How GameStop Traders Are Handling Their Sudden Windfall

Summary

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WSJ Your Money Briefing

Episode Summary: How GameStop Traders Are Handling Their Sudden Windfall

Date: February 1, 2021
Host: Charlie Turner
Guest: Julia Carpenter (WSJ Personal Finance Reporter)

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Overview

This episode delves into the experiences of GameStop traders who found themselves with unexpected financial windfalls amid January's wild stock price surge. Host Charlie Turner and WSJ personal finance reporter Julia Carpenter discuss who these traders are, how online communities have shaped their actions, the strategies they've employed, what they're doing with their gains, and the broader context of financial pressure and risk tolerance among younger investors.

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Key Discussion Points and Insights

1. The New Breed of Retail Investors

• Profile of GameStop Traders (02:28 – 02:54)
  • Most aren't full-time traders; they're individuals using commission-free, app-based brokerages like Robinhood.
  • Many are new investors drawn in by the buzz and accessibility.
  • "Most of the people I talk to are doing this on apps like Robinhood ... definitely not full time traders, usually individual investors. A lot of the people we've seen fueling this new wave of retail investing." — Julia Carpenter (02:37)

2. Influence of Online Forums

• Impact of WallStreetBets and Social Platforms (03:01 – 03:19)

  • Every trader Julia interviewed cited WallStreetBets (Reddit) and Discord as key influences.
  • These spaces encourage participation, sometimes for the first time.
  • "Every single person I talked to mentioned either [WallStreetBets] or both. ... we're seeing a lot of people encouraged to get into trading for the first time ever." — Julia Carpenter (03:01)

• Community Pressure and Group Dynamics (03:19 – 03:56)

  • Forums exert pressure to 'hold' or act collectively, with some degree of intimidation, online harassment, and polarized sentiment.
  • "There's definitely a lot of pressure to not sell, that these individual investors have a duty to play as a collective..." — Julia Carpenter (03:19)

3. Divergent Strategies: Why and How They're Trading

• Varied Motives and Approaches (04:01 – 04:36)
  • Some are new to trading, seeing it as a once-in-a-lifetime opportunity.
  • Others are motivated by ideological or political statements against hedge funds and Wall Street.
  • Many are just seeking to capitalize on quick gains.
  • "...some are investing for the first time ... described as a once in a lifetime opportunity. Other people are holding ... to make a political statement ... Others are just looking to get in low, sell high." — Julia Carpenter (04:01)

4. What Are They Doing with Their Windfalls?

• Reinvesting vs. Diversifying (04:41 – 05:14)

  • One trader sold early, cashed in, and went back in with new gains.
  • Others are using proceeds to diversify their investments, cashing out of 'hot' stocks and shifting to more stable, long-term options.
  • "I spoke with one person … sold his shares, then got back into the market ... Someone else said ... turn around and invest in a more diversified portfolio." — Julia Carpenter (04:41)

• Paying Down Debt and Financial Goals (05:40 – 06:02)

  • Winnings being applied to credit card debt, tuition, or in hopes of paying off student loans.
  • "One ... is planning to use that money to pay down his credit card debt and ... toward his tuition. Someone else is holding ... hoping to pay off her student loans." — Julia Carpenter (05:40)

5. The Debt and Financial Strain Context

• Younger Generations’ Financial Reality (06:08 – 06:28)
  • Stagnant wages, rising living costs, student loan debt, and the impact of pandemic layoffs are common pressures.
  • Many see these trading opportunities as a chance to change their financial situations.
  • "It's the new reality for a lot of younger people. ... A lot of younger people have been affected by unemployment or pandemic layoffs. On top of all of that, you have the student loan crisis." — Julia Carpenter (06:08)

6. Risk Awareness

• Conscious Gamble for High Stakes (05:27 – 06:30)
  • Traders are aware of the risks; the volatility of their portfolios is seen as a learning experience.
  • Despite risk, the potential upside justifies the gamble for many.
  • "Especially watching how the market movements affected their individual portfolios was kind of a crash course for a lot of people..." — Julia Carpenter (05:27)
  • "Everybody I talked to said that they understood it was a gamble, but the potential positive was too great for them to ignore." — Julia Carpenter (06:30)

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Notable Quotes & Memorable Moments

• "These individual investors have a duty to play as a collective ... there's kind of some intimidation happening on both sides." — Julia Carpenter (03:19)
• "I think it's the new reality for a lot of younger people ... there's a lot of burdens placed on people right now, and they're hopeful that this could help alleviate." — Julia Carpenter (06:08)
• "Everybody I talked to said that they understood it was a gamble, but the potential positive was too great for them to ignore." — Julia Carpenter (06:30)

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Timestamps for Key Segments

• [02:28] — Profile of new retail traders
• [03:01] — Role of WallStreetBets and Discord
• [03:19] — Pressure and intimidation in online trading communities
• [04:01] — Motivations: first-time investing, ideology, profits
• [04:41] — Reinvesting vs. diversifying
• [05:40] — Winnings used for debt and tuition
• [06:08] — Generational debt, economic strain
• [06:30] — Attitudes toward risk

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Conclusion

This episode provides a layered look at the human stories behind the GameStop trading frenzy, revealing the interplay of collective action, financial pressure, and calculated risk among everyday investors. It highlights how financial windfalls are offering new opportunities—and tough choices—for people navigating an uncertain economic landscape.

Transcript

[Small Business Owner]

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[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it, don't they?

[Consumer Rights Advocate]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.

[Charlie Turner]

Here's your money briefing for Monday, February 1st. I'm Charlie Turner for the Wall Street Journal filling in for J.R. whalen. Shares of the video game retailer Gamestop are on a wild ride. Plenty of observers are predicting a sudden end, but until then, some traders are pocketing their winnings while they can.

[Julia Carpenter]

I think especially watching how the market movements affected their individual portfolios was kind of a crash course for a lot of people and how this stuff works.

[Charlie Turner]

Coming up, we'll talk about the traders fueling the rally, what their strategies are and what they're doing with their earnings. Our personal finance columnist Julia Carpenter will walk us through it after the break.

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Advocate]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it, don't they?

[Consumer Rights Advocate]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.

[Charlie Turner]

Traders who've bought shares of GameStop have made out quite well. Far the video game retailer stock soared more than 1,600% last month. In our last episode, we discussed how a lot of observers are calling it a bubble that'll eventually pop, which means there is always the risk of holding onto the stock for too long and losing everything. Our personal finance reporter Julia Carpenter has been talking with the traders that are fueling the rally to get a sense of what they're thinking and what they plan to do with their earnings and she joins me now. Julia, thanks for joining us.

[Julia Carpenter]

Thank you for having me.

[Charlie Turner]

Julia, you talked to quite a few people who've made a lot of money from GameStop's rally. What can you tell us about them? These aren't full time traders for the most part.

[Julia Carpenter]

Most of the people I talk to are doing this on apps like Robinhood or using brokerages without commission, app based brokerages. So definitely not full time traders, usually individual investors. A lot of the people we've seen fueling this new wave of retail investing,

[Charlie Turner]

are they taking any of their cues from these online forums that have fueled the rallies such as Wall street bets and discord?

[Julia Carpenter]

Absolutely. I can tell you right now, every single person I talked to mentioned either one of those or both. And I think especially with Wall street bets, we're seeing a lot of people encouraged to get into trading for the first time ever.

[Charlie Turner]

Have traders felt pressure from these online forums to act in a certain way?

[Julia Carpenter]

If you look at WallStreetBets, if you spend a lot of time on it, there's definitely a lot of to not sell, that these individual investors have a duty to play as a collective, that they have a duty to stay. But also, if you read stories about people who work on Wall street, people who are full time traders, they have received threats, they've received online harassment. And so there's, there's kind of some intimidation happening on both sides. One encouraging people to stay in, others encouraging people to kind of stay out.

[Charlie Turner]

Can you talk about how some of them buy, sell or hold their shares? What's the strategy here?

[Julia Carpenter]

I talk to a variety of investors who have strategies kind of all over the place. Some people are investing for the first time because of this, so they've opened accounts to take advantage of what they're seeing online, described as kind of a once in a lifetime opportunity. Other people are holding because they're intentionally trying to make a political statement or some sort of ideological expression about hedge funds and Wall Street. Other people are just looking to kind of get in low, sell high, you know, make the most money that they can with this kind of short, short experience that we're seeing.

[Charlie Turner]

What about reinvesting? Did you speak with any traders who've taken that approach?

[Julia Carpenter]

We did. I spoke with one person who kind of panicked at the beginning of the week when he saw how quickly this was escalating. So he sold his shares, then got back into the market with other gains, and then was using that same specifically to kind of go all in on GameStop. I spoke with someone else who said, I'm going to take my wins from this and then turn around and invest in a more diversified portfolio, kind of taking advantage of what was happening with the market with GameStop, AMC Nokia, these other very hot stocks, and then kind of using it to shore up a longer term position.

[Charlie Turner]

We talked to Streetwise columnist James McIntosh on our last episode and James said what he thought was taking place was a stock bubble and Bubbles inevitably pop. Do the people that you spoke with seem aware of that risk?

[Julia Carpenter]

Yes, I think especially watching how the market movements affected their individual portfolios was kind of a crash course for a lot of people in how this stuff works.

[Charlie Turner]

So what have some of the people you've talked to done with their winnings?

[Julia Carpenter]

So I spoke with one person who just sold off his shares, and he is planning to use that money to pay down his credit card debt and put the rest of the money toward his tuition for school. I spoke with someone else and who is holding partially because she's hopeful that we would see a rise and she'd be able to pay off her student loans entirely.

[Charlie Turner]

It's interesting how many of the people you spoke with have a lot of debt to pay off. Is that a common story?

[Julia Carpenter]

I think it's the new reality for a lot of younger people. We're seeing wages stagnate, housing costs and cost of living rise even in the pandemic. And a lot of younger people have been affected by unemployment or pandemic layoffs. On top of all of that, you have the student loan crisis. So there's a lot of a lot of burdens placed on people right now, and they're hopeful that this could help alleviate.

[Charlie Turner]

So for these people, the risk is worth it?

[Julia Carpenter]

Absolutely. I think everybody I talked to said that they understood it was a gamble, but the potential positive was too great for them to ignore.

[Charlie Turner]

Wall Street Journal personal finance reporter Julia Carpenter. Thanks for being with us.

[Julia Carpenter]

Thank you so much for having me.

[Charlie Turner]

And that's your money briefing. I'm Charlie Turner for the Wall Street Journal, filling in for JR Whalen.

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Advocate]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it, don't they?

[Consumer Rights Advocate]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.