As happens every once in awhile, the entire internet is pretending to know about the stock market in order to talk about financial news this week. There have been several good primers (which still leave me, an idiot who can’t even budget, with myriad questions) about the whole GameStop trading kerfuffle, but my colleague Jack Crosbie offered one takeaway yesterday: The House, meaning Wall Street, always wins. This isn’t really a David and Goliath story, as seductive as that trope is, about the little guys organizing on Reddit to screw over Wall Street short-sellers (although there have been difficult-to-confirm anecdotes circulating about people paying off their student loan debt or putting food on the table with their GameStop earnings). It’s mostly a story, broadly speaking, about the rich getting richer and, when they perceive their position is tenuous, changing the rules to favor themselves even more heavily—meaning, it’s a story about how capitalism works.
Let’s take a look at the most recent developments in this story. As of this morning, the trading app Robinhood, which is at the center of all the GameStop stock drama, has reportedly stopped allowing users to buy stock in GameStop and other meme’d up stocks like AMC, Blackberry, and Nokia. Users are apparently allowed to close out their positions but not buy new stock in this handful of companies, with Robinhood citing “recent volatility.” This comes as more than half of all Robinhood users reportedly now own stock in GameStock. Per Vice:
This is likely to have a massive impact on Robinhood users and ultimately the company. According to a popup on the app’s homepage, 56 percent of all Robinhood users own at least some GameStop stock. They are now unable to freely trade it; the app is only allowing users to close out their positions, meaning they can sell it but not buy more. This is potentially devastating for novice investors or those who simply want to follow the general marching orders of the r/WallStreetBets subreddit, which is to hold (and buy more) GameStop stock until further notice.
As you might imagine, people are pretty pissed!
Even JaRule is invested, as it were:
Politicians and lawyers are also getting involved:
The fix does seem to be in. Yesterday, Discord banned r/WallStreetBets’ (the subreddit where this all began) server for “hateful and discriminatory content after repeated warnings.” Huh, OK! While I don’t put it past a subreddit that describes itself as “like 4chan found a Bloomberg Terminal” to be using plenty of “hateful” content, you gotta admit the timing is pretty convenient.
Another important thing to understand: Robinhoood’s main moneymaker is not these fly-by-night retail traders. The whole app is basically a contained world for the Big Money guys to study the stock-buying behavior of the Less Big Money guys and get ahead of trading (which equals profit.) You can read more about that here.
Here’s how I understand this in the simplest possible terms: A hedge fund was trying to short GameStop stock (market manipulation). Then Reddit got involved by buying a ton of GameStop stock, messing up the hedge fund guys’ short positions and driving the price way, way up (market manipulation, but apparently the bad kind). It all seems like a lesson in ‘it’s OK when we do it, because we get the markets, but it’s not cool when the ruffians get involved and mess things up for us.'” Wall Street people simply adore the “free market” and its guiding “invisible hand,” but the hand is fully visible here, as Wall Street pulls any corrective lever they can to stop the bleeding and marginalize these day traders.
It’s also worth noting that, for half of Americans, this simply isn’t a top-of-mind issue because they don’t own stocks. As friend of the blog Hamilton Nolan wrote at a great site (RIP) a while back:
Then there’s the big picture: only half of American households own any stocks. (This figure includes everyone with a 401(k) or other retirement account.) The vast majority of them own less than $10,000 worth. Eighty four percent of stocks are owned by the top 10% wealthiest households. So, who will be directly impacted by the recent fall in the stock market? Rich people. They can afford it. America already immorally favors investors with our tax laws. Rich people who earn a living purely from their investments pay a lower tax rate than those of us who have real jobs. We need not cry for them when those investments decline.
The stock market is made up; it’s a casino for the very rich. And even though lots of Americans will never sidle up to the table, the stock market at large is regarded with an almost religious fervor, like markets were bestowed on us by God above. They also carry an enormous ability to negatively impact our lives (see: 2008). What’s clearer than ever is that the rich will always win, which is why they bow before “the market,” and when things go haywire as a result of their schemes, they’ll always be bailed out as normal people pay the price. It’s all deeply immoral—and predicated on selling the rest of us short.