Thursday, January 28, 2021

Reddit, Gamestop and Market Nihilism

 I've been exceptionally busy lately and haven't had the time to really work on any content, but the whole GameStop and reddit thing was too much to not at least discuss. I see a few glaring things that really paint a horrible picture of the state of society - in particular the younger people.

What is happening here is really simple. All these Redditors are buying up GameStop, Blackberry, AMC and other stocks. It's a concerted effort that is driving up the prices of these stocks. All of these companies are weak companies, so we have Hedge Funds moving into short them. Now, if not always, this has been projected as this battle between the regular folks and the big bad Hedgefunds.

A few takeaways:

The Market is just a game

The only thing I can take away from the redditors is that the market is just a game. They don't view investing, taking money to make more money, as anything real. They view it merely as shuffling papers, moving money around and the rich get more of it - while everyone gets screwed.

Investing is a noble act of allocating resources where it is best suited. It is one of the few areas where reason is the dominant proponent of it and hence why it is so derided. One has to choose where to put money that will generate the most output. Short sellers, the true heroes of this story, are the ones that are taking on tremendous risk to keep the market efficient. Resources that go to poor companies, like GameStop, Blackberry, AMC, etc actually take away from the market. People creating cancer cures seem like a better place for money than a failing brick and mortar game shop.

So first take away: the market, investing, is just this game of papers and moving money around.


Reality is just whatever 

GameStop is a brick and mortar game business. It's dying and has no future. It has poor fundamentals and overall not worth much. This is reality. With the view that the market is just a game, is to detach the business from what it really is. What makes GameStop a 30 billion dollar company? Nothing more than the fact that they can chase the price out.

The fundamentals don't change despite this and eventually things will go back to where they belong - not before crushing some.

Conclusion

I didn't have much time for writing this, so I just wanted to keep it simple. The heroes of this story are the hedge funds for shorting these companies. They are making reality based decision making. The redditors are nihilistically approaching the market with nothing, but destruction as their goal.

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