No, it didn’t.
But are we having fun yet? Prolly not if you’re one of the gumbies who treats bedtime stories like the Herald’s steaming pile of bovine faecal mass as reliable market intelligence. I promised last week we’d revisit the Game Stop story, once things had shook out some. And they have. Mostly what got shook out was the life savings of mug punters who jumped into the hot tub long after the smart money had wiped off its dick and walked away.
So lets recap. What the hell just happened? Unlike the Herald’s shareware lite version, the reality was actually kinda superfuckinghypercomplicated and I’m not gonna even attempt to explain it all. But I hope to give you the comic sans dot point version so you’ll be armed against the next dangerous idiot who tries to convince you that a giant can of carnivorous fucking sandworms from the fabled desert planet of Arrakis is actually a convenient and delicious source of protein and you should just dive right in.
First, lets do a little question and answer.
Q: Game Stop is what, exactly?
A: It’s a video game store. The biggest video game store in America, since you ask, which used to be a big fucking deal, lemme tell ya. But nowadays it’s like being the skinniest, hungry-ass T-Rex caught in a sucking tar pit, looking at the killer asteroid filling the sky and wondering why you wasted your life.
Q: Oh, that’s sad. Poor Rexy. How’d that happen?
A: Because streaming media + Covid-19 has killed the market for brick and mortar game stores. EB Games will go the same way here in the next few years. (As will newspapers and free to air TV and coal fired power stations. Honestly though, you’ll miss the dinosaurs more).
Q: Okay, so if Game Stop is doomed, why did the stock market get such a boner for Game Stop shares last week?
A: Initially, because a bunch of internet trolls decided to fuck with some hedge funds. And then because the stock market is a vicious apoclyptic thunderdome where weaponised undead gladiators fight for every scrap of tasty human flesh.
Q: Say what?
A: All right. I’ll try another metaphor. Imagine the stock market as a casino. You got your big dick high rollers at the table making their bets, but they’re not the only action on the floor. If you are not just a degenerate gambler but also an irredeemable sociopath you can bet on whether or not your fellow gamblers are likely to fail bigly and end up living under a highway overpass, masturbating into burning oil drums for warmth in the dead of winter. Many of these sociopaths work for hedge funds.
Say you’re an idiot and you bought a bunch of shares in a dying business. Plastic video game cartridges, say. Or a metropolitan broadsheet newspaper. You might be growing nervous about your investment. Suddenly you meet me, an amoral sociopath. I offer to ‘borrow’ those shares from you for a while, but don’t worry. I’ll totes get them back to you at the same value. Fuck, the way these bitches been going down, that’s a sweet deal. And because you’re an idiot and you think metropolitan broadsheet newspapers, coal fired power stations, network TV and/or video games on plastic discs, are for sure gonna come roaring back, you agree to lend me your shares. What could possibly go wrong?
Did I mention I’m a sociopath?
So yeah, I sold your fucking shares, dude. But it’s good. We’re cool. I still got time to get your precious little bits of paper back to you.
I’m just gonna wait for the market to crush the fucking life out of your sad little business and when their share price tanks, Imma gonna buy up big.
I borrowed your shares and sold them at, say, ten bucks pop.
Then, the share price collapsed and I bought the same number of shares back at three cents each.
It’s called closing my position. It’s called shorting. And it means I can give you back your lousy shares and trouser the $9.77 I made on the deal.
Or the nine million, seven hundred and seventy thousand, if I bought more.
Q: Okaaaay. I think I get it. You’re a bad man who profits massively from the misery of others. But what happened to the poor dinosaur game people?
A: Natural Selection.
Q: Huh? But the Sydney Morning Herald told me it was a battle for ages between the evil billionaire overlords of Wall Street and a gallant little band of internet…
A: No. That wasn’t how it happened. Yes, the rally in Game Stop’s share price started in a subreddit called WallStreetBets. But this isn’t your grandma’s internet knitting circle. (Your grandma’s internet knitting circle is called QAnon and they’re building a space laser. Or hijacking it from the Space Jews. Or something. I’m not sure).
Anyway, WallStreetBets is like 4Chan for daytraders. You might have read the heartwarming stories about the kid who’s mum bought him ten Game Stop shares for his birthday, and now he can go to college without selling a kidney to pay for the tuition? That’s nice. Or maybe you saw the unemployed line cook who made out like a bandit and now he doesn’t have to eat sawdust muffins for dinner anymore. Good for him.
But that wasn’t how this happened.
What happened was late last year an investor with a lazy fifty grand to spare dumped it into Game Stop shares on a hunch. The company was doing what companies do when they get into trouble, closing stores and fucking its employees. Investors love that shit, because in the zombie holocaust gladiator cage fight of the stock market, savagely cutting costs means increasing profits and fattening dividend payouts.
(Did I mention that there would be sociopaths?)
This redditor, going by the superhero name of ‘DeepFuckingValue,’ bought into Game Stop at 30c and had seen the price rise to 85c off the back of all those sackings and that sweet, sweet human misery. Didn’t hurt that a bunch of one time gamergate incels were performatively owning the libtard virus pussies by totally going to mall without a mask to buy a game and own the libtard virus pussies.
Take that, Fauci!
DeepFuckingValue’s initial investment of US$53 000 was now worth US$113 000 and he posted a picture of his profits.
On WallStreetBets this is known as gain porn.
Still, nothing much happened.
But discussion on the subreddit soon turned from how Game Stop might be undervalued at eighty-five cents, to how many billions of dollars a couple of hedge funds had bet against the company being able to rescue itself by closing stores and screwing it’s work force.
And here is where the story takes off because of math, psychology and Elon Musk.
The sociopaths on reddit quickly worked out that Game Stop was the most shorted stock in America. Two hedge funds in particular, Melvin Capital Management and Citron Research, had shorted the shit out of it.
As the million-plus members of WallStreetBets were getting increasingly tumescent about DeepFuckingValue’s gain porn, and starting to lay their own bets on the stock too, the quants and strangely human-looking android hedge fund managers at Melvin and Citron were getting a little… toey. For their short to work, they needed Game Stop to stay in the tank.
By early January, however, the subreddit barbarians had poured enough money into the company that the constant uptick in its sharemakert value was beginning to attract the algorithms of vulture capital. A stock going up is likely to keep going up… until it doesn’t. Some of the buyers were the hedge funds, hedging against… themselves; trying to grab up increasingly rare offers of Game Stop shares (cos everyone’s holding onto them now, watching the numbers go up) because eventually the hedge funds were going to have to make good on their promise to give back stocks they had borrowed and… you know… er, sold.
The heat grew and grew and grew and then this happened.
This illiterate brainfart immediately juiced the price of Game Stop shares by 137% to $334.
Quite a climb from the thirty cents DeepFuckingValue paid for them.
And because Musk is a liminal character who sits at the intersection of extremely online douchebro culture, and clueless real world normie culture, the clueless fucking normies at places like the Sydney Morning Herald suddenly piled in with millions and millions of words about an online band of loveable rogues getting one over on the Establishment. Even though, anyone with thousands of dollars to wager on Gamestonk! is at the very least hanging around the servant’s entrance to the Establishment, and even though the actual fucking superrich mercenary killer elite of the Establishment were by now charging into the stock for their own profit-taking orgy.
As Bloomberg’s Matt Levin pointed out.
Surely a lot of professional investors are white-knuckling this thing, buying it as a trade and hoping they can get out before the redditors do. “Lol GME to 1000 [rocket emoji] [rocket emoji] [rocket emoji]” is a perfectly good hedge fund thesis right now. WallStreetBets started this but anyone can jump in now.
Judging by volumes, everyone has. Yesterday Bloomberg’s Eric Balchunas pointed out that GameStop was “the most traded equity on the planet,” with $20 billion of volume. Tesla was No. 2. GameStop closed yesterday at $147.98, for a market capitalization of about $10 billion, up 93% from the day before, up 641% from two weeks ago.
By the time you heard about it, the Game Stop rally wasn’t a raid on the High Tower by the plucky little muppets of the internet thieves guild, it was—to borrow from Andrew Granato on the excellent Margins substack—The Massive Redistribution of Money from Some Rich People to Some Other Rich People. The biggest winners were the biggest investors, and they were all billionaire Establishment douchepalaces like Fidelity and BlackRock.
There were of course other examples of evil shenanigans and stupid shenanigans and an accelerating sense of impending shenanigeddon…
But that is a story for another day.
The take away for you is not that the media is straight up lying to you and milking your prostate when it parlays narratives like Game Stop into simple bed time stories. It’s that they don’t know what the fuck they’re talking about.
But unlike me, they’ll never admit it.
Well, this went on a bit longer than I expected, which is good, because next week I’m at the beach recovering from a book deadline. My idea of recovery is to compose an essay on epistemic collapse for you, but I’m not going to post it next Friday.
You can wait until I get back.
That doesn’t excuse you from widely sharing this free post, however, so I can lure even more suckers into my trap.