Radio host and Trump loyalist Rush Limbaugh compared the hoopla surrounding the Reddit gaming of GameStop stock to the former president inserting himself into politics, asserting that the elites in the ‘Deep State’ would ‘destroy’ anyone who managed to beat them.
Limbaugh on Thursday shared that he felt the move by Robinhood and others to restrict trading after surges in GameStop, AMC Entertainment and others, came as a means of protecting hedge fund billionaires.
‘Folks, it’s not just political now. The elites are bent out of shape that a bunch of average, ordinary users have figured out how to make themselves billionaires,’ Limbaugh said, Fox News reports. ‘I’ve been studying it all morning and the best thing I can tell you is… whatever you think is going on in politics, Washington establishment, the Deep State, what have you, it’s the same thing in finance.’
For Limbaugh, the situation surrounding the stock showed that there was ‘those who are allowed to make a lot of money’ and those who aren’t.
Rush Limbaugh on Thursday shared that he felt the move by Robinhood and others to restrict trading after surges in GameStop, AMC Entertainment and others, came as a means of protecting hedge fund billionaires
‘If you figure out how to make a lot of money, and if you’re like Donald Trump and you figure out how to get elected, you figure out how to beat the Deep State, they’re gonna come and they’re gonna wipe you out,’ he said. ‘They’re gonna destroy you, and that’s what’s happening with GameStop’
‘If you figure out how to make a lot of money, and if you’re like Donald Trump and you figure out how to get elected, you figure out how to beat the Deep State, they’re gonna come and they’re gonna wipe you out,’ he said. ‘They’re gonna destroy you, and that’s what’s happening with GameStop.’
Limbaugh said that the Reddit community had figured out how to ‘game the system’ and turn the stock market in to a ‘profit-making device for themselves.’
‘In the process they are harming the intended winners in this financial circumstance and that would be the hedge funds out there. The hedge funds are supposed to be the ones making a lot of money. They’re not and they’re begging other hedge funds to bail them out,’ he said.
The controversial host claimed that the elites didn’t want average Americans taking part in the stock market or to get access to the perks they utilized.
GameStop stock has rocketed from below $20 earlier this month to close around $350 Wednesday as a volunteer army of investors on social media challenged big institutions who had placed market bets that the stock would fall. The action was even wilder Thursday: The stock swung between $112 and $483 before closing down 43.2% at $197.44
‘Now they’re actually making it clear to anybody that has the ability to notice that you’re not allowed to use the stock market the way they do, you’re not allowed to profit, you’re not allowed to make the kind of money they do,’ he said.
‘And the perks are, the ability to guarantee your kid’s financial future. The ability to guarantee yourself a financial future, the ability to guarantee yourself a position of some power, depending on who you are in the establishment, the club of elites, whatever you want to call it, and it extends to far more than just political,’ Limbaugh said.
‘This GameStop business now makes this something that is understandable beyond the political world and that is its value. It’s not just political anymore. It’s not just that you can’t think for yourself, on issues, and matters of politics… everything is rigged in favor of the elites and this has come along and set that rigging.’
How does ‘shorting’ a stock actually work?
Stocks typically benefit investors if the price goes up – they buy stock, the price increases if the company does well, then they sell it for a profit.
But there is a way to reverse that process. Known as ‘shorting’, it involves placing a bet against a company that means a trader makes money when the value goes down.
To do this, a trader borrows stock off a broker, usually for a fee, which they immediately sell – but with a clause saying that they have to buy back that stock by a certain date and return it to the broker.
If the value of the stock goes down, then the trader buys it back for less than the sale price, returning the stock to the broker along with the fee and keeping the rest of the money for themselves.
But, if the stock price rises, they will be forced to buy for more than the sale price, making a loss in the process.
While this sometimes happens by accident, other traders can deliberately boost the price in a process known as a ‘short squeeze’ – which is what Reddit did.
This benefits the ‘squeezers’ because they know that at some point, the short-sellers will be legally obliged to buy back their borrowed stocks, driving the price up further.
It also inflicts heavy losses on the short-sellers, since the amount they lose is tied to the amount the stock rises – they are effectively ‘punished’ for betting against the company, which is what some Redditors appear to be interested in.
Investors have been on a GameStop buying spree, which not only pushes up the shares but puts pressure on short sellers to make purchases to ‘cover’ their bets to avoid steeper losses.
This is known on Wall Street as a ‘short squeeze’ and can result in a dizzying rally by forcing short sellers into becoming buyers.
As a result, GameStop surged 18 percent on Monday, another 115 percent Tuesday and had leapt 135 percent Wednesday. That followed a stunning 50 percent jump on Friday.
The extreme volatility has raised concerns about manipulation, which could lead to an investigation by stock market regulators, and has even drawn attention from the White House.
Late Wednesday, the Securities and Exchange Commission said it was monitoring the activity.
GameStop shares plunged on Thursday after trading app Robinhood restricted purchases.
By noon, a federal class action lawsuit had been filed against the trading app in the Southern District of New York.
Robinhood also halted buying for shares of theater chain AMC, BlackBerry, retailers Express and Bed Bath & Beyond, headphone maker Koss, swimwear line Naked Brand Group, and Nokia. All were down by double digits in midday trading.
GOP Senator Ted Cruz and Democrat Squad member Alexandra Ocasio-Cortez have both called for investigations and criticized Robinhood for shutting down trades while hedge funds are still free to buy and sell stocks as they please.
The war began last week when famed hedge fund short seller Andrew Left of Citron Capital bet against GameStop and was met with a barrage of retail traders betting the other way. He said on Wednesday he had abandoned the bet.
The Redditers have taken advantage of a process called ‘short selling’, which effectively reverses the way the stock market traditionally works.
Instead of buying a stock in the hope company does well and the price goes up, then selling for a profit, shorting involves betting against a stock in the hope the value goes down, and then pocketing a share of the difference.