5.) Gamestop Populism Is Good, Actually
If you’ve been following the stock market this week, you witnessed one of the most bizarre financial events of the 21st century. In short: a Reddit forum called “WallStreetBets” took over the stock market and helped to dramatically inflate the stock prices of a number of companies, including Gamestop, AMC Theatres, Nokia, and even the liquidated remains of Blockbuster Video — did anyone even know that was a thing before this week? And we’re not talking small moves: three weeks ago, Gamestop traded around $18/share. At one point yesterday in premarket trading, Gamestop hit $483, before dropping like a rock because… well… we’ll get to that.
So was this really just a bunch of basement-dwelling weirdos pumping their stimulus checks into a dying brick and mortar video game store “for the lulz”? Nope. Actually, those weirdos stumbled onto something pretty insane: hedge funds were betting against these companies en masse by short-selling — borrowing stock shares and selling them to other investors in hopes that the stock price would fall. This alone is pretty normal activity on Wall Street. But in the case of Gamestop (and to a lesser degree, AMC) these short sellers had overextended themselves — more shares were being sold short than there were total shares available to be traded. This left the hedge funds vulnerable to a “short squeeze” if enough people committed to buying and holding, meaning there would be a rapid rise in price. Then, once the price rose, in order to exit their short positions, the hedge funds would need to “cover” their position by buying stock — further contributing to the spike in price. So what happens when there are more short-sellers trying to escape their position than people willing to sell them their shares? In a nutshell, this.
Normally, in a short squeeze, even with heavy short interest, the short sellers will be able to escape because normal investors are happy to sell with 50%, 75%, 100% gains. What made this debacle so unique is that everyone on both sides was so absurdly stubborn. The short sellers continued to double down on their positions and publicly taunted the Reddit traders for buying into such a silly company, thinking that this bravado would discourage any more buying — but that obviously backfired! Ultimately, the price continued to go up as more retail investors bought in and hedge funds began the process of closing their short positions.
So the basement-dwelling Redditors found a weakness and exploited it for their own profit by buying and holding. What’s wrong with that? Isn’t that how the stock market works?
4.) Anti-Gamestop Fascism Is Bad, Actually
Here’s where this story goes from funny to infuriating. Financial media spent all week lamenting the fate of the short sellers, urging action by government and private actors. On Wednesday night, Discord (a communications medium) shut down the “WallStreetBets” channel, citing “hate speech.” For several hours after market close, the WallStreetBets subreddit was also shut down. (We later learned this was done by the moderators to deal with an influx of spam, but that wasn’t known at the time and so contributed to a panic.) As everyone knows, if you want to defeat an army, divide and conquer. It seemed that Big Tech had weighed in and decided that the “free market” was no longer allowed. As a result, Gamestop (and especially AMC) tanked during after hours trading.
Then, on Thursday morning, a number of brokers announced that they would be limiting trading on Gamestop and AMC to “protect the consumer.” Robinhood in particular decided to prevent all buy orders on these stocks, only allowing sell orders. Because a high percentage of these Reddit traders used Robinhood, this pretty much ended any chance of the short squeeze continuing. Gamestop tanked on Thursday, dropping from $483 premarket all the way down to $112 at one point. The shorts escaped to live another day. And because of that, Robinhood announced they would once again allow buy orders on GME and AMC during Friday’s trading session.
Robinhood is tied in with one of the major hedge funds that shorted Gamestop stock. I won’t get into that — plenty of folks will write about the corruption at play here in the coming days. Robinhood will probably ultimately take the fall here (ahead of their IPO — yikes!) even though other brokers participated in similarly shady activities. The fix was in across the board. Tank the price so the short sellers can get out alive.
The long-term cost of all of this will be significant. What started as a turf war with no bad guys ended in victory for the side with the institutional power needed to illegitimately crush the other. That’s not going to go over well. Millions of non-political people just took a giant red pill. Faith in our institutions will only continue to disintegrate.
3.) The GOP Must Compete In the Pro-Family Policy Space
I wrote an essay in the Daily Caller about the myriad of ways with which Republicans can compete in the pro-family economics space. As the Democrats embrace Joe Biden’s new expansive child tax credit proposal, which would distribute large monthly checks directly to parents, it is clear that Republicans need to have a more substantive and popular policy answer than just “no”. Here are a few options:
Expand the Child Tax Credit
While it is true that the Tax Cuts and Jobs Act increased the child tax credit by $1,000 per child, it also eliminated personal exemptions, so the net impact on families wasn’t as significant as advertised. Instead of supporting Biden’s plan, which would be temporary, Republicans could argue for a permanent child tax credit expansion for working-class families — $3,600 per child under six, and $3,000 per child ages six to 17.
This would immediately be cheaper than Biden’s proposal, which would amount to an eye-popping $5,600 and $5,000 per year, respectively. To cut costs even further, Republicans could propose means testing the credit above a certain income level — do millionaires really need another tax benefit?
Reform the Earned Income Tax Credit
The Earned Income Tax Credit is generally regarded by Republicans as a valuable benefit for low-income families, but it is rife with problems, including fraud and erroneous payments. Additionally, there are serious issues with its distribution curve — it arguably disincentivizes having more than two children.
A number of Republicans, including Missouri Republican Senator Josh Hawley and Florida Republican Senator Marco Rubio, have already released proposals that would address many of these problems, while also maintaining a strong incentive for work. A substantive proposal to amend the Earned Income Tax Credit, or even expand it — potentially while combining it with the Child Tax Credit — could be a political winner for Republicans.
Pass Budget-Neutral Paid Family Leave
Pro-family Republicans worried about the deficit should definitely take a look at Louisiana Republican Senator Bill Cassidy’s budget-neutral paid family leave bill. The Advancing Support for Working Families Act allows new parents to take a $5,000 cash advance on their child tax credit at the time of their child’s birth or adoption, which would be paid back over 10 years at zero-percent interest.
This costs the federal government next to nothing — the debt would be forgiven upon the death of the parent or child — and it gives working-class families needed support at a time of financial difficulty. Promoting this bill as a fiscally conservative alternative to Biden’s plan is a no-brainer.
Create New Educational Tax Deductions for Families
Another option for Republicans is to promote educational choice and take aim at the teachers’ unions that are destroying the failing public school system. Texas Republican Senator Ted Cruz introduced a bill called the Student Empowerment Act, which would expand tax-advantaged 529 plans to include K-12 education expenses for public, private, and religious schools, as well as for homeschoolers.
Alternately, Republicans could skip the middleman and go even more aggressive by making all K-12 education expenses tax-deductible.
The political case for promoting these pro-family proposals is crystal clear. The Republican Party needs working families on its side to be successful electorally. The Democrats know this — seemingly more so than the Republicans — and are making a play to buy their support. It would behoove the GOP to counter Biden’s untenable pro-family economic proposal with viable options of their own.
2.) If Hawley and Cruz Are Cancelled, Conservatism Is Next
Okay. If you made it this far after all my rambling, I’m impressed. But one more substantive thing: you gotta read this essay in The American Mind by my boss, Frank Cannon. It’s brilliant:
…[T]o support the electoral vote objections of Hawley and Cruz, while opposing the rioters, is far from a fringe view. It is the view, polling suggests, of the majority of Trump’s 74 million voters, even now. It is alarming to find it so reviled and attacked in the most absurd terms, especially among those who are nominally their representatives. It is a bad state of affairs for an elected official to know that holding this set of opinions can destroy them.
There are of course vehement disagreements on questions of election integrity, but seeking to live peaceably with those whose political positions you strongly oppose is the central question of American politics. The reasonable, the noble course of action is the one taken by Hawley and Cruz. A reasonable leader would respect the people enough to hold a debate, seeking to persuade his fellow citizens. A courageous leader would advocate for his beliefs even in the face of elite mockery and corporate punishment, seeking to persuade his fellow citizens by argument rather than by force.
This is not what the Left seeks. Having lost the ability to appeal to their own authority without pushback, they are perfectly content to turn to force. They do not seek to persuade, because they believe that opposition to their premises is too troglodytic to merit a response. If opposition persists, they will happily censor, or fire, or jail.
Any conservative worth his salt ought to be alarmed at this, and ought to defend the objectors. What has been lost in corporate contributions ought to be made up in personal ones. Republican politicians, especially 2024 hopefuls, ought to publicly and loudly defend Hawley and Cruz, if only out of recognition that should the vanguard coalition succeed in this, the political future of any other conservative is far from secure. Whatever comes next will be worse, and a Lankford-esque response will be woefully insufficient.
Hawley and Cruz are leaders now because they’re willing to take political risks. If we are to face the political moment, we will need to take more of these kinds of risks, and in more difficult circumstances than these.
Check out the whole essay at The American Mind — a great publication, by the way!
1.) Dave Portnoy As Populist Hero
I was struck by something last night. Tucker Carlson was interviewing Dave Portnoy of Barstool Sports fame on his show. Dave continues to be something of a populist hero: raising millions of dollars for small businesses harmed by the pandemic, publicly challenging the wisdom and efficacy of COVID-19 lockdown policies, and now, calling for criminal and civil action against all those who exerted institutional power to essentially cheat the Gamestop traders.
Have a great weekend, everyone.