A war between billionaires. India bucked Amazon for our very own Reliance. And it is all about the dominance of India’s estimated $1 Trillion consumer retail market. Amazon has now moved the Supreme Court to challenge the ongoing dispute.
GameStop Hysteria and Hysterical Taxes
A Week Ago. The biggest stories on the internet were Elon Musk’s tweets, the Farmer’s Bills, Bitcoin’s Surge, and of course the GameStop frenzy. Newspapers and media were trying to come up with the fanciest headlines. A bunch of gaming nerds smacked Wall Street at its own game. Yes, in plain terms, they shook the stock market of the USA.
What’s the story? Institutional investors, including the $13bn hedge fund Melvin Capital saw an opportunity to make a profit from betting against GameStop’s share price, or short selling.
Hello Reddit. A forum called “WallStreetBets” came into action. The users of the forum decided to buy into GameStop shares (or options to buy them), initially because they thought it was undervalued, then to send a message to the short-sellers. Acting in unison they pushed up the share price to astronomical levels to more than $350 (to be precise- 19 times in 3 weeks). What is this new power of social media to supercharge trading?
Higher and Higher. Any short seller that had borrowed GameStop shares at the start of the year and sold them in the market for $18.84 had to find another $301.16 per share to buy them back again and return them to their owner. Since some hedge funds had borrowed and sold millions of GameStop’s shares, they were facing huge losses and had to buy the shares back to stop those losses from rising further. Buying the shares back created additional demand, pushing the price up higher. This is called the Short Squeeze.
Not Only That. The battleground shifted to other shares that have been bet against by hedge funds including BlackBerry, cinema chain AMC and American Airlines.
Hysterical Ideas. A “tax-on-every-stock-trade” has been afloat ever since this Gamestop frenzy. Most investors do not pay commissions anymore on security transactions. And these taxes might prevent these frenzies. But these taxes might just create an “idea” that the stock market is safe from such incidents.
Additional capital gains levy might drive trading overseas, cause major damage to the domestic financial institutions of the USA, and hurt the value of stocks.
Wealth Tax. The cry for such a levy has also grown since the inception of COVID19. Moreover, such a levy has failed. Every time. Everywhere. It is super-hard to collect as it involves valuing every year everything you own. Wealth is not just cash. It also includes stocks, ownership of small businesses, etc…
A Draconian Short Term Tax. For example trades under a month should be taxed at 60%. Less than 2 weeks: 80%. Less than three days: 90%. Can this be the solution to end speculation? At least put an end to the most mindless variety of it?
2.4 Trillion. In 2019, Senator Bernie Sanders had proposed a US Bill which aimed to tax the trading of stocks, bonds, and derivatives at rates that could have raised $2.4T over 10 years. A similar idea was proposed by Economist John Maynard Keynes in the year 1936. It was to discourage excessive market speculation. Is history trying to say something?
In a world filled with unemployment, do we need people sitting behind screens and generating profits on fads like GameStop?
We will do the hard work, you just need to subscribe
Not so Sweet – Crazy Tax Story
Oct’20. Ireland’s Supreme Court ruled that “Subway bread isn’t actually bread.” Wait! How?? In order for “bread” to be “bread” in Ireland, the amount of sugar in the dough must be 2% of the flour’s weight. Subway’s bread is 10%.
What happened? Brookefinders Ltd., a Subway franchisee argued against paying value-added-tax. Staple foods like milk and bread are exempt from this tax anyways. To settle this, the court had to decide whether or not Subway bread was considered a “discretionary indulgence.”
All Subway franchisees in Ireland will now have to pay a 13.5% VAT for bread sales.