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A stock-market revolution is unfolding. Or is it all just a big troll? We caught up with our staff writer Derek Thompson to figure out what’s going on.
The conversation that follows has been edited and condensed.
Caroline Mimbs Nyce: For starters, what the hell is happening?
Derek Thompson: GameStop is this middling physical retailer that has been shorted by a bunch of hedge funds, meaning that they bet this stock would decline in value. And a team of Reddit day traders came up with a clever revenge plot to drive up the value of the stock.
When the stock value increased, a bunch of people felt the pang of FOMO or pandemic boredom and bought stock, which resulted in a $40-a-share company becoming, in a matter of days, a $400-a-share company—without any underlying change in what that company does, or how it operates or what it says.
Caroline: So what’s new here? What sets this apart from normal Wall Street gameplay?
Derek: What’s new about the GameStop mania isn’t mania, and it’s clearly not GameStop. It’s Reddit, and it’s Robinhood.
Reddit, the online message board, allowed this group of probably mostly amateur day traders to come up with this plot. And Robinhood allowed ordinary investors to just open up their phone and buy a stock of GameStop without paying any commission.
Reddit and Robinhood stand for two things, the democratization of information and the ability of the internet to create very motivated and sometimes morally righteous, upstart clubs that can act for good or evil.
Caroline: So what motives are behind this?
Derek: There’s a portfolio of motives. I think some people are doing this for FOMO reasons. Then there are boredom reasons. A lot of people are suffering in this pandemic, but there are also a lot of people who have a lot of time by themselves at home.
And finally, I do think that there’s a moralizing aspect to this. A lot of people are really frustrated with the hedge-fund industry and the practice of shorting. In that respect, it’s a little bit akin to, 1,000 years ago, people buying tickets to a public stoning. People want justice done on a very public stage.
It’s possible that a year from now, looking back on GameStop week, we’ll say, Hmm, nothing’s really changed, except hedge funds now are more cautious about shorting cheap brand-name companies.
But I do think that something stranger is afoot, because when it comes to the internet, something stranger is always afoot.
Caroline: Do you have any reaction to Robinhood halting trade on the stock yesterday?
Derek: There might be a simple explanation, or it might be extremely strange. We don’t know yet, so I don’t want to speculate.
Maybe the cost of clearing all these trades was so onerous that the company had to temporarily shut down operations. But it might be the case that something about its relationship with various financial firms played a role in its decision to shut down an app that was supposed to democratize access to low-cost trading.
People are comparing it to the “French Revolution of finance.” But if Robinhood is acting at the hedge funds’ behest, it’d be as if, at the last minute, the king made a deal with Robespierre. And then together they slaughtered the French peasants.
One question, answered: How useful is recycling, really?
E. A. Crunden reports:
Recycling has well-documented benefits for the planet and can reduce carbon emissions. Still, as climate actions go, even the most committed recyclers caution that this one has clear limits.
“There are a lot of climate benefits to bolstering the recycling system,” Beth Porter, the author of Reduce, Reuse, Reimagine: Sorting Out the Recycling System, told me. “But we also have to acknowledge that recycling is not among the highest-priority actions.”
Tonight’s Atlantic-approved isolation activity:
Read a poem. Here’s Tiana Clark’s “I Stare at a Cormorant.” I’m still thinking / about the cormorant who disappeared / when I was writing this poem.
Today’s break from the news:
A nurse practitioner tried to launch a reality show about his hard-partying lifestyle. He ended up at the center of a massive drug bust.