The Crowd Squeeze

I’ve been doing all kinds of things and reading all kinds of stuff. I intended to be done with something else, instead of finishing some stuff that I managed to leave unfinished, but then people started fucking with the stock market in the US. If you thought there was nothing good about 2020 and 2021 is just a sequel to it, like it looks like it is, at least we got to enjoy people squeezing money out of hedge funds.

I don’t know if this is even necessary, but I’ll cover how this works anyway. I don’t know how you could have missed this and not read about how it all works, but gist is that people with a lot of money, so much money that it makes no sense, made a massive bet and now it’s backfiring on them, because a lot of people, so many people that you can’t comprehend it, made a bet against that bet. So, in short, you have a small number of people with shitsloads of money trying to make even more money on top of all that money, countered by a shitload of people with little money, the difference being that it’s really hard win against that many people, because the number of your opponents or, rather, enemies is virtually infinite. One walks away, another walks away, and so on and so forth, but that’s simply not enough as there’s just too many of them and it’s only likely that others will join them. It’s whack-a-mole.

To be more accurate, hedgefunds sought to short-sell faltering game retailer GameStop shares, to the point that more than 100 percent of it publicly traded shares were shorted. If I’ve understood correctly, the shares were shorted 140 percent, meaning that a lot of the shares that had already been shorted were shorted again. It’s unlikely that they were able to get it all, at a go, which means that the same shares were shorted a number of times. If that seems ridiculous, it’s because it is.

The idea behind short-selling or shorting is to borrow shares, sell them at a certain price and then wait for the value of the shares to down, buy those shares at a low(er) price and then return the shares. The point is to pocket the difference, minus expenses (whatever you had to promise to be able to borrow those shares, taxes etc.). If that seems like a good way to make money, by basically doing fuck all, it’s because it is.

It is, of course, a gamble. If the value of the shares goes up, instead of going down, you are fucked. Instead of making money, pocketing the difference, you now have to pay the difference. It’s as simple as that.

What happened in this case is that those who shorted the company, more than once, mind you, thought they had won the lottery because, well, GameStop hasn’t actually been relevant for years. Its business model just doesn’t make sense these days. It’s like what happened to Blockbuster but with PC and console games. It’s just that bad that shorting it just made sense.

The problem with that kind of mass shorting is that it’s not exactly hard to notice and, well, it being not hard to notice, someone did notice it. This presents an opportunity. If the prices go up, there is profit to be made from it. While it may seem to make no sense to invest in something that is bound to fail, it does when others have shorted the shit out of it. This move to counter the short is known as the short squeeze. The idea is to squeeze money out of the big-time gamblers who shorted the shares. And oh boy, did people jump at the opportunity to squeeze!

Squeezes are not a new thing. What’s new about this squeeze is that it’s a crowd squeeze. To be clear, it’s funded by the crowd, but it’s not crowdfunded. Each person in the crowd acts on its own, instead of placing the money into a shared pot. So, like I pointed out already, you don’t have one big fist that squeezes money out of those who shorted shares, the hedge funds, but a virtually endless number of little fists that do that on their own.

To explain this in fancier terms, first in Tardean parlance, shorting is an invention. Someone came up with it to make money. It was imitated by others. It’s, however, not an invention that is imitated by the many. Why? Well, it’s a gamble. It’s also not a gamble but a dickish gamble. I’d also say that it also requires quite a bit of money to do, at least if you wish to do it consistently. You can’t always win, so you have to be prepared to pay the difference every now and then. You have a certain buffer, something that allows you to take some hits. Most people don’t have such luxury, which is why most people don’t go shorting shares. It just doesn’t scale that way.

To make sense of the scale issue, keep in mind that you need to return what you have borrowed. It’s like borrowing some item from a friend. You are expected to return that item to that friend. If you sell that item in the meanwhile, you still need to buy that item back in order to return it. Of course, that item might be something common, like a tool, so it’s going to be fine if the tool isn’t the same tool that you borrowed from that friend, as long as it’s functionally the same. The thing is that you are in trouble if the item that you want to buy back in order to return it is now more expensive than what it was when you sold it. You can’t go back to your friend and hand over the money you got from selling whatever it is that you had borrowed from your friend. No. You need to return that thing. It’s irrelevant to your friend that you now need to spend your own money to get that thing back. No one forced you to borrow that thing. It’s your problem that you thought you’d make some money out of selling what’s not yours in hopes of buying it back cheaper once you return it.

Squeezing is also an invention, something that’s also been imitated in the past. What’s new about this squeeze is that it is, in a sense, also invention, not a mere imitation of previous squeezes. People didn’t simply adopt the squeeze. They adapted it. They reworked it. They made something new out of it. The new thing about it was that ordinary people, with relatively little money, saw this as an opportunity to squeeze the lights out of wealthy financial institutions. Others then imitated it, so that it became a flow or a wave that is very hard, if not impossible to stop.

To explain this in Deleuzo-Guattarian terms, people countered capitalism by acting as a horde, wittingly or unwittingly. They aren’t seeking to gain from the situation. Okay maybe some seek to gain from the situation, I mean that’s only likely, but it seems that most people involved are not seeking to gain from it or, if they gain, they gain and if they don’t, they don’t. I’d say that many are simply driven by the opportunity to counter the system, to weaponize it against itself. They don’t care or seem to care that they may lose. I reckon they are more than happy spend a couple of hundred dollars or euro to do just that. It’s also a relatively small price to pay for that, hence all the YOLOing. How will it pan out? I don’t know, nor do I recommend people to spend money they cannot afford to lose. Can this, what’s happening, be dangerous? Yes. Can it be cancerous? Yes. But, be as it may, this does express that there’s power in people.