I wrote an article earlier this week called Hedge Funds Vs Reddit where I mostly talked about my observation to how people reacted to the chaos. I read a few news reports today on how the users of the subreddit group r/wallstreetbets were gearing up for another attack. So it seems that this ongoing predatory attack against lucrative investments is a reality Wall Street has to live with now. And I think it’s brilliant. But it might come with a cost.
Sending a Message
Looking at what went down with GameSpot indicates these retail investors who are targeting hedge fund short positions are not doing it for the money. Driving up the stock price of a company that does not reflect its financial performance does not benefit anyone. But it can be a potent strategy if you want to destroy someone holding a leveraged position. Why would anyone want to destroy someone at random with no pretext or justification? Because it wasn’t random. And there is plenty of pretext and justification;
- 2008 Financial Crisis
- Tax Payer bailouts
- Emerging inequality
This is Main Street vs Wall Street, where there is enough pretext to go around for everyone.
Pro Wall St or Main St?
If you have followed me for a while, you probably can speculate my viewpoint on these events to be different from others. Aside from the bailout, I don’t hold the elites on Wall Street exclusively responsible for the 2008 financial crisis. I think those on Main Street equally lost their composure to greed and money. The crisis was one of the best events that happened to me and many others I know.
I purchased a home just after 2008. Before then, I saw what was happening with the predatory loaning and refused to play the game. It felt like I was missing out, until I didn’t. Fact is, people want what the bankers have to give them without having to think. People hate to think. But as things go sour, they also play innocent and pretend to be the victims of corporate greed. So my position between Main Street vs Wall Street is somewhere roughly in the middle. Financial or political, I enjoy playing both sides of the game, unless instincts prompt me to sit at the sidelines. Nevertheless, I am excited for what is about to go down.
Main Street Takes The Initiative
Retail investors from r/wallstreetbets sent a shockwave into the financial system with a simple message; You can’t do whatever you want. A message well received. Banks, hedge funds and investment firms are revaluating their future investment strategies. They can no longer publicly announce the details or strategies that their company partakes in, for the fear of being targeted. Some are requesting anonymity moving forward. The profitable short-selling strategy is infinitely riskier now with investors needing to consider potential rise in a stock price that doesn’t need to reflect its financial performance. All it takes now is a group of people around the world to coordinate themselves in a mass purchase of stock to wreak havoc on any company holding a short position. But that’s not all.
The Message is the Beginning
I think company media announcements and details in their annual, half yearly and quarterly reports will all have to be reviewed. Hedge funds with short positions are not the only ones under threat. The consequence will extend to any public business with the potential to impact executive salaries, bonuses, prospective mergers and acquisitions, divestments and initial public offerings. And this list is not exhaustive. These are just a few on top of my head. Imagine if a company announcement spills on to the media that one of its executives will be getting $X millions at the end of the financial year. Or that a CEO’s net worth will rocket to $Y billions if the company’s stock price reaches X amount.
It won’t be long before a new group called justiceforinequality turns up with the sole purpose of targeting CEO’s and other executives pay packages. I don’t think we have exhaustively acknowledged what other doors this GameSpot event can open. But I don’t think it will benefit Main Street. I think this is a temporary shift in power. And when Wall Street responds, it will take away more power Main Street had in the first place. I hope I am wrong.
In The Name Of Client Protection
I think what r/wallstreetbets did will be used as a pretext to bring reforms and new policies with regards to how public companies will disclose and report company details. They will justify robbing the public of key company details disclosed in reports by advocating protection against predatory retail investors who seek to damage investor returns. Which is why as I mentioned in Hedge Funds Vs Reddit, that r/wallstreetbets would have sent a far more powerful message if they had targeted a company engaging in fraudulent activity. They would of maintained their character and insulated themselves from being casted out as ‘market manipulators’, ‘pump and dump schemers’ and ‘predatory investors’.
If what I am saying substantiates, then these new policies can bring on the end of transparency for Wall Street, something they would welcome with open arms. This change will further separate the rich and poor. The people of Main Street will be expected to simply trust the experts of Wall Street with their money without any disclosure. This is entirely my speculation which I hope to be proven wrong.
If I am proven right, I will write another article on this event, on how power should not be executed so poorly.