It’s ‘Not a Game’, Get It?
A public awareness campaign launched by the Securities and Exchange Commission (SEC) hoping to spread awareness that “investing is not a game,” seems to have hit poorly among its intended audience. The federal agency put out YouTube videos and an online quiz à la BuzzFeed to convey risks associated with digital assets and wading unawares into the world of margin investing. While there’s ostensibly nothing wrong with its advice — “Margin increases your purchasing power, but also exposes you to the potential for larger loss”; “If you are considering a digital asset-related investment, take the time to understand how the investment works…”; “Promises of high investment returns with little or no risk are a classic warning sign of fraud.” — the language and tone of the campaign struck many retail investors as needlessly condescending.
The SEC branded its public service campaign “Investomania,” a portmanteau of “invest” and a psychological condition commonly symptomatic of bipolar disorder that results in delusions and varied degrees of personal recklessness. This poor branding decision isn’t necessarily what triggered investors (though it otherwise didn’t help). It was the agency’s targeting of “memestocks,” and the implication that trading in them is, ipso facto, poor decision-making, which sparked outrage on FinTwit, a.k.a. Financial Twitter, and investor-meme-sodden subreddits like r/Superstonk.
Galvanizing Diamond Hands
In one SEC video, a phony game-show contestant (“Brad”) chooses the category “Meme Stocks.” He’s blasted by the wrong-answer buzzer and his money falls through a small trap door. Then he’s slapped in the face with a pie. “Things like this just further galvanize these diamond hands,” one redditor wrote. “There’s no way the US Government does shit like this unless they know we’re right.” Another replied: “Like, are they TRYING to get me to buy more?” On FinTwit, Lisa Braganca, a former SEC regulator turned crypto-startup defence lawyer, said she was was “disappointed” to see the agency “disparage investors” in memestocks as generally thoughtless. Firing back at SEC chair Gary Gensler’s account, Braganca added, “How about a video about dark pools,” referring to private exchanges that conduct anonymous trades outside the public markets they compete with.
Truths and Falsehoods
The Twitter account of an upcoming documentary, “Apes Together Strong,” which aims to chronicle the rise of “apes” — a self-affirming term adopted by some retail investors who see themselves as challenging corrupt traditional financial systems related to the popular Bored Ape NFT series — wrote that the term “memestocks” was meant to call attention to the “subversive side” of organised efforts to short-squeeze stocks like GameStop and AMC, accusing the SEC and others of co-opting the term in tow to “belittle not only retail investors but the companies they deem worthy of investment.” The two brothers directing the film say they take issue with the government and mainstream financial outlets flippantly applying the label simply to paint investors of a particular company like a “lame caricature of some basement dwelling market manipulator”.
Risks Are Real
Mockery or no, the SEC’s concerns are not entirely unwarranted. The FTC reported Friday that fake “investment opportunities” accounted for roughly $US575 ($798) million in crypto-losses reported to the agency. A common theme among the victims is “limited crypto understanding and experience.” The SEC says its “Investomania” campaign is intended to convince the public to do their own “due diligence” around investing. “With the growing access to markets, it’s as important as ever for investors to take time to educate themselves,” SEC’s Gensler said. But that’s also a message oft-repeated in memestock circles, whose patrons are encouraged (in a disclaimery-like way) to “do your own research.” It’s also easy to see how novice investors become seduced by dreams of turning higher profits through leveraged trading. Those unaccustomed to managing their own risk trading highly volatile stocks can easily find themselves buried under a pile of margin debt.