One of the things I try to do with this space is explain the often byzantine world of politics, government, and media; the differences as well as the similarities; and how all three blends together to make for life in these United States. The way I explain it to other people, I try to make all this clear to my father’s hunting buddies. It’s not that they’re lacking intelligence, it’s that the average person often has a naïve and distorted view of the three.
The last six or so years has convinced me this is so, and it definitely spreads from one extreme of the political spectrum to the other. It should be understood, though, that I am an expert in absolutely nothing. Of the three, I probably know more about the media and that’s due to a twenty-fiver-year-old journalism degree from the University of Florida. The other two are thanks to a lifelong interest in politics stemming from a need to understand all the jokes in Bloom County.
So with that in mind, I try to avoid topics I don’t feel comfortable with because, to be blunt, I don’t understand them. Some things require more explanation than my poor attempts at taking notes for history’s first draft can handle. That Mark Twain quote about good times to keep one’s mouth shut applies here.
Now I said all that to say all this. I’m going to break this rule and try to explain the day’s events for the layman about something I’ve never been able to wrap my head around. And why am I running the risk of sounding like a damn fool? Because it’s so damn funny, that’s why. I am, of course, referring to the pantsing the stock market world has gotten over the last few days from a bunch of wisenheimers on Reddit. I won’t go into hard numbers, just a general overall, and yes, I’ve put it off long enough so let’s get to it.
First, for those who don’t understand, let’s explain GameStop. Put simply, it’s a brick-and-mortar dinosaur in a digital world. Used to be it was the go-to place to buy video games, computer and console, as well as the hardware required and some of the fun, silly gee-gaws that make up the fandom. Over the last decade or so and spurred on by the success of digital storefronts like Steam, it’s become increasingly irrelevant in the modern gamer world. Even consoles like Sony’s PlayStation or Nintendo’s Switch offer as much on the downloaded front than can be bought in stores. Furthermore, most hardware manufacturers peddle their wares online and there’s always Amazon or Best Buy.
The company has been going down for the third count the past couple of years and if you hear about it in the news at all, it’s because it’s doing something new to try and not bow to the inevitable. Now we bring investing into the mix. GameStop is a publically traded company and like many businesses in sorry shape, it’s a prime subject for short squeeze stocks. Now, what that means is, essentially, an investor buys when the stock price is high (rather than the “buy low, sell high” axiom) and makes money on those buys due to different mechanical aspects of the stock market. When the price of a stock drops, they make money. Somehow. As I said, I don’t understand all this fully but this practice is popular with hedge funds in particular and is seen as one of those “yeah, but it’s legal so what are you going to do about it?” deals.
Now bring in the internet or, more specifically, the bunch of rascals who frequent Reddit. Long story short, Reddit represents the double-edged sword of the internet like almost nothing else. It can be a place of information, entertainment, and funny pet pictures but it also helped Donald Trump get elected and spread the QAnon nonsense like wildfire. Maybe more so than any other social media site, it is wide open and almost impossible to control.
Generally, these aren’t guys who do much investing and vice versa. These people make memes. But there is some investing going on, particularly in a community called r/wallstreetbets. Earlier this month, GameStop stocks – known as $GME on stock tickers – began to rise so the folks at WSB jumped on board. Many of them used the Robinhood app, which allows investors to do their thing without having to go through traders or third-party companies. The more the Redditors piled in, the more straight investors abandoned ship, the more the $GME stock rose. The media caught wind as more straight investors lost money and the internet goofballs made more. This is called a “frenzy.”
It all came to a head Friday, when the clowns that generally post Fallout screenshots with amusing captions drove GameStop’s stock price from $43 a share to $380, making it one of the market’s most traded stocks. Okay, so what, you may ask. Isn’t that how the stock market works?
Well… no, not really. The biggest impact of all this tomfoolery is the strain it’s put on the internet infrastructure on brokerages like TD Ameritrade and that’s starting to filter into the meat-space world of Wall Street. Like so much else, especially in the last year, the built-in inequality of the stock market is being laid bare for all to see and understand. Usually, this sort of thing is in the domain of hedge funds and private equity firms, who use stocks of companies like GameStop as something of a casino regardless of how it impacts employees or even consumers, usually to their detriment. That’s what killed Toys ‘R Us.
So there’s a “David and Goliath” aspect this with the Reddit folks seeing what they’re doing to Wall Street. Other companies that are struggling have been brought into the game, mainly because the younger Reddit crowd has fond memories of them. AMC Movies and Bed, Bath, & Beyond, both seriously up against the wall, have benefitted as well as the pretty much dead Blockbuster. I think there’s only one active Blockbuster in the country.
Keep in mind, all this is legal. It’s messing with the Wall Street world and ripping the mask off in some areas, but none of it is illegal or, for that matter, immoral according to standard practices. This is what Wall Street does, they just don’t have to deal with smart ass kids with nothing to do because of COVID. Furthermore, this comes at a time when a lot of folks are caught out bad because of the aforementioned epidemic and have used their good-gotten gains to pay for medical emergencies and shave off some student debt.
Like I said, this is giving straight traders a serious case of the red ass but the general consensus to their concerns is “cry more.” It’s drawn the attention of the Biden Administration and, in particular, long-time Wall Street foe Elizabeth Warren in the Senate. There is a worry this might cause a stock bubble, which will eventually pop and that’s never a good thing. However, due to the participants, a lot of experts feel this is a sign the market has become too wrapped up in get-rich-quick enthusiasm and speculation. Of all people, Harpo Marx discusses something similar in his autobiography that lead to the Crash of 1929.
Again, though, the main thing we’re all learning is how shaky the stock market really, truly is and how vulnerable the thing we base our economic health on is to a bunch of goofballs who barely have any idea what they’re doing. I bring up Harpo’s insights because we learned absolutely nothing from the 1929 crash and we really haven’t learned much from the handful of crashes that have happened since. Hopefully, this will bring more people into the game and more of us will understand just how much of our lives are tied to the stock market, how much they get away with in the name of filthy lucre, and just what could be done to maybe make them cut that shit out and quit screwing us all over so they can buy a new Rolex.
In the meantime, though, that’s just funny as hell, ain’t it?
Dear Y'all 