The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

GameStop: The Best Story EVER!

Posted on | January 28, 2021 | Comments Off on GameStop: The Best Story EVER!

Oh, my! Oh, my! What a storm of hilarious schadenfreude has overtaken the stock market this week! The hero of this saga is a guy with a Reddit account called “DeepF**kingValue” who, in September 2019, accumulated $53,000 in stock in the retail chain GameStop.

From any objective analysis, this was the Stupidest Investment Ever, because GameStop’s business model — selling physical copies of videogames and equipment in brick-and-mortar stores, mostly at shopping malls — is doomed in the online digital era. And yet . . .

“DeepF**kingValue” had a hunch that GameStop was drastically undervalued when it was selling as low as 30 cents per share. His argument was that the retailer was shifting to online sales, competing with Amazon, while cutting costs by closing many of its brick-and-mortar stores. So he kept buying, and the share price kept going up, and as “DeepF**kingValue” shared his story on the Reddit channel WallStreetBets, a cult following developed. By December, with GameStop selling at $4 a share, “DeepF**kingValue” was a legit millionaire.

God Bless America, land that I love!

You can imagine every agent in Hollywood trying to get their client the lead role of “DeepF**kingValue” in The GameStop Story, a yet-to-be-made movie that will win every Academy Award. And the brilliant plot twist, the Second Act turn, is when actual corporate guys started to notice what was happening with this Reddit-driven phenomenon. Ryan Cohen, CEO of the online pet-supply business Chewy-dot-com, ploughed $82 million into GameStop at an average price around $9 a share (as much as 30 times what “DeepF**kingValue” had paid for his shares in 2019), which got Cohen a seat on GameStop’s board. Meanwhile, the Reddit crew on WallStreetBets discerned that hedge funds, which considered GameStop a sure loser, had gone short on the company, i.e., investing money on the proposition that its share price would go down.

Billions. B-I-L-L-I-O-N-S — these hedge fund wizards were so sure that GameStop was overpriced that they shorted the stock to the tune of something like $13 billion. And they got screwed. Bad.

Prison gang rape is the only metaphor that comes to mind for how badly the hedge funds got screwed on their GameStop shorts. How bad was it? So bad that NASDAQ intervened, so bad that Discord shut down the WallStreetBets chat channel, so bad that the Securities and Exchange Commission is now investigating the Reddit crew.

The “creative destruction” of capitalism can be a beautiful thing to watch, and if I were asked to write the script for The GameStop Story, the closing scene would be when “DeepF**kingValue” (played by Seth Rogen with a neckbeard) drives up to Mar-a-Lago in his gull-wing Lamborghini, with a Swedish supermodel named Elsa in the passenger seat.

Donald Trump comes out to greet him, personally.

Not kidding here. Liberals are actually claiming that “Trumpism” is what has caused the GameStop bonanza. The hedge funds got screwed over by “white supremacists,” some liberals are arguing on Twitter.

What does this claim imply? It implies that any challenge to the status quo is illegitimate, that it’s “hate speech” or “terrorism” any time you do something or say something that disrupts the ordinary process by which rich people get richer and powerful people exercise power.

Yeah, tell me again how Biden won that election with 81 million votes. Meanwhile, my college-age son decided to drop $50 into Nokia (another stock the Reddit crew is pumping) and I doubt he’ll be driving a Lamborghini next year, but who knows, in the Land of Liberty?

God bless America, my home sweet home!

UPDATE: Welcome, Instapundit readers! The Professor observes:

The way the establishment works is, they win, you lose. Then they say well, that’s just the rules, better luck next time! Then if you actually have better luck next time, they change the rules. Then they tell you the rules are the price we pay for civilization.

“Analysis: True.” Heh.




 

Category: Economics

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