The GameStop Mania Should be a Wake-up Call For Our Elite Class
The GameStop is in the news again. Its stock price was up more than 100% on February 25th, after so many “experts” predicted its “unavoidable” crash. Clearly these “experts” failed to understand and appreciate what the Gamestop saga was really about.
The Gamestop saga began as an ordinary investing event. A few well-known Wall Street hedge-funds bet on the demise of brick and mortar businesses such as GameStop. They were so confident in their "intelligence" that they borrowed and sold 140% of GameStop shares available to purchase, expecting to buy these shares back at a rock bottom price so they would make a windfall.
Naturally, someone took the opposite bet. It is important to know in the beginning of the GameStop saga, those who took the opposite bet were not a bunch of inexperienced first-time retail traders as the media wanted us to believe. The early buyers of GameStop stocks are sophisticated investors who believe the company was undervalued based on their analysis, including Ryan Cohen, who co-founded online pet retailer Chewy, and Michael Burry, whose hedge-fund Scion Asset Management made millions after successfully shorting mortgage backed securities during the 2008 financial crisis. Even Keith Gill, who trades from his basement and is known as "deepF_gvalue" on Reddit and "Roaring Kitty" on YouTube, is an experienced retail investor with the Chartered Financial Analyst designation (the most difficult professional certification to obtain in financial industry). In summary, the original bet of GameStop on both sides were waged by professionals who knew what they were doing.
In a normal time, if GameStop share price goes down significantly and the company files bankruptcy, the hedge-funds would rake in billions and pat themselves on the back for "creative destruction." If GameStop share price goes up, Cohen, Burry and Roaring Kitty would be credited for "saving" a great American company.
However, we don't live in normal times, the pandemic has changed everything.
As the result of government lockdowns, schools were shutdown, many businesses were forced to close (some forever), and millions of Americans lost their jobs. The majority of us were forced to stay at home. The prolonged lockdowns, isolation, and unemployment (for many) have created many lonely souls. For many, social media has become the only means to keep them in touch with the outside world.
Some who never invested in the stock market before found their way to investment groups such as WallStreetBets on Reddit.com. For these new comers, investing offers something new and exciting to kill time and boredom. Seeing someone who appears to be as ordinary as you post graphs which show off their eye popping investment gains was also inspiring -- if the other average Joe could do it, why not you?
Besides the desire and aspiration to make money, these people found a new identity, a new community, new connections, and regained a sense of belonging. They invented their own lingo, memes, and inside jokes. They call themselves "retards" because they believe that's how the elite class see them. On those discussion boards, people don't just trade investment ideas, they make jokes; they offer encouragement to one another, i.e. "hold the line" (aka don't sell); they celebrate each other's wins and comfort one another on their losses. Above all, they are united in their contempt not only for Wall Street, but for the entire elite class.
They rallied behind GameStop and AMC stocks because these are the companies that they are familiar with, the stocks that were cheap, and they could bet against those suit-wearing, jet-setting Wall Street guys. Many of the newcomers started investing with very little money, likely using the $1,200 and later the $600 stimulus checks that the government sent. But don't underestimate the power of a crowd.
When there's hundreds and thousands of people organized to take the opposite bet against the hedge-funds, they succeeded in making those Wall Street firms bleed billions of dollars. The David slaying Goliath story inspired more like-minded people to join them. They bought shares of GameStop to join a movement, a movement to defy the elite; show the elite class that they are not special; they're neither smarter nor better than the rest of us; and average Joes who work together can beat the elite in their own games and deliver long-overdue justice.
The seed of such populists contempt for the elite was sowed in the aftermath of the 2008 economic crisis. Many Americans across the political spectrum were disgusted that while Main street was suffering, Wall Street got a bailout from the mess it created and no one went to jail. The Wall Street bailout and the lack of accountability planted the seed of discontent and gave the rise of a populist movement that crossed party lines. On the left, it fueled the rise of an aging socialist, Sen. Bernie Sanders; on the right, it sent Donald Trump to the White House in 2016.
The pandemic further deepened the populists' distrust and contempt for the elite in this country.
The pandemic reveals that the elite class is the emperor who wears no clothes on and they only pretend to know more than the rest of us. The changing tune on wearing masks is a good example. Initially, the CDC, the Surgeon General and Dr. Fauci all told Americans that wearing masks was not necessary because it wouldn't do much to prevent the spread of the coronavirus. Then months later, the rhetoric on mask wearing has changed from not necessary to wear one, to wearing one is a must, wearing two is better, and three is the best.
Last March, Americans were asked to endure two weeks of lockdowns to "flatten the curve." Two weeks soon turned into months, the rest of the year, and the lockdowns spilled over into 2021. The lockdowns ruined our economy, cost millions of jobs, and disrupted so many lives. Anyone who dared to question the effectiveness of lockdowns was immediately condemned as a "science denier" and "grandma killer." It turned out that those who advocated for lockdowns based their recommendations on a deeply flawed model, and the real grandma killers are state government policies that insist on sending COVID-19 patients back to nursing homes.
Was America's suffering worth it? The United States is still leading the rest of world in both confirmed cases and COVID-19 related death tolls. We thought vaccines would save our day, thanks to a few private enterprises for developing multiple effective vaccines in record time. But the government's vaccine rollout has been a disaster. Who can blame Americans for feeling everything is out of control and we are led by apes?
The pandemic also reveals that the elite class doesn't even bother to pretend that they live by the same rules as the rest of us. From county health officials to state governors to politicians in Washington, everyone who has power in their hands rushed out arbitrary rules on what Americans could not do. Many of these rules made no sense. Then the rule-makers were often caught on camera violating the very rules they forced ordinary citizens to obey. Wearing a mask is a must for everyone else but not necessary when Nancy Pelosi was getting her hair done, or when Joe Biden was celebrating his election win. Traveling to see families during Christmas was highly discouraged but was completely fine for the mayor of Denver. Ordinary Americans weren't allowed to have proper funerals for their loved ones, but state funerals and mass gathering for politicians and elite sanctioned political causes didn't have to abide by the same rules. Throughout the pandemic, ordinary Americans have been constantly reminded by so many similar examples that rules are for small people, our system is rigged, and our elites are hypocrites.
The Reddit discussion boards and other social media gave ordinary Americans a public square to vent their frustrations and contempt for the elite class, the GameStop mania gave them a way to rebel, to reclaim their own independence by making the elite lose! A tweet by "Reddit Investors" summarized the sentiment this way: "Remember when the suits told us we couldn't work and only gave us $1,200? Remember when the suits bailed out the financial institutions in 2009? Remember when the suits told us we couldn't trade stocks for our "best interests"?
Anyone who treats the GameStop mania as an unsophisticated mob gambling their money away in the stock market where they don't belong is missing the point of this story. The GameStop mania is a manifestation of a movement that has been fueled by ordinary Americans' growing contempt for America's elite class, aimed at delivering long over-due justice to those in power by beating them at their game. This is why the elite class must take the GameStop mania as a wakeup call. If they don't change their behavior, take actions to make the system more transparent and fairer, and try to earn back people's trust, even if they could use their power to bring GameStop stock price back to earth, the movement will not disappear. It will show up in other aspect of our society, maybe in even more shocking fashion.