Updates
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Originally published, January 28, 2021, 11:50 am.
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January 28, 2021, 9:48 pm:
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Robinhood, a brokerage that supposedly “democratizes” trading in stocks is restricting trading[1] on stocks that were targeted by short-selling hedge funds and then in a countermove by retail investors to squeeze the hedge funds.[2] I saw plenty of shrieking about hypocrisy on my Twitter feed and it appears my tweeps actually have a point.[3]
I don't think any of this GameStop narrative is what it seems. Citadel likely has the market power to stop most retail brokers from trading these stocks, and maybe it rode the stock up and then built up a short position. We need a real investigation of what is happening.
— Matt Stoller (@matthewstoller) January 28, 2021
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January 29, 2021, 3:41 am:
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Short-sellers on targeted stocks in the GameStop squeeze lost an estimated nearly $71 billion.[4] Poor babies.
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January 29, 2021, 12:12 pm, revised 3:01 pm:
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Text previously here has been moved to and further developed in a new blog post entitled, “The GameStop Squeeze.”
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January 29, 2021, 1:15 pm:
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Robinhood has partly rescinded its freeze on GameStop squeeze transactions.[5]
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January 29, 2021, 3:01 pm:
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There is a new blog post entitled, “The GameStop Squeeze,” which supercedes text previously in the 12:12 pm update from today.
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Donald Trump
When paleoconservatives, the tendency of conservatism that includes neo-Nazis and white supremacists, say something like this, it’s “Blacks and browns” who pose the perceived threat:
Asked earlier by a recruit what to prepare for, [Jessica Marie] Watkins allegedly wrote in November that if [Joe] Biden became president, “our way of life as we know it is over. Our Republic would be over. Then it is our duty as Americans to fight, kill and die for our rights.”
“If Biden get the steal, none of us have a chance in my mind. We already have our neck in the noose. They just haven’t kicked the chair yet,” she said, according to the indictment.[6]
In this case, it’s Joe Biden or the government, which in my mind, brings it back to authoritarian populism. But it is a paleoconservative level of paranoia.
Spencer S. Hsu, Rachel Weiner, and Tom Jackman, “Self-styled militia members in three states began planning in November for recruits, weapons ahead of Capitol breach, U.S. alleges,” Washington Post, January 27, 2021, https://www.washingtonpost.com/local/legal-issues/self-styled-militia-members-in-three-states-began-planning-in-novembe-for-recruits-weapons-ahead-of-capitol-breach-us-alleges/2021/01/27/f13b0bfc-60b9-11eb-9061-07abcc1f9229_story.html
Hedge funds
The picture I was getting on Twitter is largely consistent with the New York Times account of small “investors” deciding to stick it to hedge funds by buying shares in stocks that the funds had decided to “short,” running the value of those stocks up, “squeezing” the funds.[7]
The underlying sentiment is generally a lot like this:
I love the stock market because when it goes up we get nothing but when it goes down we all lose our jobs. Except during a pandemic when it goes up and we still lose our jobs
— Shoegaze Dad (@yeoldedad) January 27, 2021
In short, revenge against billionaires who’ve gotten a lot richer even before the pandemic,[8] but especially during the pandemic,[9] while a lot of people have lost their jobs and face poverty and eviction.[10] Some are parroting back the lines that victim-blamers have aimed at them:
hedge fund managers who have lost their money should learn how to code
— Bes D. Socialist (@besf0rt) January 28, 2021
If I was a Hedge Fund losing billions to Reddit shitposters, I would get a second job driving for Uber, cut out the Starbuck's, and skip the avocado toast.
— Jean-Paul Blarte: Mall Cop (@OldPappyThomas) January 27, 2021
And that’s pretty much how the New York Times has it:
Ben Patte, 16, a high school student in Wisconsin who said he made $750 off GameStop stock, said the campaign felt like vindication for himself and fellow young traders. “It’s a good opportunity to make money and stick it to the hedge funds,” he said. “By buying GameStop, it’s kind of like beating them at their own game.”
No one knows how this ends. Some analysts say the intense activity could eventually prompt a wider sell-off in the market by forcing hedge funds on the losing side of these trades to sell parts of their portfolios to raise cash to cover their losses. . . .
Justin Speak, 27, an evangelical pastor in California, and his wife, who recently left her job to raise their children, have made $1,700 off GameStop in the past week. Mr. Speak said that so far they had mainly put the money toward a new bed. He described a sense of frustration at how well those in the financial sector have done since the financial crisis of 2008.
“There’s a catharsis to actually making money off their pain a little bit,” he said of his modest earnings from GameStop. His wife put it more bluntly: “Eat the rich.”[11]
The risk of that wider sell-off[12] is, of course, there, and that ultimately hurts the folks pushing this. The rich are gambling with money they can afford to lose; these folks aren’t. Which means capitalism wins again, at least in the interim.
It’s probably also worth noting that Elon Musk, who is very much among the winners[13] in this pandemic-associated widening of social inequality,[14] and notorious for despising short-selling, helped publicize this effort.[15]
Matt Phillips and Taylor Lorenz, “‘Dumb Money’ Is on GameStop, and It’s Beating Wall Street at Its Own Game,” New York Times, January 27, 2021, https://www.nytimes.com/2021/01/27/business/gamestop-wall-street-bets.html
Eric Levitz, “Robinhood Banning GameStop Proves the Free Market Is a Lie,” New York, January 28, 2020, https://nymag.com/intelligencer/2021/01/robinhood-ban-gamestop-share-price-explained.html
Sujata Rao, “Losses on short positions in U.S. firms top $70 billion – Ortex data,” Reuters, January 28, 2021, https://www.reuters.com/article/us-retail-trading-shortbets-idUSKBN29X1SW
Kevin Stankiewicz, “Leon Cooperman on GameStop Reddit speculators: ‘I’m not damning them’ but it will ‘end in tears,’” CNBC, January 28, 2021, https://www.cnbc.com/2021/01/28/leon-cooperman-on-gamestop-reddit-speculators-im-not-damning-them-but-it-will-end-in-tears.html
Hamza Shaban, “GameStop stock roars back after Robinhood lifts trading freeze,” Washington Post, January 29, 2021, https://www.washingtonpost.com/business/2021/01/29/gamestop-stocks-robinhood-reddit/
- [1]Eric Levitz, “Robinhood Banning GameStop Proves the Free Market Is a Lie,” New York, January 28, 2020, https://nymag.com/intelligencer/2021/01/robinhood-ban-gamestop-share-price-explained.html↩
- [2]Matt Phillips and Taylor Lorenz, “‘Dumb Money’ Is on GameStop, and It’s Beating Wall Street at Its Own Game,” New York Times, January 27, 2021, https://www.nytimes.com/2021/01/27/business/gamestop-wall-street-bets.html↩
- [3]Eric Levitz, “Robinhood Banning GameStop Proves the Free Market Is a Lie,” New York, January 28, 2020, https://nymag.com/intelligencer/2021/01/robinhood-ban-gamestop-share-price-explained.html↩
- [4]Sujata Rao, “Losses on short positions in U.S. firms top $70 billion – Ortex data,” Reuters, January 28, 2021, https://www.reuters.com/article/us-retail-trading-shortbets-idUSKBN29X1SW↩
- [5]Hamza Shaban, “GameStop stock roars back after Robinhood lifts trading freeze,” Washington Post, January 29, 2021, https://www.washingtonpost.com/business/2021/01/29/gamestop-stocks-robinhood-reddit/↩
- [6]Spencer S. Hsu, Rachel Weiner, and Tom Jackman, “Self-styled militia members in three states began planning in November for recruits, weapons ahead of Capitol breach, U.S. alleges,” Washington Post, January 27, 2021, https://www.washingtonpost.com/local/legal-issues/self-styled-militia-members-in-three-states-began-planning-in-novembe-for-recruits-weapons-ahead-of-capitol-breach-us-alleges/2021/01/27/f13b0bfc-60b9-11eb-9061-07abcc1f9229_story.html↩
- [7]Matt Phillips and Taylor Lorenz, “‘Dumb Money’ Is on GameStop, and It’s Beating Wall Street at Its Own Game,” New York Times, January 27, 2021, https://www.nytimes.com/2021/01/27/business/gamestop-wall-street-bets.html↩
- [8]Nick Hanauer and David M. Rolf, “The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90%—And That’s Made the U.S. Less Secure,” Time, September 14, 2020, https://time.com/5888024/50-trillion-income-inequality-america/↩
- [9]Charles Lane, “The rich got richer during the pandemic. We need to claw back their gains,” Washington Post, January 25, 2021, https://www.washingtonpost.com/opinions/the-rich-got-richer-during-the-pandemic-we-need-to-claw-back-their-gains/2021/01/25/d17c8a44-5f32-11eb-9430-e7c77b5b0297_story.html↩
- [10]Associated Press, “Tenants Behind on Rent in Pandemic Face Harassment, Eviction,” U.S. News and World Report, June 14, 2020, https://www.usnews.com/news/best-states/virginia/articles/2020-06-13/tenants-behind-on-rent-in-pandemic-face-harassment-eviction; Regina Garcia Cano and Michael Casey, “Wave of evictions expected as moratoriums end in many states,” Associated Press, August 4, 2020, copy in possession of author; Kriston Capps, “What Happens When the Eviction Bans End?” CityLab, May 29, 2020, https://www.citylab.com/equity/2020/05/pay-rent-eviction-ban-coronavirus-housing-crisis-landlord/612277/; Kriston Capps, “Landlords Challenge U.S. Eviction Ban and Continue to Oust Renters,” CityLab, October 22, 2020, https://www.bloomberg.com/news/articles/2020-10-22/landlords-launch-legal-attack-on-cdc-eviction-ban; Michelle Conlin and Christopher Walljasper, “Time’s up: After a reprieve, a wave of evictions expected across U.S.,” Reuters, October 19, 2020, https://www.reuters.com/article/us-usa-housing-eviction-insight/times-up-after-a-reprieve-a-wave-of-evictions-expected-across-u-s-idUKKBN27415U; John Fritze and Nicholas Wu, “Trump administration announces nationwide eviction moratorium through end of the year,” USA Today, September 1, 2020, https://www.usatoday.com/story/news/politics/2020/09/01/trump-imposes-eviction-moratorium-because-covid-19-pandemic/5686402002/; Sam Levin, “California landlords are locking out struggling tenants. A ‘tsunami of evictions’ may be next,” Guardian, July 30, 2020, https://www.theguardian.com/us-news/2020/jul/30/california-covid-19-evictions-landlords-tenants; Eric Levitz, “This Recession Is a Bigger Housing Crisis Than 2008,” New York, July 13, 2020, https://nymag.com/intelligencer/2020/07/coronavirus-recession-evictions-crisis-congress.html; Heather Long, “Millions of Americans are heading into the holidays unemployed and over $5,000 behind on rent,” Washington Post, December 7, 2020, https://www.washingtonpost.com/business/2020/12/07/unemployed-debt-rent-utilities/; Heather Long, “Nearly 8 million Americans have fallen into poverty since the summer,” Washington Post, December 16, 2020, https://www.washingtonpost.com/business/2020/12/16/poverty-rising/; Renae Merle, “Evictions are likely to skyrocket this summer as jobs remain scarce. Black renters will be hard hit,” Washington Post, July 6, 2020, https://www.washingtonpost.com/business/2020/07/06/eviction-moratoriums-starwood/; Gretchen Morgenson, “Large corporate landlords have filed 10,000 eviction actions in five states since September,” NBC News, October 26, 2020, https://www.nbcnews.com/business/personal-finance/large-corporate-landlords-have-filed-10-000-eviction-actions-five-n1244711; Will Parker, “Struggling Rental Market Could Usher in Next American Housing Crisis,” Wall Street Journal, October 27, 2020, https://www.wsj.com/articles/struggling-rental-market-could-usher-in-next-american-housing-crisis-11603791000; Jenny Schuetz, “America’s inequitable housing system is completely unprepared for coronavirus,” Brookings, March 12, 2020, https://www.brookings.edu/blog/the-avenue/2020/03/12/americas-inequitable-housing-system-is-completely-unprepared-for-coronavirus/; Kyle Swenson, “Renters thought a CDC order protected them from eviction. Then landlords found loopholes,” Washington Post, October 27, 2020, https://www.washingtonpost.com/dc-md-va/2020/10/27/trump-cdc-eviction-moratorium-loopholes/↩
- [11]Matt Phillips and Taylor Lorenz, “‘Dumb Money’ Is on GameStop, and It’s Beating Wall Street at Its Own Game,” New York Times, January 27, 2021, https://www.nytimes.com/2021/01/27/business/gamestop-wall-street-bets.html↩
- [12]Matt Phillips and Taylor Lorenz, “‘Dumb Money’ Is on GameStop, and It’s Beating Wall Street at Its Own Game,” New York Times, January 27, 2021, https://www.nytimes.com/2021/01/27/business/gamestop-wall-street-bets.html↩
- [13]Charles Lane, “The rich got richer during the pandemic. We need to claw back their gains,” Washington Post, January 25, 2021, https://www.washingtonpost.com/opinions/the-rich-got-richer-during-the-pandemic-we-need-to-claw-back-their-gains/2021/01/25/d17c8a44-5f32-11eb-9430-e7c77b5b0297_story.html↩
- [14]Heather Long, “The recession is over for the rich, but the working class is far from recovered,” Washington Post, August 13, 2020, https://www.washingtonpost.com/business/2020/08/13/recession-is-over-rich-working-class-is-far-recovered/↩
- [15]Matt Phillips and Taylor Lorenz, “‘Dumb Money’ Is on GameStop, and It’s Beating Wall Street at Its Own Game,” New York Times, January 27, 2021, https://www.nytimes.com/2021/01/27/business/gamestop-wall-street-bets.html↩