SUMMARY
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“The wheel of Fortune turns; I go down, demeaned; another is carried to the height; far too high up sits the king at the summit. Let him beware ruin.” – “Fortune plango vulnera,” from Carmina Burana
The world is not a just place. There is inequality in the world that needs addressing, from income inequality to social justice issues, to the absolute inability for karma to make a dent in the world as it is. As a result, trying to navigate an unjust world is bound to wear at the soul.
For introverts like me who want to connect with others virtually, Reddit feels like safe harbor from those world-weary feelings. It’s a place for me to talk to like-minded people about specific topics, and to find information about things I value or want to improve in myself.
Reddit, much like any other social media platform, is also an open avenue for democratizing long-simmering outrage about the state of the world.
The recent goings-on with the WallStreetBets subreddit and GameStop stock feels like the latest in a long line of attempts to make something feel right about a world that doesn’t support everyone equally.
WallStreetBets and the short squeeze
How does one explain the entirety of this ongoing tale without running out of words? I’m not quite sure, but I’ll try.
A hedge fund called Melvin Capital essentially pushed for people to “short sell” the stock of GameStop (GME), a video game store chain. Those on Melvin Capital’s side were betting that GameStop’s stock price would go down, and selling the stocks at a certain point above the market price would net them a profit.
A short sell is when you borrow shares to sell, expecting the price to go down, and then buying them again when the stock price drops. The seller regains his shares, and gets to keep the difference.
A subreddit called r/WallStreetBets (WSB) was on the opposite side of the equation. The redditors there liked GameStop for a number of reasons: some of it was based on information – such as checking the financials of GameStop and seeing the possibilities of the company not going under and realizing it was being severely shorted – and some of it was based on just personal support of the stock.
Redditor DeepFuckingValue (DFV) was hyping up the stock as he bought quite a bit of it. As Esquire notes in its report of how this all came to pass, “DFV would be rewarded, handsomely, for his faith.”
“By August 2020, his contracts were worth $600,000. In September, he crested $1 million. Mid-October, $2.3 million. He entered 2021 with more than $3.1 million in GME contracts, and then shit got really crazy. As DFV’s legend grew, more people on WSB got in on the action, pushing the GME price higher and higher. As of his latest update, DFV’s E-Trade account is worth $22.8 million, $4.4 million of which is in cash he pulled out. And it all started with $53,000 in options premiums.”
Unfortunately for Melvin Capital, it was also shorting GameStop. Because their short sell backfired, this means that they need to buy back GME stock at prices MUCH higher than they expected and then give those shares back to the original owner. In other words, those on Melvin Capital’s side of the equation received heavy losses.
Striking back at those with money
The distressing thing about the WallStreetBets event, for me, is that it’s a glimpse into how people with less power would be willing to sacrifice everything to strike back at those with far more power, without necessarily realizing other people are still benefiting from the chaos and sitting quietly amassing more wealth.
WallStreetBets subreddit members are often characterized as amateur traders with far less resources than your average hedge fund.
You can imagine, in this case, someone putting their savings into this one play with the hope of doing two things: making a profit, and telling the rich to, essentially, screw themselves.
Based on discussions on the subreddit, there is an undercurrent of people wanting to keep their GME shares so they can mess with hedge funds and put them out of business.
The feeling I get from people posting is that WSB retail investors are, in some respects, understandably angry there are super-rich people out in the world and want to make their own fortunes in order to “balance the scales,” so to speak.
At the same time, other Wall Street firms already disclosed they benefitted from this, and others took on new trades to make their money. Did it all matter then, from a metaphysical scale-balancing viewpoint?
Resumption of the status quo?
The inequality won’t end with this round of publicly-discussed short squeezing, and with trading apps and hedge funds trying to bring back the status quo, it feels as if the Reddit-induced rally won’t make a dent, other than being a footnote for history.
A short squeeze is what happens when the stock that investors are trying to short sell goes up in price instead of going down, forcing investors to buy back the shares – at a loss.
More to the point, none of this affected those most hit by inequality: those who don’t have $5,000 in savings to invest in sticking it to Wall Street, or who don’t even know what Wall Street is.
At best, WallStreetBets’ attempt to short squeeze Melvin Capital and its ilk was generated, democratized outrage at the world being unfair for the purpose of making a buck and a statement.
As I said earlier, the goings-on with the WallStreetBets subreddit and GameStop stock feel like the latest attempt to make something feel right about a world that doesn’t support everyone equally. At the onset, it might feel like a form of outrage turned justice, but it was also trolling as a performative piece meant to make people feel good at lashing out.
This whole episode feels like the latest turn in Fortune’s wheel – some will rise as others fall, but actual, actionable social and economic justice is never maintained – and that’s what wears at my soul the most out of this whole thing. – Rappler.com
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