I imagine a lot of readers are following the tulip-mania over Gamestop, which is roiling Wall Street and costing a lot of hedge funds some serious money. It is certain to end as such speculative excess always does—with a crash leaving a handful of people who got out at or near the top with nice gains, and a lot of losers on the side of the road. It is sure to be a new chapter in the next edition of Charles Kindleberger‘s Manias, Panics and Crashes (a true classic).
What is novel about the Gamestop “short squeeze” is that it is being propelled by a spontaneous online community that has self-assembled into a fast-moving mob, with the purpose of “taking down the hedge funds” that have short positions on Gamestop. It is reported that several hedge funds have incurred several billion in losses already. When I looked this morning, an April $150 put option (more than $100 out of the money even at today’s fallen share price) will set you back $9,000; even a $150 put option expiring next week is nearly $5,000. These are crazy option prices, which suggests a lot of market players think Gamestop’s decline will be swift and soon.
The more I think about it, the more the Gamestop episode resembles our woke politics of the moment. An online mob bids up the “racism/white supremacy” charge, and corporate America (not to mention Democratic politicians and the media) rolls over and pay up, which only sends the online mob market bid for racism higher. Think of it as a political short squeeze.
It is likely to end the same way, though slower. In fact, I’ve been predicting that 10 years from now people will be saying, “Whatever happened to Black Lives Matter (the organization, not the slogan)? Where did they spend all that money corporate America lavished on them?”
Meanwhile, as one wag somewhere put it, the job of conservatives just now is “to stand athwart history, yelling ‘Gamestop’!”