Meme Lords of Chaos - Agents of Zoomsday

Elegies to Failed Revolutions: Part II. GameStop lessons in confronting the kleptocratic techno-oligarchy.

For those of us who have followed, but then quickly forgot about the GameStop saga, know this, it is far from over. After a few weeks of relative quiet, when GME was trading sideways at around $45 per share, the dragon had awoken again. Just earlier today, Wednesday the 24th, GME had shot up 100% in a matter of minutes, topping off at almost $190 per share. And yet again it was part of the mainstream newscycle. The stock was rising so fast, the stock exchange had to halt trading in the stock for brief periods. And yet again Reddit was shut down for brief periods apparently crashing due to heavy traffic to r/WallStreetBets. But more on this later.

Only a few times in recent years did subculture smash so violently into the overculture the way that Reddit managed to do the last week of January 2021. During that week Reddit users targeted several hedge funds in the business of shorting stocks in GameStop and AMC Theaters, plus a few other ‘meme stocks,’ and caused the hedge funds to lose a lot of money. Melvin Capital by itself lost 53% in value in its short positions in the short squeeze, down to $8 billion from $12.5 billion in invested cash. Many have already commented on the short squeeze as being de facto a form of warfare, including Matt Taibbi, the Rolling Stone reporter who now writes a column at Substack, and Max Keiser and Stacy Herbert of the Orange Pill Podcast. I made several comments on this subject as being a form of class warfare by other means. But this scenario isn’t without context or precedent. From time to time the usually steady and quiet world of managed normalcy ruptures with unprecedented force that nobody saw coming, nobody other than those who were directly involved in doing the rupturing.

I.

Enter Reddit. In a strange and bitter metaphor, two events intersected each other on February 2nd. On that Tuesday, the private space faring company SpaceX launched a test rocket to see if it could safely land it back on the launch pad. It rose thousands of feet up in the sky and then returned back down to Earth and then as it was about to land, it smashed to the ground in a violent explosion of debris. On the same day at precisely this moment the meme stock GameStop was itself crashing on the stock exchange after having an unprecedented lift off to the metaphorical moon the previous week, doubling in price three times in three days. Within seconds the meme lords unleashed a torrent of images comparing the stock #GME with the SpaceX rocket with the unlikely heading of ‘success.’

The irony was indeed that what transpired was in some sense a success, but along completely different lines from those undertaken by SpaceX and the Redditors involved with the meme stock war on Wall Street. SpaceX had learned a lot and gather a lot of data from its mission, even though the result was a destroyed rocket. It may be that SpaceX had in fact learned more from the failed mission than if it in fact succeeded. The Redditors had also learned a valuable lesson in organized financial warfare against hedge funds and the financial class. They learned that the hedges don’t go down easily and without a fight. Through their efforts the Redditors exposed Wall Street for what it is, in Max Keiser’s words, a casino gulag where the greatest myth ever told is that the stock market is in some ways related or in fact is the economy. It is not. Numerous myths were shattered with the Reddit attacks on Melvin, Citron and Citadel. There is no ‘free market.’ The free market is only there for those already in the club. As Redditors cleaned out Melvin, Citadel stepped in to pump in more money. As Robinhood shut down trading for its users, the hedges were simply allowed to cover their positions, regroup and mount an attack. This left the CEO of Robinhood in a strange and precarious position, between the Robinhood users (many of them Redditors) and his benefactors (customers) and investors like Citadel, JP Morgan Chase and Goldman Sachs. Robinhood managed to raise $3 billion in capital over the weekend, to cover all of its purchases and sales with its clearing house. At least this is the explanation that Vlad Tenev, the CEO of Robinhood, gave in an awkward interview with Chris Cuomo. An obviously coached Tenev was dodging tough questions and gave the same answer over and over, deflecting any notions of a possible conspiracy. Seizing the opportunity to discuss his media pitch over the entire fiasco and possible collusion, the experts of The Behavior Panel analyzed Tenev’s body language throughout the interview, with the underlying question – was he telling the truth or not – in mind. The answer, though somewhat ambiguous, is that Vlad knows more than he’s willing to tell the public. He claimed, and still does, that Robinhood needed money, it did not have, to cover the deposits with their clearing house the day GME was skyrocketing, while at the same time denying that taking money from investors like Citadel had nothing to do with their decision to halt trading for a full week in GME and the meme stocks.

Ok, Citadel did not go directly to Tenev to tell him to stop the trading of meme stocks. They did not need to. As a major investor in Robinhood, Citadel is like the superego for Robinhood, meaning that Robinhood will do whatever it thinks is in the best interest of Citadel. Robinhood’s business model is based on payment for order flow to its customers like Citadel and in a Bloomberg interview Gurley on Friday, Bill Gurley mentioned on live television that 64% of Robinhood revenue comes from options trading, meaning that Robinhood is, according to Gurley, actually not democratizing trading but rather ‘glorifying speculation,’ which runs counter to Robinhood’ own mission statement. The payment for order flow is another matter entirely. Simply put, payment for order flow is what Robinhood does when it sells its own users’ data and buying habits to hedge funds like Citadel. The hedge funds then use this information to ‘front run’ stocks, establishing positions based on what trends it sees from the user data. Front running and payment for order flow are essentially forms of insider trading, both illegal by SEC regulation. The trouble is that these regulations are rarely, if ever, enforced.

GameStop began its rapid descent in full on Monday the 1st. First day it lost half its value, then on Tuesday another half, roughly tracking its gains from the previous week. All other meme stocks followed suit, with AMC tracking and trailing almost perfectly with GME, hour by hour, minute by minute. Reddit message boards lit up with ‘loss porn,’ shots of individual users’ Robinhood accounts posting heavy losses. Many retirements lost, play money in the hundreds of thousands, losing half its value in less than two days time, and by the end of the day all the corporate media, friendly to the hedge funds, were running front page news  highlighting the huge losses, completely forgetting the immense fortunes made by some Redditors the week before. While Robinhood continued to restrict trading, first allowing only 1 share of GameStop to be bought on its platform, then 20 shares, loosening restriction on all other meme stocks or getting rid of them completely, it did so while watching GameStop plunge.

Though vast fortunes were lost on GameStop, people had lost their retirements or otherwise put large dents in their personal fortunes, what had changed was the sentiment around ‘the markets.’ A sense of solidarity grew even deeper during the dark times. Many of those who lost vast amounts of money continued to post and meme in support of the movement as if it was a real revolution against the financial system. The hedges may have won the battle, but they surely have not won the war. The casualties were heavy, but unlike in real life war, the Redditors can and will regroup and come back at some point. And this is one of the many lessons learned from the GameStop event. The fantasy of finance was blown wide open. It exposed the class divisions and antagonisms rooted deep within the very essence of finance in America and the aristocratic dimensions of those who profit from it. But the Redditors have in essence revealed for the first time that it is indeed possible to kill the monster so to speak, or at least wound it, in order to come back and deal the final blow later. The stock market is no longer safe the way it once was for the investor class.

Because of Robinhood’s mishandling of the situation, it was revealed that there indeed exists a force, a conspiracy, against the lower unwashed classes, the yokels and riff raff, the ‘degenerates’ of the digital realm. While Robinhood did bleed out a lot of its users to other platforms like WeBull (which also placed restrictions on meme stocks), it ironically added more than 600,000 new accounts over the weekend, thus creating another cohort of individual users ready to take the plunge into finance, further gameifying the space. In an irony of ironies, what could have been Robinhood’s death rattle, became a boom, a fresh injection of cash and users, whose information it can continue selling to hedge funds, at least until the politicians and regulators take notice. While some, like Elizabeth Warren did, Robinhood’s approach stayed virtually unchanged. We now live in a post-Trumpian world. What Donald Trump did for politics, Robinhood is now doing to the financial world. It is disruption of another order, if we take the buzzword for what it is, another name for destruction. While Trump was the nouveau riche rube in the White House, a canker sore in the mouth of the establishment and a virulent ulcer in the stomach of the American public, he was in some ways the perfect disruption, a man of wealth and power who tirelessly failed upward, just like his peers, but without the necessary veneer of respectability and tact. Robinhood opened the doors to the millions of Clintonite deplorables, digital pitchfork-wielding plebiscite with nothing else but destruction of the old world on their brains. At least this is the official narrative that the traditional media would like everyone to believe. Trump and Robinhood became the two wings of a concerted attack on the entrenched establishment of the moneyed elites, who have thus far weathered the storm. The Redditors have gained some significant allies to their cause in the guise of Mark Cuban and Elon Musk, though it’s not clear what their intentions are.

Reddit wasn’t done though. After GameStop came the Tilray short squeeze the following week. Tilray, the Canadian cannabis company saw shares shoot up 250%, then crash again along with the rest of the cannabis sector, roughly back to where they were at the beginning of January.

Then on Thursday February 18th the Congressional hearing happened. Vlad Tenev, Ken Griffin of Citadel and Gabe Plotkin of Melvin were all subpoenaed as was Vlad look-alike Keith Gill, a.k.a. Roaring Kitty a.k.a. DeepFuckingValue. The CEO of Reddit was also summoned. Tenev, Griffin and Plotking were fielding questions all day concerning their practices, but neither one broke ranks, as each dodged questions, deflected criticisms and prattled off the same script until the time ran out. Whatever congress decides to do, it will more than likely hurt the retail investors rather than the hedge funds.

And thus, on the 24th the short squeeze began to be squoze again. About 20 minutes before market close, GME began taking off, first some 30%, then 50% then 100%. Ten minutes after market close the stock was up to an almost $190 high from the $45 low from the previous three weeks. Earlier in the week the CFO of GME was fired and Reddit decided it was time to voice their digital opinion. And again Reddit was shut down and trading in GME was halted on the exchange. This one is still very much a TBD.