GameStop: a win for the guppies
The stock market, when it operates without fraud and without the government’s thumb on the scales, is always a gamble. Those who are risk-averse have other options. The events around GameStop, however, showed that the professional risk takers aren’t playing fair and that, when the little people rise up, the government stands ready to smack them down again.
By 1991, I had my retirement fully invested in the stock market. In that year’s crash, I lost not just my earnings and my employer’s matching funds but a great deal of my principal. That was the beginning of my risk avoidance. Eventually, I returned about 40% of my funds to stocks, keeping the rest in Treasury bills.
In mid-September 2008 I was back at headquarters for training. One afternoon I got the willies, hunted down a free computer, sat down, and moved all my funds into T-bills. That year I earned 3%. If I’d not moved my funds, my losses would have been right around 25%. I could have made a lot of money in the stock market since then, but…risk avoidance.
What’s been going on the past few days has been fascinating. It reminds me of several movies: Trading Places -- that $1 bet was so sweet. Granny Wendy’s comment in Hook, “Peter, you’re a pirate.” And the scene from The Accountant where the brother makes a point to the short trader that his actions hurt lots of little people. Kind of like Biden and the pipeline employees, doncha think?
My friend Lauren, a fantasy and science fiction novelist, describes it this way:
Short sellers (sharks) were targeting a company. Normal people (guppies) found out and drove the stock price up, resulting in huge losses (as in billions) for the sharks. Pandemonium erupted, with people cheering that the sharks got what they had coming and the sharks screaming that they’d been cheated by the guppies ganging up on them.
Normal people, riding high on their win, start playing the same game with other stocks being treated the same way.
Pandemonium continues as the SEC gets into it and Congress considers legislation that would make such wins against sharks illegal in the future.
I sure hope that Congress, the White House, and the SEC are able to take a clear-eyed look at this and see it for what it is – free people making free choices about their money. Individuals (including corporations) freely invested in hedge funds. Hedge fund managers freely invested that money in the market as they chose.
Others freely invested in the market too. Sometimes you win, sometimes the projected trajectories fail to materialize and, sometimes, nerds rule. There’s no need for official America to put its thumb on these scales.
Anony Mee is a retired public servant.
IMAGE: Stock exchange by piqsels. CC0 Public Domain.