Digital Pitchforks

I was going to post about some other topic but the news about GameStop kept appearing in my News feed, so I was like “What is going on?”

Schadenfreude! Big time! I will admit I have that same gleeful feeling upon reading that regular small investors took down one or two hedge funds. I don’t know what propelled a lot of small investors to boost GameStop’s stock as a way of taking down the hedge funds who were short selling. I need to read some more to find out what was the instigating incident and why GameStop.

But, after thinking a bit, I wonder if this activity is really a good thing? This is pitchfork behavior where hordes of people gang up on somebody because they are irate about something (namely, the rich keep getter richer and impoverishing everyone else); however, what if those hedge funds have been doing some fancy financial stuff like the banks had been doing before the 2008 Great Recession? What if bankrupting one hedge fund company instigates a domino effect that pulls down the financial system, very similar to what we nearly went through in 2008?

Maybe I’m worrying too much.

Or, what if after the hedge funds leave the short selling of GameStop because they lost a lot of money and now the little guys want to cash out? If all of them, or a lot of them, try to cash out, wouldn’t the stock price just tank, thus costing them a lot of money? Depending on how much money the small investors had put in for this effort, they could lose a lot of money that they really couldn’t afford. The fact that the news called GameStop an ailing video company kind of suggests that the high price will drop precipitously because the fundamentals of the company is not healthy.

Talk about cutting off your nose to spite someone.

And lastly, the company itself could be grievously harmed by these actions: price rises too high to be sustainable and then overshoots in dropping the price on its way to bouncing back to its “actual” price. These small investors may be killing the company before its time.

Then, think about this, these small investors have learned something: they can now go out and attack hedge fund companies or any investment type company but doing the same thing. In my readings about the whole GameStop saga, the description of the actions by the small investors sounded almost nihilistic to me – again, like hordes of rabid hyenas. This is not the last time they will do this: they will do this again and again, if no adverse financial repercussions – individually, company-wise or nation-wise – happen. This could be very destabilizing.

Come to think of it, voting in Trump in 2016 was a pitchfork moment. We had unhappy people ready to throw a wrecking ball to our politics without a thought of the destruction that could entail. To me, this is nihilistic behavior.

Today, we are suffering from the consequences of that choice: a raging coronavirus with a needlessly high death rate, a white supremacy/Nazism/extremism that has metastasized throughout our country, and people believing in an alternative and fake reality.

So this story of GameStop could be a foretaste of something worse to come.