I have been watching the Reddit/GameStop thing unfold and the way it’s been covered by various media sources, including Conservative pod-casts and talk radio.
The camps have split into:
“Redditors are financial terrorists who are going to destroy the stock market and economy.”
And
“Hedge funds deserve this and more because they are a bunch of fuckers who use the market like a casino and it’s only a problem when a bunch of internet randos beat them at their own game.”
I think the person who annoyed me the most on this was Ben Shapiro, who said (paraphrasing) “if you believe in the need for a stock market, you have to condemn what these Redditors are doing.”
I know what I want to happen here won’t happen, but I can believe that both sides are right and both sides are wrong because both sides are complaining about something that is orthogonal to the real problem.
The absolute, number one, real problem with the stock market is that we have a system in which the value of a stock is mostly if not totally divorced from every other metric of a company’s success.
Tesla was valued more than Ford, even though Tesla only sells 500,000 cars in a year and Ford sells about 6 million. Tesla wasn’t going to outsell or out-earn Ford. But because of the way investing works, Tesla’s valuation could be worth far more than everything about the company is actually worth.
This sort of fuckery can lead to problems like Elizabeth Holmes, CEO of Theranos, who through the culture of venture capitalism, silicon valley, and the cult of the tech CEO, used fraud to pump the sock value of her company to be worth billions while never producing a single viable product.
Then there is the attitude that a company’s main responsibility is to its shareholders. That leads to fuckery like what Boeing has done (well documented on this blog) which was great for people with Boeing stock in the short term, but literally killed people as cost-cutting in testing caused planes to fly themselves into the ground and spacecraft to fail to reach orbit.
In theory, I could start a local bakery with one storefront, take it public, and if I worked the market right, could make it worth billions in valuation from trading even though all I do is sell cupcakes one at a time to housewives.
What we need to do is regulate the stock market.
Short selling should be banned, it provides no overall economic good. It allows some people to get rich by hurting companies. Like betting that an old man with a cane will fall and break a hip. Short-sellers make money off the suffering of others.
Second, we need to figure out how to more firmly tie a stock’s value to the value of the company. You can’t have wide dispersions in value.
If the idea is that buying stock is investing in a company, betting that the company will do well, you need that company to actually do well, not just have the value of the shares do well regardless of the company’s performance, or vice versa.
The stock market cannot be a casino. Redditors proved how much of a broken system it is. Rather than attack them as financial terrorists, we need to regulate the market.
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