The GameStop short squeeze has been described as a revolt against financial capitalism, or the realization of Occupy Wall Street. This is like calling the movie Air Bud a critique of basketball because a golden retriever proved surprisingly good at the game.
That an investing influencer under the moniker DeepFuckingValue collaborated with like-minded speculators on Reddit forums to identify an arbitrage and put the squeeze on ostensibly sophisticated hedge funds is nothing short of impressive—and a testament to the accessibility of the markets. Some big players saw real losses, but so far the markets have not crashed, and the financial industry is not shook.
Indeed, some of the biggest profiteers from this week’s market action are asset managers like BlackRock, market-making hedge funds like Citadel, and the private equity giant Silver Lake. Other big investors quickly followed Robinhood users into the GameStop trade, along with many new small-time day traders. How all these various players exit the trade—and whether they do so at a profit—will shape whatever response regulators may offer to the situation.
After some brokerages suspended trading in GameStop and other hot stocks, conspiracy theories quickly spread that “suits” intervened to keep small investors from playing the market. Some populist politicians joined the conspiratorial social media pile-on. The more prosaic reality is that online brokers swamped in new business had to raise money to meet capital requirements, imposed by regulators to protect investors of all stripes.
Populism this ain’t. Occupy Wall Street did not speak with a single voice, but after the 2008 financial crisis, the “99%” were clearly fed up with speculation. Some of demands that emerged from that movement included universal basic income, debt relief—and a financial transactions tax to curb short-term investing. A decade later, is the dream really unfettered access to leveraged options trades?
Make no mistake: The “suits” would love to see that pivot—some call it neoliberalism.
