ThinkPad: Game(Stop)...Set...Match
Thinkpad spent too much time reading up on GameStop this week. But don’t worry we still got you covered for the budget.
Happy Sunday.
Look, we know the budget is around the corner. Well, it’s tomorrow. For the next week or so we’ll all obsess about it. But this week, much of the attention was stolen by the crazy GameStop story playing out in the U.S. It has little to do with India but it’s pure gold.
Many of you may have already kept track of what’s going on so we’ll keep the recap short. A bunch of traders from a sub-Reddit called Wallstreetbets (for those of us who don’t frequent Reddit, a sub-Reddit is essentially a chat group) have pushed a bunch of fancy hedge fund managers into billions of dollars of losses. They’ve done it by driving up the share price of a company called GameStop using options, leading to a short squeeze for funds that were heavily short on the stock.
That’s a very sanitised version of everything that’s been going on. This Bloomberg deep dive into the story is all kinds of fascinating. Read here.
The story quickly took on a David vs. Goliath turn. As large hedge fund managers got beaten at the their own game by seemingly average joe traders, everyone picked sides and the whole story degenerated into the social media equivalent of a bar brawl. No, it didn’t end there. Discount broker Robinhood, which, as its name suggests, portrayed itself as the small retail investor’s way into Wall Street, decided to restrict trading in GameStop stock. And another fight broke out. Like we said, a digital age bar brawl.
As you can see, ThinkPad spent entirely too much on this story over the week. But if you are also looking for some good fun reading on it, check out a series of newsletters from Bloomberg’s Matt Levine.
Ok, back to bread-and-butter budget work.
We got the Economic Survey on Friday. There were essentially two key takeaways from the document, relevant to the budget. First, it pegs growth at 15.4% in nominal terms next year. That will make the budget math easier to square. Second, it argues for continued fiscal support into the coming year. We’ll see whether the budget follows that line of thinking. You can catch the highlights of the Economic Survey here.
What came later on Friday was more interesting. The list of bills parliament will take up in the budget session had two spoilers.
First, a bill to set up a new Development Finance Institution has been listed. That’s that then. We are getting a new (old) DFI. What will it look like? And will it work better than the ICICI and IDBI of yesteryears? These two recent conversations with veteran banker KV Kamath and Vinayak Chatterjee have some insights.
The second listing is more surprising. Not the bill so much, but the manner in which it is described. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is slated for introduction, consideration and passing. The purpose of the law has been described as: To create a facilitative framework for an official digital currency issued by the RBI and to “prohibit all private cryptocurrencies in India.”
Are we going to ban cryptocurrencies now (again)? Just as the rest of the world including legacy payment firms are starting to see merit in it? This is going to be a long debate and we will pick up on it when details of the bill are in.
We’ll leave you with two quick pre-budget wraps. Read here if you want a 5-minute primer on what to watch. Or watch this (slightly longer) summary of key numbers to watch in the budget.
If you are among those who have seen one-budget-too-many to worry about targets that are rarely met, take a trip down memory lane with Raghav Bahl, as he writes a personal account on six of India’s powerful post-liberalisation finance ministers.
Rest up before a busy week.