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06 May


Reddit uprising beats Davos Man at his own game

As connoisseurs of Reddit's WallStreetBets forum bought shares of GameStop, the "smart money" lost untold billions

WallStreetBets Photo: BitcoinMagazine

/NOVOSTIVL/ Davos Man just had his worst week in decades as a bunch of Reddit-reading day-traders beat him at his game.

Bad enough, the World Economic Forum's billionaire's festival in the Swiss Alps got upended by COVID-19 -- and was held virtually. But the investment game underwriting its "Woodstock for plutocrats" just got rebranded by an anti-capitalist uprising creating a Fortune 500 company out of penny stock GameStop.

Hey, that is our job!, many Davos groupies are thinking. Revel in the anarchic genius of a financial flash mob placing a video game retailer among Tesla and Amazon, while knocking WEF's champagne-and-caviar-fueled money fest from the headlines.

All while having the 1968 Beatles classic "Revolution" trending on Spotify, making the Bitcoin frenzy seem almost rational, and inspiring an everyman stock boom in Malaysia. Priceless!

Well, not for the hedge fund masters of the universe who were shorting GameStop, struggling theater chains AMC or Bed Bath & Beyond. As connoisseurs of Reddit's WallStreetBets forum bought these shares, the "smart money" lost untold billions.

2021 is just not the Davos crowd's year. First, they were barred from their hyper-exclusive annual retreat by a pandemic. Next, WEF faces prickly questions about putting Southeast Asia at risk in May, when it hopes to take its six-star circus to Singapore. Now, the laissez-faire ethos WEF has championed has come back to haunt it.

But even WEF leadership seems to be letting on that the ideals its Davos revolution sought to celebrate and embed in governments and stock bourses everywhere were all an act.

When WEF founder Klaus Schwab rails against the "neoliberal global order" that his organization helped champion and commoditize, you know the jig is up. That pivot is "rich in irony, given that the WEF largely built its business license by providing a marketing platform to U.S.-based IT and banking giants," observes Stephan Richter, who runs The Globalist online magazine from Berlin.

Schwab's revisionist history is quite surreal. The political scientist credited with coining Davos Man, Samuel Huntington, defined it as folks who "have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing, and see national governments as residues from the past whose only useful function is to facilitate the elite's global operations."

In recent decades, Washington helped grow the cause. When speculators attacked currency pegs in Thailand, Indonesia and South Korea in 1997, the enforcers of the so-called Washington consensus parachuted in to save the neoliberal order. In exchange for bailouts, the U.S. Treasury and the International Monetary Fund demanded harsh reforms in Bangkok, Jakarta and Seoul, while Washington protecting Davos set investors from accepting big losses. Those parachutes were back in action in 1998 when Long-Term Capital Management blew up.

A decade later, amid Wall Street's subprime-debt crash, Washington did more to save giants banks -- and the big money invested in them -- than households. The Davos gathering amid that storm in January 2009 saw a bull market in schadenfreude, as keynote speakers Vladimir Putin of Russia and Wen Jiabao, China's premier at the time, called for a wholesale reimagining of global financial markets. Again, priceless.

Now populist leaders are running the asylum -- and have the Davos crowd on the run. Donald Trump may be out of power, but the Jan. 6 mob riot he incited on Capitol Hill still has Washington draped in crime tape.

As U.S. President Joe Biden takes the reins, it matters that Rodrigo Duterte of the Philippines, Narendra Modi of India, Viktor Orban of Hungary, Jair Bolsonaro of Brazil and their ilk no longer have an ally in the White House. Yet populism is its own dilemma for WEF members.

In recent years, Schwab and his team have done an about-face by admitting "globalism is an ideology that prioritizes the neoliberal global order over national interests." This pivot rings hollow to critics like Richter, who claim the "shift is a hijacking attempt. It shows how corporate elites are trying to accommodate nationalist populism while still maximizing their own personal gains which, of course, come at the expense of the very masses they are attempting to appeal to."

Some of those masses grew tired of feeling left out of conversations the Davos set often dominates. They are striking back at the empire in ways the elite cannot ignore: their portfolios. And now -- surprise, surprise -- Wall Street is having second thoughts about this financial democracy thing. Amateur investors are using free stock trading pioneer Robinhood to drive certain stocks higher, hurting giant bearish bets. Suddenly, pumping and dumping is wrong?

"Apparently, market manipulation is only legal when rich people do it," quipped former White House economist Robert Reich.

As the GameStop crusade draws parallels to the Occupy Wall Street movement, Asian day-traders are getting into the act. In Malaysia, for example, members of the "BursaBets" Reddit forum are reportedly driving up shares in local glove manufacturers. Companies with names like Top Glove, Supermax and Hartalega have drawn investor attention amid coronavirus-era demand for personal protective equipment.

One can debate the pros and cons of this Reddit rebellion. At the very least, it is another reminder of why Davos Man should sit 2021 out. The brave new world this gang liked to think it was creating is finding its voice and rising up. Maybe a little more listening in 2021, and less gabbing? Hollow talk of a better world is no longer cheap.