{"id":24341,"date":"2021-02-03T08:43:13","date_gmt":"2021-02-03T08:43:13","guid":{"rendered":"http:\/\/www.counterpunch.org\/?p=132697"},"modified":"2021-02-03T08:43:13","modified_gmt":"2021-02-03T08:43:13","slug":"some-corporate-suite-context-for-the-fun-and-games-at-gamestop","status":"publish","type":"post","link":"https:\/\/radiofree.asia\/2021\/02\/03\/some-corporate-suite-context-for-the-fun-and-games-at-gamestop\/","title":{"rendered":"Some Corporate-Suite Context for the Fun and Games at GameStop"},"content":{"rendered":"

You\u2019ve probably seen by now some of those new \u2014 and jaw-dropping \u2014 stats on billionaire wealth. Analysts at Inequality.org started the statistical ball rolling this past fall with riveting research on how much the fortunes of America\u2019s super rich have climbed since Covid began crushing the U.S. economy. This week those same researchers have come back with an alarming update<\/a>.<\/p>\n

Since mid-March, the latest numbers show, America\u2019s billionaire fortunes have climbed 38.6 percent, over $1.1 trillion, enough to send \u201cevery one of the roughly 331 million people in the United States\u201d a Covid stimulus check of over $3,400.<\/p>\n

We know exactly \u2014 at least mathematically \u2014 why billionaire fortunes are rising so fast: Billionaires own a disproportionately large share of corporate stock. Corporate share values have skyrocketed since Covid entered our lives, and no one has benefited more from that rise than billionaires, many of whom happen to run those corporations whose shares are skyrocketing.<\/p>\n

These billionaire top execs, insist their cheerleaders, owe their good fortune to their exceptional talents. Today\u2019s richest corporate titans do their best, naturally, to feed this CEO-as-genius perspective, no one more so than Tesla\u2019s Elon Musk. His electric car company now rates as far and away the most valuable automaker in the world.<\/p>\n

Musk has watched<\/a> his fortune leap from $24.6 billion ten months ago to $179.2 billion last week. Tesla now has a market value higher<\/a> than the combined value of the world\u2019s other nine carmakers \u2014 despite only annually manufacturing a fraction of the cars these other manufacturers are making.<\/p>\n

The many Musk fanboys tribute that formidable market value to their hero\u2019s visionary genius. But let\u2019s get real here. Today\u2019s soaring share prices don\u2019t reflect CEO visionary smarts or even high levels of two-feet-on-the-ground executive competence. They reflect the plutocracy-friendly government policies and speculative madness that overtake economies whenever a precious few have accumulated far too much.<\/p>\n

What exactly is going on? Let\u2019s start with those plutocratic-friendly government policies. Support for these policies \u2014 on everything from deregulation to trade \u2014 predates the Trump years and crosses party lines. But Trump\u2019s generous tax cuts for the rich and various other moves injected sizeable piles of new cash into the pockets of the deep-pocket set. Where to put it all?<\/p>\n

The Federal Reserve made that decision easy. The Fed\u2019s low-interest rate policies<\/a> \u2014 a response to anemic growth in the \u201creal\u201d economy \u2014 depressed returns from bonds and other fixed-income investments. Stocks became, in a sense, the only game in town for investors with cash aplenty, and the resulting \u201cgusher of money with nowhere to go but speculative assets\u201d drove up<\/a> share prices. In 2020, the tech-heavy Nasdaq share index rose<\/a> 44 percent, and the Dow Jones and S&P 500 also hit record highs.<\/p>\n

These record share prices, in turn, have driven up the net wealth of the nation\u2019s corporate and financial elite, the core of the top 1 percent. This lofty single percentile, notes a Federal Reserve December 28 statistical update, holds<\/a> 52.7 percent of corporate equities and mutual fund shares. The bottom 90 percent of Americans own<\/a>just 11.7 percent.<\/p>\n

In this wonderfully rich-people friendly environment, Wall Street has nurtured new financial instruments for helping rich people get even richer. Since the start of 2020, speculators have raised over $93 billion<\/a> for \u201cSPACs,\u201d short for \u201cspecial acquisition companies,\u201d entities that venture out into the financial markets flush with all the cash they need to buy up shares in companies with execs eager to cash out or expand.<\/p>\n

All these SPAC billions, of course, create still more demand for shares and even more windfalls for top corporate execs, who need not have done anything of note to \u201cdeserve\u201d their ever-greater good fortune.<\/p>\n

But the speculative madness runs far deeper, as we\u2019ve seen so vividly this week. A failing 37-year-old video games chain, GameStop, has become front-page news the nation over. No surprise there. Not every day, after all, that a company\u2019s shares hurtle<\/a>from $19 to $483 in just a few weeks.<\/p>\n

Media reports have generally<\/a> been painting<\/a> this GameStop story as a \u201cDavid-and-Goliath battle between an army of small investors and Wall Street.\u201d Average Americans mobilized via online message boards, the tale goes, have snookered high-and-mighty financial hedge funds at their own speculative games.<\/p>\n

That spin does have an element of truth to it. Some of the now over 6 million<\/a> average Americans who\u2019ve gathered online together via the Reddit group WallStreetBets have so far made many thousands<\/a> of dollars in stock-trading profits off relatively tiny initial investments. And some hedge funds, most notably Melvin Capital Management, have taken a substantial hit.<\/p>\n

We have no need here to go into the intricacies of the financial warfare that\u2019s pitted Wall Street masters of the universe against the suburban-basement peasants of WallStreetBets. Analysts elsewhere have done<\/a> noble work explaining<\/a> the ins and outs<\/a>of stock options<\/a> and short-selling<\/a>.<\/p>\n

In a quick nutshell: Hedge fund billionaires have been betting for decades on companies to fail \u2014 and sometimes nudging them over the edge. The WallStreetsBets gang called that bet on the hedging around GameStop. They mobilized en masse to buy up shares of the sputtering company, a move that sent its share price soaring and left hedge fund billionaires muttering.<\/p>\n

But the whole episode, on closer inspection, turns out<\/a> to be less David vs. Goliath than \u201cGoliath vs Goliath, with David as a fig leaf.\u201d<\/p>\n

The financial insurrectionists of WallStreetBets, for instance, are doing<\/a> the bulk of their stock trading on the \u201ccommission-free\u201d Robinhood brokerage platform. But Robinhood is hardly stealing from the rich and giving to the poor. Robinhood is routinely executing its clients\u2019 trades through \u201cthird-party\u201d financial powerhouses that give those clients less<\/a> than what they should be getting for their money. These third-parties pay Robinhood a fee for the privilege of nickel-and-diming each client trade. The nickels and dimes add up.<\/p>\n

\u201cThe Street always wins,\u201d observes<\/a> analyst Elizabeth Lopatto at the Verge<\/em>, \u201cespecially if you\u2019re trading with Robinhood.\u201d<\/p>\n

The biggest of the third-party fleecers in the GameStop story, Citadel Securities, actually belongs to hedge fund billionaire Ken Griffin, part of a troika of companies that operate under the Citadel LLC umbrella. The hedge fund part of that troika helped bail out Melvin Capital Management, the biggest hedge fund loser in the GameStop war, and took a hefty ownership share of Melvin Capital in the process.<\/p>\n

Among the other major Wall Street players lurking in the GameStop story: Goldman Sachs, JPMorgan Chase, and all the other big banks that host \u201cdark pools,\u201d opaque private exchanges that serve<\/a> huge institutional investors. These dark pools \u201chave been making tens of thousands of trades in the shares of GameStop on an ongoing weekly basis,\u201d note<\/a> analysts Pam and Russ Martens at Wall Street on Parade<\/em>, but our banking giants need not report out the details of their trading on a specific or timely basis, rendering the data they do provide \u201cuseless in terms of monitoring price manipulation.\u201d<\/p>\n

Wall Street\u2019s banking giants, the Martens team adds, have every incentive to manipulate, \u201cto suck in the small investor at the top of a market bubble in order to create an escape route for themselves\u201d \u2014 and actually did that sucking big-time during the 1990s dot.com bubble.<\/p>\n

And what, might we ask, of GameStop itself? The company\u2019s corner office crowd has been royally enjoying all the fuss. CEO George Sherman has watched<\/a> his personal stash of GameStop shares run up \u201cfrom $45 million a month ago to as high as $1.13 billion.\u201d His largest shareholder, the former CEO of the Chewy online pet-products retailer, at one point this week was gaining<\/a> $4 million per hour.<\/p>\n

Workers at GameStop, meanwhile, don\u2019t have much to look forward to. The company is still planning<\/a> to close 450 more local stores in 2021.<\/p>\n

Let\u2019s end this reflection with an emphasis on the positive. This entire GameStop episode may eventually wind up making a valuable contribution to our political and economic debate. How can anyone now argue \u2014 with a straight face \u2014that our financial markets serve to efficiently move capital to innovating enterprises that make significant contributions to our social well-being?<\/p>\n

What sort of social order, the GameStop saga forces us to ask<\/a>, lets people get rich betting on whether companies are going to fail? What sort of society lets top corporate execs enjoy the betting?<\/p>\n

What kind of society? The one we have now. The one we have to change<\/a>.<\/p>\n

The post Some Corporate-Suite Context for the Fun and Games at GameStop<\/a> appeared first on CounterPunch.org<\/a>.<\/p>\n\n

This post was originally published on CounterPunch.org<\/a>. <\/p>","protected":false},"excerpt":{"rendered":"

You\u2019ve probably seen by now some of those new \u2014 and jaw-dropping \u2014 stats on billionaire wealth. Analysts at Inequality.org started the statistical ball rolling this past fall with riveting research on how much the fortunes of America\u2019s super rich have climbed since Covid began crushing the U.S. economy. This week those same researchers have More<\/a><\/p>\n

The post Some Corporate-Suite Context for the Fun and Games at GameStop<\/a> appeared first on CounterPunch.org<\/a>.<\/p>\n","protected":false},"author":55,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"_links":{"self":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/24341"}],"collection":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/users\/55"}],"replies":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/comments?post=24341"}],"version-history":[{"count":1,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/24341\/revisions"}],"predecessor-version":[{"id":24342,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/24341\/revisions\/24342"}],"wp:attachment":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/media?parent=24341"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/categories?post=24341"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/tags?post=24341"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}