WASHINGTON (AP) – They’ve been through a financial crisis. Two deep recessions. Student debt mounds. Stagnant payment. Expensive medical care. Reduce job prospects.
They saw the rich grow, while a pandemic pulled tens of millions of people out of work and left many more isolated and vulnerable at home.
Now, they feel, it’s recovery time.
Nearly a decade after the Occupy protest movement left Wall Street more or less unharmed, the financial city could face a new assault.
Day traders, mobilized in a Reddit chat room, shed all the money they can find in the stocks of a video game retailer called GameStop and a few other beaten companies. Their purchase inflated the stock prices of those companies beyond anyone’s imagination – and, not coincidentally, caused huge losses to the hedge funds of the super-rich, who had placed bets that would lower their shares.
Their strategy, of course, is fraught with risk. The prices of the shares they bought are now multiple above any justified level of income, earnings or future prospects. The danger is that, at any time, stocks may collapse.
Probably so. But, as one Reddit user wrote on Friday, saying that hedge funders will drink champagne as they look down on 2011 protesters on Occupy Wall Street:
“I’d rather lose them all than give them what they need to destroy me … I’ll burn them all just to upset them.”
Their anger and desire to choose strong Wall Street financiers sent shivers through ordinary investors and raised fears about the fragility of markets in general, after a prolonged period of earnings from shares fueled by extremely low interest rates. These fears have just caused the S&P 500 index to suffer the worst week of losses in October.
GameStop Actions? They launched almost 70% on Friday. In the last three weeks, they have made an amazing 1,600% gain.
“They’ve been figuring out how to play Wall Street for a long time,” said Robert Thompson, who has long followed cultural trends as director of Syracuse University’s Bleier Center for Television and Popular Culture. “I’m amazed it didn’t happen sooner.”
Young traders, such as 27-year-old Zach Weir, fueled the frenzy, buying five GameStop shares this week.
“I’m a student, so it’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 case: Protecting a prized toy store, where he allegedly spent his adolescence on Friday night, from financial tycoons who want the company’s failure.
What if he loses his investment?
“If my account goes to zero, it goes to zero,” Weir said. “It simply came to our notice then. I think it’s bigger than money now. “
Frustration and anger over rising financial inequities in the US economy have increased for years. The richest 1% of Americans collected about 19% of their pre-tax revenue in 2019, up from less than 11% four decades earlier, according to the global inequality database led by Emmanuel Saez and Gabriel Zucman , economists at the University of California, Berkeley, along with other researchers.
New York University economist Edward Wolff found that the richest 10% of Americans own about 85% of the stock’s wealth, a share that has grown steadily over time.
The financial crisis that triggered the Great Recession of 2007-2009 intensified resentments against bankers who had financed the tiring loans behind the catastrophe and ignored the obvious risks, only to receive bailouts from taxpayers and to largely escape liability. The growing revolt fueled the Occupy movement, in which protesters took over New York’s Zuccotti Park and other public spaces and called for far-reaching financial reforms, most of which did not happen.
The coronavirus caused additional pain, flattening the economy and causing the loss of more than 20 million Americans. This week, a report by anti-poverty group Oxfam found that the world’s richest people had inflated their collective wealth by $ 500 billion since the pandemic broke out in March. Meanwhile, nearly 10 million people who lost their jobs as a result of the pandemic remain unemployed.
The stock market, the chosen target of Reddit day traders, has long remained the first American symbol of ingrained wealth. But technology, including forums like Reddit, has made it easier, faster and simpler to mobilize, exchange information and collectively address those affected. And e-trading applications, especially Robinhood, allow amateur traders to buy shares without commissions with a single click.
They noticed a vulnerability in the market: the so-called short squeeze.
When hedge funds and other investors want to bet that the stock price will go down, they arrange a short sale: they borrow GameStop shares, so to speak. Then they sell the borrowed shares, planning to buy the shares later at a lower price and cash in the profit.
But the short circuit can be triggered disastrously if the stock increases instead of decreasing. Then, missing sellers may be forced to give up betting by buying the target shares. Buying them, in turn, can send stock prices higher and worse and make things even worse for short sellers in an intensified feedback loop.
GameStop, its future threatened by e-commerce and a pandemic that has kept customers at bay, is among the strongest stocks. Some of the Reddit rebels are players who want to protect the retailer from Wall Street looting. Or simply deal a fair blow to hedge funds and financiers who have lived long as others have suffered.
Not all day traders are inflamed with anger. They only see an opportunity to earn money and pay bills.
“A lot of people have trouble paying rent,” said Alexis Goldstein, a veteran of the Occupy movement. “Many people are at risk of evacuation. A lot of people are very desperate, honestly, for new ways to make money. ”
However, Goldstein worries that the revolt will eventually fail.
First, some of the Wall Street firms that are targets of Redditers are actually taking advantage of the volatility that the Redditers attack has hit.
And the most sophisticated professional traders are no doubt figuring out how to capitalize on the chaos. Normally, they have to work hard and invest a lot to determine what their competitors are doing and to take advantage of this information. Instead, Reddit traders are announcing their intentions, discouragedly and publicly.
“I guess Robinhood and Redditers investors don’t make money,” Goldstein said.
He would like to see a different list of reforms – reforms to limit the excesses on Wall Street, while helping those who are left behind.
“We hope we can ask fundamental questions if we want our markets to be speculative-oriented or if we want them to create innovation and jobs,” she said. “Don’t rush so hard for a dollar and instead rebuild the social safety net.”
Tom Osran, a 59-year-old Chicago lawyer, has been reading the WallStreetBets forum on Reddit for years. But only last week he decided to act for the first time, buying in GameStop. His investment, he said, rose 1,000 percent from last week, though he declined to disclose the dollar amount.
Osran said he estimates that the astronomical rise in its shares could save GameStop from hedge funds that bet that a company with 40,000 employees will fail.
“It’s fun to be part of a movement,” Osran said.
He knows he could lose everything he put into GameStop’s actions. However, it is philosophical.
“We are all adults, we all know that stocks can rise and fall,” Osran said. “It has been extremely profitable so far, but tomorrow everything could disappear.”
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Pisani reported from New York.