Clipping the Hedge Fund

[ysabetwordsmith]

Here is a rare story about rich people losing. :D Now for the important points...

1) Hedge funds do a lot of harm. We would be better off without them, because it is a gambling problem that hurts everyone, not just the people with a gambling problem.

2) This backlash happened because a bunch of ordinary people objected to a few rich fucks artificially manipulating the system in ways that hurt companies they cared about. So they did something about it. This touches on the original reason why investment was invented: it allows people to pool resources so they can have things nobody could afford individually. Build a marketplace. Buy shares in a trading ship. That sort of thing. Today it can be used to salvage businesses that sell stuff we want or need.  This is related to Community Supported Enterprise, just discontiguous rather than local, which is apt for far-flung businesses.

3) We are many, they are few. The inherent flaw of inequality is that it's unstable and vulnerable to attack. By definition, the lower layers must be much larger than the upper layers. Previously, it was difficult to mobilize this mass of potential outside of, say, a revolution. But now we have social media: that makes it much easier.

Congratulations, r/WallStreetBets.  You put a new tool in the box. Now it's up to everyone else to notice this and use it again, to block rich fucks from jerking the economy around like an abused dog, so we can defend the businesses that we use.

The economy is just a thing that some people made up.  It is what we make of it.  As a construct, it has no life of its own.  So if you don't like it, do something about that.  You have a shiny new tool to stick in it, and gods know there are struggling businesses everywhere.  Go tell your friends.  This tool only works if enough people apply it together.  Kind of like democracy.

Comments

[siliconshaman]

I like the fact that the politicians are, for once, coming down on the side of the ordinary people... I mean, when you get the likes of Ted Cruz agreeing with AOC, and saying "screw those rich fucks"..

[(Anonymous)]

Rich people lose more often then we think, we just usually use different words for it: insurrection, revolution rebellion...and people in power would call it 'a perversion of the natural order,' as in Macbeth.

Odd thought I had this morning: Not only do buisinesses get bailouts, but every dang economic downturn I've lived thru has official folks encouraging ordinary folks to spend $. Buy at restaurants, make those down payments for your wedding venue, etc etc. Its not just the /government/ that bails out the economy; the common (hu)man is expected and encouraged to do their part as well .

...aaaand come to think of it, we're expected to bail /each other/ out too: loaning cars and phones and time and money...yet somehow big business doing this is 'an infringement of civil liberties' and the government doing this is 'socialism, evil!'

[thewayne]

I have to disagree with you on a couple of points. I do agree that there's a lot of evil in hedge funds and Wall Street in general. And I love the Reddit people screwing with them and Melvin(?) needing a bail-out because of their massive bets against Game Stop.

But Game Stop is fundamentally doomed and this is probably not going to save them for one big reason: the CEO and board really don't want to save it. They want to milk what little is left out of it then pop their golden parachutes.

They closed 460 locations last year. They're highly leveraged in malls, and malls are dying. And there's the basic problem of so much game content is being distributed online, so what's the point of going into a brick and mortar store? You're not going to buy State of Decay 2 or 3 or whatever in a store because you have to download it.

Their purchase of the Think Geek stores was widely viewed as a bad idea. They were beautiful stores, but they carried material that needed to be seen in person. The stores were wonderful to wander through and admire, and I spent some fair coin in them. But if there's one thing you can say about every Game Stop store that I've seen, it's that they are SMALL. There's just no way you can carry Think Geek merchandise in them, and you can't afford to expand the stores. So you move Think Geek online, and now you're competing against the entire internet of geek merchandise. You're going to fail to distinguish yourself against that crowded universe, guaranteed failure.

Absolute waste of money.

So all this stock manipulation is going to achieve is prolong the death of Game Stop and give more money to the board and stockholders.

In the end, the chain is still going to die an unpleasant death. No more money is going to go to the employees, they're still going to make $12-15 an hour. No more merchandise is going to go into the stores, they've been slow to stock new titles for years.

The board and the CEO want it to die.

Total kudos to the people demonstrating that Wall Street is nothing to respect. But Game Stop is moribund, and what they are doing is not going to change that unless they can somehow manage a total board takeover, and then we'll see if they're up to the challenge of running a nation-wide multi-million dollar company that is tipping over the precipice.

Two salient points from the article

[ng_moonmoth]

Yes, it's good that sufficiently motivated people found a way to inflict damage to speculators who were destroying something they valued. And it's also good that the speculators needed a massive infusion of cash to resolve their losing bet -- and are getting no sympathy from the government, and the sharks who put the bailout cash in are circling around the blood in the water.

Other important things to keep in mind, though: the hedge fund survived the experience. I opined elseblog that it was like jumping off a cliff and breaking both ankles and a few ribs rather than being incinerated in the fireball the car was about to become, but survive it did. Second, and more important, the hedge fund closed out their positions on Wednesday, which was before I heard about any of this -- and probably a lot of other people, too. (That's a general rule, by the way: by the time one has heard about a financial exploit, it's too late to get on board -- and getting on then just helps pay off the peope who heard about it before then. And that's how the rich get richer.) And because the success of the exploit required hanging on to the stock until the hedge fund's positions were resolved to obtain the desired effect, there are now a bunch of people who bought during the run-up at prices ranging from very overpriced to insanely overpriced -- and aren't going to be able to get rid of at anything like what they paid for it, because the artificial demand that cranked up the price is gone now, and the number of people who actually want to own part of GameStop's business isn't really very big. Those buyers, some decent percentage of which weren't thinking about that, are also going to wind up getting hurt.