In defense of Roaring Kitty
Friends, Romans, countrymen, lend me your ears; I come to defend Roaring Kitty, not to praise him.
Roaring Kitty does not deserve our praise, because he is not a force for good. He is an international icon of stupidity and nihilism, and he is making our stock market worse.
But Roaring Kitty does deserve our defense of his rights as an American. These rights include the right to trade securities anonymously in compliance with the law, to freely explain his opinions based on public information, and to truthfully describe facts to the public.
Every American has the right to be stupid, and Roaring Kitty has chosen to exercise that right to the fullest. There is nothing illegal about truthfully describing your stupid views in public, as demonstrated on a daily basis by our elected officials. Public stupidity is the bedrock of our democracy. In theory, we debate different ideas and hope eventually the less stupid ideas will triumph.
Stupidity is not illegal. It is also not illegal to talk your book, that is, to purchase a security and then say nice things about it (with appropriate disclosure). If stupidly talking your book was illegal, CNBC would fall silent.
What’s the right response to the re-emergence of Roaring Kitty? Here is one view:[1]
Former SEC Chair Jay Clayton suggested in an interview with the Journal that Gill should publicly answer questions about his trading. Such questions include: Is he working with anyone else? How did Gill, an individual investor, finance his purchases of GameStop shares? Has he hedged any of his bets on GameStop? And what are his ultimate intentions?
“Absent answers to these questions,” Clayton said, “I’m very uncomfortable for retail investors and for market integrity.”
These suggestions make no sense. Should we create new disclosure requirements out of whole cloth in order to prevent Clayton from being “uncomfortable”? Should every successful investor be publicly hounded about their intentions? A nitwit buys a stock, the stock goes up, suddenly the nitwit gets the Spanish Inquisition?
Clayton seems to think that retail investors are innocent victims of a criminal mastermind whose nefarious machinations must be unmasked, Scooby-Doo style. Untrue. Retail investors are consenting adults who are willing participants in a self-destructive bout of mass stupidity. That is their right as Americans.
Having watched Roaring Kitty’s latest rambling video, here’s my conclusion: this guy is no criminal mastermind. He is a humble man with much to be humble about.
Let me make a distinction between Roaring Kitty in 2021 and Roaring Kitty in 2024. Some have argued that the meme stock craze of January 2021 might have been illegal market manipulation via a short squeeze.[2] That’s a separate issue which I won’t address here. I certainly agree that short sellers are a force for good and hunting them to extinction is a bad idea. But the events of 2024 do not appear to be a short squeeze.
I see Roaring Kitty and his followers as a misguided wave of dumb money that reflects a more general pattern of “global dumbening.”[3] But just as we should defend the rights of smart money (short sellers), we should also defend the rights of dumb money (Roaring Kitty).
I am no fan of Roaring Kitty. But I think we should respect his right to speak and trade in accordance with his beliefs, however misguided they are. That’s the American way.
[1] “Keith Gill’s GameStop Trades Pose Conundrum for Market Cop,” The Wall Street Journal, June 6, 2024.
[2] Allen, Franklin, Marlene Haas, Eric Nowak, Matteo Pirovano, and Angel Tengulov. "Squeezing shorts through social media platforms." Swiss Finance Institute Research Paper 21-31 (2021).
[3] Lamont, Owen A., and Richard H. Thaler, “‘Dumb Money’ Exposes the Baffling Allure of Bad Investment Advice,” The New York Times, October 1, 2023.
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