The GameStop affair is like tulip mania on steroids

It’s eerily similar to the 17th-century Dutch bubble, but with the self-organising potential of the internet added to the mix writes Dan Davies in The Guardian

  

Towards the end of 1636, there was an outbreak of bubonic plague in the Netherlands. The concept of a lockdown was not really established at the time, but merchant trade slowed to a trickle. Idle young men in the town of Haarlem gathered in taverns, and looked for amusement in one of the few commodities still trading – contracts for the delivery of flower bulbs the following spring. What ensued is often regarded as the first financial bubble in recorded history – the “tulip mania”.

Nearly 400 years later, something similar has happened in the US stock market. This week, the share price of a company called GameStop – an unexceptional retailer that appears to have been surprised and confused by the whole episode – became the battleground between some of the biggest names in finance and a few hundred bored (mostly) bros exchanging messages on the WallStreetBets forum, part of the sprawling discussion site Reddit. 

The rubble is still bouncing in this particular episode, but the broad shape of what’s happened is not unfamiliar. Reasoning that a business model based on selling video game DVDs through shopping malls might not have very bright prospects, several of New York’s finest hedge funds bet against GameStop’s share price. The Reddit crowd appears to have decided that this was unfair and that they should fight back on behalf of gamers. They took the opposite side of the trade and pushed the price up, using derivatives and brokerage credit in surprisingly sophisticated ways to maximise their firepower.

To everyone’s surprise, the crowd won; the hedge funds’ risk management processes kicked in, and they were forced to buy back their negative positions, pushing the price even higher. But the stock exchanges have always frowned on this sort of concerted action, and on the use of leverage to manipulate the market. The sheer volume of orders had also grown well beyond the capacity of the small, fee-free brokerages favoured by the WallStreetBets crowd. Credit lines were pulled, accounts were frozen and the retail crowd were forced to sell; yesterday the price gave back a large proportion of its gains.

To people who know a lot about stock exchange regulation and securities settlement, this outcome was quite inevitable – it’s part of the reason why things like this don’t happen every day. To a lot of American Redditors, though, it was a surprising introduction to the complexity of financial markets, taking place in circumstances almost perfectly designed to convince them that the system is rigged for the benefit of big money.

Corners, bear raids and squeezes, in the industry jargon, have been around for as long as stock markets – in fact, as British hedge fund legend Paul Marshall points out in his book Ten and a Half Lessons From Experience something very similar happened last year at the start of the coronavirus lockdown, centred on a suddenly unemployed sports bookmaker called Dave Portnoy. But the GameStop affair exhibits some surprising new features.

Most importantly, it was a largely self-organising phenomenon. For most of stock market history, orchestrating a pool of people to manipulate markets has been something only the most skilful could achieve. Some of the finest buildings in New York were erected on the proceeds of this rare talent, before it was made illegal. The idea that such a pool could coalesce so quickly and without any obvious sign of a single controlling mind is brand new and ought to worry us a bit. 

And although some of the claims made by contributors to WallStreetBets that they represent the masses aren’t very convincing – although small by hedge fund standards, many of them appear to have five-figure sums to invest – it’s unfamiliar to say the least to see a pool motivated by rage or other emotions as opposed to the straightforward desire to make money. Just as air traffic regulation is based on the assumption that the planes are trying not to crash into one another, financial regulation is based on the assumption that people are trying to make money for themselves, not to destroy it for other people.

When I think about market regulation, I’m always reminded of a saying of Édouard Herriot, the former mayor of Lyon. He said that local government was like an andouillette sausage; it had to stink a little bit of shit, but not too much. Financial markets aren’t video games, they aren’t democratic and small investors aren’t the backbone of capitalism. They’re nasty places with extremely complicated rules, which only work to the extent that the people involved in them trust one another. Speculation is genuinely necessary on a stock market – without it, you could be waiting days for someone to take up your offer when you wanted to buy or sell shares. But it’s a necessary evil, and it needs to be limited. It’s a shame that the Redditors found this out the hard way.

Cricket - The Gavaskar lesson on batting

The new breed of Indian batsmen need to carry the flame that Sunny, Sachin, and Rahul kept burning for so long

Martin Crowe in Cricinfo

December 17, 2013

 

	Sunil Gavaskar: Head still, feet at the ready, moving according to the movement of the ball © Getty Images  Enlarge

Wisdom is priceless. When you get on a learning path, it is the best time of your life. Every day means something, every lesson provides the clarity you clamour for. You move forward, evolve, grow, and become more fulfilled as the big picture, the dream even, emerges from the shadows and into the light.

I will never forget the moments when I had the opportunity to acquire a touch of acumen, a piece of pure pansophy (Pansophism, in older usage often pansophy, is a concept of omniscience, meaning "all-knowing". In some monotheistic belief systems, a god is referred as the ultimate knowing spirit.). I was desperate to get a heads-up on life, especially about how to bat at the highest level. And so when I heard or saw that a walking encyclopedia on batting was nearby I went on a mission to trap the great man, whoever and wherever he was.

It started with meeting many fine players during my scholarship year at Lord's at age 17, under the watchful care of coach Don Wilson. I brushed up to Colin Cowdrey, Geoff Boycott, Fred Trueman and more, as Old England toured the land. Among the stories of endeavour they would tell were pearls of wisdom. It was an informal education on how to play the game.

When I returned a year later in 1982 and took up the groundsman-and-overseas-player role at Bradford's Park Avenue in North Yorkshire, I didn't quite realise how lucky I would be. When India played Yorkshire that summer, they did so on my patch and dubiously prepared pitch. This was where I met Sunil Gavaskar, one of the all-time greats and at the time the best player in the world alongside Viv Richards. I had to get inside this man's head, even if for a minute.

Being the groundsman gave me the chance. Over the four-day fixture I picked my moment and swooped like a vulture. "Sir, when playing the Windies, what is the single most important thing you must do to combat their pace and bounce?"

"Son, it's your eyes. Before I go out to bat, I find a wall and position into my stance with my right ear hard up against the wall. By doing this I feel my head and eyes level, my balance perfect, my feet light and ready to move. The wall is ensuring that I stay still. In the middle I pretend the wall is still there. Head position and balance. From there my eyes are in the best position to see the ball and to stay watching it until the shot is played."

Minutes later, back in the dusty shed, I found my wall. I could stand in position forever, my balance perfect. The mind and body got used to the balance, the more I did it. It was a lustrous piece of advice I never ever forgot. When my form dropped I went back to Gavaskar's elementary instruction.

Whenever I watched Sachin Tendulkar I thought he must have spoken to Sunny about the same thing, for Sachin always displayed a still, balanced stance and head position.

Now it's up to others to carry the torch. In the cauldron of South Africa it's up to a new breed of Indian batsmen to carry the baton that Sunny and Sachin did so incredibly, for so long.

These two men are not tall, so bounce was always their greatest enemy. Yet they trusted that if they saw the ball in a balanced position, with feet at the ready, they would move according to the movement of the ball, whatever shape that took. Eyes, then footwork. In that split second, once they saw the trajectory, the feet went to work, allowing the eyes to stay watching.

Dealing with bounce became just another obstacle, another movement to deal with. The key was their mental strength to clear the mind of any doubt, any second- guessing. When I first played West Indies, in Port-of-Spain, I assumed I needed to be ready a split second early, so I started moving before I saw the ball. I got 3 and 2 as Holding and Marshall easily trapped a moving, nervous target. It was a hopeless performance.

I went back to Sunny's sage advice and used the wall technique. A week later, in Georgetown, albeit on a flatter track that gave me a chance to build a more positive mindset, I batted so much better. After that I realised fully what Sunny had meant. It was the start of my international career proper.

	India's top five need to work out what shots are working for them and what shots are too risky. Importantly, they need to get a feel for the occasion

Over the next month, against Steyn, Philander and Morkel, India can counter the home advantage, the pace and bounce, the second-guessing. Firstly, they must have a premise for success, and Sunny and Sachin, their master predecessors, have paved the way. They did it, and therefore it can be done again. They must draw upon that wisdom and apply it to their own game.

It takes courage to stay still with the head and trust the footwork when time is of the essence. You buy time when you see it early and play it late. It is when you see it late and play it early that the wheels fall off. Also, as Sunny, Sachin and Rahul Dravid proved, there are points where you have to be prepared to wear the opposition down, mentally and physically. You have to be patient. This way you can break it down to only the one ball that comes at you, one five-second block of concentration to deal with. Then another, and another.

Obviously, all this has to be done collectively, as a batting unit. The mind can deceive you when wickets are falling at the end, no matter how well you may have a grasp on your own situation. It has to be a combined commitment to fully embracing the challenge and working on the response.

Playing shots is important, as long as they are the right shots. You can't play them all. It's not like a T20 match. India's top five need to work out what shots are working for them and what shots are too risky. Importantly, they need to get a feel for the occasion, the opposition, the pitch, the air in which the ball travels quicker, especially in Johannesburg. They don't have much practice or time to get ready, given the nature of tours these days. So they must prepare in the mind and the imagination is perfectly equipped to provide a sense of calm within, before facing the heat in the middle.

For the top three, Dhawan, Vijay and Pujara, they only need to imagine Dravid in battle mode. He was the wall for a good reason. Rahul backed his eyes and his feet. For Rohit Sharma and Kohli it will be Sachin they can remind themselves of. These two icons showed time and again how it can be done, and those two learnt from Sunny, the master of compiling long innings against the might Windies.

Life is not about doing it alone. It's about learning from those who have already climbed great heights, and adding that history to one's own make up. Combining the love of the game and one's own ability with the wisdom of the ages is the essence of what we are here to do.

South Africa will throw all they have into these next two Tests. They are the No. 1 Test side by a long stretch. They have been messed around recently regarding this tour. They are highly motivated, there is no doubt. And they will steam in.

India need to provide the wall of resilience. Sunny used it, Sachin breathed it, Rahul was it. Kohli and Co can prosper by adding another brick in the wall of Indian batting mastery.