Las Vegas Review-Journal (Sunday)
GameStop surge echo of Occupy movement
Day traders gang up on major hedge funds
WASHINGTON — They’ve endured a financial crisis. Two recessions. Mounds of student debt. Stagnant pay. Costly health care. Dim job prospects.
They’ve seen the uber-rich 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 — and, not coincidentally, inflicted huge losses on the hedge funds of the super-rich, who had placed bets that the stocks would drop.
Their strategy 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.
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 drive to pick on Wall Street financiers have sent shivers through ordinary investors and heightened fears about the fragility of the markets after a prolonged period of stock gains fueled by ultra-low interest rates. Those fears caused the S&P 500 index to suffer its worst week of losses since October.
GameStop shares? They rocketed nearly 70 percent on Friday. Over the past three weeks, they’ve delivered a stupefying 1,600 percent gain.
“They figured out how to play the way Wall Street has been playing for a long time,” said Robert Thompson, who has 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 like 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 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 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,” Weir said. “At this point, it’s not about the money.”
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. Outrage fueled the Occupy movement, in which protesters took over New York’s Zuccotti Park and other public spaces and demanded financial reforms.
The coronavirus inflicted more pain, flattening the economy and causing more than 20 million Americans to lose jobs.
The stock market, the target of the Reddit day traders, has stood as America’s premier symbol of entrenched wealth. But technology, including forums like Reddit, has made it ever easier, faster and simpler for small investors to mobilize, swap information and plot strategy. And e-trading apps, notably Robinhood, allow amateur traders to buy commission-free stocks with one click.
Not all the day traders are inflamed by anger. They just see an opportunity to make money and pay bills.
“A lot of people are having trouble paying rent,” said Alexis Goldstein, a veteran of the Occupy movement. “A lot of people are at risk of eviction. A lot of people are very desperate, quite frankly, for new ways to make money.”
Yet Goldstein worries that the revolt will fail.
Some of the Wall Street firms that are targets of the Redditers profit from the very volatility that the Redditers’ assault has whipped up.
“I suspect it’s not Robinhood investors and Redditers who are making money,” Goldstein said.