Generation ‘Y’ takes on the short-sellers
Fans of the raunchy BBC series Industry cannot but be astonished about how dealing room culture turns freshly-minted graduates into trading fiends in a matter of days.
Now, ‘Generation Y’ is taking its revenge on a Wall Street and City habit of fixing the money-making machine in its favour.
The social media site Reddit, a reincarnation of the 2011 post-financial crisis Occupy Wall Street movement, has taken up the cudgels.
Cutthroat: Fans of the BBC series Industry (pictured) cannot but be astonished about how dealing room culture turns freshly-minted graduates into trading fiends in a matter of days
Instead of hurling abuse at bankers, it is using the untrammelled power of social media to take on short-sellers.
It is an efficient tool, because behind every short seller there is respectable finance.
Wilder short-sellers could not prosper unless longer holders of shares were willing to play ball by loaning them stock to manipulate for a fee.
Similarly, much of the borrowing deployed by the hedge funds comes directly from big banks. In the run up to the financial crisis, Goldman Sachs was seen as operating as a huge hedge fund which is why the ‘Volcker rule’, which stopped investment banks trading on their own account, became law.
Few citizens will mourn the idea that the short-sellers have given a bloody nose by launching a retail assault via social media.
The amazing gyrations in the shares of bricks-and-mortar Gamestop in the US and Pearson and Cineworld in Britain could lead this new army of investors to believe that shares only move upwards.
That is why the UK regulator, the Financial Conduct Authority, issued a warning for latecomers to the party about volatility.
American regulators are muttering dark warnings about market manipulation. Some retail brokers are refusing to deal in stocks on the Reddit hit list.
It is a little too easy to regard all short-sellers as locusts, as they were labelled in Germany during the financial crisis.
At the respectable end of the hedge-fund business, London-based firms such as CQS and Lansdowne Partners were the canary in the mine in the 2008-09 crisis.
Analysis of re-packaged mortgage securities and credit default swaps, stuffed inside financial group balance sheets, was a signal that most UK banks were going bust.
By forcing down share prices, by taking short positions, the hedges sent a signal to longer-term investors and regulators that something seriously was amiss.
The behaviour of a second group of short-sellers is more troubling. The technique of issuing one-sided ‘research’ reports, before and after shorting shares, often smells of abuse.
What is satisfying about the response of the Reddit crowd and their swamping of bulletin boards with messages is that their goal is transparent. They want to teach shorts a lesson.
There can be nothing more sweet than seeing the racier hedge funds caught out and seeking bailouts from investors and bankers.
The trouble is that when shares behave as erratically as Gamestop, AMP, Cineworld et al, there will be people caught in the rush.
Market newcomers thinking they have found a new alchemy, turning £50 into tens of thousands, could see gains vanish before their eyes.
More seriously, when shares surge or are trashed on speculation rather than on fundamental analysis, more traditional investors, such as pension and mutual funds, could be badly damaged in the rush.
Running a booze giant during a pandemic, when hospitality in Britain and across the world is locked down and India and South Africa have imposed prohibition, might seem a nightmare.
Not, it seems, for Johnnie Walker-to-Guinness titan Diageo. Its focus on ever posher brands, from the US to China, keeps the spirits high.
Its purchase of tequila lookalike Casamigos from George Clooney and others has been a roaring success in the US where it sells for the fancy price of $50-a-bottle (£37.00).
China’s share of revenues has jumped from just 1 per cent to 5 per cent as the country has fallen in love with single malts and top-of-the-range Blue Label Johnnie Walker.
Chief executive Ivan Menezes believes the next big thing will be designer gin, having bought Chase in the UK and Deadpool star Ryan Reynolds’ Aviation American Gin.
The group has done its bit for the struggling bar trade with £30million of direct help to customers struggling with Covid costs.
It might be thought that with half-year operating profits of £2.2billion and some 20 per cent of UK pubs facing extinction it could do more.