Name one thing that Reddit users infatuated with Elon Musk and Twitter leftists have in common. Did you guess a hatred of Wall Street? If you did, I applaud you. Because we’ve witnessed something truly interesting this week.
I don’t pay much attention to the stock market, but even I heard about the insane crowdfunded effort in short-squeezing to thwart the effort of the firms shorting GameStop stock. The stock for GameStop, a brick-and-mortar chain of video game retailers, was at a price of $17.25 and in a period of stagnation on Jan. 4.
By Jan. 31, it was at a staggering price of $325, a 1,784.06% increase in value. It was an absolute dumpster fire, with people on both sides lamenting losses and reveling in the victory of improbable gains. One of the firms that was attempting to short the stock, Melvin Capital, lost more than $4.5 billion. This week has been so absurdly tumultuous for the stock market that the troubles even reached the executive office, with President Joe Biden and Federal Reserve Chairman Jerome Powell debating how to approach this reported catastrophe.
Now, how are we supposed to interpret this insane string of events? It’s a good indicator that the general opinion of Wall Street has turned sour and that their ever-present hypocrisy is on display for everyone to see. It’s a clear sign that the stock market is an abstraction, completely separate from the material well-being of the American people.
What’s shorting, you may ask? It’s a practice many investment firms engage in, which is essentially betting on the price of a stock falling. A common “copypasta,” a block of text that people copy and paste around the internet, is being shared that explains shorting in terms of apes, snakes and banana prices. But for our purposes, it’s basically borrowing stocks, selling them to force the price down, then buying the stock back at a lower price to reimburse the loan and pocketing the difference. It’s a slimy operation that hinges on the failure of people’s livelihoods.
I’ll give a quick debriefing on the actors at play. Reddit is a social media of sorts — a collection of online forums that specialize in many different topics. One of these subreddits is r/wallstreetbets (WSB), and they describe themselves in their About Community page as if “4chan found a bloomberg terminal.” It’s a pretty apt description — a bunch of hyper-insular young men that are crass and brazen in both their speech and their investments. They think the “stonks” meme is still funny by proxy of Elon Musk using it on Twitter, which is all I really have to say.
Recently, they noticed a few investment firms shorting GameStop. In all their brazen lunacy, they decided that they would short-squeeze the companies. It worked, amazingly, and has many scrambling to find a way to minimize losses. Elon Musk even joined in on the fun, using his status as an idol for many who use Reddit to bolster WSB’s efforts.
However, despite their reprehensible predilections, they have caused Melvin Capital to lose billions in assets, along with a staggering $19-billion loss for the multitude of firms interested in shorting GameStop. In turn, these companies have made a mad dash to protect their assets and find any way to stop people from investing.
Robinhood, an application for trading at the stock market, controversially stopped its users from trading GME nearly instantly after the stock shot up. As of now, as some sort of concession, they allow their users to trade only one stock of GME at a time; a handful of other stocks are also limited.
The U.S. Securities and Exchange Commission put out a statement on Jan. 29 saying “the Commission will work to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation. The Commission is working closely with our regulatory partners, both across the government and at FINRA and other self-regulatory organizations, including the stock exchanges, to ensure that regulated entities uphold their obligations to protect investors and to identify and pursue potential wrongdoing.” To many, this seems like a way to cater to both sides, or to side with the investment firms rather than the individuals.
This entire debacle has really shown to everyone the sham that is the market. Sen. Ted Cruz, R-Texas, and U.S. Rep. Alexandria Ocasio-Cortez, D-N.Y., shared discourse about this on Twitter, seemingly sharing the anti-firm sentiment. What seemed like a moment where the two agreed took no time to dissolve, however. But their sentiments seemed to be similar.
Firms have been manipulating the market for decades — the SEC even admitted so during the 2008 financial crisis. The status of the stock market is completely separated from the actual material struggles of most Americans. We saw this especially clearly last year, with the COVID-19 pandemic obliterating jobs and unemployment skyrocketing to 14.7% in April. In December, unemployment was 6.7%, still nearly doubled from January of that year at 3.6%.
Despite this, the S&P 500, an index of the most profitable stocks from 500 American firms, displayed an 8% year-to-date gain in September 2020. There is virtually no connection between the health of investment firms and the material conditions Americans have to endure every day.
Discourse has shown that this isn’t even a partisan issue. If Sen. Cruz can try and piggyback off the sentiment of Rep. Ocasio-Cortez, then perhaps there’s a kernel of truth within the object of contention. Since the success of this unprecedented and decentralized effort, I guarantee we’ll see more grassroots efforts to turn the stock market on its head. We shouldn’t let Wall Street feed off the American economy like a parasite, festering in its own greed and hubris.
We’re riding this thing to the moon, whether we want to or not.
Sam Fogel can be reached at email@example.com.
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