Jaime Rogozinski founded WallStreetBets to create a forum for young traders to share trading ideas, especially those of higher risk. Today, it is the largest subreddit on trading, and one of the most popular online communities for young traders. Rogozinski shares his favorite trading anecdotes from the forum.
The global financial markets have become a gambling house for millennial traders. How did this happen? Well, Jamie Rogozinski. Our next guest is here to explain just that Jamie is the author of a wall street bets. How boomers made the world's biggest casino for millennials and Jamie is also the founder of wall street beds, a popular sub Reddit forum on which the book is based.
Wall street. Bets is one of the largest forums on the internet for discussions about finance and trading in the world. It has close to 2 million followers on Reddit already today. Jamie, welcome to kiszko. It's a pleasure speaking with you. Hi, thank you for having me. It's a pleasure to be here. I get this question from my peers and my friends who have followed wall street bets for many years.
And their first question is always, can you please ask Jamie. For his inspiration behind wall street bets. What inspired him to start this thread that has now become a global phenomenon, almost a cultural movement amongst young millennial traders. Um, yeah. Yeah. Well, to be fair, I get asked that question a lot too.
Uh, the inspiration was a vacuum of a space for people that were looking to get involved with the markets in a way that was more aggressive. We need more risk, more reward. Uh, and at the same time, uh, wasn't a full-time profession. That's to say. Uh, there was either places where you can discuss passive investing, right?
This usually picks the form of indexing, uh, long-term high term time horizon, or a full-time professional traders. These are people that work in prop shops or a big investment firms. Uh, there was no spot for people that just wanted to actively manage. So I started in wall street bets, um, and the name I gave it was basically.
Because of the inspiration of taking higher risks. Whenever I was informed that we're discussing regular investing and I would say, Hey, what do you guys think of this? And that stock or whatnot, people would say that's too risky. You're gambling with the market. So the name I gave it wasn't really with the intention of having it be a casino, but it was to try and.
Uh, push away. And you critics of, uh, discussing higher risks strategies. Yeah. Has it evolved? Has the subreddit evolved in a way that you had anticipated when you first founded it? It there's elements that have evolved, uh, there's elements that have always been there that the overall, uh, attitude, the feel of, of people that are taking, uh, risks and taking them very lightly, that's always been there.
Uh, the evolution definitely has taken place from, uh, a place where people go there to actually learn, uh, they approach, uh, the forum with questions about, okay, well, what do you guys think about this? Or if I want to use stock options during earnings, what could potentially happen to a place where it's, it's just the risk, you know, let's get rid of the, the thought process behind it.
Do we think it's going to go up or down? Yeah. Okay. Uh, let's talk about your book and the themes behind the messages of your book. Now, your book is called again, once again, wall street bets, how boomers made the world's biggest casino for millennials. Can you explain, first of all, what the title means? How is it that boomers have created a vacuum for millennials to come in and fill this void for gambling?
Jamie? Well, they, they did a couple of things. Number one, they made normal gambling illegal, or very difficult, not until recently. Were you able to bet on sports and even still, it's kind of a shady area. Uh, physically betting in places still is really tricky. Uh, you have to get a certain States or riverboats or whatnot.
Uh, so they set up, uh, the infrastructure around the legal framework and they also, uh, created a. Uh, a poor example, uh, the rebid mistrust, they were in charge of the, uh, they were in charge when the.com bubble busted. They were in charge of the 2008 fiasco. And the millennial generation got the C uh, while they're still in school and not participating in the workforce.
Uh, Uh, what's happening to their parents or older people at their houses are going upside down. So they lose a little bit of respect or a lot of respect for the whole system of wall street. So you have this mistrusting idea. Uh, you also give them a difficult financial, uh, landscape to work with a lot of these kids when they're leaving college right in the middle of, uh, the last financial crisis.
They're having difficulty finding employment or well, flank thing, employment. So they just think the whole thing's a joke. They finally ended up doing better. They ended up making some more money. They're looking for something to do with it. They don't trust that if they stick their retirement in the stock market, that it's going to be different this time.
So you can't beat them, join them. Okay. Now, uh, one of the themes that you've discussed in your book is that the global financial system has now become a, in your words, illegal conduit. For gambling. It's like the stock markets are a casino. Now, first of all, is this, in your opinion, is this a recent development?
And to what extent does this have any significant impact on global financial markets? The way people trade now, the attitude towards trading, no, nothing has changed to make the marketing casino. I guess it's always had. Really similar structure to it. What was missing was the access to the market. If you wanted to participate in trading stocks, the first time I had traded the stock back in 2000, let's go with six.
I bought shares of Google. It cost me $30 permission to buy a $30 commission to sell it, have to go. It's a huge, uh, burden. It's a barrier venture is really high. Nowadays you download the app on your phone pay zero commission you funded is that we, and you start playing with here's to be a video game, uh, with access to super complicated instruments that are, uh, either highly leveraged or very complicated to understand, but they come with big arrows and confetti animation.
Uh, so I think it's the access to the market. So the participants are lower. The barriers of entry lower, the minimum account balances get lower. The cost of playing is almost no, even if you don't it with stock options. Yes. Production was share prices. Yeah. So anybody with any money with any cell phones able to play with it.
So now it turns, so now you're mixing a world where you, you still have professionals that are taking it seriously. You have still some professionals, but are taking risks. Akin to gambling, but now you also have a huge population of let's call them retail, amateurs, millennials, whatever name you want to give them.
And they're really mixing it up. And because he'd come in huge amounts of volume and especially this year, we see that they're actually affecting the markets. Right. We've seen, we've seen what they've done with. Very notable examples, especially this year. Yeah. One of the things that, uh, traders have done is explored some of the loopholes and Robinhood.
So a few years is actually on wall street beds. I've posted about, uh, their gains and their losses and how they're able to, uh, use. There, uh, there's one particular loophole allowed you to use the premiums you got on trading options and selling options to actually adding to your equity's position and thereby your, your margin account grew from it potentially $1,000 to $50,000.
Uh, that's you know, a significant amount of leverage. And, uh, they're able to utilize this method and to their, to their, uh, either late gain or the loss. A lot of people did lose even more. Then they, they started off with, by a significant margin. Do you think that my question is, do you think that retail trading and investing, especially on apps and trading platforms like Robin hood should be more regulated?
I mean, they, they should. Okay. So to be clear, these exploits, uh, were exploits, right? They weren't, they weren't necessarily something that should have happened. Any other broker. I would not have permitted that to happen. That was an oversight. Uh, and, and it's an oversight of the regulations, the regulations for him, it's that type of leverage.
Uh, and, and the actual, uh, the biggest, uh, profile was the guy that took $2,500 and leverage it up to a million dollars, uh, which is very dangerous. So as far as, as far as the regulations concerned, you know, it's already there, I guess it's more the enforcement of the regulation. Uh, w when it comes down to protecting the investors, I suppose, I mean, but they know what they're doing.
When you take a $2,500 position and you leverage it up, you can't play dumb and say, I didn't realize what I was doing. And in fact, that's, uh, that's the intention of what it is they're doing. And to some extent, and it's almost ironic, right? When you look at large institutions that behave responsibly in 2008, we've use fancy, uh, Mortgage backed securities, these big derivatives or whatnot, they ended up, uh, basically crashing the entire system.
They didn't end up having to pay for that. They had to get bailed out. So they, you know, th their risk involved was non-existent. Uh, these, these kids that, that are playing like this, I guess it depends on each one, what ends up happening. But a lot of these guys don't have a million dollars. So like your team, they don't need the costs.
Uh, they just give it to somebody else. It's just, just like the bigger banks were able to do that. Yeah. And your book, you've also used a variety of anecdotes to illustrate your point. Can you share us, share with us some of these anecdotes? What are some of the, uh, one of the, some of the stories that you've, you've seen on this subreddit that really struck out to you as something memorable, uh, something that you would have expected people to do?
My favorite all time anecdote, and it's going to be, it's really hard to break because it almost deserves a book of its own. This was about almost two years ago before this infinite margin so-called margin margin, margin Vish. Uh, this one individual actually started the CMX blade to a different extent because there wasn't margin back then he still was able to , uh, an infinite amount if you really wanted to, but he ended up stopped.
To quote him because the market closes at four o'clock. So he was leveraging up that particular day, uh, starting with a small cash amount. And he was using something called box spreads. And I won't get into the technical level, but it's kind of a tricky options, uh, strategy and kind of find a little loophole where the Robin hood wasn't accounting for the collateral necessary for it.
And so he ended up. Getting this massive position, uh, hundreds of thousands of dollars on what he considered to be a risk-free, uh, position because of what the textbooks tell you what should happen. And he was doing this position on something that's called, uh, XIV, which is this ETF on the VIX. And now we're talking about synthetic products that are tracking volatility for the, I mean, this thing is super complicated and he's buying these.
Sophisticated option spreads on top of that, you would not be able to explain this to the average person it's doubtful. He really understood. In fact, it's probable that he didn't understand it. He leveraged up like crazy. Uh, everyone's screaming at him that he, that he's going to lose this money. And, uh, and so as his trade was going on, He ended up taking out his profits.
So you put in $5,000. Wow. He took out $10,000, but kept the majority of his position open the following day. It all went crumbling down his account with negative, uh, something like 50 or $60,000, but he walked away with his money. You know, Robin hood closed his account off Robin hood and put up. Stopping box spreads all together.
They prohibited that particular strategy. The guy ended up with a Wikipedia entry dedicated just, just to him and him. What was his leverage amount again? What was his, uh, how much did he leverage his up himself? Up to. It's been a while, but I'm going to go up to three or $400,000. Okay. Uh, if I'm not mistaken has been happening, it's happened so many times I've lost track, but it is particularly was so 5,000 to four.
He gained 5k at what happened to his losses. Robin had closes his account, the losses just go away. And that was actually a running joke. I read on a wall street bets like, Oh, if you have a bunch of losses just closed her account that go away. No, but that's, that's obviously not true. Right? So in order to when I made this book, uh, I reached out to as many people as possible.
And some people spoke to me. Some people did not, he pulled it off. Right. This was the first time that that Robin had experienced this. I have no idea what goes on internally. I just know that. He, he closed his account or a Robin hood closed it out for him. Uh, he never ended up being liable for it. That's not the same story for other people going to pull the, uh, November of last year were, uh, made liable for their losses.
Yeah. One thing I've learned from wall street bets is that, uh, the culture of risk-taking hasn't changed at all since 2009. In fact, it's probably, it's probably, uh, exacerbated by. By platforms like Robin hood that have a zero, a $0, uh, commissions. Now, now one of the, uh, one of the individuals that was, uh, reading about, he actually posted a YouTube video, uh, levering himself up to what he believes is his personal risk tolerance, which was 25 times.
He ended up, uh, betting everything on, uh, Apple. Uh, I think it was. Either calls or puts. Anyway, he went the other way. He lost 78 to 90% in the first 10 seconds. Uh, he ended up getting a lot of views on YouTube, um, and, and, uh, it became really pretty, pretty infamous that way. Uh, why is it that this culture of the risk is still very much prevalent with us today?
You think after everything we've seen everything we've witnessed in the clonal financial markets since 28, 2008.
They have, they have crappy role models, right? If they saw the other people doing it to look at, you know, you look at a ton of examples throughout the history of wall street. If we want to call it that people involved with the financial system on an international level, you know, there was this guy called the London whale or something like that.
He worked at JP Morgan was working with, uh, Credit swaps or something like that. And he would end up doing similar things, lost millions of dollars. Three is for, from you have, uh, you've had traders also, I think in London that, that were drunk one day and they were just pushing buttons and they bought so much oil.
They pushed the price, right? So you have people that are doing it anyways, they're doing it with massive amounts. And so you have these kids and say, okay, well I have $250 or I have a thousand dollars. The most that I can move as this amount of money, let's go ahead and put it in there. Uh, it's S some people actually make a ton of money, surprisingly to my surprise, more people after they make this huge payday take their money and they walk away, they leave some money there and they keep playing around with it.
There's some, some big profile examples where it's not the case, but. Now, these guys are just hoping for a big cash out. Just like, if you want a slot machine, you're not going to want it again. They take their money, they leave. And, uh, you know, th they're they're risking what they have no different than someone would risk when they go to a casino.
Yeah. Has anyone ever approached you and said, Hey, I lost a lot of money. And I learned all these things from wall street bets. Uh, I needed to shut down the site because it's not good for other people. Has that, have you ever countered that before? No, but I'll tell you what worries me more is when people make a lot of money and in a profile where that is much more damaging.
When somebody loses a lot of money, it lets everyone know. It reminds everybody that what they're doing is risky. Uh, so it's, they already knew that going into it, but it's a subtle reminder. Sometimes you just get a little lucky street, gets to your head. Uh, this is what you're going to do for the rest of your life, without really realizing that they were likely lucky.
Uh, and so when somebody makes a huge payday people decide the Kotel, people we'll decide to dream that same way. And a lot of people end up doing it. The fact is statistically, most people lose money when we do this particular type of strategy. Uh, I think that's why they go all in with, with a few hundred dollars at a time I'm walking away with.
As much as what was it? $125,000 from a, from a 900 or $700. But, uh, so they're going for that one. Um, but when the w w when you have these big wins, it encourages more risk and it makes people forget that it's risky. Whereas the other way around it, I've had no people that want it to shut it down because they lost money.
I did get a message one time from a dad who was concerned that resembled. Uh, more of a family issue. I spoke to him on the side, but it was, uh, yeah, it was just the one. Okay. Well you're right. I mean, uh, big gangs. Aren't often, uh, they're, they're posted and they're upvoted and they talk about them. They spread like wildfire, these stories of big gains.
You talk about a couple of hundred, a couple of thousand dollars to hundreds of thousands of dollars. I've seen posts like that before. What's also surprising to me is how much losses are being encouraged to be posted. What are your thoughts about that? I think that's part of the reason why wall street bets is, is popular.
I think that's, it's a, it's a refreshing, a level of honesty, which people appreciate. If you do go to other forms of resemble or whether they're professionals or whatnot, you have a lot of guys that say, look how much money I've made and look at my car, look at the screen lifestyle. And it's just showing, showing and look at my great win rate.
You know, it's always positivity and the people that know what the people that have been around a block know, uh, they're just showing the good stuff and you're forgetting the show. Yeah. You go to wall street, pets, you put it all on the table. You're being completely transparent with everything. People give tanning feedback sometimes really funny stuff times, uh, cracking some jokes and sometimes very intuitive, uh, very helpful knowledgeable answers.
Uh huh. Uh, but the, the, the discussion that takes place, it's a really honest one. You know, some guy will come in and say, well, I read all of the, um, financial documents from this company and they're going to do the IPO or their earnings, and just say, Oh, throw this big, sophisticated, uh, analysis, which is really helpful for a lot of people.
And then other guys will come in and get the same amount of opposed to say, well, I live with my parents and I decided not to go to college because. The burger King was offering better with the, you know, and it just completely make a mockery in effect. They don't know what they're doing, but I do think that you should like Tesla because it has a ludicrous button in there.
I'll put a funny video, uh, uh, and it's celebrated. Yeah, I know. I know people personally who go all in on option chains on stocks that they. On companies that they don't even know what the companies make. It's just like, okay, my friend's doing that. I'm going to make a bigger position. And, uh, I'm going to see if I can out gamble him.
I think there's this culture. I think there's a culture here, not just within wall street bets, but of younger traders in general, that I've observed of sort of us versus them, them being the older generations, that more traditional methods of investing. I'm just, I'm on wall street beds right now. This is meme that I, that I, that I've noticed it's called the great war between.
WSB and traditional investor boomers. And there's this, there's this meme that, that I can show, but it's like, it seemed from the Lord of the ring with the orcs are the old investors, the older generations and the, you know, the good guys or the, uh, the wall street betters. Do you think this attitude well, well sort of, it's just a coming of age or if you think it will become prevalent and the next generation of traders and investors who will be dominating the markets.
I think that these guys are shining no light on the ludicrousness. That is, that is always existed. Okay. Um, this year w when coronavirus forces, uh, everyone into a shutdown and, uh, everyone's starting to use zoom for their meetings. People flocked to, to buy the zoom stock. Would that caring about the financials or understanding what they were doing it in very high profile manner that, you know, the ticket presume is the letter Z M a, but the ended up buying a different company whose ticker symbol was literally zoom, spell it out.
And so people would buy this stock, uh, thinking that it was zoom and everyone's making fun of him, all the guys that traditionally look at them. These reports are, what other, the Cedars going? Ha ha ha. You guys bought the wrong company. You silly children. Well, those silly children made much more money.
Then the people that were investing in the actual zoom company, so they don't care. Right. They have the last lie. Not only did they not look at the financials, they bought the wrong darn company and they took advantage of it and get so many people flack too. And I guess it was such a low volume stock that the price got super, super pushed.
They ended up having ICC have to step in to try and fix that, but they did the same with Hertz Hertz declared bankruptcy. These guys all sit there and go look at this price and they say, look, the price of zoom is really close to zero, or you're supposed to buy stocks when they're low and sell them when they're high.
Well, it's pretty close to low. So let's go ahead and just buy it. We don't care about differential effect. They just brag about the fact that they have bad financials, but they pushed the stock up from $2 to $5. That's making a hundred, 200 something percent. On a bankrupt company. So, so they're showing a ludicrousness of, of a system where everyone was guessing anyways, before these guys had enough numbers to push the stock prices around professional analysts, Hitler and say, well, you know, I'm thinking about the forward guidance on this particular sales number and this.
What's happening to the geopolitical, if they're guessing too. Uh, and sometimes they gets it right. And sometimes they don't. Is that what we should be doing then like the younger traders, forget business school. Just go on WSB. Look at what people are talking about. Calling in that because at the heart is going to push up the stock, but in all seriousness, I mean, how should a young trader wants to learn how to trade, how to invest?
What would you advise him to do to educate himself? Well, first he has to define what it is that he wants to get out of it. It's it's, it's a boomer question to ask yourself that. But, uh, but it's important because that's how you can define your path. If you're looking to make money. If you're, if you're actually trying to grow your wealth, I, it pains me to say it, but just buy and hold index, leave it in there.
Don't, don't play around with it. Uh, if they're looking to take a more active role and gamble with it, then I'm going to say, uh, make sure that they start with understanding. The recital that they define their risk. This is how much I want to lose be okay with that, be at peace with that, expect to lose it, uh, put the money in and hope for the best.
Usually the biggest trades are also the biggest losses for people that take $700 and make a hundred and something thousand dollars from it had a very, very, very, very, very high chance of being able to lose that amount of money, uh, much like a slot machine. There's other there's other particular beds that we'll end up paying one to one.
Those beds tend to have a higher probability, but the payout ends up being lower. Uh, so, so with the guys who look into it's a gamble and I'll understand that that's the point and for the people that want to take kind of a middle of the road, they would only have that trade. And then what I'm really getting involved with that, uh, my advice to them is decide whether that's what you want your profession to be, because you can't do.
Uh, uh, full-time trading at a full-time job. It is, it is a very complicated thing, regardless of what the, the company financials and all that stuff. Yeah. I was looking at the, uh, professional traders also don't look at those numbers. They're looking at price movements and all sorts of different physical methods.
Uh, that is, uh, that is a very difficult craft one that they could pursue if they wanted to. Uh, but it's just as difficult as any full-time job. I think the first piece of advice you gave, uh, investing in an index fund, if you posted that on WSB as an anonymous user, you get downvoted. Oh yeah. I mean, absolutely.
If you want to do that, there's a, there's a forum for that. You're in the wrong place. Yeah, absolutely. Yeah. Anyway, Jamie, it was a fantastic experience talking to you and, uh, best of luck with your book and your future endeavors. Thank you for coming to the show today. Thank you for having me. I'm David Lynn stay tuned for more. .