GameStop Stock’s Ascent Isn’t About Attacking Rich People
Sorry, Leon. You’re wrong.
GameStop stock has enjoyed parabolic gains as Reddit users saw an opportunity to buy a heavily shorted stock. The extra buy volume generated a short squeeze of the ages, but not everyone is happy.
Melvin Capital has lost billions of dollars from their short position on GameStop. Melvin Capital is owned by Citadel, a hedge fund which also happens to be Robinhood’s top customer. They pay plenty of money to Robinhood for consumer data.
No wonder Robinhood temporarily halted the ability to buy shares of GameStop, Blackberry, AMC, and other stocks that received plenty of love from Wall Street Bets…
…BUT still gave investors the ability to sell their shares.
Now the media and 1% are rushing to depict billionaire hedge fund managers as the victims entangled in “market manipulation” caused by Redditors joining forces to buy a struggling company.
It’s not unheard of for stocks to reach absurd valuations based on a frenzied market atmosphere. GameStop may be ridiculously overvalued if you look at traditional metrics like the P/E, P/S, and EPS, but the dot-com era produced equally if not even more jaw dropping valuations.
We’ve also still got Nikola Motors in the stock market getting propped up by the likes of Paul Coster even though the company has admitted to deceiving investors about their vehicles.
It’s not manipulation when Paul Coster raises his price target and gets extremely bullish on a fraudulent company…and then the stock price soars in the short-term based on his recommendation. It’s part of “just doing business.”
If you’re the founder of a legit company, you don’t run away after a short report accuses you of fraud.
2008 was also part of “just doing business.” Not only did the people at the top heavily contribute to wrecking the economy, but they also received hefty bonuses, avoided prison time, and GOT. BAILED. OUT.
And God forbid people get stimulus checks during a pandemic with millions of jobs removed from the economy and many businesses shuttering their doors. It’s certainly not a rich people problem.
Wall Street Bets has shifted the battle, giving the same powers to the retail investor that were exclusively enjoyed by the people at the top. Now they’re crying foul. But Wall Street Bets isn’t engaging in market manipulation.
The Wall Street Bets strategy is simple. Look for a heavily shorted stock small cap stock and invest heavily into that stock to force a short squeeze. That’s they’re playbook. It’s not market manipulation when you utilize public knowledge in a free market and take advantage of other people’s mistakes. Investors do that all of the time.
It’s manipulation when you prevent people from buying securities but only give them the ability to sell.
It’s manipulation when you use insider trading to make your investing decisions and deceive people about their assets.
Angered that their own tactics are getting used against them by retail investors who have outsmarted them, billionaires are heading in droves to the media to explain how they’re the victim in this mess.
Leon Cooperman came on CNBC recently to warn that investing in GameStop now will end in tears. He seemed to be the only one crying as he whined about recent events being “a way of attacking wealthy people [that is] inappropriate.” He literally cried on air over Elizabeth Warren’s proposed wealth tax and was accused of insider trading by the SEC which he paid to settle.
Leon’s claim that GameStop’s price appreciation and the current environment is “a way of attacking wealthy people” is a half truth. It’s an attack on shady wealthy people who have been part of a system rigged against retail investors.
It’s an attack on the system that has enabled certain rich people to manipulate retail investors for decades without any punishments. If you’re part of that system, you’re going to hear about it and deal with it for a while…hopefully for a long time. Sorry, Leon.
Not all wealthy people are the same. Some deserve every bit of criticism they’re getting right now and then some. Others deserve praise for their actions and being great role models.
Yelling at others because they disagree with your opinion about GameStop and getting in hot water with the SEC for insider trading would definitely put you in that former category.
With that said, no one’s going after Chuck Feeney, and for good reason. He’s the billionaire who gave all of his money away. He did it right. He gave his fortune to good causes not for the tax breaks or good PR, but because he believes that dying rich is a disgrace.
There are plenty of wealthy people who donate anonymously and are tied to a strong mission that goes beyond boosting their portfolios.
You don’t have to give all of your money away to be seen as a good person. Just don’t step on people to get your dollar…and then ask them (and the government) to pity you when things don’t go your way. That’s insult to injury.
People at the top didn’t change after 2008. Fake apologies were given and politicians exuded fake anger that made for great theater but no significant progress.
If you got to where you are by stepping on people, you’re going to hear it from the Wall Street Bets crowd and everyone else who supports their work. If you did shady business to reach your rich status, you’re part of the problem. If you’re in one of those camps and are crying about this “attack on wealthy people,” you did it to yourself.
People in the media convincing us that billionaires are the victims and Redditors are manipulating the market aren’t on the right side of this battle.
That tune has changed a bit considering Robinhood’s role to the point of strange bedfellows from both political sides agreeing on the issue. It’s easy to change your tune when the reality of the situation becomes harder to deflect from or ignore.
Wall Street Bets was (and still is) frequently picked on as a cluster of inexperienced, novice, amateur speculative traders who knew very little about the market and just wanted the tendies.
If the Wall Street Bets community is just a bunch of novices and amateurs, then what are the hedge funds they just crushed?
Wall Street Bets didn’t just give retail investors the power to make hedge funds sweat. It’s a concentrated power which is far more potent than scattered power.
Redditors have been adamant about focusing the fight on GameStop stock. That is their central prize, their primary way (for now) to get revenge for the Great Recession. AMC, Blackberry, Nokia, and other stocks are also seeing similar jumps for similar reasons, but GameStop stock is their central focus.
Someday, GameStop stock won’t have the same mania it currently has, but Redditors can easily find a similar stock and load up accordingly. And the lessons from this saga will forever be etched into history.
Regardless of how little or how much politicians act upon recent events, one thing is certain. Wall Street Bets will make up for any lack of action by capitalizing on hedge funds’ weaknesses and further expanding the current dialogue.