Energy Stocks that Stand Out in 2021

The volatility and group-think we have witnessed with mediocre traders trying to band together to "beat Wall Street" is fascinating in so many ways.  First, there is an important rule to remember in the financial markets: bulls make money, bears make money, but pigs get slaughtered.  Last week, we saw these traders goad one another on to "hold the line" and to hold their positions, short-squeezing hedge fund Melvin Capital and a few others as they increased the stock prices of GameStop (GME), Blackberry (BB), Nokia (NOK), and Bath and Body Works (BBBY).

At first, it's "fun" to see the stock market as a casino and to believe that people can work together to "out smart" or "beat" the system.  However, as stated in behavioral finance, not everyone can beat the market because everyone is the market.  This includes the genius that hedge funds have long-term.  As novice traders, they probably even believe that they have gone through some religious, spiritual 2-DAY workshop, now claiming that they are the experts in the finance world.  The truth, however, is that their group-think behaviors will only work to the level in which it serves everyone and as people's situations change, so do their commitment to "holding" that line.

This behavior also doesn't take into consideration that shorters' alternatives actually have more clarity than previously: as the individual traders come together on Wallstreetbets and have claimed which stocks to hold, hedge funds can simply research and short other companies in other industries, quietly.  In addition, they could create bull spreads on the financial securities that offer short-term growth.

Similar to poker, sometimes the smartest way to sucker the mediocre traders is to get them to believe they are the experts first.  By letting these traders believe they are actually more in control than they think they are, it will be easy to calculate their results along these trade and view their holding tolerance.