RobinHood or RobberBarron?
If you have watched the news in the past 48 hours, there is a good chance that you saw something about Reddit users manipulating the stock market. For what has made for a tantalizing tale, a group comprising millions of digital activists dedicated to a singular mission has taken over Wall Street. Their goal? To stick it to the very people who have manipulated the market since its conception.
Although I do have a degree in Finance, I won’t pretend to understand everything that has happened in the months leading up to this. However, I do know enough to recognize retaliation and vengeance when I see it, and, this week, I saw a lot of it. A group of savvy internet conspirators discovered that certain hedge funds were making bets on stocks that they couldn’t afford to lose. So, just like every other revolutionary microcosm of the past few years, these brave traders called them out not only with words, but with tens of millions in collective capital. It must have come across as amusing to these Wall Street titans at first, but that facade fell fast, and hard. By Monday of this week, multiple hedge funds were hemorrhaging, receiving cash injections from bigger funds to stay afloat. Although this extra cash may have kept them afloat, the stock that these fund managers floated did not. Then, the turn of events became reminiscent of one that we witnessed in 2007–2008 — the blame, and repercussions, came down upon the everyday citizens, not the funds responsible for the true manipulation.
Throughout this week, talking heads, flabbergasted financiers, and outraged old-timers flooded the media, decrying the absolute swindle that was unfolding before their eyes. Although they created the illusion that their concerns rested with the consequences for “retail,” or amateur, investors of these massive spikes in capital markets, their true ire was aimed at the fact that, for once, they had been beaten at their own game. A coalition of rookie investors had found the gap in their armor, and were hell-bent on making them pay for it. In many cases, they have paid — at one point during this week, a hedge fund called Melvin Capital had lost $6 billion betting the wrong way on GameStop, a stock that remains a relic of the past. However, big Wall Street players don’t like to lose.
Resorting to even more trickery, no matter how blatant, these hedge fund managers and Wall Street whales colluded with multiple trading platforms, the likes of TD Ameritrade, Schwab, and, of course, Robinhood, to stop the purchase of these securities, making it nearly impossible for amateur investors to continue the rally. When panic broke loose, even the eyes of Washington insiders were glued to the saga unfolding, with some of the most-prominent voices declaring that the SEC would become involved. From the sidelines, billionaires, like Elon Musk, Mark Cuban, and Chamath Palihapitiya, cheered on the little guys in the 21st-century version of David and Goliath. For anyone with even a remote interest in personal finance or investing, it was a cataclysmic victory, a shred of hope that, for once, the people could fight back against the 1%.
The true epicenter of the battle remains to be seen. Tomorrow, at market close, the short positions opened by these hedge funds will expire, meaning that the funds will be forced to buy these shares to stop the bleeding. When that happens, this buying frenzy will drive the stock prices to ever-teetering heights. Once the market has broken through this barrier, there is no telling what could happen. To be clear, GameStop, the focal point of this entire offensive against Wall Street, is not worth its current value. Not even close. In fact, the company was preparing for a potential bankruptcy less than a year ago.
For what has made for a tantalizing tale, a group comprising millions of digital activists dedicated to a singular mission has taken over Wall Street.
Now that we have a better grasp of the basics of what is transpiring, we can talk more about the true meaning of this madness. For once, it seems that the average, American citizen has a seat at the table of the feeding frenzy that is the financial markets. I have watched as people reaped not thousands, not hundreds of thousands, but millions in profits within a few days. It has been deemed an “opportunity of a lifetime,” one with the potential to lift people out of dire straits. Some investors have already come out to say that they used the proceeds from these trades to pay off student loans, medical bills, and finance houses. THAT is the true genius of what is happening right now.
As social-media becomes ubiquitous, the ability to connect with virtually anyone from virtually anywhere has manifested into a teeming cohort of change-hungry people with grandiose ambitions. Well, for the individual, maybe these ambitions could be considered “grandiose.” However, with support from millions of like-minded individuals, those ambitions are not only attainable, but essential to the future of our nation and planet. It was through these channels that people organized themselves, their resources, and their willpower to fight for racial equality. It was with the power of this enthusiasm and bloodthirstiness for change that internet-surfers-turned-spies tracked down domestic terrorists responsible for the desecration of our democracy on the steps of the Capitol building. It was with this fearlessness and brazen disrespect for the rules set by the “Powers that Be” that investors from all corners of our round globe united to fight the 1%, who have so rapaciously raided the bank accounts of their constituents. The everlasting rule has become clear — you can’t hide from the internet.
The game has forever been changed. Not just the financial game, but the Game of Life in which we all partake. It held true in the past that, with enough money and enough influence, you could silence your foes, relegate them to the shadows with hardly a whisper. That worked well for a long time. Yet, they have failed to consider that, although they wield disproportionate power, the power of the People will always prevail, just as Orwell stated not so long ago.
