Eat The Rich
“The reason the market is doing what it’s doing is people are sitting at home getting their checks from the government, okay, and this fair share is a bullshit concept,” Cooperman shouted on the business network earlier today. “It’s just a way of attacking wealthy people. It’s inappropriate and we all gotta work together and pull together.”
Leon Cooperman is a billionaire Hedge Funder BTW.
The stock market —from all I can tell— is legalized gambling, and so like in the movie The Sting, when an upstart successfully grifts a major grifter, the major grifter gets mad. Anyway, the whole thing is about the little guys out-played the big guys who were short selling a dying brand or two.
Vanity Fair (paywall):
As you’ve probably heard by now, shares of GameStop, the video game retailer, have surged approximately a gazillion percent in the past six months, spiking sharply in the last several days. You might wonder why that happened, given that most people don’t go to the store to buy video games anymore, particularly during a pandemic, and the short answer is that a gaggle of small-time traders, many of them posters on the Reddit forum r/WallStreetBets, decided it would be both funny and a bit of cosmic retribution for them to drive up the price of GameStop’s shares, screwing over the hedge fund managers who’d bet the company’s stock was going to drop precipitously.
Obviously, that didn’t end up happening! Whereas in late 2020, a share of GameStop was worth just $18.84, at one point on Thursday, it was going for more than $500. (Later, its trading was restricted by apps like Robinhood and Interactive Brokers, and shares fell to around $240.) That turned out to be extremely bad for the firms who’d shorted the company and literally ended up losing billions of dollars. As Bloomberg put it, “it’s a humbling turnaround for the hedge fund titans, who in 2020 staged a comeback by pouncing on the wild markets caused by the COVID-19 pandemic. But that crisis helped push thousands if not millions of retail traders into the U.S. stock market, creating a new force that for now the professionals seem powerless to combat.”
The Pod Save Whatevs boys newsletter last night:
The stonk journey continues: Popular online brokerages Robinhood and Ameritrade have blocked purchases of GameStop and AMC shares(plus a handful of other companies), after Reddit investors banded together to drive up share prices and destroy some hedge funds. Robinhood, whose mission is “democratize finance for all,” informed users that they could close out their positions in the restricted companies, but not buy new shares. Hedge funds, meanwhile, were still able to trade freely. That move drew swift criticism from people who couldn’t help noticing that it sure looked like market manipulation to protect the Wall Street establishment. Rep. Alexandra Ocasio-Cortez (D-NY) called for an investigation, Sen. Ted Cruz (R-TX) agreed and got reminded no one wants to hear what he thinks, and Robinhood users filed a class-action lawsuit. Robinhood announced it would allow “limited buys” on Friday, but shares of GameStop and AMC have already plunged more than 40 percent. AOC will be discussing all of this on Twitch tonight, for further Stonk Week analysis.
Again, I’m not a genius about this stuff, but gambling is gambling and sometimes you lose. What I think this event shows us is how the über-wealthy have gamed the system all along (and expected to be able to continue to) and how they got outplayed. If this thing does come to be a criminal hearing, I’m not sure that the Hedge-funders will want that as it will expose their game.
UPDATE 1: Sen. Professor Warren –
“With stocks soaring while millions are out of work and struggling to pay bills, it’s not news that the stock market doesn’t reflect our actual economy. For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price. It’s long past time for the SEC and other financial regulators to wake up and do their jobs – and with a new administration and Democrats running Congress, I intend to make sure they do.”