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Singh says day traders are ‘not the problem,’ but rather Wall Street amid GameStop push

WATCH: How Wall Street responded after small investors sent GameStop stock soaring.

NDP Leader Jagmeet Singh says that day traders are “not the problem” and that the hedge funds should face more regulation following a volatile week on the stock market.

“The regulation should be clearly on the Wall Street bankers who effectively almost created, or did create, a complete economic meltdown because of their greed,” Singh said, referring to the 2008 stock market crash.

“Folks that are trading and day trading or… engaged in different stock buying and selling – they are not the problem. The problem that we’ve seen historically has been a lack of regulation of folks on Wall Street who have taken advantage of workers.”

Read more: Robinhood, Interactive Brokers restrict trading on GameStop, BlackBerry and other stocks

Singh did not expand on how these Wall Street bankers should be regulated, but he added that Canada should ensure the wealthiest are “paying their fair share.”

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His comments come after multiple individual investors have honed in on the GameStop stock and others, causing hedge funds that had engaged in a practice called short selling to lose massive amounts of money.

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‘Short squeeze’ results in sharp rise in share price for video game retailer Gamestop – Jan 25, 2021

Short selling is what happens when professional investors borrow shares of stock in a company they expect to fail. These investors take that borrowed stock, sell it, and then buy it back later so they can return it to its original owners – all while pocketing the difference.

However, it’s a risky game to play if the gamble fails and the company doesn’t falter. That’s what happened when droves of Reddit users piled their money into GameStop shares, which was one of the most heavily shorted stocks on the market.

This practice, called a short squeeze, caused the price of the GameStop shares to skyrocket. These day traders also threw piles of money at other shorted stocks, including AMC, BlackBerry and Nokia. Because these hedge funds had pledged to buy back the stock they had borrowed, they were on the hook for the indefinitely increasing price of the stock.

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Read more: Wall Street titans lose more than US$70B amid Reddit frenzy that fuelled GameStop and others

At first, some of these hedge funds opted to hold on, hoping that the individual investors – the little guys of the trading world – would see their skyrocketing gains and sell the stock, pocketing their reward.

But that’s not what happened. In what many Reddit users are calling a “class war,” they are “holding the line” and refusing to sell. The end result of that is that they are squeezing indefinite sums of cash out of the hedge funds that had decided to gamble on the company failing.

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White House monitoring stock situation involving GameStop, other firms – Jan 27, 2021

While some stock market observers are warning that this is a risky game that could see many average folks losing money when the artificially inflated stock price inevitably drops, others are applauding the investments as a stand being taken against Wall Street.

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They’re framing the average Joe retail investors as the David taking on Wall Street’s Goliath.

“Gotta admit it’s really something to see Wall Streeters with a long history of treating our economy as a casino complain about a message board of posters also treating the market as a casino,” tweeted U.S. Rep. Alexandra Ocasio-Cortez.

“Anyways, Tax the Rich.”

At the time, Singh echoed the message on Twitter.

“Agree and agree. Tax the rich,” he wrote, reacting to Ocasio-Cortez’s tweet.

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NDP push for ‘excess profits’ tax, Liberals say they raised taxes on wealthiest 1 per cent – Oct 8, 2020

So far, the push has indeed forced some hedge funds to pull back and accept heavy losses. Citron Capital, a short-seller, is among those that confirmed they dropped their bets on GameStop shares. The man who runs Citron, Andrew Left, said on Wednesday that his company faced “a loss, 100 per cent.”

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GameStop stock surged to over $450USD a share on Thursday morning, but has since dropped to around $250USD — a massive jump from its cost just weeks ago. As the price continues to fluctuate, the standoff could end in many average traders losing the piles of money they’ve poured into the stock.

Singh said that while he “will not be giving anyone stock advice,” people should tread carefully.

“In terms of stock advice, I should not be giving anyone any stock advice. I think you should consult a professional and make sure you get professional advice,” Singh said.

“Be safe, be prudent, and make sure you make a good decision looking at all the evidence.”

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