45BloombergBusinessweek February 8, 2021beena rebellioninthestockmarket,in
caseyouhadn’tnoticed.TheBattleof
GameStop,thestampedeofthememe
stocks,andtherageagainstRobinhoodwereastransfixingas
theburstingofthedot-combubble—onlythistimetheaction
wasfocusedona handfulofcompaniesassociatedwith1990s
culture,andthistimeeverythingwasgoingup.Thanksto
traderstalkingit uponsocialmedia,thestockofGameStop
Corp.,theunprofitablemallretailerofvideogames,climbed
asmuchas1,745%fromthestartoftheyear.TheAMCmovie
theaterchainpeakedata gainof839%;BlackBerryandNokia,
whichoncemadeverypopularphonespeoplestrappedto
theirbelts,spiked279%and68%,respectively;andKoss
(headphonemaker),Build-a-BearWorkshop(chainofstores
that... youknowwhattheydo),TootsieRollIndustries(yes,
thatTootsieRoll),and,forsomereason,silverallshotup.
Thepasttwoweeksbrokea lotofpeople’sbrainsre:how
WallStreetworks.OnemoneymanagertoldBloombergNews
thatGameStopwashis“most-hatedstockofalltime.”Also,
a lotofwell-compensatedhedgefundmanagerslosthuge
sumsbecausethey’dbeenbettingonthestocksmentioned
abovefalling.Andthefrenzywasallcausedbyanextremely
onlinecrowdthatDougHenwood,writingintheleftistpubli-
cationJacobin, wrylycalled“thewrongkindofpeople.They
don’tliveinGreenwichinhouseswithtwenty-cargarages.”
Instead,theycamefromthefrequentlyprofaneReddit
messageboardWallStreetBets,whereposterstalkabout
stocksandoftenbandtogethertotrytomoveprices.It has
itsowninsiderlanguage:“stonks”forstocksand“tendies”
forgains,becausechickentendersarea rewardforbeing
good(andbecauseit’sfunny).LotsofWSBpostersdon’tbuy
stocksdirectlybutinsteaduseoptions,whichallowthemto
takebigpositionsfora relativelysmallamountofmoney,a
formofleveragethatamplifiespotentialgainsaswellasrisks.
Theyalsoliketogoaftertheso-calledshorts,investorswho
betagainststocks.Theideaisthatbypushingupa highly
shortedstock,theWSBcrowdcan“squeeze”shortsintopro-
tectingthemselvesbybuyingthestockthemselves,trigger-
inga (temporary)upwardspiral.
WSB’s campaign for GameStop gained steam early
onwith aninvestment case madebya poster named
DeepF---ingValue,who in offline life, Reuters reported, is a
charteredfinancialanalyst who used to work at an insurance
company.It canbe hard, sifting through the memes, to tell
whentheRedditors are glomming onto a stock because they
trulylikethebusiness, or because they think they can manip-
ulatetheshares,orbecause they think it would be hilarious to
messwithsomehedge funds. Like so many movements that
havebubbledupfrom social media, New York Times tech and
mediawriterJohnHerrman observed, the GameStop push
wassortofa jokeuntil it wasn’t.
Andit gotpolitical, in ways that have been hard to make
senseofintheheat of the moment. What else would bring
togetherthelikesof tech-bro idol Elon Musk—who fanned
therallybytweeting “Gamestonk!!”—and progressive U.S.Representative Alexandria Ocasio-Cortez? On Jan. 28,
Robinhood Markets, the zero-commission trading platform
that’s been the gateway to the market for many young inves-
tors, restricted buying in GameStop and other popular Reddit
stocks. “This is unacceptable,” AOC tweeted. She called for
hearings into why retail investors were blocked “while hedge
funds are freely able to trade stocks as they see fit.”
Robinhood later said it had to cut off buying temporarily
because the overwhelming demand for those volatile stocks
was causing its clearinghouse—a behind-the-scenes organi-
zation that makes sure buyers and sellers actually get their
stocks and cash—to demand higher deposits. The trading
platform eased the restrictions after furiously raising more
money. “We didn’t want to stop people from buying stocks,
and we certainly weren’t trying to help hedge funds,” the
company said in an email to customers.
Still, it was a bad look for a company whose stated mis-
sion is to “democratize finance.” Robinhood makes options
trading on smartphones easy and nudges users into setting
up margin accounts so they can speculate on stock with bor-
rowed money. The GameStop raid showed what tools like that
could do. “Until GameStop, it seemed to be much harder to
borrow money, speculate, and collude if you weren’t on Wall
Street,” wrote Matt Stoller in his economics newsletter Big. At
a key moment, Robinhood and other discount brokers real-
ized they couldn’t really keep the playing field level.ut this rebellion was hardly a revolution. Let’s say
it plainly: A lot of small investors who jump onto
GameStop and the other meme stocks are going to get badly
hurt. Some already have been. If you bought GameStop at
its peak, you were down 73% as of Feb. 3. Honestly, buy an
index fund instead—you’d have made an annual 13.5% if you
held on to an S&P 500 tracker for the past decade. And be on
guard against market bulls speaking the language of populists.
Before GameStop, the culture of finance was already enter-
ing its latest imperial phase, spreading out beyond practi-
tioners and into the consciousness of ordinary savers and
working people for the first time since the 2008 real estate
collapse. In the interregnum between that crisis and the pan-
demic, most people were happy to ignore the markets even
as they climbed. Cash was still being plowed into stocks, and
there was plenty to be earned by big asset managers, but
it was an increasingly bureaucratic affair: Human resources
departments set up 401(k)s, chunks of paychecks got directed
to broadly diversified funds, and Vanguard Group, Fidelity
Investments, or BlackRock collected a tiny toll.
Circumstances obviously changed in 2020. The pandemic
and the sheer boredom of lockdown, excitement about new
technologies, free stock trading—all that and more began to
pull people in. It’s hard to put your finger on what triggers
market exuberance, but once it gets going it can create what
the economist Robert Shiller has described as a feedback loop.
Markets do well enough that people start to pay attention, and
they start to talk about it and experiment with investing.There’s
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