GameStop takedown of hedge funds is Trumpism

GameStop's stock closed at $4.21 a share a year ago today. It fared OK during the covid 19 stock crash the next month, losing less than 50 cents a share. And then its price started to climb as it closed stores and moved online. The video game industry has exploded.

And GameStop's price exploded. It peaked at $469.42 a share on Wednesday.

That cost a hedge fund $13 billion because its managers bet against the company's price rising.

This run-up of the stock began with the social media monster Reddit, which has a subreddit (chat room) called WallStreetBets. A fellow using the pseudonym DeepF**kingValue got people to bet on GameStop beginning in September.

The New York Post reported, "The massive surge in GameStop’s stock price has made three of its biggest investors billions of dollars richer.

"The video-game retailer’s top individual shareholders racked up a collective gain as large as $5.5 billion as Reddit day traders drove the shares to dizzying heights.

"The biggest winner is Chewy.com founder Ryan Cohen, who joined GameStop’s board of directors earlier this month."

The story also said, "Cohen owns about 9 million GameStop shares for which he paid an average of $9.12 apiece, putting his an initial investment at roughly $82 million, according to Bloomberg data. His 13 percent stake in the company had ballooned to a market value $3.4 billion at Wednesday’s peak share price of $380, giving him a paper profit of more than $3.3 billion."

Well that is on paper.

His actual gain may be 50¢ when GameStop's price falls to the reality that it is worth the $9.12 he paid. And GameStop will be better off having a successful online merchant on its board.

But the fallout is on Reddit because hedge funds don't like to lose money. And hedge funds have friends in powerful places. And as helpful and loyal to the Cause as Reddit has been (it banished its popular The Donald subreddit), Reddit enabled a ragtag group of nobodies to kneecap a hedge fund.

Stacey McCain loves the story to death. He has 13 billion reasons to like it, one for each dollar lost.

He wrote, "Prison gang rape is the only metaphor that comes to mind for how badly the hedge funds got screwed on their GameStop shorts. How bad was it? So bad that NASDAQ intervened, so bad that Discord shut down the WallStreetBets chat channel, so bad that the Securities and Exchange Commission is now investigating the Reddit crew."

Robinhood, an online stock trader that targets people under 40, has blocked purchases of GameStop, AMC, and BlackBerry stock. It turns out Robinhood really does not want to make you a millionaire, kiddies. Sorry.

Glenn Reynolds wrote, "In the words of George Carlin, it’s a big club and you ain’t in it. But this is especially awkward for Robinhood, which is acting like a Deputy Sheriff of Nottingham. I assume its status as a cool brand for millennials and Gen Z will take a major hit."

Young Robinhood customers are learning a life lesson that while people can get rich quick, they are not one of them. You have to be part of the In Crowd. Martha Stewart thought she was. She went to prison over a $45,000 trade. (A jury convicted her of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigator.) Conrad Black also went to prison for a bad stock deal. (A jury convicted him of three counts of fraud and one count of obstruction of justice) No one at that hedge fund will do time for losing $13 billion.

The media immediately blamed Donald John Trump.

Well, why not?

Chris Cillizza of CNN wrote, "What's the end game for the GameStop surgers? Like, now that they have proven the point that they can take a stock that the pros have declared moribund and revive it -- at least for a moment -- what do they do now? Because they don't really believe that GameStop is suddenly the new Amazon or Apple or Google. It's still mostly a business that derives its value from brick and mortar stores in malls. Which, again, is not exactly a big growth area in the coming years.

"The point is that there is no real point beyond showing up the pros -- proving to them that they aren't as smart as they think they are and that they don't have the ability to control everything.

"Which, again, has its roots in Trumpism. The entire notion of Trump's candidacy and presidency was to stick it to the elites. And then, well, uh, there wasn't really a plan beyond that. The screwjob was the point."

I agree, though.

We are sticking it to the elitists. Cillizza called them elite but there is nothing rare about their willingness to screw others for personal gain.

A hedge fund tried to short GameStop and got caught.

Good.

Charles Payne at Fox said, "The shorts, first of all, all this nonsense, all of this noise, all this whining by Wall Street, it’s making me sick! 140% of GameStop was short. I didn’t hear one person on TV complaining about Wall Street trying to crush GameStop, 140% short!”

"Neil, you can’t allow Wall Street to short 75% of a stock and nobody says anything, crush these companies into the dirt, and then when the individual investor makes money everyone is up in arms.

"Oh, they’re going to lose their shirt? Don’t you think people are trading, traded 80 billion shares today. People are ringing the register. I have a kid who bought a house. He made $50,000 and bought a house. So yeah, some people are going to lose, some are going to win. But if they want to change the rules of the game now because the general public is making money after decades of the shorts crushing thousands of stocks into the dirt, I watched stocks being crushed completely to zero and no one ever whispered anything because those stocks didn’t have Wall Street sponsorship."

This is a small payback.

The elitists gutted our Midwest in the 1970s and shipped the jobs to Mexico and Japan. Reagan tried to reverse that, but he was hobbled by the Republican Party. The Bushes, Clinton, and Obama followed, and the jobs moved to Red China because slave labor is cheaper than paying a worker $13.50 an hour to make widgets.

The American economy lost trillions. We know that because Red China's economy gained trillions.

We elected Donald Trump president and Washington went into open rebellion. Federal employees sabotaged his administration. The elitist insurrection shut down the economy, printed money to keep Wall Street's fortunes rising, and still had to rig the election to get him out.

The elitists bragged that this is a new post-industrial society. This is the information age, they sneered.

OK. So a bunch of people did what the elitists do and the elitists are hopping mad because the wrong people won and made them look silly.

They know who DeepF**kingValue is, and they will do to him what the British did to Guy Fawkes but without the hanging.

It is their game and their rules. I say we learn to ballot harvest.