GameStop: The Silent 'Class War'?

Reddit cries the game stops here and Robinhood finally lives up to its name. -Maybe-

This was/is a week that the online world got caught in a battle of epic dimensions and names suddenly took on new meaning. The week of January 25th, the GameStop stock began to surge dramatically skyward. In one day the stock doubled, then it doubled again, rising an unprecedented 800% in a matter of a week, a number that had even hardened Bitcoinists swooning in awe. Fueled by thousands, perhaps millions of Robinhooders, the stock became a defacto symbol of the new ‘class war’ between the new ‘knownothings’ – the disaffected poor, the ‘normies,’ and gamers, hoping for a once in a lifetime payday and the ‘shorts’ – the traditional investor class of stock holders, grandfathered into the market system through generation of family fortunes that the knownothings see as callous elite boomers making money speculating on the stock market while the pandemic and various crises rage and millions of people are either already or teetering on destitution. In a replay of the Hertz saga that saw the bankrupt company’s stock rise and fall within the span of a few days last year in a classic pump and dump scheme, driven by overzealous individual traders, the GameStop event may be a portent of something much bigger happening online. Piling into a ‘failing’ stock is one way that the Robinhooders and Redditors from the r/WallStreetBets subreddit can lay waste to hedge funds and prompt agencies like the SEC to start scrambling. Wednesday, January 27th was hyped on the Reddit board the previous evening as yet another day of all out warfare, by Redditors, who call each other offensive names like ‘retards’, ’autists’ and ‘gay bears’ in an outright rejection of polite society and also see themselves as ‘soldiers’ in a financial war against the elites, regulations be damned. What this event is seemingly designed to be, is a new kind of insurrection against the formal establishment and ruling hegemony of the financial apparatus, specifically targeting hedge funds like Citron and Melvin who make money shorting stocks to make their respective prices go down. Holding a short position is like betting against the stock. If enough money is in play or enough people do the same, the stock will eventually go down and the shorts make money. It’s a simple calculation that the Redditors are banking on. Their bet is that if enough individuals, with amounts of money large and small, pile into a single stock, or focus in on a small group of stocks, like Nokia, BlackBerry, and AMS, in addition to GameStop, then the stock will surely rise and anyone with a long position, betting that a stock will go up, will clean house. What Citron and Melvin do with a targeted position, in other words, massive amounts of cash capable of moving the stock price, the Redditors can do with sheer numbers of individuals.  Another major calculation in the nascent class war is the targeting of stocks that are the most shorted on any given day by the hedge funds, meaning that a major rise in stock price will become a nuclear detonation in the hedge fund’s short positions.

Anyone who has been even remotely paying attention to the political scene and sentiment in recent months will agree that popular revolts do not seem to work any longer. The summer of BLM protests were brutally suppressed by the Trump administration, using an unprecedented amount of police force, deployment of national guard and the nonlinear warfare of traditional and social media to capture and stage manage the messaging. Then there was the ‘storming’ of the Capitol building. Around the world people rose up in protest – India, Germany, France, Czech Republic – with the Netherlands witnessing the biggest street riots in 40 years in the past few days. Despite all the best efforts of the popular uprisings, the establishment remained in power and may have even been emboldened further. Look no further than the Trump administration, Macron after the Yellow Vest protests, Obama after Occupy, Modi, Merkel, and the list goes on. Each movement was met with the iron clad hand of the law or left to fizzle out. The Reddit war is this, but without the physical bodies. It uses sheer numbers, a crowdsourced motherload to push the stock market over the edge of the precipice, because all power of concentrated wealth rests within it. Without the markets there is no Boeing or Raytheon, the traditional contractors for proxy wars abroad. Without the markets there is no Amazon, Uber, Lyft, TaskRabbit, InstaCart, Snowflake, and yes, Tesla, Microsoft, and Apple, corporations essentially floating on air of fiat money and a wish that nobody notices. At the end of the day of trading the Dow was down 600 points, the worst trading day since October, and many were left scratching their heads why certain stocks were jumping through the roof.

That this may be the ‘poor person’s war’ on finance is yet to be determined, but this morning all bets were off and outlets like CNBC, FOX, Reuters and Yahoo were reporting that the shorts are retreating. The approximately 3 million members of the r/WallStreetBets are inundated with memes like this. Seeing random people make a million dollars in one day does surely produce a frenzy beyond anyone’s wildest fantasies. Whether these memes are real or fake does not seem to be much of an issue.

Not one of the ‘traditional’ outlets will go as far to say that this is indeed a class war or at least an attempt at one. They are playing up the notion that this may be a blip on the screen, a glitch in the system, that things will go back to ‘normal’ again, in a rehash of the most often touted platitude of 2020. Even Tom Sosnoff, former Wall Street trader and Tasty Trade founder,  got unusually flustered today on his YouTube show while trying to downplay the role that millions of Robinhood users and Redditors had in the shaping of the market price of GameStop and other stocks. He did however use an analogy to war, suggesting that before something similar happens again in the future, the markets will send in ‘marines instead of boy scouts,’ thus clearly coming out on the side of the SEC and the establishment.

That the Redditors are engaged in a siphoning of money away from the top, in a reversal of the upward transfer of wealth we’ve seen at the beginning of the pandemic, is something that seems to be only discussed between the Redditors and Robinhooders themselves. For the first time, it seems, that Robinhood is living up to its name, at least theoretically. They seem to be saying quite literally ‘the game stops here.’ When Elon Musk tweeted at the Redditors on Tuesday, GameStop jumped in an after-hours buying frenzy. That one of the richest men in the world, known for stunts meant to incite and game the system, and owner of a company whose wealth comes from the elite investors that have been piling into his stock over the past year and making it surge over 400%, would pull such a gesture, is not surprising. Musk has a lot at stake in this game. His investors come from the establishment milieu, the ones who have a vested interest in inflating the Tesla stock despite the fact it is a small boutique auto maker with very little intrinsic value and a market cap that eclipses all automakers combined, despite being only 1% of the entire auto market. Musk understands hype in the same way that the Redditors are now using and weaponizing it against those same types of investors he has been courting for years. Is Musk simply hedging his bets, knowing that if the Redditors ‘win’ many will go out to buy his cars? One of the rallying cries of the Redditors is now ‘Lambos and Teslas to the Moon’ and beyond.

But the system is indeed reacting. Stocks have been falling on Wednesday. SEC is calling for new regulations while Robinhood and Reddit have been plagued by outages. It seems like the markets are willing to do just about anything to keep their money and to keep the poor people’s hands away from it. On Reddit’s WSB board posts like this are pretty common.

Written in great haste. Excuse grammar and spelling errors.