60 Finance & economics The EconomistJanuary 30th 2021
1also wants to ensure that qualifying pro-
duction really does support American jobs
(though it is unclear how he could do this).
Companies seeking waivers will have their
requests made public. Agencies will scout
for small firms to fill gaps. And officials
will review the list of products treated as
exempt from the baabecause they are not
available in sufficient quantities in Ameri-
ca, which includes personal-protective
equipment, tungsten and cobra venom.
What do the changes mean for firms?
Contractors have grown weary of promises
to push out foreign suppliers. Jimmy
Christianson of the Associated General
Contractors of America (agc) says that, un-
less something happens on the ground, his
members “don’t really care”. Whereas some
wanted Mr Trump’s changes to go further,
others were far from thrilled. A representa-
tive of Netzsch Pumps North America, for
instance, complained that finding home-
made components would be hard, and
force up prices. With only 30% of their
business serving government markets, the
extra burden “will definitely kill our ability
to compete in markets outside the us”.
Mr Biden’s changes to the waiver pro-
cess sound complicated, reckons Jean
Grier, a government-procurement expert.
Mr Christianson notes that they could have
a “chilling effect” on the number granted. If
the federal government tries to funnel dol-
lars quickly towards products without de-
veloped supply chains in America, a
clogged waiver process could delay pro-
jects. That is what happened in 2009, says
Brian Turmail, also of agc, when states
were told to spend federal dollars on Amer-
ican water infrastructure, but some com-
ponents were unavailable.
All this might look like a snub to Ameri-
ca’s trading partners. In practice, though,
the rule-changes may not affect big con-
tracts much. Any worth more than
$182,000 are open to the 20 other members
of the Government Procurement Agree-
ment (gpa), which includes Australia, Can-
ada, the European Union and Japan, as well
as members of other trade deals. The Gov-
ernment Accountability Office estimated
that around $5bn of the $291bn of the feder-
al-procurement spending they measured
went to firms in the six biggest supplying
countries in 2014-15. Another estimate puts
the value of imports (including compo-
nents) higher, at 9%. Without legislative
changes—and those to the gpa—it will be
tricky to deprive foreigners of their slice of
federal procurement.
Mr Biden has said that he wants to work
with trading partners to “modernise inter-
national trade rules, including those relat-
ing to government procurement”. But that
too will prove difficult: when in November
the Trump administration tried to remove
some medical products from the gpa, it
was scolded by Britain, Switzerland and theeu. Leavingthegpa, MsGrierwarns,could
shutAmericaoff fromservices procure-
mentoverseas.
Sometradingpartnersworrythat,fed
upwithtweakingrulesonfederalspend-
ing,MrBidencouldattachbluntcondi-
tionsonhowstatesspendstimulusdol-
lars,whichfallsoutsidethegpa’sremit.
That,though, could create problems by
slicingthroughsupplychains.Afterfirst
shuttingCanadaoutofstimulusspending
in2009,forinstance,therealityofinte-
gratedNorthAmericanproductionmeant
thattheObamaadministrationcarvedout
anexceptionforthem.Protectionisttalk
onthecampaigntrailiseasy.Puttingit into
practiceisanothermatter. 7A
week ago few people had probably
heard of GameStop, the beleaguered
brick-and-mortar purveyor of video games.
Millennials might recall visiting a store in
their youth; their parents, perhaps, taking
them. None can claim ignorance now. The
firm’s share price has spiked from a few
dollars in 2020 to a peak of more than $350
on January 27th, transforming a firm that
was valued at less than $200m in April
2020 into a $24bn middleweight. This me-
teoric rise has been chronicled on every
front page, pored over on financial televi-
sion and even discussed in the halls of
power. Jerome Powell, the chairman of the
Federal Reserve, was peppered with ques-
tions about the firm’s dizzying ascent at a
press conference. Jen Psaki, the White
House press secretary, said that Janet Yel-
len, the treasury secretary, was keeping a
close watch on events.Why such a fuss? Perhaps because the
story itself is staggering. There is a tiny
nugget of sense in GameStop being worth
more now than it was last year. In August
Ryan Cohen, the former boss of Chewy, an
online pet-food store, began amassing a
large stake. In November he turned activ-
ist, writing to the board to urge it to invest
in e-commerce. The board liked his plan
and offered him and his former colleagues
seats. Investors liked it too. By January 11th,
his first day as board member, the 12.9%
stake that he had paid about $76m for had
doubled in value.
The rest—which has turned him into an
overnight billionaire—is fuzzier. The fren-
zy has been fuelled, seemingly, by users of
r/wallstreetbets, a forum on Reddit that
now has more than 4m followers. These re-
tail investors have hoovered up shares and
placed leveraged bets that GameStop’s
price will rise. Some forum-dwellers point
to fundamental reasons, such as Mr Co-
hen’s involvement, to justify their bets. But
most express a vigilante-style desire to
stick it to establishment investors, who
had spurned GameStop. The retailer had
become a target of short-sellers, who bor-
row shares, sell them, and later buy them
back, ideally at a cheaper price. It was a
popular trade: the total value of short posi-
tions in GameStop was more than the com-
pany’s market capitalisation in late Janu-
ary. Retail investors wanted the shorts to
lose money.
And they did. Bullish retail traders were
ginned up when the marketmakers who
sold them their bets were forced to hedge
against rising prices by buying shares.
Short-sellers were also forced to buy shares
after incurring losses worth several billion
dollars. The wall-to-wall coverage of the
stock has prompted yet more investors to
pile in. GameStop was the single most
traded stock in America on January 26th;
volumes matched that in the five biggest
tech giants combined (see chart). The share
price more than doubled the next day. The
masses are coming for other heavily short-
ed stocks too. Share prices for amc, a chainNEW YORK
A Reddit mob drives the markets, and
Wall Street pros, crazyMarket maniaWill the
GameStop?
UnStoppableSource:Bloomberg *Alphabet,Amazon,Apple,Facebook,MicrosoftBig-techtotal*GameStop30020010002020 2021Nov Dec JanDaily trading volume, shares, m
3,0002,0001,00002020 2021Nov Dec JanPrice,Nov2nd2020=100Big-techaverage*GameStopBitcoin2