GameStop saga exposes deep hypocrisy from elite investors and proves US financial market is detached from reality

Excerpt from: GameStop saga exposes deep hypocrisy from elite investors and proves US financial market is detached from reality — RT Op-ed

Hedge fund managers have already taken to the airwaves to call on a Securities and Exchange Commission (SEC) investigation, and the Biden administration is “monitoring the situation.” The GME rally even drew calls for investigation from Michael Burry, the famed investor who helped launch a retail-investor frenzy in 2019 by investing in none other than GameStop. All of them seem to think that the situation was anti-competitive stock manipulation, which would be extremely difficult to prove since, among other things, Melvin knew what Redditors were doing and stayed firm on their short position.

Elite investors and their foot soldiers in Washington are obviously mad about what’s going on and the most likely outcome here is that new legislation or executive action will go through to shut regular people out of trading in some way or another. It’s hard to say right now what might take shape.

In the interim, some in the media are painting this situation in stark political turns. In a column posted on January 27, CNN’s Chris Cillizza blamed the GME rally on Trumpism, which is a lazy analysis that seems similar to the same liberal smugness that assumes anyone who plays video games is a Trump fanatic – and also dismisses that a lot of the online left supports these Redditors in their Wall Street infiltration.

It’s hardly a political issue in the sense of left versus right, but rather ordinary people on the internet versus hedge funds. In my view, however, the real worrisome part here is that these Redditors are juicing certain stocks based on nothing – certainly not valuation – and only out of pure spite against large investment firms.

While that might be a noble thing to do it exposes the utter absurdity of the stock market, the problem the US financial market has with valuations and why I believe there will be an epic financial disaster soon (I have discussed this topic here, here and here). The GameStop debacle shows exactly how foundationless the financial market really is at a time when Wall Street’s performance looks deceitfully rosy.

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Excerpt from: Mega-investors punished with $70 BILLION LOSSES as GameStop and other shorted firms see stock surge – data analysts — RT Business News

Short-selling investors lost a staggering $70.8 billion this month, according to financial data analytics firm Ortex. Their losses were partly driven by small traders pumping money into stocks like GameStop.

Short-sellers lost $70.87 billion on US companies this year so far, according to analysis from Ortex reported by Reuters on Thursday. To put the loss in perspective, $70.87 billion is half a billion dollars more than the GDP of Slovenia, according to CIA statistics.

In just a few short days, the American people realized their power and took down $70 BILLION in predatory trading. We’re not even finished. This number will rise.Play the game. Take the loss. The American people have spoken. :rocket:https://t.co/vJyAOwZ9Rs

— Jake Parker (@JakeParkerLIVE) January 28, 2021

In the world of stocks, short-sellers identify failing companies and borrow shares in them, hoping that, as the price falls further, they’ll buy the borrowed shares cheaper, pay back their lenders, and keep the profit. It’s standard practice on Wall Street, but it’s resulted in astronomical losses for some of the finance industry’s biggest hedge funds this week.

A dedicated community of amateur investors bought shares in $GME, $AMC, $BB and $NOK (GameStop, AMC Theaters, Blackberry and Nokia) and other shorted companies, driving prices to dizzying heights and making off like bandits as the hedge funds scrambled to pay back their borrowed shares, some of which had increased in value by 1,000 percent by Thursday morning. According to Ortex, short-sellers were down money on more than 5,000 US stocks.