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January 30, 2021 03:34 pm

How Reddit's Co-Founder, Jim Cramer, and Wall Street Reacted to GameStop's Surge

Friday afternoon CNBC reported that "heightened speculative trading by retail investors" (later referred to as "GameStop mania") had "continued to unnerve the market."The Dow Jones Industrial average lost 620.74 points, or 2%, to 29,982.62, the first time the 30-stock gauge has closed below the 30,000 mark since Dec. 14.... The market also experienced the highest trading volume in years as the mania heated up. On Wednesday, total market volume hit more than 23.7 billion shares, surpassing the level during the height of the financial crisis in 2008. Thursday also saw extremely heavy trading with more than 19 billion shares changing hands. But Forbes reports that experts "seem in broad agreement that the bull market can rage on.""The market is not broken, but recent events have revealed some cracks," says Commonwealth Financial Network Chief Investment Officer Brad McMillan, who thinks one likely result of the week's frenzy could be that the price of options — which helped fuel some of the outsized meme-stock demand — rise to help curb "price hacking" in the future. McMillan eschews concerns from other experts that the Reddit-fueled price mania could be a sign the market is in the middle of a bubble akin to the dot-com era in the late 1990s, but he says "crackdown" by regulators is likely. CNN pointed out that the tagline of Reddit's forum is "like 4chan found a Bloomberg terminal illness" — and cited two more reactions: - "We've seen how social media can be manipulated to expose fault lines in our democracy," said Arthur Levitt, Jr., the former chair of the Securities and Exchange Commission, in an op-ed [titled "Danger Lurks Beneath Reddit Day Traders' GameStop Triumph"]. "Are we certain the same isn't happening in our financial markets? Time to find out." - "I think it's a real example of what we're already seeing with the way media has been upended," said Reddit co-founder Alexis Ohanian in an Instagram video this week. "All of these big institutions have been challenged, quietly and sometimes loudly, at moments, for the last 10 years with the rise of social media." Meanwhile, CNBC's stock pundit Jim Cramer advised the traders who'd helped spark the runup to grab their profits now:"Take the home run. Don't go for the grand slam. Take the home run. You've already won. You've won the game. You're done," Cramer said on "Squawk on the Street." "Please don't lose a lot of money on GameStop," added the "Mad Money" host. Cramer, who's being treated in the hospital for a pinched nerve, said he called into CNBC in hopes of making sure people recognize the potential downside risk in GameStop and other soaring short squeezed stocks. "Don't let them get hurt. It's our job" to make sure people know they may get burned if the stock price collapses, he said.... Cramer said he was concerned about the stability of the rest of the U.S. equity market the longer the frenzied trading continued... "I'm not saying that Reddit is good or bad, or that the shorts are good or bad," he said. "I'm just saying that the government has to step in and at least try to address the situation so the rest of the market isn't panicked by four stocks that are heavily shorted."

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