Man, I’m glad I waited until the afternoon to talk about this today to you. As of the time of writing, legislation and a legal challenge from Alexandria Ocasio-Cortez may change what the future holds on this, and I needed to wait until the fallout to sum this up effectively and not bore the pants off you all.
Before I do that, I have to put this. Whilst I’m going to explain to you what’s happened with gamers and the stock market, the views expressed here are solely my own. They do not reflect the views and opinions of those who employ me, and certainly not Gamerhub’s as a whole. Now that’s out of the way, lets talk about it.
The stock market is the world’s biggest legal casino. You, as a person, can buy shares (or percentages of them) At a low price, and when the price is high enough, to sell them back at a profit. This is normally how you make a profit on the stocks. However, there’s something in the industry called “shorting” that happens normally from people with lots of money. Trust fund kids, stockbrokers and Hedge Fund managers do this all the time. They’ll buy stock in a company, sell it on at a high price, and when the company fails, buy it back at a lower price to make money. Yes, this is morally abhorrent, making profits out of misery and people getting fired, but it happens a lot more than you’d care to think. This was one of the reasons why the sub-prime mortgage crash of 2008 happened, and we’re still feeling those effects today.
Well, over the last 72 hours, a lot of gamers decided they’d had enough of that. Using a reddit thread (r/wallstreetbets), they decided to make Hedge Fund Managers (hereby referred to as HFMs) lose a lot of money. How do we know that they’re gamers, and why?
Well, it started with GameStop. To those not in the USA, Canada or Mexico, GameStop is the UK and EU’s version of Game. They sell new games, buy old games and sell the old games at a profit. Two major contributions haven’t helped GameStop at all. Firstly, the world of gaming is increasingly looking at digital purchases only, and cutting out the middleman. PS Plus, Xbox Game Pass Ultimate and what Nintendo have on their E-Store are draining the lifeblood out of games shops. If you want a comparison point, look at how Blockbuster failed when Netflix became the giant it is today.
Then there’s the pandemic. You’re probably sick of hearing about this, but COVID-19 has made normal retail all but impossible, and has torn the normal way of life for millions apart. It’s even harder to sell second-hand goods when each physical copy has to be isolated for 72 hours and disinfected.
Because of all this, GameStop’s stock values were falling at quite a voracious rate. Things like this are nothing new, but then Reddit got involved. On Reddit, the people on r/WallStreetBets decided they’d had enough with the HFMs playing Russian roulette with their favourite shops and immediately invested in them. So the HFMs, who had sold the stock in the first place got a hell of a shock when they had to repurchase them for a higher price.
“How bad was it?” I hear you ask. Well, voice of the reader to explain my point, until last night, the price of one unit of stock had risen some 350%. Now, yes, there’s an element of class warfare in here. People with less than £5,000 in the bank became quite rich. It can be seen as revenge for the financial dips we’ve had since 2000. However, that’s what everyone goes at for an angle. I’m not siding with the 1%ers here, but understand that this can potentially close big businesses and rob people of their pensions, as most HFMs work on behalf of big businesses and banks. It’s worth bearing that in mind as we look at the reaction and potential side effects.
Well, the main app people have been using is a stock trading app called RobinHood. Their twitter account claims that they’re “democratising finance for all”. So far, so viva la revolucion. However, this has started to take one heck of a twist, as on the night of 28/01/2020, they stopped individual shares in companies including GameStop, Nokia, Blackberry and AMC. These companies had all been shorting targets. 23 hours ago (at the time of writing), they issued a statement saying that “In light of current market volatility, they are restricting transactions for certain securities to position closing only”. What this effectively does is stop the tide of people costing HFMs money by using their app. However, this isn’t over yet. Enter US Representative Alexandria Ocasio-Cortez. AOC has frankly not been shy about saying what’s on her mind in the past, and as of 16:36, 28/01/2021 (GMT), she had this to say.
She isn’t alone, as people who would normally disagree with everything she stands for have agreed with her, including Ted Cruz. For the sake of relative impartiality, I won’t pass comment on Senator Cruz. Elon Musk has also agreed with her, as well as several other politicians. It appears as of the time of writing that the USA government are going to step in to solve the issue and allow normal people to continue to use the stock market for their own interests.
What are the ramifications?
Well, there are two. Either things turn back to normal, and life goes on as per, but that would rely on some deeply unpopular legislation passing through in the USA. I’m not saying that’s impossible, as the Democrats in the USA have been funded by big businesses in the past. I am however saying that this would make them incredibly unpopular with the electorate, and this wouldn’t be beneficial to them so soon after an election.
The other option is far more interesting and could lead to some lasting changes. As I hope you understand from what I’ve explained, the financial markets are effectively giant casinos rigged for the rich. If the gamers get what they want, the following things will happen. Firstly, the US Supreme Court will force Robinhood to allow trading again by individuals, which will likely cost HFMs even more money. The wealth redistribution will likely force legislative change and give far more powers to the consumers. This will lead to a change in the way gaming markets work, and allow for better consumer power in the gaming market.
So, that’s the whole situation explained, and I hope you’ve enjoyed reading that. As I’ve said, please keep safe during all this, and I’ll see you in my next article which will be up on the 31st of January 2021.
For The Gamerhub, I’ve been Davey