wired | At its heart, the GameStop story is about small-time traders—many, according to press accounts, young and inexperienced—going up against established players and winning, to the tune of tens of thousands of dollars a person (so far, at least). The WallStreetBets subreddit describes itself as “a gathering place of millions of unique individuals who are tired of being run over by the big guys and are each fighting back in their own way.” Its investors, who use the page to discuss strategy and timing, were exploiting the rigidity in “short” positions of hedge funds, who bet that GameStop’s stock would decline in value. Such “short” funds represent a commitment to provide a share of GameStop at a specific time, no matter the price, magnifying the profit potential if the redditors could push the stock in the other direction and send the hedge funds scrambling to meet their obligations.
This week, the GameStop story became a national talking point, particularly on Twitter, where users of all stripes and political persuasions cheered on the financial chaos. The billionaire entrepreneurs Elon Musk and Mark Cuban defended WallStreetBets, as did the left-wing representative Alexandria Ocasio-Cortez, each pleased to see hedge funds undone by their own greedy ways. An arcane finance story became a class-warfare parable for the general public, with regular folks acting just as clinically as the hedge fund executives they were vanquishing—that is, being upfront about treating investments as mere manipulations, as opposed to some complex matter meant to assess the genuine value of a company. As Ocasio-Cortez wrote on Twitter: “Gotta admit it’s really something to see Wall Streeters with a long history of treating our economy as a casino complain about a message board of posters also treating the market as a casino.”
On Thursday, Robinhood blocked the kind of speculative trades of GameStop stock that were used by the redditors to drive up its share price. Though the brokerage reportedly did this to protect its own finances, the move nonetheless seemed destined to backfire in ways similar to Egypt’s drastic internet shutdown, which ultimately helped the protests spread. Suddenly, the GameStop controversy changed from a revenge fantasy against hedge funds to a matter of economic fairness: Are the same tools available to all investors, no matter their wealth? (The comparison is obviously imperfect—unless you really see the Reddit day traders as freedom fighters. More to the point, by blocking speculative trades of GameStop, Robinhood could be seen as protecting new investors who seem destined to lose money when GameStop’s share price comes back to earth.)
Next up in this cycle, one imagines, is the recognition that this revolution, whether tolerated or quashed, won’t change much at all. And like the authoritarians who found their way back to power, the hedge fund managers are likely to rein in the trading apps and their mischievous fans, ensuring their hold on the markets.
That’s the thing about the internet—time and again, it has proven better for the top dogs. At the very least, it certainly won’t threaten them. If we are foolish enough, and heartless enough, to allow a financial system that so thoroughly separates wealth creation from work and genuine improvement to society, well then the internet will make this skewed system even more lucrative for those who play. The richest will reap the wealth and the poorest, least experienced traders will end up holding the bag. An empty bag, at that.
0 comments:
Post a Comment