LITTLE GUYS BOUGHT IN AT THE BOTTOM OF THE PYRAMID:

The nearly five-fold jump in GameStop's average trading volume from July to December signaled that large institutional investors were buying the stock. SEC filings show that they bought 40.8 million shares in 2020 and another 18.2 million shares in January of this year. These are banks, insurance companies, hedge funds, and mutual funds that manage large holdings on behalf of sovereign wealth funds, "high net worth" individuals, pension plans, 401(k) plans, and endowments.

There are hundreds of institutional investors, but 38 major ones each manage financial assets of more than $500 billion, totaling $37.8 trillion in assets among them. They trade stocks in blocks of 10,000 shares, and their trades accounted for an estimated 90 percent of all daily U.S. trading activity in 2019. By some accounts, their sway has ebbed to 75 percent of all trading since the pandemic began. Still, either way, decisions by some 20 or 30 investment committees of the biggest players typically determine whether most stocks rise or fall on a given day.

Their dominance is the rule because money talks in stock markets. By these measures, "retail" investors -- the rest of us -- are just along for the ride. On occasion, small investors move as a herd into or out of a particular stock, purportedly the current story of the Reddit crew and GameStop. The truth is, in most cases, the herd follows a big price increase or decline from the big players buying or selling large blocks of shares.

Based on the data, that is what happened when GameStop's share price and trading volume took off. Big players were driving the price up (and sometimes down), not the rascally Reddit crowd. On January 13, the stock's trading volume ballooned to 145 million shares, and its price jumped from $19.95 to $31.00. In one day, the total shares held by all investors (46.9 million) turned over more than three times - and that was only an overture. By Friday, January 22, GameStop's share price reached $56.04 on volume of 197 million shares, and the following Monday, it jumped to $76.79 per-share on trading of 178 million shares. Over the rest of last week (January 26-January 29), GameStop's share prices gyrated from $148 to $347 to $194 to $325 on average trading volume of 126 million shares per day.

Unless most of the Reddit bunch have assets in the top one-tenth of one percent of Americans, they were mere bystanders to last week's trading of 682 million shares at an average price of $218.20 - purchases totaling nearly $150 billion in a wildly volatile market. Only institutional investors have such resources to trade stocks, not self-styled populists with Robinhood on their iPhones. Since most big players are regulated public corporations with fiduciary responsibilities to avoid the enormous risks involved in this high-stakes game of chicken, the GameStop players almost certainly are all lightly regulated hedge funds.

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