I. Power to the Players
A wealthy investor in a Manhattan high rise feels his carotid arteries begin to pulsate against the meat in his neck. A slow ache starts in his temples and slides triangularly down his jaw.
Damn sternocleidomastoid syndrome, he thinks to himself as he calls for Oleksiy, the Ukrainian boy who gives the good massages.
It’s been an exceptionally bad business day and he fucking knows, godamnit, that he’s going to have a lot to answer for. He’s stopped taking calls about a half hour ago. You see, the short squeeze was unprecedented and in order to cover, his firm had taken larger losses than ever before. Sure, they could get bailed out by another large investment firm, like Brown Brothers Harriman, but you can bet your grandpa’s hoarded Nazi gold that our investor will be pushed out of the LLC for this. He was done. Fuck.
And all because of some uppity fucking internet trolls.
Rubbing his temples, the strange pressure that started off as a mild annoyance begins to radiate and expand. It soon becomes an almond-sized point of high-frequency buzz, dense and embedded deep in the center of his forebrain.
“Fucking hell!,” he rages with a deep, pharyngeal articulation as he abruptly stands up and fires his Breitling for Bentley desk clock across the room. The antique leaded glass door on his mahogany book case shatters. He sits back down.
“Motherfuckers,” he mutters, staring at his computer screen. Top posts on the r/wallstreetbets subreddit glare at him, mocking, insulting: “HOLD $GME, HOLD $NOK, HOLD $BB, HOLD $AMC YOU FUCKING BEUATIFUAL AUTISTS!!!!! TO THE FUCKIN MOON!!!!!!!!!&!!!!!” A screenshot of Elon Musk’s twitter is emblazoned triumphantly as the pinned top post.
The little blue checkmark begins to shake. Our investor notices another Tweet from Mark Cuban a few posts down.
The black massage table in the distant corner becomes a beautiful, vivid seafoam green. Something is very wrong. These fuckers are fucking me, he thinks, and they don’t even realize they’re not going to win.
Suddenly the room around him is overlain with a moving, translucent and swirling paisley print. The spermatic shapes superimposed on his vision create a spinning sensation and a powerful nausea sets in. He reels. He vomits on the Persian rug, his eyes watering.
Adrift, now, in a deep black oceanic pool, he looks–confused–at the now vibrating, now jumping bronze art-deco globe on the corner of his desk. There is motion all around him but…
On the wall to the right, the Rothko painting looms larger than anything else in the room. It is the great and terrible throat-slitting beast of time. It is the 10 million dollar prism of doom that has been waiting for him. He knows it will swallow him whole and make certain that he is never again without hunger. He never understood the painting until now. The deep reds and the gray-white border… The last gasp of a dying 11 year old in a Bangladeshian chemical fire… The hillbilly cancer cluster on a decaying moonbase suffering from colony collapse disorder… Mother Earth’s giant gaping headwound… Was it really all him?
Rothko’s longitudinal swath of the deepest black becomes the only pulsating being in the universe. Maybe he is free?
But back, again, he notes that the pain behind his eyes becomes ever more distant. He cannot move, and for a moment, knows nothing but the sour, metallic twinge of a succulent red wine and the sensation of motor oil dripping soothingly down the back of his skull. A moment of clarity: Yeah I’m evil. I’m the bad guy. OK. Acceptance.
He almost laughs at the thought of it. His life destroyed by a group of Redditors, for the lulz.
Now, as the large oak doors to his luxurious office open, the investor feels the familiar sensation of a tasteful Mercedes Benz S Class limousine running over highway rumble strips. The attractive Ukrainian boy appears as a silhouette against a backdrop of the brightest, most violet crystalline energy he has ever seen, pure. He’s hitting the rumble strips more frequently now, one after the other, BBBBRRRMMM, BRRRRRMM, BRRRRRRMMMM until it is a constant and overpowering vibration. No, he thinks, I won’t be taken out by a bunch of fucking pranksters on the cock-sucking internet!
A thousand candle-filled Mason jars glitter in his consciousness and condense like newly forming stars. The incomprehensible, irresistible forces of the universe pull the lights together into a single brilliantly illuminated corporate letterhead in the void:
GameStop®: Power to the Players™
Despite all his efforts, the words just won’t come out. He strains harder than he ever has before. With all his will he curses at the Reddit trolls: “Blackrock, Vanguard, Fidelity, Citadel; they’ll eat you all, you rotten fucks!“
II. The Age of the Underdog™
The strange sound startled Oleksiy and caused him to stop his forward advance toward the old man. It was something like the guttural sound the wild boars back home made if his father did not place his shot as skillfully as he had hoped. A death rattle… The large oak door creaked behind him. As he approached the old man he saw that his eyes were like those of a doll.
Oleksiy later heard it was something called an arteriovenous malformation that ruptured inside of the investor’s brain, and he thanked God for it. Of course, the anatomical anomaly probably wouldn’t have amounted to much if it hadn’t have been for those noble souls at r/wallstreetbets. He didn’t hate the old man, although he certainly didn’t miss massaging his atrophied muscles through his wrinkly, sagging skin. But the investor’s death had triggered a chain of events so unthinkably wonderful that it almost seemed like a work of fiction.
The authorities, suspecting foul play in the investor’s demise given the timing, collaborated with the SEC in their investigation. It was an unprecedented sweep of Justice. A myriad network of insider trading, funding of child labor practices abroad, and various other exploitative business practices were exposed. The new Biden administration levied heavy prison sentences and fines to all the corrupt Wall Street elite. Capitalism would never be the same. Crony capitalism was dead, replaced by a free market far kinder to the common man. It wouldn’t be long before the entire world was pulled out of poverty.
The markets were now open and democratized for the small time retail traders. Everyone could be an entrepreneur now. The corporate and financial worlds’ ties to covert intelligence agencies and their illegal, unethical maneuvers were also uncovered in short time. Never again would these vampiric ghouls topple another government in the Global South for the purposes of profit.
This was of special import to Oleksiy, as his parents had been killed during the War in Donbass. Nationalist thugs encouraged by the CIA at the behest of US and Western-European business interests had decimated his former nation. But that was before. Now the elite financial backers of the right-wing and fascist Ukrainian insurrectionists had been placed on trial at the Hague and the CIA was abolished. New regulations were passed and a peaceful era of fair and free trade was ushered in.
The Western World rejoiced as Vladimir Putin was defeated in a peaceful democratic election by Elon Musk, who governed fairly from his private space station. Every Russian citizen was given a fractional share of TSLA. Xi Jinping opened Chinese markets completely to Westerners, giving discounted IPO stock prices to the brave r/wallstreetbets veterans of the GameStop Trade War of 2021 through a deal with Robinhood and TD Ameritrade. Mark Cuban gave every Redditor $100 to invest. Due to a popular Instagram campaign, HBO remade the last season of Game of Thrones, and everyone loved it. It was now the Age of the Underdog™ and a bright new Pax Americana.
III. Does this shit mean anything? And what the fuck are you talking about?
Such is the fantasy, exaggerated as it is: Capitalism is made pure and ethical by returning the market to the hands of the people as the masses get their vengeance. The story in the financial headlines today is one of large hedge funds being destroyed by masses of Redditors in a glorious display of solidarity: The masses rise up with righteous indignation in an inspirational display of activist entrepreneurism and give the Wall Street vampires their comeuppance. Your Facebook feed beams with claims that Reddit has risen up and is eating the rich.
Not quite. The problem with Wall Street isn’t just corruption, it’s capitalism. We shouldn’t be seeking market based solutions for that. This is a liberal fever dream. Hedgies aren’t going bankrupt; Wall Street isn’t getting got; and this is not a working class victory.
In the garbled words of our cerebrovascularly impaired villain: “Blackrock, Vanguard, Fidelity, Citadel; they’ll eat you all, you rotten fucks!“
…And he was right.
Alright, check it out: An interesting development has been occurring in financial trading that some of you are no doubt aware of. If you already know what’s going on, go ahead and skip to here. But if you don’t I’ll try to break it down in simple terms because as we all know financial types love to use obfuscating bullshit terms. Basically, against all reason, the stock for the retail videogame outlet GameStop has been soaring astronomically. It went up something like 1600% in the first month of 2021. This shouldn’t be occurring for reasons that should be obvious: GameStop is a brick-and-mortar deal; most of the new games purchased are now done so online; there’s a global pandemic going on; one would hope that less people are going to the mall to buy used copies of Tomb Raider, or whatever (I’m not a gamer, idk). Because the stock price kept going up investors that were “short” on GameStop have been losing lots of money.
Now for a while I found it difficult to wrap my head around what it means to “short-sell” a stock. Most of us know that it’s essentially betting against a company. It means that if the value of the stock (or whatever asset) that you are short-selling goes down, you make money. How exactly it works is kind of confusing, but, as in all such matters we shall turn the metaphorical world of the illegal drug trade.
Say I’m a drug dealer. I go to a bigger drug dealer and he “fronts” me some dope (I “borrow” it from him, no money up front), let’s say $500 worth. This means that he gives me the drugs and then later, after I sell all the drugs, I go back to the dealer and give him $500. Now in the normal way of doing business I would hopefully sell the drugs for, say, $600, giving me a profit of $100. This is somewhat analogous to how things are normally done in the stock market: I tell my broker that I want some shares of a stock, I buy them for $500 and then, when the value has gone up, I sell them for $600; so I’ve made $100 bucks.
In short-selling the drug dealing analogy goes like this: I get fronted the $500 worth of sweet dope. I immediately go and sell it to another dope boy for $500. Now, I did this because I know that the local drug market is about to be flooded with some bomb-ass shit that’s going to drive down the value of the drugs I just bought. So in a few days, after said bomb-ass shit hits the streets, the same amount of dope I got fronted for $500 is now worth only $300. So I go and buy $300 worth of drugs and return them to my dealer, pocketing $200. I’m not a drug dealer but I have watched The Wire, so I assume that doing that would definitely get you a severe ass-beating at the least. But on Wall Street this is common practice.
In the above analogy we assumed that the price of the drugs would go down. Now, obviously if the price of the drugs went up–say to $1,000–and I’ve already sold my fronted dope for $500, when the time comes to pay back the dealer I’ve got shell out a cool $1,000 to make sure my kneecaps remain intact, meaning I’ve lost $500. This is pretty much the same when it comes to stocks. When my broker “fronts” me stock to short-sell, it’s just that; it’s borrowed stock. So when I sell it immediately I’m really selling stock that I don’t own. As long as the value of the stock decreases, I buy the equivalent amount of stock back and replace the borrowed stock, pocketing the difference, same as with the drugs. But if the stock price increases eventually I will have to cover the borrowed stock, and I could potentially lose big. Very big. Theoretically your losses could be infinite. This is what has been happening to those who have gone short on GameStop (GME on the NYSE) and the financial media has been freaking out about it.
GME stock has gone up at least in part because of the Reddit group r/wallstreetbets (WSB). The subreddit group describes itself as “like 4chan found a Bloomberg terminal,” and is basically a crass and un-PC zone where retail traders call each other “retards” and “autists” while trading stock tips and memes and bragging about risky trades. They have sort of an “everyman” kind of vibe as opposed to the stuffier, more serious r/stocks. They use day trading apps like Robinhood and appear to bring the attitude of gaming to stock trading.
At some point the WSB went all in on a campaign to buy GME stock in order to drive up the price and fuck over the hedge funds who have been shorting it. Since this whole GME thing has taken off I believe they’ve made efforts to clean up their image a bit, using bots to scrub bad language, etc. in an attempt to avoid a ban. It’s a smart move considering that their Discord server got shut down and the people they’re pissing off would like any excuse to de-platform them. They (and others) have now created a bubble and caused some investors to lose a lot of money. This creates a short squeeze, as those who have gone short on stock then have to buy shares to cut their losses. Buying shares to cover your short only continues to drive up the price of the stock. A major target of this meme-induced bubble is Melvin Capital Management. Melvin and at least one other hedge fund have closed on their short position, after two large hedge funds (Point 72 and Citadel) invested roughly 2.75 billion dollars in Melvin following its huge losses related to the debacle.
While the sentiment of “sticking it to the man” is definitely a considerable factor in the image and actions of r/wallstreetbets, that’s not what’s really going on at all. Although many are likely sincere in their hatred for the short-selling vampires and their desire to ruin a hedge fund manager’s life, let’s not pretend this is class consciousness or class warfare.
Mainstream corporate news is comparing this to Occupy Wall Street. It’s not. Even as small crowds begin to amass outside the NYSE in a show reminiscent of the deeply flawed 2011 protest movement, it’s important to pay attention to who they are (reactionaries) and to listen to what they are saying besides the now cliche “eat the rich (“We want a free market”). This is not a working class movement.
Even some ostensibly on the left are cheering this on as though it’s some sort of anti-capitalist protest. The David vs. Goliath narrative being pushed doesn’t really hold any water if you are imagining David to be the working class. Of course it’s nice to imagine the wildly irresponsible elite traders and capitalist vampires getting screwed over financially. I have nothing but ill will for them. And part of me does hope that the trolls at WSB do well with this. But when pigs like Mark Cuban, Chamath Palihapitiya, and the the richest man in the world support it (presumably because they hate short-sellers, and also ’cause it’s good PR), it ain’t a real class-based movement against Wall Street, and it’s not going to bring the whole corrupt system crashing down.
It’s just some big capitalists swallowing up some smaller ones, consolidating.
It’s also the aspirational petty bourgeoisie flashing their dick at the incredulous Wall Street in the locker room, grinning.
A person much smarter than me laid this out in a fantastic twitter thread, but Citadel (the hedge fund helping to “bail out” Melvin), among many other large firms, pays Robinhood (and other retail investor apps) to be able to see Robinhood’s orders before they are placed. This is called “order flow.” This allows them to front-run those trades, theoretically. Front-running is basically insider trading, but somehow in this case I guess it’s legal (maybe?). Here’s a nice example of front-running from Investopedia: “Say a broker gets an order from a major client to buy 500,000 shares of XYZ Co. Such a huge purchase is bound to drive up the price of the stock immediately, at least in the short-term. The broker sets aside the request for a minute and first buys some XYZ stock for his or her own personal portfolio. Then the client’s order is put through. The broker immediately sells the XYZ shares and pockets a profit.” That example would be illegal. But using a computerized strategy called high-frequency-trading (HFT), large firms like Citadel Securities are able to effectively front-run the retail investors using Robinhood, TD Ameritrade, Fidelity, etc. They use automated algorithms that operate in the precious milliseconds provided by access to the order flow. Since it’s a computer bot that’s doing it, I guess it’s legal. That is how Robinhood is able to offer trading free to retail investors, by charging firms like Citadel for order flow access. Because of all this, Citadel is now heavily invested in a firm that is usually quite successful, and at rock bottom prices. It seems that they were able to profit off of both the long and short on this.
Interestingly, Robinhood and other online brokers have now restricted trading of GME and other stocks, which appears to have dropped the stocks’ value as many retail traders are shut out. Rumors that Citadel and others reloaded their shorts (bet again against the stock) prior to the shut out are at this time unsubstantiated but at the very least there does seem to be collusion against the retail investors by multiple firms and the finance media.
Now, when this all shakes out and the bubble finally bursts, a few of the small-time retail investors who got out at the right time will obviously be much richer than they were before. But many will probably lose a lot and I hope they were prepared to do so in this attempt to stick it to the man that ultimately just helps the rich.
IV. It ain’t real
What should be obvious from all of this is that the stock market is not the real economy and is increasingly divorced from the real, material world. There is no value created in selling and buying stocks. The childish, naive idea of the stock market as a vehicle for growth and the democratic sharing of profits is pure fiction. Most of the stock that is traded was released into the market long ago, meaning that it is not used for productive development or to generate investment capital for growing businesses. In fact, corporations generate most of their capital for new investment from their profits alone. Those who trade on the stock market make the vast majority of their money through capital gains, which is money made by selling the stock to another investor, not through payments from the corporation they own stock in, which is dividends. The richer you are, statistically, the more of your income comes from capital gains. As noted in this article from 2015:
[F]or those making $10 million or more, salaries and wages only account for around 15 percent of their income. Their real money comes from capital gains, with capital gains accounting for about half of their earnings. Another 15 percent to 20 percent came from interest and dividends. About 25 percent of their income came from business income, which means they owned or held a stake in a private company.
Robert Frank, CNBC
Financial speculation like credit, usury, stocks, and bonds and their increasingly complex offspring are what Marx referred to as fictitious capital. Most of Marx’s writings on fictitious capital and financial capital are contained in Capital Volume III, which I have not read, so I’m not going to pretend to be an expert on it. I look forward to further investigating this idea of fictitious capital and I plan to read this book pretty soon (possible book report to follow). Nevertheless, the basic idea seems pretty straightforward; there are a couple “fictions” involved here. First, fictitious capital is not “real” in the sense that it (be it stocks, bonds, credit extensions, loans) is merely a claim of ownership on future profits or debt repayment. There is no guarantee that the debt will be paid back. For instance, if you loan me $200 with the promise that I will repay you in a week with interest, but a week later I’m dead, well that money never materializes. In the same way, when I buy a stock expecting the value to go up in order to resell, but the company goes bankrupt, the value I expected never materializes.
Now, it could be argued that all investment is, at its core, merely a claim of ownership on future profits, and that is true. But when it comes to stocks, etc. the speculation is doubly removed from the material world. As a secondary market for trading debts, stocks and bonds (i.e. the stock market) develops, the capital becomes even more “fictitious” as it is yet again divorced from actual productive investment. Someone obviously initially (in the IPO) advanced money (capital) to be used for the company’s productive development (production of commodities, be they goods or services). But as it exists on the stock market it is merely paper (or rather digital) claims of ownership. Speculative trading on the future value of the stock itself for the purpose of capital gains rather than speculative investment into the company itself for an actual share of the profits (dividends) are very different. Essentially this secondary market trades stock shares not on the basis of actual profits the company will accrue, but on the expectation of a future return from reselling the stock. Of course there is usually some correlation between these two as an unprofitable company is likely to see its stock value plummet. But what we see with GameStop illustrates just how fictitious capital can be.
Most of us working people intuitively know that the stock market is one giant scam. This whole GameStop sham should only make us more sure that it’s dogshit. We won’t find Market-Based Solutions for the revolution. So if you think collectively buying stocks to make a hedge fund manager have a bad day is cool, wait until you hear about general strikes.
Don’t burst a blood vessel man.
In this crumbling core 