then, people started talking about doing a gamma squeeze — which the Nasdaq Whale, Masayoshi Son, had done by buying all these options to manipulate the price of the stock [and push it] higher.


SPENCER JAKAB: Because as the price rose, it would be like a virtuous cycle where the options dealers would have to buy the stock. And they were talking about it openly. And the guys at these hedge funds should have seen the writing on the wall. They should have gotten out. And they did not, generally. That was their chance to go and do something else. They just didn’t take it seriously.


CHARLES MIZRAHI: But they don’t. And the stock starts to go into the stratosphere. Walk us through that.


SPENCER JAKAB: It starts to go up in December. GameStop continues to report very bad numbers. So, its business is going horribly. And the stock is going up! The business is going down — a lot worse than expected — and the stock is going up in the opposite direction.


SPENCER JAKAB: Then, in January, it reported its Christmas sales — which were awful. But that didn’t matter anymore. Because Ryan Cohen showed up and said: “I’m going to be on the board, and I’m putting these two other people who were with me at on the board, too. You other people, please pack your bags and leave.” And they agreed.


SPENCER JAKAB: That set off the storm. The stock was going up through mid-January. Now, Gabe Plotkin of Melvin Capital was losing a lot of money. And another short seller shows up — who was known to the people on the board. His name is Andrew Left. He’s an activist short seller — a very brash, vocal short seller.


SPENCER JAKAB: He shows up, and on January 19, he says on Twitter: “Listen, you guys are the patsies of this poker game. I know all about short selling, and you don’t. I’m telling you why the stock is going a lot lower.” Now, they had a different enemy — who was sticking it in their face.


CHARLES MIZRAHI: They had a public lynching.


SPENCER JAKAB: They hacked his accounts, terrorized him on social media and in person, sent him menacing messages and did all this crazy stuff — which is horrible to do to anybody, no matter what you think of them in business. He couldn’t do his presentation because his social media accounts had all been hacked.


SPENCER JAKAB: All of a sudden, they had an identifiable enemy. They had Gabe Plotkin and Melvin Capital. And then, they had [Andrew Left]. To them, he was a lot worse. He had shorted some stocks that they liked on the WallStreetBets board already. He made some money and forced them into losses through his research. So, he got bulldozed and run over. He got out with a 100% loss in his positions.


CHARLES MIZRAHI: And he basically said: “I’m not going to be public about these anymore.”


SPENCER JAKAB: Yeah, he said: “I’m going to stop producing short research.” And this guy had taken on some mean guys. He had taken on actual criminals. At one point, he had faced criminal prosecution abroad. It’s not like it was his first rodeo.


SPENCER JAKAB: And he was shaken. I spoke with him [a few] different times throughout this period, and he was uncharacteristically shaken. He’s not a wimp, let’s put it that way. But he didn’t know what to do or say. He published a couple of videos that are still on YouTube. The name of his company was Citron Research. They’re very conciliatory to this group — not that they cared. He got run over. And Gabe Plotkin got run over. Gabe Plotkin’s fund lost almost $7 billion in a matter of days.


CHARLES MIZRAHI: Let’s give it a little color. Gabe Plotkin was really successful. He’s a smart guy. He worked for SAC. I forgot the name change. What’s the name?


SPENCER JAKAB: It’s Point72 now, but it was SAC when he worked there.


CHARLES MIZRAHI: Cohen backed him for a lot of money. And this was a smart guy. He knew what he was doing. In one year, I think he personally made $800 million. He was doing really well. So, when he was shorting this, and his people were not looking at it, it was a freight train coming right at his face. And he was short. I think The Wall Street Journal kept publishing how this guy was short and it was costing him huge amounts of money — until he got a cash infusion.


SPENCER JAKAB: Yeah, he said: “It wasn’t a bailout.” So, he got a cash infusion. If it’s not a bailout, I don’t know what you call it. It was $2.75 billion. The two people who contributed that cash were his old boss, Steve Cohen, and most of it came from a man named Ken Griffin — who also plays a central role in the story.


SPENCER JAKAB: Ken Griffin runs one of the biggest, most successful hedge funds in the world. And he runs a company called Citadel. He is also the major shareholder in a firm called Citadel Securities — a separate firm — that was the main firm that processed the trades of Robinhood.


SPENCER JAKAB: It paid it for its trades. It was the biggest source of revenue for Robinhood — buying its trades. It’s not a stock market or a bank, but it’s a market maker. It’s a wholesaler. It processes the trades using very sophisticated, fast computers. And then, it fills the trades. It’s not cheating or lying. That’s its business and what it does. And it actually gives pretty good execution and prices to these retail traders. But its business allows Robinhood’s business to exist.


CHARLES MIZRAHI: Robinhood’s business could not exist if you didn’t have Citadel.


SPENCER JAKAB: If you didn’t have companies like that, yeah.


CHARLES MIZRAHI: Companies like Citadel buying the order flow, right. So, in January, the stock price goes up. I remember one day it doubled. How high was it?


SPENCER JAKAB: $483 is where it peaked.


CHARLES MIZRAHI: What was the market cap? GameStop had a market cap at the height of what? How much was that worth?


SPENCER JAKAB: Oh, gosh. I think it went from being worth $230 million to $24 billion — something like that. Maybe it was briefly even more than that. But I think it’s closing market value was about $24 billion. So, it was worth a lot for a business that had not made money in years.


CHARLES MIZRAHI:  Close to $35 billion because now it’s at $102 a share.


SPENCER JAKAB: Well, there are more shares now. It issued more shares. I think that on a closing basis, maybe $24 billion was the peak. But I could be wrong. Intraday, it might have been more. It was worth a lot. $43 billion is what it hit intraday. And the business is not worth that much, obviously. But with stock prices, it is what it is. The market’s always right.


SPENCER JAKAB: The hedge funds that were initially there got out with severe losses. New hedge funds came in. Then, Elon Musk, the CEO of Tesla — who is revered by this Gen Z and Millennial cohort — came out on Twitter with one tweet at 4:08 p.m. on Tuesday, January 26: “GameStonk!!”


SPENCER JAKAB: Not GameStop, “GameStonk.” Because a “stonk” is a company that goes up anyway. And that set off a new explosion. Then, he had a link to WallStreetBets, in case you couldn’t figure out what he was talking about. That set off a new conflagration.


SPENCER JAKAB: And then, Robinhood was having a great week … Until it was having possibly its worst week ever. Robinhood could not handle the volume because brokers have a broker, too. You think that something happens instantly. You look at your brokerage account, and you’re like: “I bought the stock, money went out of my account and the stock’s in my account.” Well, no, the stock’s not in your account yet. The money went out of your account, but it’s going to take a couple of days to get to whoever bought it.


SPENCER JAKAB: You don’t see it, but that plumbing of the system goes through a clearing house. The clearing house is like the broker’s broker. It makes sure everyone gets paid and gets their stock.


SPENCER JAKAB: And if you come up short as a broker, the clearinghouse has a problem. So, it wants to make sure you have enough money on deposit in case you’re not good for the money. And it went to Robinhood — which was still a pretty small company — and said: “Guys, you need to come up with $3 billion in the next three hours before the market opens. Otherwise, you’re shut down.”


SPENCER JAKAB: And there was no way — even today, with the kinds of money being thrown around — they could get $3 billion in three hours in the middle of the night. So, they went back to the clearing house. They said: “Listen, if we stop our clients buying these stocks…” And that’s why you identified this risk, because they’re buying this handful of stocks like GameStop, AMC theaters, BlackBerry, Bed Bath and Beyond, Nokia — all these meme stocks. “If we stop people from buying anymore, what do we owe you?” They said: “Then you owe us $700 million and change.” And they could just about do that. They called in all their bank lines and they did it.


CHARLES MIZRAHI: Let me point out one thing for our listeners. And correct me if I’m wrong. The reason the clearinghouse did it on these specific stocks is because the swings in price were so great that in order to mitigate risk, they were asking for more money down per trade.


SPENCER JAKAB: Exactly. The swings were so crazy and so many of their clients owned it. Because Robinhood was the main broker of all these people. Think about it, someone may have opened an account on Monday and bought the stock that day. And their money didn’t even arrive until Wednesday. Or they bought it on Wednesday and it wouldn’t arrive until Friday. So, the money was not there at Robinhood yet, or they were using margin borrowing or other things. There was a huge amount of risk being taken by its customers.


SPENCER JAKAB: But ultimately, it was Robinhood’s risk because its customers might not have very much money. If you’re a 24-year-old kid, that’s all your money. They could come after you for more money, but you’re like: “Dude, I don’t have any money.” And that’s not good enough for the clearing house. So, the clearinghouse said: “OK, $700-something million, that’s fine — if you don’t allow your clients to buy anymore of the stocks.” And they went crazy. They didn’t explain it.


SPENCER JAKAB: Think about it. Robinhood was in a difficult position here. Because if you’re a financial institution, you can’t signal to the market that you’re almost out of money. That’s not a very smart thing to say when you have lenders and all kinds of counterparties. So, they came up with a very technical mumbo-jumbo answer for their customers. Their customers went crazy because this was saving the hedge funds.


SPENCER JAKAB: Then, the price of all these things started to go down. Within a week, GameStop lost almost 90% of its value. So, who knows how much higher it could have gone? There would have been a limit, but they cut the rally short. Maybe it would have been worth $200 billion. Who knows? There’s no rational limit to what something could be worth.


CHARLES MIZRAHI: It had all the makings of a disaster of enormous magnitude. It could have wiped out zillions of people who were on the hook for this. But nobody really knew. So, it wasn’t an innocent move. It was a planned move by the clearing house to stop this. It was a runaway train. So, that’s when the fever broke. And I believe hedge funds that were short were able to get out somewhere around there. Or were they starting to get out there?


SPENCER JAKAB: Well, it depends. Some still lost money, but they were able to get out at a lower price. It did bail out those hedge funds, but that’s not why it was done.


SPENCER JAKAB: To this day, there are conspiracy theories. Just two days ago, there was some warehouse that burned down near Chicago. People said: “Oh, that’s where they kept the records of so-and-so. It’s all a conspiracy.”


SPENCER JAKAB: It doesn’t matter what happens. It came out in some investigations that people from Robinhood were talking to people from Citadel Securities. Well, yeah, they were the main source of revenue. I’m not surprised they were talking. They weren’t saying: “Hey, stop trading.”


SPENCER JAKAB: If Robinhood had not had this problem, they would have loved to keep going. Citadel Securities would have loved to keep going because they were making a lot of money on processing all these trades. So, it wasn’t a bad thing for them. It was just too much of a good thing. And that’s the simple reason why it stopped.


SPENCER JAKAB: But immediately, people were outraged because it does look awfully suspicious. It looked like they were bailing out the hedge funds. You had Ted Cruz, AOC, Donald Trump Jr., Josh Hawley — everyone was piling on. Late night talk show hosts were piling on and people misunderstood what was going on. They were raking Robinhood over the coals. And then congressional hearings were called that day for three weeks.


CHARLES MIZRAHI: When you heard these people talk, you realized they had no idea how the financial system works. They were just out there shooting the breeze on things they had no idea about. It wasn’t conspiracy theories. It wasn’t anything. And I just saw the other day that the FBI seized computers of short seller Andrew Left of Citron Research over GameStop and what happened back in January 2021.


SPENCER JAKAB: Yeah, who knows? Maybe they saw something else. I can’t say why the FBI would do that. But yeah, they were looking for bad guys. Because you always want to find the bad guy. And they might not be looking in the right place. Maybe they’re looking in the right place or maybe there’s something else going on there. I have no idea. That’s above my pay grade.


SPENCER JAKAB: They called these hearings and called out the short sellers destroying the American dream of mom-and-pop — which is exactly backwards, because short sellers have been kicked to the curb. And short sellers are not angels, but they exist for a reason. The absence of short sellers is bad for mom-and-pop. I think for some politicians, that’s difficult to understand. And for some politicians, it’s not difficult to understand. But they don’t want to understand it. It’s not a popular stance.


CHARLES MIZRAHI: If it wasn’t for the short sellers, there would still be an Enron. There would still be WorldCom. The short sellers are like the hyenas of the Serengeti. You need them. They’re the scavengers. I shouldn’t compare them all to that…


SPENCER JAKAB: If you didn’t have hyenas, you’d have a problem.


CHARLES MIZRAHI: Exactly. They are important for the ecosystem. Because if a company is not run by a bunch of charlatans, who cares? It doesn’t matter. They would go right through it because they’re not going out of business and not cheating. But the frauds that are being exposed and the charlatans who were pumping up stocks — that’s the purpose of the short sellers.


SPENCER JAKAB: And [they are] making prices right because you’ve got to have somebody who bets against the price. You can’t just have…


CHARLES MIZRAHI: The world buying in the one direction.


SPENCER JAKAB: You can’t just have: “I’ll buy the stock or I won’t buy the stock.” You have to have somebody out there saying: “Not only will I not buy the stock, but I’m going to sell the stock because I think it’s too high.” You need somebody making that bet for prices to be more correct.


CHARLES MIZRAHI: You need someone on the other side of that trade. If you don’t have someone on the other side of the trade, you’re dead. There’s so much I could speak to you about for the next couple of hours on this book. It’s absolutely great.


CHARLES MIZRAHI: I lived through this, and I’m in the business. And as I’m reading this, there’s so many intricate things you brought up about the order flow, the payments and all the details that I had no idea about — which makes it even scarier.


CHARLES MIZRAHI: I’m editorializing here. If it wasn’t for the fever breaking, a lot of young people — the ones who were trying to go against Wall Street — would have been killed. Wall Street bailed them out. The irony of it!


SPENCER JAKAB: Yeah, kind of. It wasn’t doing them a favor either. But yeah, it did. They were so angry that trading was stopped, but they would have lost more.


CHARLES MIZRAHI: It’s like a kid eating so much sugar. You hate your parents for stopping you, but thank God you’re going to have teeth one day. One final close on this: What do you think Wall Street learned from this revolution? I use that term lightly. And what did the retail trade learn?


SPENCER JAKAB: Wall Street is paid to learn. They learned how to arm themselves against this. They learned to take social media and this young group of investors seriously. They’re much better prepared. About 85% of hedge funds today have either a paid-for service, a service themselves or they troll through social media. They read it faster than a human can read it. And they’re prepared.


SPENCER JAKAB: What did retail learn? I think nothing good. Because this new generation, some of them learned that Wall Street’s a crooked place. They’re bitter about Wall Street. So, I think that hopefully some of them are going to say: “I lost some money on this — or I made a little bit of money — but this is not a sustainable way to invest. I have an account now, I’m going to buy some conservative things and hold them.” And they’ll have their foot on the ladder.


SPENCER JAKAB: But I think that’s going to be a small minority. I think most of them are going to say: “Wall Street’s crooked. I’m not going to have anything to do with it. I’m going to keep my money in NFTs, or whatever.


CHARLES MIZRAHI: Or “I’m going to go to bitcoin.” It’s fueling bitcoin.


SPENCER JAKAB: Right. So, that’s a shame because you should engage with Wall Street. You should invest. You should build up a nest egg. You should do it in a slow, methodical, conservative way — setbacks and all. There is a retirement crisis in this country for people who are close to retirement. But there’s also a retirement crisis for people who are 40 years away from retirement — who have no plan for doing it.


SPENCER JAKAB: So, if you don’t get on that ladder, then you’re doing yourself a disservice. And I think that a lot of young people are going to take a dim view of Wall Street and see it as a place full of crooks. And of course, there are crooks, unfortunately. But generally, there are good, cheap ways to invest where you pay very little money to Wall Street, engage with it very little and you can do very well. And a lot of them are going to miss that. They’re going to take a detour off of that road.


CHARLES MIZRAHI: Well, that’s the price of experience. That’s the price they’re going to have to pay. It doesn’t come cheap. This is the tuition. Jack Bogle’s Vanguard is out there. It beats 95% of all money managers over a 15-year period. Buying a simple index fund would cost you nothing. Put a little money away each month, and that’s it. But who wants to get rich slowly when you get rich overnight?


SPENCER JAKAB: It’s a tough sell.


CHARLES MIZRAHI: The more things change, the more they remain the same. There’s nothing new here.


SPENCER JAKAB: Yeah, that’s the thing. There are some new things. I hate to say it’s the same old story because there are some very unique twists. And I tried to tell it in an entertaining way, too. There are definitely some unique twists.


SPENCER JAKAB: But of course, it’s the same old story of Wall Street winning and the little guy losing. And it doesn’t have to be that way. Because the technologies that I talk about are of great benefit to the little guy, like those index funds. Those index funds didn’t exist 40 years ago. You couldn’t invest for 0.03%. And that’s the same thing that makes $0 commissions possible.


CHARLES MIZRAHI: That’s right. Technology brought the cost down for the average person to invest better than an institution could have 20 years ago. It’s amazing.


CHARLES MIZRAHI: Folks, the name of the book is The Revolution That Wasn’t: GameStop, Reddit and the Fleecing of Small Investors by Heard on the Street columnist at The Wall Street Journal, Spencer Jakab. It definitely should be on your reading list this year, because there are so many great lessons on investing that he weaves throughout the book.


CHARLES MIZRAHI: I love all of the things about the social proof, influence and how you build a stage because there’s so many great lessons here. This is a book that you should definitely get because history doesn’t repeat itself, it rhymes. And this definitely rhymed with so many other catastrophes I’ve seen. So, Spencer, all the power to you. The book went on sale on February…


SPENCER JAKAB: February 1.


CHARLES MIZRAHI: So, hopefully, by the time you guys get this, there’s a zillion five-star ratings. And I’m sure a lot of these people are going to flame you and call you the devil incarnate. Have you had any attacks or anything personally against you from this book?


SPENCER JAKAB: Oh, yeah, for sure. It is what it is — one-star reviews and things like that. Some of them are just so obviously malicious. If it’s something insulting like: “I didn’t read the book, but this guy is a clown,” Amazon will remove that. But I think people will see through that.


SPENCER JAKAB: And listen, if somebody reads this and they thought it was just OK, then leave an OK review. Leave an honest, sincere review if you read the book.


SPENCER JAKAB: But if you loved it, don’t be shy about that either. Because that all matters to an author who wants to have another book — how the last book did. So, Charles, I really appreciate the kind words about the book. I’m so glad you liked it. Thank you for having me.


CHARLES MIZRAHI: Oh, great. All the power to you and keep coming out with great stuff. And I was telling you on the phone when we first spoke, I’ve been getting The Wall Street Journal for close to 40 years. When I first started as a floor trader in 1983, I started getting The Wall Street Journal.


CHARLES MIZRAHI: I don’t think there have been many days in my life that I have missed it. The first thing I do is turn to the editorials. And Heard on the Street is the second thing I turn to. I think you do great stuff on the back page. It’s really good stuff for investors.


SPENCER JAKAB: Thank you, I appreciate it.


CHARLES MIZRAHI: All right. Spencer, thanks so much for your time and I greatly appreciate it. Happy to have you on again.

CHARLES MIZRAHI: Thanks for listening to this episode of The Charles Mizrahi Show. If you’re a new listener, welcome! If you’ve been listening for a while, we’re glad to have you back. Either way, we’d love to know what you think of the show. Please leave a review if you listen on Apple Podcasts. Reviews make it easier for others to find the show. You can also see the video of the interview on The Charles Mizrahi Show channel on YouTube.


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