The Gamestop rally has been happening recently in the United States of America and I couldn't help but notice that it is quite similar to something that happened in India in 1992. You might know of Harshad Mehta who has been receiving a lot of media attention recently due to his biographical web series being released named "Scam 1992" which is available on sonyliv.com. Harshad Mehta was a part of a major controversy which involved the misuse of the bank receipts to artificially increase the price of the shares in which his money was invested. These included notable shares like Associated Cement Company (ACC). To read more about the Scams led my Harshad Mehta you may read from the following picture.
Now that we know about the history of Harshad Mehta we can talk more about the similarity of this "scam" with the GameStop controversy. This is not legally proven but it known to everyone that there a few power players in every stock market who can manipulate the market according to what is the best for them due to the high amount of holdings they have in the market. These players make these manipulations in a low-key way so that the mainstream media does not cover these controversies and they make profits worth millions or even billions under the radar. Since the manipulations are not too large in the eyes of lay-man they just think that its a normal movement of the market. But, what happened in the case of Harshad Mehta and even the case of the Gamestop rally which was led my a subreddit by the name of r/wallstreetbets was that the price changes were so significant that they could not be ignored. The shares which Harshad Mehta invested in were on astronomical highs since he invested in them and similar was when the Reddit community joined hands. The price of GameStop shares was on a 1600%+ higher value than its price just 2 weeks back.
Since the price change was so massive and since it caused losses to major "power players" this issue was covered but every major source of media or entertainment and there is news about a movie being directed about this incident which according to me is humourous. But what I was confused about was that everyone was saying that GameStop does not have any underlying value for this inflated valuation of its stock so this is an extremely "careless" and "immature" from the "new and young traders". My question to them is that why isn't everyone calling this to the people who rallied the Tesla share price to over 850%+ in the past year without any such underlying value or profits to account for such an increase. The only reason for that increase is the belief that everyone has in Tesla and in Elon Musk.
Something important that people don't get is that the Stock Markets are not a representation of the success of the companies but are a representation of human sentiment. The share prices don't necessarily represent the success of a company but the belief of the people in the company and history can prove this to us but are not able to understand this. No one can predict the stock market just like no one can predict human sentiment. We witness this every day but are never able to understand it. Whenever a piece of positive news about a company is shared in the news the share price of the company increases, like in the cases of mergers or acquisitions of companies. The opposite happens when a piece of negative news is shared like when the global pandemic was declared causing the stock market to crash collectively.
Firstly I would like to tell everyone the differences between both the incidents I am comparing so that people don't get confused and interpret something wrong. What Harshad Mehta did was illegal as he did not use his own money but the money of Indian Banks to fuel the increase in the share prices which he was not allowed. On the other hand, the people at r/wallstreetbets joined hands and used their own hard-earned money to cause the rally. Since millions of people united together it caused such an astronomical and unreal increase. What Harshad Mehta did was outright market manipulation which is illegal but what the Reddit community did was sharing information which made people individually decide if they feel its a good investment and thus ultimately led to this increase. Another difference is that Harshad Mehta did this only for selfish reasons but the subreddit community did was to stand against the "power-players" and give them a taste of their own medicine with a secondary motivation to make easy money like them.
Now the similarities between both the incidents. Firstly, in both cases, millions of people earned a lot of money and a lot of people lost a ton of money due to uneducated investing and peer pressure. Secondly, it just proved that the rich can get away with anything and when a common person tries to do something the rich do only they are penalised for it. I am not saying that what Harshad Mehta did was correct but since he was the only one punished for manipulation I am using him as an example. The power players who manipulated prices during Harshad Mehta's time were never caught. Similarly, when the rich try to manipulate prices in the US there are no penalisations or restrictions but when the common people try to do the same leading brokerages like Robinhood stop allowing the people to buy the shares and forcibly causes them to sell them to ultimately reduce the prices of the rallied shares. Also in both cases, the prices of shares were increased artificially without any solid reason which I believe has been quite obvious through the entire article written by me.
*Disclaimer: I am not saying that Tesla isn't worth investing in, but I believe that the example of Tesla was relevant for the argument I was presenting. I have nothing but love for Elon Musk and according to me he is one of best people on this planet and I appreciate him for everything he is doing for the world and the internet community with the whole RobinHood controversy and $Doge Coin as well. *
*I like to use inverted commas when I am quoting terms being used by people out of context and which make no sense in the conversation being made.*
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