Traders on the New York Stock Exchange. Photo / AP
OPINION:
This column is not about GameStop, though not for lack of trying. Last week the ageing video game retailer emerged as the hottest stock on Wall Street, a story just unexpected and absurd enough to fill the new Trump-shaped void in our nation's media diet. I was instantly hooked.
I found the initial narrative irresistible — scrappy online traders were taking on greedy hedge funds and corrupt Silicon Valley tech bros while also saving a business that is a relic from a longed-for past. The story was bizarre in a way that felt Extremely 2021, centred on a Reddit day-trading subculture that communicates in an emoji-rich, ironically (I think?) offensive jargon.
There were plot twists, loose ends and big questions. Was this the beginning of a genuine revolt against billionaires — or were billionaires likely to win whatever happened, because they always do?
But as I said, this isn't about any of that, because I was far from alone in finding the GameStop saga compelling. By the time I was set to write my column this week, the story had already gone supernova, lighting up seemingly every corner of digital media (there are already reportedly two movies in the works). I was chagrined to find that every hot take I could think of had already been heatedly taken.
Then I was struck by a larger absurdity buried in the ocean of GameStop content through which I've been wading all week: Why was I — why were so many of us in media — spending so much time obsessing about a story that mattered to so few people? Indeed, a story that was almost proudly disconnected from the real world, telling us so little about the larger economic forces shaping our lives?
I'm not just talking about GameStop's bubbly stock price. I'm talking about the entire bubbly stock market, whose gyrations during the last few decades have made it less and less of a reliable proxy for understanding the health of the economy at large — even if presidents and pundits still point to it as a benchmark that makes a difference in people's lives.
The connection between the markets and the economy has never been especially solid, but these days it couldn't be more off, and the GameStop saga suggests a further dip into abstraction and entertainment. Thanks to free stock-trading apps like Robinhood and online groups like r/wallstreetbets, the stock market is growing into a kind of high-stakes multiplayer game whose moves can have more to do with memes and mobs than anything connected to, say, profits and losses.
There's nothing too wrong with online games (well, other than the possibility that you can lose your shirt, GameStop stock plummeted on Tuesday), but perhaps stock reports should come with the same caveat palm readers issue when telling your fortune: "For entertainment purposes only." If that's too far, let's at least quit ascribing great meaning to numbers coming from the market. Treating stock prices as an economic indicator distorts Americans' views about what's actually happening, who exactly is winning and losing, and what sort of growth really benefits people in the economy at large. The more we focus on the market, the less of the economy we see.
On Wall Street, it's hardly news that the stock market has grown as disconnected from reality as a Parler user hopped-up on secret messages from Q. If you read the financial press closely last year, you'll have come across many articles examining the divergence. "Repeat After Me," commands a New York Times headline from May. "The Markets Are Not the Economy."
The axiom becomes obvious when you look at how the markets fared last year. In 2020, as the virus surged, economic growth crashed, unemployment shot up, poverty spiked, and democracy crumbled, what happened to stock prices? They soared to record highs, of course.
Why doesn't the market track the real world? There are many reasons, but a big one has to do with wealth and access. Although slightly more than half of Americans own some stock (for instance, as part of a retirement fund), a huge share of the value in stocks is held by a tiny number of Americans.
The wealthiest 1 per cent of Americans hold nearly 40 per cent of the value of stock-holding accounts; the wealthiest 10 per cent hold 84 per cent of the value. The stock market also reflects the value of just a tiny slice of the US business world — according to one expert, in 2015 there were 600,000 US companies with at least 20 employees, of which just 3,600 were publicly listed.
And yet, despite this self-evident disconnect, we are flooded every day with news about the market, the numbers presented to us with all the importance of the weather forecast. There's the Nasdaq index on the top of The Times' home page, and here's the Dow repeated with the hourly news on NPR. Want to know how well a president's speech went? Look to see how the S&P 500 reacted.
People reach for stock indexes as a benchmark for US vitality for the same reason we get fast food when we're hungry — not because it's any good, but because it's familiar and it's what's available. The economy, like the world, is messy and complex. Every day brings success for some companies and failure for others, promotions for some workers and layoffs for others. More objective measures of what's happening tend to be broad and infrequent — the jobs numbers come once a month, for instance.
The markets, though, spit out numbers every weekday, offering a comforting — if illusory — sense of precision about an economic system otherwise too vast to comprehend. For a lot of people, the markets have also become skeleton keys for unlocking a brighter future. Since the Reagan era, Americans have been encouraged to play the market as if our lives depend on it, because they increasingly do; today, the markets shape the quality of your retirement, your kids' education, maybe even whether you'll get health care.
Leaving such important matters to the whims of the stock market makes little sense to me; it's more equitable, not to mention more straightforward and efficient, for the government to just pay for college rather than create tax-advantaged investment vehicles allowing the wealthy to play the casino to pay for college.
And while I'm glad that apps like Robinhood are giving more people access to a market dominated by the wealthy, I worry that these apps will exacerbate inequality rather than mitigate it. The Reddit amateurs may be gloating about their victory over elite hedge funds now, but in the casino of Wall Street the house always wins, and many Redditors may be flirting with financial catastrophe.
That is their right, but I'm wary of celebrating it. To bring it around to the subject on everyone's mind: The stock market has turned into a game — a game we should stop.
Written by: Farhad Manjoo
© 2021 THE NEW YORK TIMES
'Treasury were cautious given the economic conditions, but the company delivered.'