LOS ANGELES — In what seemed to be a follow-up to the GameStop/Reddit stock squeeze, the value of the precious metal silver soared at the start of the week.
It even caused a run on Los Angeles coin dealers like Wilshire Coin’s Glenn Sorgenstein.
"Phones ringing off the hook, people are buying everything from one-ounce rounds, 100-ounce bars," said Sorgenstein said "We even have some 1,000-ounce bar buyers."
Wilshire Coin has been experiencing a line out the door, and while that’s happened before, Sorgenstein noted that the customer dynamic has changed.
"The buyer we’re seeing now is younger," he said. "Obviously the Reddit activity has played a big part in it, but silver, I think, has been underpriced for quite some time."
Silver prices retreated Tuesday, and GameStop stock’s value dropped at one point back to the double digits, placing a spotlight on the volatility of the market.
But at the height of the frenzy at the end of January, some brand new investors walked away with huge profits, including new parents Elizabeth Manzo and Arya Hamzelou. At the start of the pandemic, they knew nothing about stocks or trading but decided to invest their stimulus checks, hoping to create a nest egg for their growing family.
"I was a total beginner," said Hamzelou. "I knew nothing about it. I was sure, though, that the money I used could all potentially be gone."
Hamzelou began to research online how to trade and stumbled upon a Reddit thread that is now making international headlines, called “Wall Street Bets,” which was created back in 2012 for people to share investing advice. He learned how to open up a trading account and started following certain talked-about stocks.
“I wasn’t thinking, ‘Oh let’s go get Wall Street, let’s go get these hedge fund managers.’ I was just trying to, you know, help my family out,” Hamzelou said.
Between the first stimulus check in May and the second in December, Hamzelou had successfully leveraged the tips he learned from Wall Street Bets to make $10,000. At one point, he noticed the thread had also began talking about GameStop. The stock was heavily shorted by big hedge funds on Wall Street, meaning the funds essentially placed bets that the stock would plummet, and if it did, they would profit.
Wall Street Bets Redditors started a movement for people to buy the stock, lifting its price, and essentially leaving the big Wall Street investors on the hook. When you "short" a stock, you have to buy it back at a much higher price, which resulted in losses in the billions for the funds.
Hamzelou took a flyer and bought 100 shares at $35 dollars each, along with some other so-called “meme stocks,” which got their name because they are heavily influenced by online discussions.
The buys paid off. Hamzelou saw his family’s stimulus profits balloon to $40,000 dollars in just a few weeks. He even wrote a blog post to share their inspiring story.
Wall Street was sent reeling, but Hamzelou feels they just lost at their own game.
"Wall Street got bailed out in 2008," he said. "They got a lot of checks from the government, and they, I’m sure, used it to their advantage. It’s like, I’m not allowed to do what they did? You know what I mean? Just because I don’t wear a suit and tie to work, I can’t do what they did?"
Other, more experienced traders also capitalized on the movement, including Dan Peterson of Marina Del Rey. Peterson used to work for Goldman Sachs and is now a film financier who uses what he learned during his time working for a major investment bank to day trade.
"This is blowing the lid on the under workings of the financial industry as a whole," said Peterson. "We’re starting to understand that we can play the casino."
Peterson also found the Wall Street Bets thread and said he more than tripled his normal income and is up 500% in the market leveraging the Reddit page and similar online discussion groups during the GameStop stock surge. As someone who grew up in a middle-class family, he supports retail investors coming together from all backgrounds and learning how to invest.
“There’s a wealth re-distribution ability that you’re inclined to take advantage of,” Peterson said. “If you catch them holding the bag, you can use the masses to, in a very big way, completely dictate how much money they have to pay back.”
Peterson is among the Reddit investors who are looking to what’s next, including getting in on some silver stocks. But whether you’re making online traders or buying coins, Glenn Sorgenstein of Wilshire Coin wants to people to be very careful and avoid gambling with money they don’t have.
"Be calm. You didn’t buy silver two months ago, for you to jump in now, I really want people to think about what they’re doing."