Finance: Are We Actually Getting Some Unity?

I presume most readers are aware of the huge battle going on between a bunch of small investors and some giant hedge funds. The hedge funds took what I admit is the reasonable position that the company GameStop, which I don’t think I’ve ever even heard of before this, was dying, so when its stock started going up, they decided to short it. The crazy people at the sub-reddit called Wall Street Bets noticed that the number of shares that were shorted was so high in terms of the percentage of stocks outstanding – I’ve heard that it was over 100% – that they could wreak havoc if they could all bid the price of GameStop up. For then those shorting would have to buy back stock when the price was high, and when there were few people willing to sell. And this has led to a short squeeze that has put enormous pressure on those hedge funds to pay up, even though it means tremendous losses for them.

Ok, I think I have that right. The remarkable thing is the way that the elites have rallied around the hedge funds, threatening criminal investigations, wondering if this is a Russian plot, etc. See here. Meanwhile, a lot of other people – and as far as I can tell, this includes people on both the left and the right, thus giving us some unity, even if it is not the unity Biden wants – have rallied around the Wall Street Bets guys. See here. For them the whole business has a delightful David versus Goliath aspect to it.

So now the big question is: What will Biden’s administration do about it? The Democrats are big government people, and the hedge funds presumably have their ear, while the Wall Street Bets crowd do not. So, it is likely that the Biden administration will step in and do something, because that is what Democrats do, and what it will do will be to help the hedge funds. And that will piss off a lot of people, not all of them right-wingers, either. And many of them are young. Biden may destroy an entire young generation’s trust in the Democrats for years.

I can’t wait!

Comments

[Charles N. Steele]

It’s a wonderful thing, what has happened to Melvin Capital. The actions of the reddit investors are exactly what billionaires do, e.g. how George Soros made billions in forex.

Citadel loaned maybe $3bn to Melvin to try to bail them out. Treasury Secretary Janet Yellen has taken over $800,000 from Citadel for luncheon talk, which proves she must really be something! No doubt she’ll see that justice is done. Heh!