The House of Cards is Wobbling Thanks to Reddit
- Jan 28, 2021
- 6 min read
So, we finally made it out of the Trump Presidency. Somehow, COVID19 is still rampaging, and we’re hanging around 4k daily deaths, and as I predicted earlier, are well over our total casualties for all of WW2. I thought this was all going to disappear right after the election because it was some drummed up media hoax? Oh well, guess they forgot to turn it off. Maybe next week.
But I’m not not here to talk about the biggest pandemic of the century. Nah, we got bigger fish to fry today; I’m talking about Gamestop. For those of you not familiar with the store, it’s been dying slowly over the past decade or so with more and more games going digital. Basically Blockbuster but for games. Enter Wall Street, who can see the writing on the wall with stores closing all over the country and Gamestop particularly feeling the squeeze of COVID forcing most people to online only transactions. Many hedge funds have decided to short the stock of Gamestop, predicting it will fall further. If you don’t know what shorting is, it’s basically betting that the stock will fall and then you make a profit. Remember those people who made money when the housing market collapsed and millions of people lost their jobs and homes? Yea, they did it by shorting the market.
As I’ve said before, all of this is basically just gambling with slightly better inside knowledge than if you went to a casino. Wall street has become just it’s own gross entity where rich people circle jerk all of their money around betting which one of them will blink first and sell. Through decades of Republican deregulation it has completely uncoupled itself from the actual market and that fact that it is still being used as some kind of metric for the health of our economy and our country in general is insanity. It should be evidence enough that stocks are still soaring throughout most of 2020 at the same time we are seeing global shutdowns and unemployment across the country due to the pandemic.
I’ve said all this before, and now this past week, average people on Reddit have really proven it. A subreddit (basically a message board) looked at how overextended the shorting of Gamestop was, and many thousands of people all brigaded together and decided to buy up the stock and hold it. This effectively raised the value of Gamestop stock, and the hedge funds that had bet on the stocks to fall lost money. A lot of money.
“GameStop, hedge funds’ most-hated stock, was targeted by an army of retail investors who marshaled forces against short sellers in online chat rooms. In the Reddit forum “wallstreetbets” with more than 2 million subscribers, rookie investors encouraged each other to pile into GameStop’s shares and call options, creating massive short squeezes in the stock.
CNBC could not confirm the amount of losses Melvin Capital took on the short position. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin’s hedge fund to shore up its finances.”
This is all truly hilarious to me. It really shows just how out of reality our markets are. None of this has anything to do with Gamestop itself. The company didn’t suddenly invest in more stores or anything. They reported a loss in total sales from 2019’s holiday season. Yet because some people decided to bet against Wall street and there were enough of them, they shorted the short easily and somehow a failing business had it stocks up over 600% just to piss off rich investors and bet against market trends. The reactions from these Wall street investors this week have been even more hilarious. They overextended and didn’t think anyone could possibly call them out for it, and when a bunch of normal middle classers do, they call it “a dangerous trend”;
“However, what is going on now – there should be legal and regulatory repercussions. This is unnatural, insane, and dangerous.”
https://www.bnnbloomberg.ca/unnatural-insane-and-dangerous-michael-burry-on-gamestop-rally-1.1554521
The irony is thick when these investors, who have made billions betting and manipulating the markets on stocks, suddenly have it done to them. I agree, it is dangerous and shows just how unstable this house of cards really is. Doesn’t mean it’s any better when just Wall street hedge funds do it. They’re just pissed because regular folk are messing up the easy money machine they built for themselves.
And now, as of Thursday, the rich have had enough of Reddit’s shenanigans. They have put the fix in, and millions of average traders woke up to find that their favorite apps have locked them out of buying certain stocks, chief among them Gamestop’s.
“The online trading platform Robinhood is moving to restrict trading in GameStop and other stocks that have soared recently due to rabid buying by smaller investors.
Among the restrictions announced by Robinhood on Thursday was that investors would only be able to sell their positions and not open new ones in some cases. Also, Robinhood will try to slow the amount of trading using borrowed money.”
“Webull, another investing service, tweeted Thursday that it had began restricting trades on shares of GameStop, AMC and headphone manufacturer Koss. Webull cited the "extreme volatility" of these particular stocks as the reason it will only allow users to sell their positions and not open any new ones.”
Many people on the platform are even reporting that stocks they set up to buy before open were suddenly cancelled on the app minutes later, costing them potential thousands of dollars as Gamestop stock continued rising. So, can Robinhood and other brokerage apps decide to not allow a stock to be bought, only sold? Well, apparently, because that’s exactly what they're doing. And the fix is in as the hedge funds who wanted the stock to fall are now getting their wish. If millions of people are suddenly unable to buy, only sell, that kind of leaves only one direction for a stock to go. This is clearly market manipulation, like defined to a tee. And lawmakers are agreeing:
“On Thursday, Alexandria Ocasio-Cortez called Robinhood’s decision “unacceptable.”
“We now need to know more about Robinhood’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit,” she said. “As a member of the Financial Services Cmte, I’d support a hearing if necessary.”
In a tweet, Senator Ted Cruz said he agreed with Ocasio-Cortez’s statement.”
Yep, 2021 just started and we have AOC and Ted Cruz agreeing on something. Weird. And Robinhood and the other apps are probably going to pay for this, as it’s pretty cut and dried stock manipulation, and, you know, illegal. Class action lawsuits have already been filed as of today. So, why do it? Because Robinhood and other apps doing this are at the end of the day, beholden to those rich investors that are currently being fucked over:
“In May 2020, it was announced that Robinhood had raised $280 million in venture funding at a pre-money valuation of $8.3 billion led by Sequoia Capital, and 3 months later, the company announced a $200 million Series G funding round from a new investor, D1 Capital Partners, on August 17”
These big companies have weighed the costs and decided it’s going to cost them less to let these apps out to dry than it is for them to lose any more money shorting these stocks. By the time the dust settles it’ll be months from now and Gamestop will have tanked and they will have made their money back. And these type of decisions are easily made after again, countless years of deregulation cutting teeth to regulatory agencies like the FTC and Congressional Committees and big businesses seeing zero consequences for their actions. When’s the last time you’ve seen a white collar criminal in a billion dollar firm serve time over a company’s fuck up? Real time? It doesn’t happen, and it won’t happen here either.
These apps will crash from the fallout and Robinhood and others MAY end up dealing with a class action lawsuit, but the hedge fund owners and the big banks that represent them will be just fine investing in the next big app to collect data on. This is the true end game of our free market capitalism. Regulatory capture and corruption at the center of our dark heart of greed we call the Stock Market. This month has really just shown us how at the end of the day, the laws only apply for the poor, not the rich.
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