Back in 1987, the economist John Kenneth Galbraith, who had a keen eye for financial manias, told me in an interview that Wall Street has a recurring tendency towards insanity, which it never recognises until after the fact. He predicted that what he called the “carnival of greed” then playing out in the markets would come to an end, which it duly did (at least temporarily) with the crash of October 1987. The carnival is now back on Wall Street, and the insanity was in full view last week.
To recap the story: A ragtag army of amateur traders active on discussion website Reddit’s investment forums – such as WallStreetBets, which now has more than eight million members – collectively connived, for several months, to buy call options on stocks that had been shorted by hedge funds.
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