Bulls, Bears, Monkeys & Mayhem Narasimhan Vijayaraghavan
Bulls, Bears, Monkeys & Mayhem
Narasimhan Vijayaraghavan
David v. Goliath. Small Investor v. MNC Hedgefunds. Power of the People v. Power of the Powerful. Populism v. Capitalism. The screaming headlines are running wild and as varied as they come, but all uniform and consistent, in admiration of what the Internet Army of the small and beautiful has accomplished. The nihilistic tendencies exhibited in the recent insurrection on Capitol Hill in the US of A on Jan 6th, 2021 was replicated on Wall Street. There is so much of joy, celebration imbued with anger, anguish and serious worries that the small investor may be hurt badly even if he may have more than rapped the knuckles of the hedge funds.
You know what the free market advocates are crying for! Regulations. Wow, that is something! Robinhood platform banned transactions of Gamestop to ‘restrict the mayhem’. Those Wall Street honchos and heroes who ceaselessly talked of ‘market forces’ having a say all the time, are braying foul and for the blood of the little man who perpetrated the bloodbath.
One is alluding to the humongous happening on Wall Street from the Reddit platform- a bulletin board site, so to say, when small investors got together – lustily cheered on by no less than Elon Musk on Twitter- to make mincemeat of ‘shorting’ of the GameStop stock by billion dollar hedge funds. Taking on the giants on Wall Street, who have had their way, almost all the time, even in the wake of subprime crisis in 2008-2009, the ordinary American investor trumped the giants by continuously purchasing stocks to let the prices soar and trading almost in the vicinity of 23 billion dollars. A high net worth individual lost 5 billion dollars. A Hedge fund literally got wiped out and had to be rescued by fellow fund managers. Class action suits have been mounted to protect the interest of the small investor. It is Occupy Wall Street on the Digital platform.
It has taken not only Wall Street by storm but caught the attention of newly sworn in Joe Biden White House administration, and the new Treasury Secretary has gone on record that the ‘developments were being monitored closely and would be attended appropriately’. And stock markets the world over, are amazed and stupefied that it can be accomplished so easily. That the little man could get even with the big fishes. The billion dollar funds are speechless, as they have been always the predators and the small investors the prey. The tables have turned and some small investors who gotten in early, are laughing all the way to the bank. But, sadly, not all of them.
Remember, the big ones were bailed out of the 2009 financial crisis. None was prosecuted and they willingly paid huge sums in fines and penalties, for they had the benefit of huge bonuses even during crisis times. Media was squarely blamed for not sounding the alarm. Hence, the pink papers and channels are going crazily cacophonous that the small man may get hurt badly, and they are being advised not to join the ‘fun bandwagon’. The pushback is that media is again helping the cause of the hedge fund sharks. The tussle is huge and it is fascinating to watch and follow from the comfort zone that such a happening can be ruled out on D Street in India. Thankfully, equity culture is hopelessly minuscule and Internet spread on the platform, not commensurate to what may be necessary for a Tsunami, as on Wall Street to be unleashed here.
Bulls and bears among us can breathe easy. The stock market is hardly an indicator of the health of an economy. Its culture and construct is unique and far and far away from the reality of a true economy. And Budget time, in pandemic times, is the right time to tune in. Then, how best to capture the essence of the Wall and D Streets, as they are. Try this Stock Market Simply Illustrated storyline.
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for Rs.10. The villagers seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at Rs.10 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at Rs.20. This renewed the efforts of the villagers and they started catching monkeys again. Soon, the supply diminished even further and people started going back to their farms. The offer rate increased to Rs.25 and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it.
The man now announced that he would buy monkeys at Rs.50. However, since he had to go the city on some business, his assistant would now buy on behalf of him. In the absence of the man, the assistant told the villagers. Look at all these monkeys in the big cage that the man has collected. I will sell them to you at Rs.35 and when the man returns from the city, you can sell to him for Rs.50.The villagers mustered up their savings to buy the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere. Where is this stunning Reddit raid going? Watch this space.
(Author is practising advocate in the Madras High Court)
