The story of GameStop’s (GME) stock price surge in the U.S. stock market has been a global hot topic for the last two weeks. Wall Street-related topics are usually about money, and this is no exception. The exception is the political flavor behind the story that almost every observer senses. According to New York Times columnist Kevin Roose. According to New York Times columnist Kevin Roose, “Retailers are out, and Wall Street is not what it used to be.”
Today we also talk to you about this event, but of course we also focus more on the very political smell of money, the direction and trends that are changing in this society, and some insights for the future.
First, a brief overview of what’s been happening around Gamestop over the past few weeks. Gamestop is a brick-and-mortar game sales business in the US that sells hardware and software for consoles. I don’t play a lot of video games or computer games, but I know that GameStop has a lot of stores in the U.S. and quite a few Shopping malls have storefronts for this company.
Late last year, Melvin Capital Management, a large Wall Street hedge fund, held a large short position in Game Stop. Sources close to the situation revealed that the firm had bet more than $55 million on GameStop’s falling stock price. GameStop’s stock was about $17 at the Time.
Subsequently, a large number of retail investors entered the market to buy GameStop’s shares, causing the stock price to rise sharply. By the end of this Friday, which is about a month, GameStop shares were trading at $328. That means that Melvin Capital, which sold GameStop short, would have made a huge loss.
Let’s roughly introduce the concept of short selling a stock. Usually we buy a stock because we are optimistic about a company’s performance. But if we don’t, or if we think the company’s performance will be bad in the future, we can also sell the stock short, that is, if we don’t hold the stock, we can sell it first and then buy it back when it falls. So, generally, we buy first and then sell, and short selling is selling first and then buying. In English, it is called short selling.
Short selling is a technical task because it is much riskier than buying first and then selling later. For example, if a stock has a current price of ten dollars and you buy it, the biggest risk is that the stock price will fall to zero and you will lose ten dollars. But what if you sell short, the stock price can theoretically go up infinitely, so the risk becomes infinite. Of course, in practice, this will not be the case, but the risk is certainly much greater than ten dollars, for example, the stock price rose to $100, short sellers have to buy back at $100, so that the loss of $90 per share, than the normal first buy then sell nine times more loss.
So, short selling is usually the specialty of those big capital corporations that specialize in playing the money game. Usually, because they have big capital, they usually also have all kinds of social connections, with the help of the media, with the banks to take care of, and even with the government in the secret support, so they do not lose big money very often.
For example, these large companies have many so-called famous analysts who regularly tell general investors which stocks are good and which are not, and then the so-called mainstream media will follow up on the story. So, the game can be played in this way, first buy the stock, then outlook optimistic report, the stock rises and then make a lot of money. You can also do the opposite, first sell the stock short, and then launch a pessimistic report, the stock plunged, so also make a lot of money.
This time, Melvin Capital was in big trouble. They sold GameStop short under $20 and the stock rose to a high of more than $430 last week. According to estimates from data companies, short selling GameStop companies lost a total of $5 billion in the three weeks of January; last Monday, January 18, they lost more than $900 million on that day; last Friday, January 22, they lost $1.6 billion. Among them, Melvin lost how much, no one knows the specific data, but we all know that Melvin Capital urgently transferred money to two other investment funds to turnover, a total of $ 2.75 billion borrowed.
Wall Street companies, typical capital market predators, have all the advantages, but this time not by richer and more powerful enterprises to block, but by the U.S. mainstream media said “a group of cyber mob” hit a dizzy. This so-called mob is actually a group of retail investors gathered in a social media.
In short, these retail investors organized themselves online and began buying GameStop shares en masse, causing the stock price to soar and forcing the short-selling fund to take huge losses. Some people called it “ants biting the elephant”, “united leeks have power”, and “leeks turning over to become masters”.
The anonymous members of a Reddit forum called Wall Street Bets, which first had 2 million members, recently grew to nearly 6 million with the GameStop battle. They don’t trust the experts, they don’t trust the mainstream media, they don’t trust the system, and they use very little money to start a big revolt. Wall Street was horrified at the results the revolt produced, most of the media thought it was dangerous, and the exchanges and stockbrokers, together, joined forces in hopes of wiping out these revolters. Even the government might get involved.
The media interviewed some of the young people involved in what I call the “resistance movement. A 17-year-old boy from the Midwest excitedly showed a reporter his stock account, which had made over $1,000, and asked him if he would sell it quickly to cash out, and he said no, because the rebellion itself was much more fun than the money itself.
It is interesting to note that in this revolt, the left and the right will have the same position. For example, New York’s leftist Congressman AOC and Texas’ rightist Congressman Cruz, like the young people who put in $100 and some of the big players in Silicon Valley. social Capital CEO Chamath v Palihapitiya, also joined the action.
Of course, the Wall Street establishment’s counterattack cannot be underestimated. on January 28, Robin Hood, a mobile stock trading App that specializes in attracting small investors, announced that it would stop users from buying shares of GameStop, before they had announced that they would buy up to two shares, so this time it was simply blocked completely.
Not only that, the big media were all critical of the actions of millions of retail investors. The New York Times described them as a bunch of internet pranksters, and financial writers criticized the operation for endangering other investors or the “health of the market,” including the right-leaning FOX TV, which also saw big problems with the operation. Varney said directly, although the retail investors won the game, but what will happen later? Thinking about it will be very dangerous, there will be a lot of people follow suit, the investment market will become a casino, stock prices rise and fall on the basis of not performance and corporate earnings, but the scale of capital.
In fact, he did not need to remind, many markets have long been so, and not driven by the retail investors, but the size of the capital of those “professional investors” driven.
But the most interesting, is the editor of CNN Chris Cillizza. Cillizza (Chris Cillizza) that the GameStop stock market riot, completely “Trumpism” brought about by the evil consequences. He said in his article that the core of Trumpism is that the elites think they know better than you, they think they can tell you how to live or what to believe, but in reality, we, the people, are smarter than them, the elites.
This sounds a bit like what Mao Zedong said.
Chris analyzed the market in a very “professional” way and decided that the hedge funds were right and the non-elite retail investors were wrong, and the reason they had a stock market riot was because they had been “poisoned” by Trump. So he said, the retail investors have a lot of limitations in the way, can not solve the problem, they can only use this method to express despair, anger and helplessness. Even if it briefly gives everyone a good feeling, but in the end it does not help.
He may be right, but honestly, there are only a few things in this world that can be analyzed with pure rationality, and the establishment elite are often equally irrational. I didn’t think they were rational when Twitter banned the accounts of 70,000+ people, when Google blocked the Epoch Times oil tube account, or when Amazon cancelled the Parler data service.
When Wall Street triggered the subprime mortgage crisis in 2008, the government used taxpayer money to rescue businesses, but ordinary people had to bear the bad consequences of the recession, that was not rational. Wall Street racked its brains and used big capital to invent all sorts of financial instruments that were not “rational” at all for ordinary people.
Very often, social movements are not rational, and there is little logic in analyzing them with pure reason. The American founders, who preferred war and death to being governed by the British king, were not rational. The Chinese, who preferred eight years of war and 20 million deaths to Japanese rule, were also irrational. But the history of this world is driven by these irrational people.
The CNN article is certainly right about the confrontation between the “establishment elite” and the people.
This, in any case, looks like the most recent social event in the United States. Kevin Roth of the New York Times noticed it too. Kevin Roth of the New York Times noticed it too. In his article, he said: Finally, the National Guard arrived and the regulators appeared. We’ve seen that the GameStop squad is at its limit. On Wednesday, Discord – a chat app turned into a virtual casino by Reddit day traders – shut down Wall Street Bets’ servers for violating its hate speech policy.
On Thursday, the Robin Hood mobile app, which had been claiming to be “standing with the little guy,” blocked users from buying shares of GameStop and several other stocks targeted by members of the r/WallStreetBets section.
But for them, important victories are always symbolic. They may be losing by the skin of their teeth, but they have sent the message that with enough enthusiasm and rocket ship emojis, a group of my-way-or-the-highway decadent people who have no fear of authority can turn the stock market around.
That’s ironic on Kevin’s part. But the truth is that GameStop shares fell this Thursday, but rallied sharply on Friday. Hold the line messages are everywhere on the Internet’s social media, not just Reddit. One large investor who had invested more than $100,000 left a message saying, “I can leave at any time, but I assure everyone that I will stick with it as long as they do.
The goal of the small people is not “money” such rational things, but an emotion, an expression. I hope that the social elite can see some basic truths from these emotions: Wall Street cannot completely determine stock prices, experts cannot force people to think, social media cannot seal everyone’s mouths, and elites cannot live their lives instead of others.
Idiots like me have the right to choose the Life of an idiot. This right, which is the most fundamental principle on which the United States was founded, is more important than democracy and the rule of law, and its name is: freedom.
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