gamestop stock hedge fund

Game Stop, Arthur Square, Belfast, Northern Ireland. Photo: Wikimedia Commons/Ardfern

Stock market and millennial traders: Is it really a brave new world?

Fundamentally, market inclusion is a good thing. For too long the stock market has been seen as the preserve of the wealthy.

gamestop stock hedge fund

Game Stop, Arthur Square, Belfast, Northern Ireland. Photo: Wikimedia Commons/Ardfern

By this stage, as the dust settles on the chaos on the stock market that has resulted from the Redditer fueled assault on Wall Street using the guise of an almost defunct gaming retail business called GameStop, there is little more that remains to be written on the topic.

Amidst the acreage of column inches expressed on the topic, commentators have been divided between those who have praised the phenomenon and those who decry it.


Supporters of the actions of these millennial retail traders on Robinhood and other apps who drove the market capitalization of GameStop up 25 times to $25 billion have praised their actions as ‘courageous’, as they continued the work of the Occupy Wall Street campaigns by attacking evil hedge funds where it hurts most; on their home turf. Unlike Occupy Wall Street, however, who merely become somewhat of an inconvenience for traders picking up breakfast coffees and pastries from Starbucks, these Reddit traders from the group #wallstreetbets have taken some serious scalps, chief amongst them the hedge fund Melvin Capital which was forced to be bailed out.

Most commentators, especially those aligned with the interests of Wall Street institutions, have however decried the whole episode as deeply damaging and destabilising. Political establishment figures have demanded that these retail traders operating from their basements across the US who have taken aim at Wall Street be regulated and brought to justice. They argue that this type of coordinated action is nothing short of insider trading as they operate in organized cartel type movements, with their crosshairs trained firmly on the greed of hedge funds.

READ: Uncovering the mysteries of trading on the JSE


The reality is neither of the above. Historically, especially as the whole thing has faded from sight and the stock prices of GameStop and other darlings of the Redditers go back into firm correction territory, this whole episode will not in all likelihood go down as a ‘Brave New World’ of finance, when the little man from Main Street finally stormed the Citadel of Evil Greedy Wall Street.

All this is, realistically, just the last gasp of an unprecedented market expansion that began with the financial crisis. Fueled by endless free money from central banks which has meant leverage for everybody, and exacerbated by lots of time at home in lockdown and free trading from new apps such as Robinhood, markets have become accessible like never before. It was only, therefore, a matter of time before we saw something like this.

Think of it as the allegorical shoeshine boy giving stock tips on steroids.

But there is a lesson to be learned. Fundamentally, market inclusion is a good thing. For too long stock markets have been seen as the preserve of the wealthy, that you need an entrance ticket to participate and that is expensive.

Casino capitalism may have sown the seeds of its own demise

This is simply not true. It should not just be Bitcoin that is an arena for participants who are young and atypical, but all financial markets. Such participation means that future markets will be less prone to distortions and abuse from the ‘insiders’ such as hedge funds, which in many respects led us into the financial crisis in the first place. Casino capitalism, itself a product of Wall Street, may well have sown the seeds of its own demise.

South African regulators and markets such as the JSE would do well to take note. Not only are trading costs on South African markets some of the highest in the world, but the listed markets in SA seem to be dying a slow death as trading volumes hit record lows and delistings hit new highs.

It is time to open up the gates of Exchange Square in Sandton to Main Street.

In what is commonly regarded as the most unequal society on earth, only then will South African capitalism at least begin the task of making itself more relevant for all.