Many of the ‘unprecedented’ news of last year that snowballed in 2021 are somehow related to the stock market. In addition to the dollar’s ongoing depreciation, one could mention the overvaluation of new tech companies and banks’ exorbitant profits. Indeed, there is much that could be said about the features that make these events one of a kind. Yet, few such topics have attracted as much attention as GameStop’s case and the current spike in inflation.
Admittedly, since talks of price increases have begun, the craze around GameStop has ceased; but its long-term consequences remain unclear. Thus, it is time to reassess those frantic weeks to determine what really happened. More importantly, what does it all mean for the coming months and years?
Operating from a suburb of Dallas, Texas, GameStop operates the world’s leading electronic game seller. Last year, its activities spanned the world, with over 3000 stores in North America and about 1000 in Europe. In truth, the company is not one of the healthiest in business. Despite increasing “demand for its products that support remote work and virtual learning”, its shares kept falling in value.
Essentially, GameStop entered the pandemic as a brick-and-mortar corporation in a world that was to become Amazon’s. Its lack of preparedness for “the online ecosystem” made it the target of short-sellers, mostly professional financiers.
Due to its weaknesses, the ruthless professionals who put their money against GameStop were doing great in late 2020. However, as the spring started, some generally young, and predominantly amateur investors began buying GameStop’s shares propping up their price. This initially limited contingent of small investors had made its counterplans on a Reddit forum titled Wall Street Bets. As the pack grew, some media and politicians started calling for regulation lamenting trading gamification and market populism. Eventually, Robinhood and TD Ameritrade – the retail investors’ favored trading platforms – halted trading on GameStop shares, along with some other stocks targeted by these amateur traders.
And the politics all started when Robinhood blocked trading involving GameStop and other “meme stocks”. In fact, it took Democratic Rep. Alexandria Ocasio-Cortez a matter of hours to tweet her outrage for the decision. But what is more extraordinary is that it took even less for Republican Senator Ted Cruz to comment “Fully agree”. This was one of the first times that the Trumpian senator and the radical liberal congresswoman publicly agreed on anything.
Still, the reason why the two extreme wings of US politics managed to converge for once is not too mysterious. In fact, many have perceived “the decision by popular trading app Robinhood to restrict, at the height of the frenzy, the purchase of GameStop shares” as an attempt “to placate the proverbial establishment”. Hence, no surprise that politicians who have built their careers on fighting back against the elites have reacted vehemently.
… or divergent political interpretations?
But the conclusion each of the two sides has drawn from the events differs deeply.
On the one hand, Senator Elizabeth Warren has expressed liberal Democrats’ position most clearly. The reality, according to Senator Warren, is that finance is “less about the value of business and more and more like casino gambling”. Hence, GameStop frenzy is not “a one-off problem”, but the symptom of a disease requiring “systemic regulation and enforcement.”
On the other, post-Tea Party Republicans’ have found their standard-bearer in popular radio host Rush Limbaugh. In this perspective, the GameStop frenzy is “the most fascinating thing” that happened in a long time. And the reason is simple: these retail investors’ fight against rigged finance seems to echo Trump supporters’ accusations of electoral fraud. Thus, some on the right support r/WallStreetBets’ effort to democratize trading and harm the “intended winners” of the financial game.
This difference is crucial because neither of the two positions really addresses the key concern of conservatives. In fact, enlarging market access is “a way we can start talking about decreasing wealth gaps.” In order to achieve this aim, some rules have to exist and provide a minimum degree of predictability. In other words, financial markets have to be like a famous novelist’s works. At first, one can predict each book’s style, but only assume whether it will be a success or a failure. Similarly, one should not pretend any guarantee of the final result of an investment in financial assets. Yet, everyone should have an equal opportunity to learn the rules of the financial game and play it fairly.
The views expressed in this article are the opinion of the author and do not necessarily reflect those of Lone Conservative staff.