VIDEO: The Reddit Revolution, GameStop and Melvin Capital
One of the most interesting and potentially significant conflicts to happen in some time — not just financially but culturally and politically — deserves serious scrutiny.
A remarkable series of events culminated in at least one major Wall Street hedge fund on the verge of insolvency and widespread anxiety and even panic from the titans of the financial system. It was all initiated on a sub-group of Reddit known for its heterodox interest in stock markets, video games, and vaguely populist politics.
Purposely targeting the stock of a company that had long been written off by Wall Street and which short sellers had decided to ravage — the video game retailer GameStop — these small investors, many apparently working class or debt-ridden, banded together to drive up the stock price of that company into the stratosphere, abruptly leaving the hedge fund short-sellers with billions of dollars in losses.
Although it may be more complex than this once all the facts are all known, this is being treated — by those excited by it and those aghast — as a type of populist uprising, a David v. Goliath tale in which ordinary people united to brilliantly beat Wall Street at its own game, thereby transferring plutocratic wealth back to the public. Oligarchs and their media spokespeople spent all day on CNBC and other pro-Wall-Street outlets expressing outrage and demanding government intervention to protect them from what they regard as this grave injustice.
And the sub-Reddit has now been banned by at least one platform, on the highly suspicious ground that it was due to “hate speech” and not the use of this group to sabotage Wall Street billionaires (what a remarkable coincidence of timing that this sub-Reddit’s “hate speech” suddenly crossed a line exactly as hedge fund managers were demanding their heads; the page continues, however, to appear on Reddit itself).
In the video below, I discuss what happened and what the implications are. One note about the video: though I do discuss the amorphous and trans-ideological politics driving both the Reddit uprising and the reaction to it, that topic in particular merits much more consideration. Liberal journalists and pundits love to mock the idea that “economic anxiety” drives anything remotely adjacent to right-wing populism — the primary drivers are racism and other types of bigotry, they insist in unison — yet all one has to do is spend any non-trivial amount of time in that sub-Reddit to see genuine and significant levels of rational economic anger often quite untethered, even hostile, to left-liberal cultural pieties and political niceties. Given their recent noble success, everyone now wants to claim these Redditors as their own, but their politics, like many people’s, defy the clean left-right dichotomy on which the professional media and punditry classes depend, the only prism through which they can understand the world.
This is one of the most interesting and potentially significant events — not just financially but culturally and politically — to happen in some time, and I try here to explain the key components and highlight some of the most consequential implications [note that this video was filmed late last night before the banning of the sub-Reddit by Discord on obviously specious grounds and, far worse, the corrupted banning this morning by major trading platforms, including RobinHood, of any attempts to buy GameStop and other targeted stocks while still allowing them to be sold: the ultimate expression of what should be illegal market manipulation to protect hedge funds]:
Hedge Funds = Big Democratic Donors
Big Tech = Big Democratic Donors
Administration = Democrat
Funny how the hedge funds cry to the SEC and the administration and then all of a sudden we see this BS.
ANYONE who tries to spin the actions of Robinhood, Discord, the other trading platforms as ANYTHING OTHER than a clear attempt to protect the hedge funds from their stupid bets is just a pathetic Wall Street apologist and shill.
January 27th and 28th, 2021 saw the Washington Post at last totally divorce itself from what used to be called “the news”. I have the Post delivered to my door every day. On the morning of January 27, I eagerly opened my copy to see what the Post had reported on one of the biggest if not the biggest news stories of the week, the revolt of the small retail investor against the hedge fund giants. To wit the meteoric rise of shares in GameStop which cost several hedge funds who had shorted the stock billions of dollars. A rare, rare victory of the small guy against the titans of the financial world. I couldn’t find a single mention of the story in the paper! Not on the front page and even not in the “business” section. I assumed I had missed the story and went back through the paper page by page. Nope, it wasn’t there. Not one word! In the real world of journalism this would have led to the firing of the editor. But we work under different rules now.
I can imagine the editors not knowing how to play this news. Yes, they could have simply stated the plain facts; the stock moved how much, and hedge funds lost so much, but they didn’t. News is about so much more than facts these days. The dilemma was this; clearly it was at least a symbolic victory for the small guy and a demonstration of a fearsome new power in the financial world and the Post staff and management saw themselves as champions of the little guy. On the other hand, it was a near mortal blow to some of the captains of the industry who have now become (at least for public consumption) friends of the Democratic party and fierce enemies of the guy who used to be president. (Don’t blame me for bringing him into the story, the Post did that on their own) And besides the Post is a business that has had its ups and downs in recent years, and it doesn’t pay to make enemies of these guys, not to mention the owner of the Post, Jeff Bezos is one of the world’s richest men and has much more in common, if not outright friendship with said titans. So the Post decided to punt and skip the story altogether. Perhaps it took them a day to consult with Mr. Bezos and others in the industry and in the world of politics to see how to spin the story. Oh, how I would like to be a fly on the wall of the editor’s office! I am sure there was some real debate going on! I am sure the Post’s woke staff had plenty to say about this story.
Move to Thursday the 28th. The story framing is complete, and it comes down on the side of the elites. Now it’s a front-page story. In a very long two-page article the Post plays the role of the hedge fund toady and defender. The small investor is now “a flash mob with money”. And we know what sinister connotations the word “mob” has taken on in the past few weeks. As crazy as it seems the article doesn’t mention the role of short sellers (who smell bad) until the twentieth paragraph on an inside page and doesn’t mention the specific hedge fund until the twenty-ninth paragraph when this information was all over the news. Unbelievable! The Post preferred to call the hedge funds “big Wall Street firms, “wealthy institutions”, and “big institutions”.
By late Thursday the political/financial industry dealt the small investor a savage blow in a naked show of force. Halting the purchase of GameStop shares but not their sale meant the market could go only one way, down, saving hedge funds from losing billions more if not saving some from total destruction. If this isn’t the definition of market manipulation, the word has no meaning. It will be interesting to see how the liberal mainstream media plays this story in coming days. They can’t support both sides. At least we know where the Post stands. The story is not over.