In the classic 1983 movie “Trading Places”, our heroes, played by Dan Ackroyd and Eddie Murphy, discover that their lives were swapped by two obscenely wealthy brothers, Randolph and Mortimer Duke. The man of privilege was driven to poverty, and the man of poverty was elevated to wealth and privilege, and the two seemingly adopted to their new positions quite well. When Murphy’s character discovers this was done all for a bet of one dollar, he went to Ackroyd’s character and the two plan their revenge.
This is going to give away the ending, so be warned. The two discover that the Duke brothers were going to get the inside information about orange futures. This discovery alone could lead to prison time. But, of course, we all know that people like the Duke brothers are always “too big for jail”. So they play their own game on the Dukes. They give the Duke brothers fake information, then they use the real insider information to game the trading market for that day, making themselves obscenely rich and sending the Duke brothers into bankruptcy. And all supposedly for a dollar.
Fast forward thirty-eight years. A bunch of real-world people discover that some real-world rich people are playing their own games on Wall Street, and they decide they’re going to do something about it.
So a bunch of people in a Reddit subgroup find out that a bunch of companies are targeted for something called “short-selling”. That’s when investors and hedge fund managers decide they’re going to borrow shares of a business that they will sell on the belief that the value will drop. Enough of them do it, and the price will drop. They then buy back the devalued stock at the lower price and give back the lenders their shares at the depleted amount and they keep the difference. If they borrow a share for $10, short it to $2, they sell back the share to the lender for $2 and keep the $8. This is usually done to a company that is believed to be struggling and may soon go into bankruptcy and insolvency. The end result, of course, is that the company really does go under, and it often ends up shutting down and laying people off.
It’s a deplorable bottom-feeding activity, but it is perfectly legal and legitimate and it helps the rich become even richer while also hurting the hard-working Americans and driving them further and further into poverty. It’s also nothing new. They’ve been doing this for seemingly forever.
So this Reddit subgroup finds out which companies are being targeted for short-selling and they decide on their own to buy the stocks of those companies. Because, you know, they don’t want to see companies like GameStop and AMC driven into bankruptcy and have all of those countless hard-working American lose their jobs. And they spread the word to their friends as well. They use trading apps like Robinhood to make these purchases of their own money, in complete defiance of whatever financial advice they may hear. The end result is that the price of those stocks go up instead of going down, so all of those hedge fund people lose and now they have to pay back the loans with their own money at the higher value.
Now if you happen to think it’s not so bad, consider this: the value of GameStop, one of the companies targeted for short-selling, shot up 1800% in just a few days. It’s like borrowing a share for $10, believing it will short to $2, and finding out it suddenly is worth $180. You’re out $170! Well for the short-sellers for GameStop, they’re now reportedly out almost $20 billion dollars! That’s “billion” with a “B”.
But you know what? It’s also legal. No law is being violated. No rule is being broken, other than the unwritten rule that rich people should be allowed to pilfer struggling businesses into destruction for their own increased wealth. The Reddit people played the same game with the same rules as the hedge fund bottom-feeders. The only difference is that there were enough of them to turn it around and thumb the bottom-feeders. And, as of this column’s posting, it’s still going on, despite the howls of protest from the Wall Street elitists who are whining about losing money.
Let’s get brutally honest here... I have no sympathy for the Wall Street crowd on this subject. None whatsoever. I am a stockowner. I have a 401K that is invested in Wall Street. But I sure as hell would be pissed if some outside group decided that the business that I have stock in should suddenly make my stock worthless and drive that business into bankruptcy just so they can buy that third private jet and their tenth private home.
Wall Street is the world’s biggest legal casino. We all know this. There is supposed to be risk in any investment. We hear that all the time in those overplayed investment commercials. It’s there in the legal mice-type. Nothing in the world of Wall Street speculation is supposed to be either a sure-thing or a sure-flop. Nothing.
And all this talk from the Wall Street elites about how the Reddit crowd are doing something wrong is just plain bullshit. That’s right, bullshit! All of it. Bullshit!
These stuck-up prissy self-righteous self-serving millionaires and billionaires and their sycophantic enablers in the financial media have been playing this game for years, trouncing struggling businesses and driving them into failure, shutting down businesses and killing jobs and hurting hard-working Americans, and now regular people – not so-called masters of the universe, not the financial elite, not the Wall Street gang – are playing by the same rules as the bottom-feeders and they beat them at it. That’s the “free enterprise” that you love to tout. That’s the “free market” that you love to promote. Those pillars of capitalism that you love to cram down our gullets being force-fed back at you. How does it taste, Wall Street?
It probably won’t last for long. The world’s biggest legal casino doesn’t tolerate losing any more than any other kind of casino... or at least any casino not run by an orange-skinned narcissist with his name on the building. At some point the millionaires and billionaires and Wall Street elite will find a way to shut it off. But in the meantime, they should take the time to realize that their games have real consequences for others. As Jon Stewart so memorably told CNBC’s Jim Cramer in 2009, “it’s not a (bleep)ing game!”
And for those precious hedge fund bottom-feeders supposedly hurt by this, I might suggest the same advice that your brethren have been telling the rest of us for years... pull yourselves up by your bootstraps, stop buying all those houses and cars and private jets and yachts that know you can’t afford, stop buying those bottles of champagne and cans of caviar, and maybe spend some money on education so you can learn to be better people and get more ethical jobs.
What’s good for the goose is good for the pate-eaters.
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