This is the Cato Daily Podcast for Tuesday, February 2nd, 2021.

I'm Caleb Brown.

This short squeeze put to hedge funds and other big players in the stock market last week

surprised almost everyone.

How does the game change going forward, both in terms of what exactly counts as market manipulation

and whether or not any of the players involved did anything wrong.

Cato's Jennifer Shelf and Matthew Feeney spoke with me yesterday for a live edition of the

Cato Daily Podcast.

Let's begin with you, Jennifer. The name Short Squeeze pre-existed this event.

And so to begin with, what do we know about the Short squeeze? What is it and how often does it happen?

The short squeeze isn't anything new.

What's new here is the fact that it was instigated by a bunch of retail investors.

Short squeeze is, I won't say a time-honored tradition, but it's a technique that's existed for a long time,

where in investors who hold securities, hold them as an interesting term here when we're talking about shorts.

So investors who hold short positions in securities get squeezed out by those who are acting to make the stock price rise.

And they get squeezed out because as their short position, the price rises,

their short position becomes increasingly expensive.

And what's interesting about the short squeeze is it creates a feedback loop because in order

to kind of decrease the price of holding that short position, they need to get out.

And one of the ways to do that is by buying the stock, which pushes the price of the stock up even further.

So this has happened at least notably not that long ago.

Like in 2018, I remember a couple of companies being subject of short squeezes.

...