The dark side: The underlying issues of the stock market
April 12, 2021
While the drama around GameStop is fascinating to follow, Peter and Abigail also commented on some of the more serious issues they’ve uncovered about the American economic, social and political systems surrounding the stock market through the scandal.
By analyzing the console cycle, a trend where the stock price tends to spike after the release of a new gaming console, and the impact of Ryan Cohen, a successful investor who owned 10 percent of GameStop in November last year, Peter had confidence that the newly released PlayStation 5 console and Cohen’s involvement could save the company and recover the stock price. Based on these observations, he believes that the hedge fund companies made a wrong and inconsiderate decision to short GameStop but without rightful consequences.
“The GameStop fiasco is blatant proof that the market is rigged in favor of the rich at the expense of small investors,” Peter said. “The hedge funds which shorted GameStop made a gigantic blunder…which could easily be taken advantage of. They made a mistake and should have been punished for it. Instead, they used illegal market manipulation and backroom deals to bail themselves out of their error, cheating GameStop shareholders out of billions of dollars. Numerous stockbrokers literally suspended the buying of GameStop, only allowing people to sell, citing ‘excessive risk.’”
As an individual investor, Peter compared his financial risk with that of hedge fund companies to describe the inequities within day-to-day trading.
“If I make a stupid trade, I have no such resources,” Peter said. “I don’t know any senators or bank managers or SEC employees. I don’t own any stockbrokers. If I make a stupid trade, and it blows up in my face, I lose everything. Yet, when the hedge funds made terrible and risky investment decisions and rightfully lost on them, they got bailed out and had their losses covered [by stockbrokers].”
Abigail expressed a similar disappointment, claiming that powerful groups such as hedge fund companies are often able to influence the policies regulating the market, while individual investors have no say in the creation or enforcement of the rules put in place by these groups. According to Abigail, this inequity in influence violates the terms for a supposedly free market.
“It’s really upsetting to know that the stock market is really only for the rich people,” Abigail said. “They control it and can do shady things. They can stop the stock market and do things that are literally costing people millions of dollars, and it doesn’t matter [because] they’ll get away with it.”
From a social perspective, both Abigail and Peter found that while hedge fund companies broke the rules of the market and escaped punishment for their role in the GameStop stock scandal, individual traders who followed their rules were the ones portrayed negatively by the major news outlets.
“[People buying into GameStop] are being ridiculed. They are being portrayed as these bad guys who are doing terrible things to our beloved hedge fund companies and are breaking the stock market,” Abigail said. “That’s not the story I saw, right? They’re just trying to make a living for themselves while doing a lot of good things with the money they earned. One person donated over $100,000 to adopting animals, while another gave his profit to a local hospital for kids. These stories are just forgotten. These people are just regular people.”
“Our media is still owned by the rich and is oligopolized into a series of pointless and ideologically bankrupt echo chambers,” Peter said. “The media have pushed the illogical narrative that somehow small investors were at fault for this whole thing.”
While dissatisfied with the biased way the media covered the GameStop scandal, Peter and Abigail are also frustrated by the inaction of politicians to punish those responsible for violating the rules of the free market.
“Our politicians make a big show with Tweets and congressional hearings, yet their ultimate response is flaccid and utterly ineffectual,” Peter said. “The grip of the rich on our country and its institutions is so great that the biggest financial crime of the decade will be forgotten in a few months, without consequence.”
Although downhearted by the unfairness caused by the wealth gap in the U.S., Abigail remains optimistic about the future of individual investors who continue to hold their GME shares.
“I hope [that the individual investors in] GameStop win and that hedge fund companies lose,” Abigail said. “It’d be a monumental time in history where there’s a war against the rich by the poor without violence.”