F  L  A  U  N  T

When a Japanese Samurai would commit seppuku—ritual suicide—he would consume his favorite meal, compose a death poem, then ceremonially disembowel himself.  The death poems of the self-proclaimed smooth brained apes who make up the reddit board Wallstreetbets are more prosaic in form if no less poetic in intent. “I just like the stock”, “what’s an exit strategy”, “YOLO”.   To be sure it isn’t at all clear yet who’s doing the dying (some hedge funds are going to get wrekt and so too are some of these traders—while some on both sides are making vast fortunes). But there’s a cutting point to this recklessness that carves open the guts of society to expose the heart of a system that is no longer functioning. People are willingly throwing the medium of exchange into the fire in an attempt to burn down the game.  The saga began with Reddit-dwelling traders buying and holding shares in Gamestop in a strategic attempt to profit from the position of short sellers who had wildly overleveraged their shorts (bets that the stock would fall). These hedge funds had stretched themselves to bet on 140% of all the Gamestop shares that exist (that’s 40% more than actually exist for the innumerate \[which is not to cast **any** aspersions on the numerical talents of the heady aesthetes who are _FLAUNT_ readers—the system is just genuinely so batsoup crazy that big money can bet on bets on bets\]). Astonishingly the risk profile of these bets was asymptotic or _infinite._ Meaning that the potential losses (and gains) of these bets, are—in theory—infinite. Unlimited. Without bounds.  These bets have created a truly systemic risk. Larger hedge funds have been sucked into the bad bet vortex conjured by mostly smaller hedge funds, and now it seems that there is a high probability that some of the underwriting banks and institutions, not to mention a whole fleet of market makers, trading platforms, and clearing houses could get sucked in to a Gamestop sized black hole of financial pain. This could trigger a Lehman Brothers-sized market shock. Hence the reaction of Robinhood to commit commercial suicide by shutting “retail investors” (Redditors and co.) out of the market in the peak of the battle, in [what appears to have been](https://www.vice.com/en/article/qjpnz5/robinhoods-customers-are-hedge-funds-like-citadel-its-users-are-the-product) a blatant attempt to manipulate the market and collapse the price of the stock so that larger players (who just happen to be their biggest customers) could close their riskiest bets. Similar actions and restrictions were taken and enforced by Interactive Brokers, eToro, Charles Schwab, and TDAmeritrade.  The Chairman of Interactive Brokers made astonishing [admissions to changing the rules of the game](https://www.cnbc.com/2021/01/28/interactive-brokers-restricted-gamestop-trading-to-protect-the-market-says-chairman-peterffy.html) because: “We are concerned about the ability of the market… to continue to provide liquidity. And we are concerned about the financial viability of intermediaries and the clearing houses… if our customers are unable to pay for their losses we have to put up our own money”.  An unprecedented popular movement has risen to buy and hoard Gamestop stock (GME) in order to inflict a systemic wound on the financial system. By buying and holding GME the Redditors (and doubtless many large professional financial players gaming the confusion) have realized that they can literally blow these bets up, because the hedge funds can’t possibly buy and recover the 140% of shares they would need to acquire to close their bets. The neoliberal founding father Milton Friedman famously asked “is there some society you know of that doesn't run on greed?” A large portion of Redditors appear to be answering that they don’t, but that they’d like to see what one looks like. Irrespective of how this started, for many of the belligerents this has become a class war. The Samurai were the aristocracy of their time. Governing by the sword in a complex feudal system. Our own serfdom is no less apparent even if our overlords don’t wave swords. The algorithm has replaced the sword. Profit secured by technology. An extreme concentration of wealth into ever diminishing hands. The Gamestop saga is revealing the ricepaper fragility of this landscape.   It’s also demonstrating that the governance of society has been surrendered to technology companies who act in collusion to ensure their primacy. I was no fan of Donald Trump but the wide scale censorship of him and his followers by technology companies was [troubling for many reasons](https://www.gusdonohoo.com/quid-pro-covid/2021/1/12/checkers-chess-trump). In the Gamestop saga, Google has already attempted to [diminish the negativity](https://finance.yahoo.com/news/google-works-restore-robinhoods-reputation-073900580.html) towards Robinhood, Facebook have [killed](https://www.reuters.com/article/us-retail-trading-facebook-idUSKBN29X34P) trading discussion groups, and Discord attempted to [shut down](https://finance.yahoo.com/news/wallstreetbets-switches-private-forum-comes-000854636.html) its Wallstreetbets channel. This is regulation by cartel. Governance by industry. Overlordship by algorithm.  Bernie Sanders was able to outraise Super PAC funded candidates with millions of small donations. Wallstreetbets, with a similar form of momentum—and a similarly revolutionary message—has arguably created a gigantic hedge fund, with some significant fraction of trading volume coming from hundreds of thousands of small, angry shareholdings. It remains to be seen whether gaming the financial system in this way can be more impactful than democratic process. But it seems certain that the short selling game has been changed forever.   I wouldn’t dare to suggest that there’s a unified voice or intent behind Wallstreetbets, but unverified comments [like the following](https://www.reddit.com/r/wallstreetbets/comments/l78fuh/i_just_bought_5000_in_gme_i_would_not_have_done/gl603w4?utm_source=share&utm_medium=web2x&context=3) are being represented as sitting somewhere close to the heart of the movement: “I’m a bored housewife and my husband (a former attorney with the SEC) and I were so pissed this morning so we decided we don’t care if we lose it all, it’s about the principle. We threw $5000 when it was at $300-ish today. Edit: TO THE MOON!! 🚀 🚀 🚀” In the stock market we have just witnessed [one of the most astonishing bull runs in history](https://www.ft.com/video/38d64727-7683-45c4-bcb2-73459a643d0c). A web of capital stretching to ever more precarious and greater heights, even as its connection to the real economy (where people live \[and die from Covid\]) became ever more threadbare and tenuous. We seem to be approaching a breaking point.  1/31/21 DISCLAIMER: Gus holds one GME stock because his curiosity got the better of him and because Robinhood made him irate. He does not ever expect to see the money spent on it again and does not recommend that anybody purchase it. Nothing above should be considered financial advice. Obviously.