How Reddit’s Wallstreetbets Used GameStop to Attack Hedge Fund Narcissism — Mindsplain

What’s going on with the GameStop situation?

What is the internet good for if not a tightly-knit network of folks doing a deep-dive into an obscure problem? The fervent group of Redditors known as Wallstreetbets (WSB) are finance mavens who claim they’ve found a way to make themselves rich while taking down a cadre of slick, high-powered, hucksters on wall street.

Many of these self-identified “diamond-handed” “apes” have already made millions buying GameStop (GME), a Texas-based company that political pundit Ben Shapiro calls “a swap meet meets blockbuster.” Many of these newly-minted millionaires are willing to lose millions to stay in the game.

The talking heads ridicule the bros from Wallstreetbets because they’ve chosen to support a company that lost its competitive edge as online retail and digital media have proliferated. If the historically brick-and-mortar company was not obsolete before the COVID-19 pandemic, its physical locations must be doomed as the world resigns itself to buying online.

And yet, over the last few weeks, major hedge funds like Citadel and Melvin have allegedly lost billions as the self-proclaimed “smooth-brained” “retards” on Wallstreetbets cheerfully purchased cheap shares of a stock that traders were betting on to fail.

How, you might ask, did a group of basement-dwelling internet geeks get the upper hand on the Gordon Geckos of Wall St.? And why do these “boys” tout the merits of GameStop, i.e., ticker symbol “GME”? Stranger still, why haven’t they cashed in?

Who are the Wallstreetbets crowd?

The most well known member of the Wallstreetbets crowd is U/DeepFuckingValue (Keith Gill) a 36-year-old software engineer and father living in “the southwest.” Gill also has a popular youtube channel under the username “ Roaring Kitty.”

Gill is credited with identifying the opportunity with GameStop Stock, purchasing it under $10 per share and growing his total position from under $800,000 at the bottom to approximately $48,000,000 at the peak.

Although Gill’s position has fallen considerably as GME has tumbled from $480 per share to just over $60 per share, he remains celebrated by the Wallstreetbets crowd. The community now sees him as the leader of a movement. Members of the community celebrate his “Diamond Hands,” rather than criticizing his failure to take profits near the top.

The Gill-led crowd does look forward to claiming their “tendies” (i.e., profits), but the majority of its members see holding GME as being much more important than just the money.

Future anthropologists will certainly enjoy unpacking the cheeky, sardonic discourse exchanged on the subreddit. The banter is rife with ironic self-deprecating humor, repeating ad nauseum that they are all “retarded,” “autists,” “smooth-brained,” who are utterly unqualified to give financial advice and whose wives are all cheating on them.

The lone virtue to which they all aim to aspire is having a steely resolve (i.e., “diamond hands”).

Why GameStop?

On the surface, the opportunity presented by GameStop is a simple numbers-based play born of shrewd analysis. WSB redditors noted that hedge funds had leveraged other people’s money to a non-sensical degree on a bet that GameStop would fail. Specifically, hedge funds were selling so many shares of GME short that the total bet exceeded the number of shares of GME in existence by 40%.

With so many bets on the company failing, the WSB crew asked the question: “What if we mobilize an effort to buy and hold a stock that the hedge funds have overcommitted resources to short-sell for a major profit on a short timeline?” The answer, according to the community, is that hedge funds will have to choose between bleeding capital through interest on the leveraged capital, or close their positions by buying the stock, thus sending the price “to the moon.”

Hard to argue with this logic.

However, the media has observed that there may be more to the championing of GameStop as a foxhole to die in than merely its value as a strategic play.

On the subreddit, many extol nostalgic memories of buying & selling games at GameStop. Others associate it with being a place to pass time or an escape from some of the indignities of childhood. It’s probably safe to say that a significant percentage of the WSB crowd identify as gamer nerds.

More generally speaking, GameStop is a retail business bullied out of its sector by slicker, sexier business models in online retail. The Amazons of the world took GameStop’s lunch money and stole its girlfriend. And now the “boys” of WSB are looking to reclaim some of what was taken from GameStop, and maybe themselves as well.

To put it succinctly, WSB and GameStop are both underdogs.

And thanks to this tight-knit group of Redditors, the WSB participants and GameStop stakeholders now seek to seize the opportunity to take back their high school lunch money-a sum that could be a sizable sum when you consider the interest accrued.

The Drama

After an initial surge in the GameStop share price to highs above $400 (many early WSB movement adopters bought when GME was below $10 per share), prices have since fallen down below $100 per share.

Still, the DeepFuckingValue and the WSB army repeat the battlecry of “hold the line” and encourage others to keep their “Diamond Hands.” Members await updates from DeepFuckingValue, repeating the mantra “If he’s still holding, so am I.”

The enemies of these reddit warriors are not just the “suits” who work for deep-pocketed hedge funds. Other villains have since emerged. Robin Hood, the user-friendly platform that was among the first platforms to offer free trading, gained widespread adoption partly by pledging allegiance to the cash-strapped investor. The WSB crowd accuses Robin Hood of siding with the big guys at the exact moment it mattered most. At the height of the GameStop Market, Robin Hood restricted purchases of GME but while permitting unrestricted sales. This, the WSB crowd, provided the breathing room hedge funds needed to drive the price back down to safer levels.

Redditors have also observed a rapid increase in “Bots” posting in the WSB sub. Cloaked by the rapid increase in interest and memberships in the sub while GME was on the ascent, the bots post pessimistic views on GME, aiming to weaken the resolve of GME-holders, or turn the diamond hands into “paper hands.” Wallstreetbettors attribute the bot activity to hedge fund interference as they scramble to minimize and offset losses.

Another dirty tactic the apes of WSB accuse hedge funds of perpetrating against their strategy are so-called “ladder attacks.” Ladder attacks involve large financial institutions exchanging shares with one another, causing price volatility, inducing panic, and triggering holder stop-losses.

The mainstream media is another villain drawing the ire of the WSB crowd. In response to the initial windfall, Redditors felt the media had unfairly criticized the ethics of their strategy (since similar strategies do not get covered when executed by major financial institutions).

WSB also holds the opinion that the media has discouraged others from joining the movement through pessimistic coverage of their strategy. Others go as far as to say that major media outlets have misrepresented WSB strategies in such a way that has given hedge funds much-needed relief. For example, on 2/1, it was widely reported that WSB was turning to SLV (a fund tied to the price of Silver) since the GME run appeared to have ended.

The coverage of SLV misled the public in two important ways, the WSB Redditors claim. First, it suggested that WSB had lost faith in the GME strategy; and second, it advocated a strategy not endorsed by WSB. The net effect would be to divert capital away from GME towards SLV-a fund from which hedge funds like Citadel would profit greatly.

To the Wallstreetbets community, what started out as a guerilla attack on hedge funds has now expanded to become a full-fledged war against the establishment.

What does this have to do with psychology, narcissism?

The market-manipulators of Wall St. sit atop the financial social hierarchy. Not only do they hoard a disproportionate amount of the market’s resources, but they continue to display entitled attitudes, finding angles to hoover up more financial resources, whether through political influence or direct market manipulation.

It’s quite easy to make parallels between corporate greed on Wall St. to severe narcissistic, if not sociopathic, personality pathology. One famous example of adopting this perspective is the 2003 documentary film “The Corporation.”

Grandiose Narcissists

Most people either know a narcissist well or have some idea of the traits pathological narcissists display. But the GameStop drama provides an opportunity to understand the nuances of narcissism with much more precision.

Check out this model of narcissism showing the emotional dynamics of the prototypical, grandiose narcissists. On the surface, grandiose narcissists can be most succinctly described as having disgust, contempt, and anger for displays of weakness, vulnerability, and dependency.

This persona of arrogance, invulnerability, and dismissiveness belies deeper levels of sadness and annihilation anxiety. While the wolves of Wall St. may appear to be unassailable, success in the financial markets is often predicated on using other people’s money, liberal credit, cheap money, and many systemic advantages that retail investors lack.

We don’t need to look very far back to see epic catastrophic failures, government bailouts, and shameful displays of corruption among Wall St. elites. The uber-monied class may be insulated from consequences, but make no mistake: they depend on that insulation.

As for the sadness that lies beneath the narcissistic facade, it’s there-just seldom seen. The GameStop pump was one of the rare instances that it was in plain sight.

Want to see it? Look no further.

The “mob” as the the social counterweight

Referring to the aforementioned model of narcissism, you can see that two other forms of narcissism stand up in opposition to grandiose narcissism: Deflated Narcissism (a.k.a., Covert Narcissism) and Depleted Narcissism (a.k.a., “Echoism”).

In the case of the former, deflated narcissism, the emotional state is one of shame, grievance, and self-centered suffering. At pathological levels, deflated narcissism can be quite obnoxious. At healthier levels, deflated narcissism can be transformed into a natural counterweight to the excesses of grandiose narcissists.

How do individuals so identified with their own suffering find agency? Well, they form angry mobs. Collectively, mobs display (potentially healthy) forms of obstinance, entitlement, and power. Individually, mob members may feel powerless. Collectively, they can display the healthy attributes of grandiose narcissism.

The group of underdogs that gather on Wallstreetbets are one example of such a mob.

What happens next?

At the time of this article, GME is trading well below $100 per share ($63.77). The WSB movement appears to be on the verge of being buried by institutional money, the 24-hour-news cycle and the collective ADHD of modern times. The prevailing wisdom is that the WSB crowd had their 15 minutes of fame and would have been wise to cash out when the GME price was $400 per share. Already seen by some now as a cautionary tale of biting off more than you can chew, the Wallstreetbets are back in the familiar position of underdog. The smart money appears to have shifted to support the hypothesis that the dream of burying hedge funds and toppling Wall St. narcissism was a delusion.

After all, it’s a rigged system. The WSB movement got in a jab but have since been knocked out by a swift, retaliatory uppercut delivered by the establishment.

But DeepFuckingValue and the original ragtag cadre of revolutionary retail investors don’t believe this war is over. They view it as a war of attrition that tests the material of their own hands-be it diamond or paper.

They believe that the institutional money is brazen enough to open up even more short positions to prove they are bigger, smarter, tougher, and more powerful than the little guy. Most believe that holding their positions will yield massive rewards down the line. They also believe that, even if they lose, they will have fallen in a noble cause.

The self-proclaimed smooth-brained, diamond-handed, retard cucked apes believe that the war over the future of civilization is not drawn along racial, gender, or geo-political lines, but rages between the haves and the have-nots.

Make no mistake, they hold GME to become a part of a new class of haves. But for now, they are willing to lose it all to fight for the have-nots. Retirement accounts and life savings hang in the balance as hedge funds through massive quantities of other people’s money at them like hand grenades.

The Wallstreetbettors are underdogs. The odds are stacked against them. But they are a mob with a cause. Bet against them at your peril.

How can you participate?

If you support the WSB cause, the best way you can show your support is to purchase shares of GME-preferably not through the Robin Hood platform. One example of a platform that has continued to offer GME shares is M1 Finance*. This is not financial advice. It’s an invitation to participate in a social movement. Don’t invest more than you can afford to lose.

*Support the site by using this affiliate link

While this may not result in profit, the WSB crew point out that if everyone owned one share, it could very well be another gut punch to the narcissistic entitlement rampant on Wall Street. And, if we’ve learned anything since 2008, the government is not likely to mete out justice in response to Wall St. excesses.

Originally published at https://mindsplain.com on February 7, 2021.