Republicans and Democrats agree that wealth inequality, as well as income inequality, are very unhealthy for this country. In fact, they have spent decades complaining about it. However, while they were complaining, anger was building. Millions of blue-collar workers were double-crossed by politicians who wouldn’t protect them from globalization. Anger among those Americans still continues to build. Maybe, our bicameral system of government was not designed for a world with ever-increasing rate of change? Maybe, that justifies a barbarian attack on the Capitol? Unfortunately, that argument also seems to justify an attack on our financial system, arguing that it is already irreparably corrupt.
Sparing you the mechanics, when you “short” a stock, you are betting the value of that stock is going down. If it does, you make a profit. However, if it doesn’t, you can lose far more than your investment. In fact, you can lose everything –including your home. “Shorting” a stock is not for the faint-of-heart. It requires a strong stomach and a great deal of prior research. Which stock are you willing to bet everything on . . . everything? How much research would you do first?
There have been cases whereby fat-cat hedge funds short a stock and then try to drive the stock down, usually by starting rumors, but then went to jail for manipulating the stock price. Make no mistake – stock manipulation is illegal. This week, thousands of users of a chatroom on social media website – Reddit – did manipulate the price of certain stocks. The only research they did was the level of “shorts” on the company, not the fundamentals of research. They free-loaded off the research of the fat-cats. The Reddit Raiders justify their manipulation as an attack by the “little guys” on the fat cats of Wall Street — a romanticized veneer on revenge, masking their greed. Of course, neither the fat-cat hedge funds NOR the Raiders care about the company or its employees?
Until we finally deal with the festering problems of wealth inequality and income inequality, we will witness more attacks by the “little guys.” While I understand their romantic notion of “shafting the fat cats” and I am sympathetic to them, they are still doing something wrong.
The Reddit crowd believe they are “democratizing” the market, just like the barbarians at the Capitol believed they were democratizing America . . . such an romantic but erroneous emotion.
