Transformative initiatives like the GameStop rally aim to claw back some of the power and wealth from the very top.
There are few times the average, everyday person gets the chance to smile at the irony of fat cat stock traders complaining that something is “unfair”. What the GameStop stock market saga shows, however, is that Wall Street hedge funds worth billions of dollars – who routinely manipulate the markets with their speculative gambles and have the power to drive a company’s stock into the ground – are also vulnerable to the same market volatility they themselves create to turn a profit.
On this occasion, the fat cats are crying foul because they are the ones on the losing end for a change, and the fact that their embarrassing losses came from a Reddit thread must sting all the more sharply.
‘Democratisation’ is only a slogan on Wall Street
The stock market massacre occurred after Redditors on subreddit r/WallStreetBets discovered the short positions of wealthy hedge fund Melvin Capital that had bet that the value of GameStop stocks would go down. Melvin began short-selling GameStop stock hoping to turn yet another tidy profit as the company became more and more worthless.
Instead, amateur retail traders using easy to access stock market trading apps and directed by social media posts piled their collective investment capital into GameStop’s shares, driving the prices up to astronomical highs and causing Melvin and other investment firms losses of billions of dollars.
The most recent figures show that Melvin lost 53 percent of its value even after institutional investors and business magnates such as Steven Cohen bailed out the company to the tune of $2.75 billion.
While the Wall Street bloodbath affected only a few firms, the reaction from the institutional hands in the market was ridiculous. Robinhood, the app used by many of the Reddit investors, suddenly stopped allowing further GameStop stock to be bought. Robinhood claimed its mission was to “democratize finance” yet did the bidding of the fat cats who were shedding dollars as fast as they were sweating over their losses by throttling free and fair trade.
This led to an outcry from not only retail investors who had hoped for a small piece of the action by using apps such as Robinhood, but the move was also denounced by lawmakers and new tech start-ups.
Democrat Congresswoman Alexandria Ocasio-Cortez vowed to look into Robinhood’s restrictions on its retail customers, and added that the so-called “meme stock” saga had allowed everyday people to find and exploit vulnerabilities in a financial and political system that had “traditionally been cordoned off” to allow the wealthy and powerful elites exclusive control. They were now being challenged and beaten at their own game by the common man and woman.
Dan Edlebeck, cofounder of Exidio that provides a decentralised virtual private network service (dVPN), told me on Monday that new tech companies promising to “democratise” services often “talked a good talk, but almost always fail to walk the walk” in the face of large institutional pressure.
“When we lose, it is deemed as an acceptable loss and a simple market reality. When the fat cats lose, they turn off the game and unplug the TV,” Edlebeck said. “How does that ‘democratise’ anything for the average consumer?”
Speculators are gamblers
That is precisely what is happening here. Wall Street has decided that it simply no longer likes the rules that it imposed on everyone else but made enormous wealth from, hand over fist, for decades.
By marketing themselves as a platform that can be accessed by any small investor looking to make some money on the stock markets, Robinhood should have continued to allow legitimate purchases of stock and should have sided with their customers. After all, the Robin Hood of legend took from the rich and gave to the poor.
Instead, and while no one is asking them to rob the rich but to simply give the everyday person a chance to get rich themselves, Robinhood is kowtowing to its billionaire Wall Street backers, including JP Morgan, Barclays, Goldman Sachs, and Morgan Stanley. In effect, it is taking the freedom of the common man and woman to trade as they see fit while shoring up the positions of the mega rich.
Why is it perfectly acceptable for institutional investors and bankers to speculate and gamble on a stock failing yet retail investors need to be stopped in their tracks when they buy and support that stock?
After all, it was over-extended bankers who created the economic bubble that finally burst in 2008 causing one of the largest financial crashes in history that the world has yet to recover from. Those bankers were bailed out with taxpayer money and by public cuts to services.
Now that the public has a greater chance to trade stocks and shares and have made an autonomous decision to go against and punish the flagrant gambling addiction of the biggest Wall Street investors, they are deemed to be an unacceptable threat who must be curtailed.
The reality is that the true threat are the same massive hedge funds, corporations, and banks who toy with the global economy time and again and either get rich off their unscrupulous trading tactics or are protected by a capitalist system that rewards greed and punishes taxpayers for the failures of billionaires.
All of this will likely blow over soon and the big market players will adapt and try to formulate new ways to keep small traders out of their elite club. But the thought of billionaires chewing their fingers to the bone because of an army of Reddit users will continue to delight an entire generation who have been repeatedly thrown under the bus by the mega rich and their establishment supporters. It will hopefully inspire more radical and transformative initiatives that aim to finally claw back some of the power and wealth from the very top.
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