GameStop day traders enjoy the moment they’ve dreamed about
WASHINGTON — They’ve endured a financial crisis. Two deep recessions. Mounds of student debt. Stagnant pay. Costly health care. Dim job prospects.
They’ve seen the uberrich grow richer while a pandemic threw tens of millions of people out of work and left many more isolated and vulnerable at home.
Now, they feel, it’s payback time.
Nearly a decade after the Occupy protest movement left Wall Street more or less unscathed, the citadel of financial might faces a new assault.
Day traders, mobilized on a Reddit chatroom, have poured about all the money they can find into the stocks of a struggling video game retailer called GameStop and a few other beaten-down companies. Their buying has swollen those companies’ share prices beyond anyone’s imagination — and, not coincidentally, inflicted huge losses on the hedge funds of the superrich, who had placed bets that the stocks would drop.
Their strategy, of course, is freighted with risk. The prices of the stocks they’ve bought are now multiples above any level justified by revenue, earnings or future prospects. The danger is that at any time, the stocks could collapse.
Maybe so. But as one Reddit user wrote Friday, asserting that hedge fund financiers would drink Champagne as they looked down upon Occupy Wall Street protesters in 2011:
“I’d rather lose it all than give them what they need to destroy me ... I’ll burn it all down just to spite them.’’
Their rage and hell-bent drive to pick on powerful Wall Street financiers have sent shivers through ordinary investors and heightened fears about the fragility of the markets in general after a prolonged period of stock gains fueled by ultra-low interest rates. Those fears just caused the S&P 500 index to suffer its worst week of losses since October.
GameStop shares? They rocketed nearly 70% on Friday. Over the past three weeks, they’ve delivered a stupefying 1,600% gain.
“They figured out how to play the way Wall Street has been playing for a long time,’’ said Robert Thompson, who has long tracked cultural trends as director of Syracuse University’s Bleier Center for Television and Popular Culture.
“I’m amazed it didn’t happen earlier.’’
Feeding the frenzy have been young traders such as 27-year-old Zach Weir, who this week bought five shares of GameStop.
“I’m a college student, so that’s basically a month’s rent for me,” said Mr. Weir, who is pursuing a master’s degree in marketing.
He did it, he said, because he believes in the cause: protecting a cherished game store where he would hang out as a teenager on Friday nights from financial tycoons who want the company to fail.
And if he loses his investment?
“If my account goes to zero, it goes to zero,” Mr. Weir said. “At this point, it’s not about the money. I think this is bigger than the money now.”
Frustration and rage over widening financial inequities in the American economy have been mounting for years. The richest 1% of Americans collected about 19% of pre-tax income in 2019, up from less than 11% four decades earlier, according to the World Inequality Database, run by Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley, along with other researchers.
The financial crisis that ignited the Great Recession of 2007-2009 intensified resentment toward the bankers who had financed the dodgy loans behind the catastrophe and had ignored the obvious risks, only to receive bailouts from taxpayers and largely escape accountability. Rising outrage fueled the Occupy movement.