The collapse of SVB is making a lot of Redditors unusually happy
"Oh boy, an SVB piece in Forum!" you think to yourself. I know what you're expecting. You probably think I'm going to write some tepid rehashing of the prevailing talking points on leftist Twitter. Maybe I'll say something like, "This is just like 2008!", or "You can't privatize earnings and socialize the losses!", or maybe even, "The consistent failure of our government to rein in the reckless gambling of the wealthy is a scathing indictment of neoliberal capitalism," and so forth. See, the thing is, I'm actually smarter and better than everyone else on Twitter, and so that's not going to be the focus of this article. Instead of talking about all that, I'm going to tell you about a community of weird little stock market freaks on Reddit and why they frighten me.
After writing about Bed Bath and Beyond last month, I now get automatic emails from Reddit with posts from r/Wallstreetbets, a notorious subreddit of day traders, crypto enthusiasts, and meme-stock pushers who were responsible for the 2021 GameStop short-squeeze (in brief, a lot of hedge funds were betting that GameStop was going to continue decreasing in value, and r/WallStreetBets artificially raised its stock price to screw them over). And last Friday, their top post was ominously titled "this is about to get very interesting." It came from legendary user u/atobitt, who was breaking six months of silence to weigh in on the recent collapse of Silicon Valley Bank. It reads like the words of a doomsday preacher, predicting that "the next couple of months will reveal the master's true hand. We will see the cards laid upon the table as they collapse from the house on which they were built." This was clearly a big deal; as user u/AwildYaners points out, they'd "never been this zen, or early, on an atobitt post."
User u/atobitt was a participant in the original 2021 GameStop short squeeze, and seems to periodically come out of the woodwork to make a vague prediction about an upcoming reckoning. So what exactly is he predicting?
An explainer post on r/SuperStonk, the primary subreddit for GameStop-specific discussion, breaks down the community's dogma. What they foresee is another GameStop short squeeze that makes 2021 look like child's play — the so-called "Mother Of All Short Squeezes" (MOASS). And it's absolute lunacy. They claim that "predictions of the short squeeze potential range from $10,000 per share, to $100 million per share." It includes an absolutely fascinating infographic about what to do during the glorious day of rapture when the MOASS arrives and the value of GameStop goes to literally infinity dollars — no, that's not a joke. The post also claims that there's "evidence suggesting there is no theoretical ceiling on what the price could climb to." I highly recommend it if you want to understand the level of delusion in this community.
Let's take a moment to really understand the worldview of these people. They understand the exploitation and injustices of capitalism; they are disillusioned by the actions of big banks and corporations, and feel that they've been sold a lie their whole lives. In the u/atobitt post I mentioned at the start of the article, user u/Biotic101 says, "We are gamers, we are curious, we do not fear grinding. Thus, we have been climbing down deeper and deeper into the rabbit hole. We have discovered how the world really works. And it makes you feel as if you have been asleep in the Matrix all your life and you just woke up."
To be fair, much of their worldview is based in truth. They correctly believe there is tremendous fraud in our financial systems, and that the wealthy use the instruments of capitalism to screw over everyday folks. It's an exploitative system in which interactions are turned into transactions, every aspect of human nature is commodified, etc. and so forth. But as I argued in my article on Bed Bath and Beyond, these communities don't desire to replace this system with a better one, or even to amend it. They're just waiting for their Armageddon — some nebulously-dated day of judgment when the old guard implodes and they become the new wealthy. They seem to sincerely believe that they will become multi-millionaires. And that day of reckoning is always tantalizingly close. Never mind last month when they said it would happen this month. They did their Due Diligence (DD) this time around, read the right scripture and studied the star charts. This is the time they'll get it right.
There is an ocean of explainer posts and YouTube videos to bring new users up to speed on all this, and they all read like a pitch from a pyramid scheme or televangelist. 'This is the investment of a lifetime that The System doesn't want you to know about! Just send us five dollars of seed money, and the Lord will see that this blessing is returned to you a hundredfold!' They honestly compare investing in GameStop to buying BitCoin in 2009 or Apple stock in the 70s.
Except, none of that's going to happen. Oh sure, GameStop might short squeeze again — in the interest of not wanting to look silly if it does, I'll concede the possibility. It happened before and it could certainly happen again, especially considering how feverishly devoted these people are to their cause. I would, however, imagine that the hedge funds who got blind-sided in 2021 have learned their lesson and adapted accordingly. Even if it does happen though, I find it impossible to believe it will be the kind of earth-shattering implosion of the stock market that they predict. So the question is, what will these people do when the promise is broken too many times?
We already got a glimpse of this in August when their idol, "Papa Cohen," pulled the rug out from under them. Ryan Cohen is an entrepreneur with a Musk-ian penchant for rallying millions of Redditors to his cause by virtue of being a serious businessman who also speaks in memes. His involvement in Gamestop was, while not the sole cause, extremely crucial in fueling the 2021 short squeeze. In August 2022, he made a routine filing of his position in Bed Bath and Beyond (BBBY), which led to a small rally in its stock value. But unbeknownst to his followers, that very same day he had actually sold all his shares in BBBY — something the rest of us only learned the next day. Legally, I'm not accusing him of enacting a pump-and-dump. I'm merely stating my opinion that it looks like a pump-and-dump. And the subreddits lambasted him for this, feeling intensely betrayed by the one man who they thought was truly working for them.
These people buying GameStop are, for the most part, young men, many of whom self-identify as gamers, tech savvy, probably addicted to the internet, and desperate for companionship. It's no coincidence that most of their slang focuses on instilling a sense of community. One of their terms, A.P.E, means "All Primates Eat" — in other words, look out for one another. User u/hmoonves tells us, "the high from buying GameStop shares is unlike anything I’ve ever experienced." There's also substantial overlap between memestock buyers and the crypto buyers; most of their in-group slang is the same, and much of their ideology overlaps (as many hype-posts point out, GameStop's new management is allegedly getting into the NFT market). It's not particularly surprising, because it requires a similar mindset to buy either. You need to believe you're on the inside of some exciting new tech or commercial venture that is going to break the old financial institutions, and now matter how much others scoff, you're going to prove them all wrong when you become a millionaire one day.
It's a community living in an information tunnel who are absolutely convinced that their day of reckoning is coming, with an emotional dependence on being one day vindicated. The collapse of SVB (remember when I said this article was about SVB?) certainly doesn't bode well for the tech industry. But these communities are so myopically focused on their own success that they only see it as a sign of the impending financial collapse they've been praying for. But it won't do what they hope it will, and sooner or later their patience will run out.
And what do you get with a large, organized group of angry, young men who feel disenfranchised and betrayed by the status quo? It's an ideal ground for fascism, but this time uniquely flavored by millennial/zoomer meme culture, tech fetishism, and crypto-bro libertarianism. I'm certainly not the first to make this argument, but the frightening potential of this community still feels relatively under-discussed.
Cryptocurrency, NFTs, and memestocks all get their value from having a massive pool of speculative investors buying in, not from possessing any actual utility. It's a greater-fool scheme — money keeps flowing in, giving the illusion of value, as long as there's a greater fool to buy-in after you. This entire community has stayed afloat purely because the immense cultural presence of cryptocurrency means that they have a very, very large crowd of fools to draw from. But it will falter one day, and when that happens we will have to deal with thousands of broke and despondent Redditors scrambling for someone to direct their anger at.