Last week saw a rare convergence of video games and the stock market in popular news coverage. Well, not video games directly, but rather, one of the most popular video game stores: GameStop. Unless you've been living under a rock for the past week or two, you've probably been hearing about how a group of Reddit posters got hundreds of thousands (or millions) of fellow Reddit readers to buy and hold stock in GameStop over the past few months, raising its stock price from $5 per share to a max of almost $500 per share. This was much to the dismay of many Wall Street investors and hedge funds, who had been betting that Gamestop would lose money. Those hedge funds have been losing those bets due to the actions of these Redditors, and some very rich people are suddenly losing a little bit of money.
I'm not going to talk too much about this because Jim Sterling already released a fantastic Jimquisition episode about this very topic yesterday. It's seriously one of their best work ever, despite not being directly about video games, because it strikes right at the fundamental core of why the video game industry is so corrupt and exploitative: because that's just how American corporate capitalism is: corrupt and exploitative. So check out that Jimquisition if you want to hear more ranting about how the stock market is really just a casino for rich people who like to bet on everyone else's lives, how it's unfairly rigged against small investors, and how it creates perverse incentives for businesses and investors to hurt the workforce. I am in absolute agreement with almost everything that Sterling says in this video.
Monday's Jimquisition about the GameStop stock story is one of Jim's best works.
Nevertheless, I do want to talk a little about this topic because the excesses and exploitative nature of American corporate culture is a particularly frustrating issue that I am very passionate about criticizing. Full disclosure: I (along with some of my colleagues and friends) did buy stock in GameStop (along with AMC, Blackberry, and Nokia) as a form of protest against the corrupt and rigged Wall Street system, and in the hopes of making a quick buck. Unfortunately, I bought mine at one of the peak prices and, as of the time of this writing, I've personally lost several hundred dollars on the purchase, since GameStop's price has been dropping. But I haven't sold yet. I'm in it for the long run.
The hedge fund managers who were suddenly at risk of losing millions of dollars (or more) because they bet on GameStop to fail were suddenly calling for government or regulatory intervention. They wanted stock purchases to be frozen, or for regulatory agencies to bail them out because they lost their gamble. The stock trading app, Robinhood, even conceded to these demands last Thursday or Friday, halting the purchase of any new shares of GameStop and even closing out the accounts of some users who had purchased the stock. They did this in the name of "protecting users from a volatile market", but really, it was almost certainly to protect the hedge funds who were losing money.
I'd like to remind my readers that these hedge fund managers who were crying foul are the same people who complain about government regulation, taxes, minimum wage laws, and so forth on the grounds that the market should be "free". They, after all, make shit-loads of money trading volatile stocks and using various investment strategies to manipulate the prices of certain stocks for their own personal and professional gain. But the moment that the average consumer starts to use these same systems and rules, these promoters of "free, un-regulated markets" start crying foul. It's not "market manipulation" when they gamble with other people's money; but they want to say it's illegal "market manipulation" when we, the average plebs start gambling and winning their money. Elites want "free markets" when they are exploiting those markets for personal financial gain, but when the average pleb starts exploiting it, suddenly, these same corporatists want regulation and welfare from the state to protect them from their own bad bets. Please remember that next time you hear someone criticize progressives for "just giving handouts to the poor". At least the poor need the money or benefits. These hedge fund managers can get by just fine without their precious GameStop short sells. But they don't care. They're greedy sons-of-bitches and want to squeeze the general public for every last penny they can get out of us, even if it means thousands of people will be laid off of their jobs and fall into poverty.
Worse yet, these same elites love to criticize poor and middle-class Americans for not investing our money. But when a bunch of us decide to try, they cry that we're manipulating their markets. Because that's what they think it is: "their market". They only tell us to invest (and then blame us for not following their advice) because they know that the majority of Americans don't have enough disposable income to be able to afford to invest any meaningful amount. Maybe we can put away a few hundred or thousand bucks into the stock market, but even the collective tens of millions of us are not putting the quantities of money into the market that these elites are.
Is WallStreetBets a criminal conspiracy?
These elitist hedge fund managers are even suggesting that the organizers of the GameStop buy should be criminally prosecuted under charges of conspiring to commit market manipulation. Market manipulation is, technically, illegal. Yet, hedge funds do it all the time. In fact, a now-deleted video of an interview with Jim Cramer started making the rounds this past weekend, in which he confessed to using his former job at a hedge fund to manipulate markets to enrich himself and his company. Jim Cramer, by the way, is a famous market analyst who hosts his own show called Mad Money on CNBC, and is a valid authority on the topic.
But is this "conspiracy" to buy and hold GameStop stock actually illegal? Or more importantly, should it be illegal?
Well, I'm not a lawyer or an economist, so I can't answer that question. Take my opinions on the matter with a large grain of salt. Maybe a bucket-full of salt. But my two cents as a laymen is: what is the functional difference between a single person or business buying 1 million shares of a stock; versus one million people each buying 1 share? My understanding of the stock market is that share price is largely determined by two factors: supply and demand, and recent sale prices. The more people buy a stock, the less of that company's shares are available on the market, and the more valuable each share becomes. There's other factors too, but for simplicity's sake, I don't think there is very much difference between the two cases of a single large buy versus a large number of individual buys.
A single rich person or hedge fund buying a million shares of a particular stock would increase the value of that stock (even if by pennies). That person or hedge fund could then sell that stock at a higher value than it was originally purchased, netting the individual or company a profit. When trading millions or billions of shares, even differences in value of pennies can quickly add up to large sums of money. The gamble is that if you're buying, and everyone else is selling, the value will go down, and you won't make profit.
Is there a functional difference between 1 person or business buying a million shares,
versus a million people each buying 1 share?
The point here is that a single wealthy investor seems to have as much (or more) influence on the market compared to large numbers of small investors. They can move their money around in organized and deliberate ways that can make certain stocks look more or less appealing, which encourages others to buy or sell, further manipulating the value of said stock. And according to Jim Cramer, this is exactly what hedge funds do. With modern computerized trading, hedge funds can do this sort of thing dozens or hundreds of times every minute with whatever stocks they wish, changing or setting the values of those stocks almost on a whim, and pocketing the difference.
If you ask me, this system of rapid, computerized trading is far more dangerous than millions of people "conspiring" to buy or sell a single stock. A single malicious elite actor has much more impact on the market than thousands or millions of common investors. And even if all the actors are acting in good faith (which they aren't), rapid computerized day-trading is open to error as a result of computer bugs or programming flaws. I'm a professional software engineer, and I'm telling you that no large-scale computer program is fool-proof. They all have bugs and glitches. These sorts of mistakes in the systems can, and have, lead to disastrous consequences for both individual companies and also the market at large. So why is it allowed?
Back to the charges of "conspiracy" against WallStreetBets organizers. Yes, I can see a case for this being "conspiracy" to manipulate the market, especially if the stated goal on the Reddit posts is to "drive up the value in order to destabilize the market and cost hedge funds billions.", and not "I think GameStop is a swell company that I want to invest in, and I think others should invest in it too". But once again, I ask, how is this conspiracy between millions of Redditors any different than the conspiracy of one that hedge funds and elite investors engage in every single day?!
For one thing, the Reddit posts about buying GameStop are on a publicly-viewable forum. This isn't secret, insider trading, like senators engaged in after the start of the pandemic. These posts were publicly available for months, and GameStop's price has been slowly ticking up during that entire time. These people aren't suddenly flooding the market with buys, then quickly selling at a profit in a matter of minutes the way that hedge funds do, or in a traditional "pump and dump" scheme. They bought and held the stock for months, sharing that increased value with everyone else who owned the stock, whether those others were aware of the WallStreeBets "conspiracy" or not.
Perhaps most importantly, as far as I know, the WallStreetBets Redditors never lied about the value of the company. They never claimed that GameStop was about to get some huge windfall, or that its sales would dramatically increase for some non-obvious reason. They simply pointed out that if a bunch of people all agree to buy and hold the stock, its value will rise.
The GameStop "conspiracy" was all done on public forums,
unlike senators who sold stock after closed-door meetings at the start of the pandemic.
So no, I, personally, do not see this as illegal market manipulation. I see it as an organized protest, along the same lines as Occupy Wall Street, against the corruption and evil taking place in the stock market every day. A protest against the systems that allow the super wealthy to become even more rich at the expense of all of the rest of us. It's an example of the common people banding together to show that, when united in a cause, we can make meaningful change to social, legal, and economic systems that are usually stacked against us. In fact, this is probably much more meaningful of a protest than Occupy Wall Street ever could have been, because this protest actually does get Wall Street's attention because it actually is costing those elites and hedge funds money. Also, the lack of a physical protest means that more people from around the country (or world) can participate. I couldn't personally fly to New York to participate in Occupy Wall Street, but I could sit at home in my underwear and buy a couple shares of an over-priced stock in the name of "sticking it to the man".
Ugh, but why GameStop?!
My only real objection is that these WallStreetBets "conspirators" chose GameStop of all companies to save. Why GameStop? GameStop itself has a history of abusive and exploitative practices that target both its employees and its customers.
- They run a business model based on buying back used games at a mere pittance, then re-selling those traded-in games for almost full retail price (the source of almost half the company's revenue) and lying to the customer about it.
- They encourage their associates to aggressively up-sell pre-orders for big upcoming releases, even in a market in which supply shortages of AAA games is virtually unheard of, and pre-order culture has become increasingly toxic to the consumer and damaging to the developers.
- They take advantage of young game-playing teenagers who are excited to work in a games-related job, and therefore accept low wages, inconsistent hours, and no benefits.
- They refused to supply their stores and employees with critical protective equipment such as hand sanitizer in the early weeks of the pandemic, despite government requirements to do so.
- And they tried to declare themselves "essential businesses" in order to remain open during the pandemic lockdowns so they could hold super-spreader midnight release events for games like Animal Crossings: New Horizons and Doom: Eternal, which put their employees and customers in danger of contracting a deadly disease. Yes, they did concede and shut down stores without holding those midnight release events, but only after a surge of pressure from employees, and state and local governments.
- And let us not forget that GameStop bought ThinkGeek and then proceeded to run it into the ground, by flooding it with the same licensed pop culture nerd toys that you can buy at any Hot Topic, instead of the novel and niche technology products and apparel that it was known for, which forced the closure of the once-beloved online storefront.
Why, of all companies, did these Redditors chose GameStop?! It is no saint, and it isn't worth saving. GameStop deserves to die. But, ironically, I guess that is exactly the reason GameStop was chosen. The protest only works if a failing company is chosen, because failing companies are the ones that hedge funds are betting against.
Why couldn't they have chosen a company that is actually doing some good in the world? Like a struggling solar panel manufacturer? Or a fledgling electric car company that, with extra investment, could compete with the dominance of Tesla? Or a company that re-homes pets that were abandoned due to the pandemic? (does such a company exist?) Or, I don't know, maybe one of the bio-tech companies that might develop a vaccine that gets us out of this pandemic nightmare and saves hundreds of thousands of lives? Or even just any other brick-and-mortar chain that doesn't base its entire business model around exploiting its employees and scamming its customers?
OK, fine, good luck finding such philanthropic companies in publicly-traded markets. Those aren't the kinds of companies that tend to go public. But even so, why GameStop?! One of the other companies that has been pushed by WallStreetBets is Nokia. You remember them? They used to be a big cell phone company back in the flip-phone era. But even though they may seem defunct now, they are developing innovative new 5G technologies. GameStop stock is a game not to be taken seriously by any serious investor. But Nokia is actually a viable company that still gets large tech contracts from other businesses and from national governments around the world. Nokia isn't without its own nasty baggage, but it is actually, arguably, a viable investment. (Note: I'm not a stock advisor, and this should not be taken as stock advice.) Why couldn't Reddit have focused on that company instead?
When all is said and done, if you want to buy shares in these WallStreetBets companies, and you don't mind losing everything you do invest, then I think you should go for it. You might make a decent pay-day (and you are just as likely, if not more likely, to lose it all). But more importantly, we should send a message to Wall Street, its regulators, and the government, that the stock market should work for us. It should be a way for us, the consumers, to decide which companies and businesses we actually value and want to succeed. It should not simply be a slot machine that only billionaires get to play, and in which they gamble with our very livlihoods.
WallStreetBets' investment in AMC Theaters paid off the company's debt,
ensuring it survives 2021, regardless of what happens with the pandemic.
If nothing else, the WallStreetBets GameStop situation has shown that we have the power to influence the stock market. If you don't believe me, then consider that WallStreetBets' investment campaign in AMC movie theaters actually gave the company enough capital to pay off its debts, ensuring that the company will survive 2021, regardless of what happens with the pandemic. Even if AMC's stock value plummets due to theater business remaining low, the debt relief is permanent.
Through our voices united (and, more importantly, our wallets united), we can help keep valued businesses afloat, or we can devalue businesses that do us wrong.Together, we have more control than we thought. Unlike Occupy Wall Street, this movement actually has the Wall Street elites afraid of us.
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