My correspondent from the Gamestop thread had more to say that led me to create a new thread:
Note that some of the hedge funds taking it in the shorts (oo, unintended double entendre pun!) are the same funds that tried to drive Tesla out of business by shorting them as well. There’s a bunch of hatred for those funds out there by people like Elon Musk (he’s the only person I’ve seen named, but article claimed there were others). And Tesla is doing very well at the moment. So one could argue, and I do, that some of these hedge funds really deserve to arrive in bankruptcy. They’ve been a corrosive (at best) effect on the economy, and might well be illegally manipulating the market.
I translate my reader’s comments to be a question about the social utility of hedge funds, or Do hedge funds advance the interests of society as a whole. Much like my frankly skeptical questions about the utility of trading algorithms which depend on speed measured in microseconds or less, and often result in owning stocks for a few seconds. The idea that making money by taking advantage of the gap between prices in a microsecond caused by the advent of news doesn’t seem to be wise investing, but rather an experiment in gaming a system.
It’s legal I presume, but, by not following the rules dictated by the reason the market exists at all, a probability exists that the markets will become contaminated, much like zombies are humans contaminated by a virus. If there were zombies. The market strays further and further from its primary purpose.
While hedge funds may, as a general concept, serve a social function, my reader’s comment to the effect that hedge funds have engaged in activities designed to maximize their profitability has caused the investment of investors in resentment.
And these observations, I think, most investors would characterize as fraudulent. Back when I paid a lot of attention to investing, there were certain firms known to take a short positions in certain companies, and then they’d start spewing out reports that painted the companies in a negative light. Were they truthful? Was it even ethical for them to issue reports that must be characterized as self-interested, whether accurate or not? Individual investors who were positive on those companies were resentful, because they lacked the resources to influence the market as much as the big firms could. That meant the market was being distorted.
And that lead to hatred. It’s one thing to play a game, but when only some of the players have to follow the rules, then there’s suspicion. People may leave the market, to its detriment. And others may profit without justification. Which all leads to Leon Cooperman.
Who is Cooperman? He’s a billionaire hedge fund manager who recently commented on the Gamestop ongoing incident and taxation in general:
“The reason the market is doing what it’s doing is people are sitting at home getting their checks from the government, okay, and this fair share is a bullshit concept,” Cooperman shouted on the business network earlier today. “It’s just a way of attacking wealthy people. It’s inappropriate and we all gotta work together and pull together.”
While Cooperman does not appear to have been affected by the GameStop carnage, at least in a meaningful way, he’s basically the perfect person to show up on TV and scream about how wealthy people are being attacked. If you’re unfamiliar with the guy, he’s long been known for going apeshit when people suggest that the über-wealthy aren’t paying their fair share, or when politicians express anything less than total respect for the “job creators” of the world. During the Obama years, he claimed that the 44th president’s decision to call Wall Street executives “fat cat bankers” right after the financial crisis was encouraging “class warfare” and that Obama’s “tone” was “cleaving a widening gulf…between the downtrodden and those best positioned to help them,” i.e. the benevolent rich. During the 2020 Democratic primary, he sparred with Elizabeth Warren over her supposedly “shitting on” the American dream and for being mean to the 0.000001%. And after the Democratic primary race came down to Joe Biden and Bernie Sanders, he claimed that Sanders was “a bigger threat [to the stock market] than the coronavirus.” Yes, the coronavirus. (Later, he went on CNBC and cried, claiming he’d been so antagonistic about 2020 because he cares so much about America.) [Vanity Fair]
As he’s a hedge fund manager, I just have to wonder what social utility he brought to society that warrants his assumption of such a privileged position – and his violent rejection of the idea that his taxes should be higher than they are, especially in view of the various statistical studies indicating wealth is so deeply concentrated in the upper reaches of society.
I mean, I have no problem with an inventor of a vaccine being accorded a ton of money. The social utility is obvious. But what did a hedge fund manager do that results in a similar position? Financial cleverness, political connections, and depending on the largesse of government to bail you out in case you screw up, none of these are impressive. They’re depressing.
But I’d like to see him address that basic question of social utility, rather than shouting about his taxes going up and how that’s horrible. I feel like his shouting is the distracting hand of the magician, and we need to figure out what that other hand is doing.
