Remember Hometown Deli? It's the squat cinderblock New Jersey sandwich shop that is publicly traded and raised $2.5m on a $100m valuation, based on $35k in annual revenue. It was the source of much puzzlement and mirth last month.
Since then, there's been a lot of financial sleuthing to figure out what this "company" is - the smart money is that it's a prepackaged financial vehicle to allow an otherwise unmarketable offshore company to go public, by doing a reverse-acquisition.
A reason for this attention is that Hometown is an emblem of the casino economy, in which the financial sector makes vast fortunes without producing anything of value, simply by making bets, including bets on other bets (which are sometimes also bets on bets).
The stories about the casino are often about the way that unwise retail investors are wasting their "stimmies" by being the sucker at the poker-table, getting fleeced by the sharp operators who know how the game is really played.
That's how things played out at the Berkshire Hathaway annual meeting, where Warren Buffett and Charlie Munger (the only billionaire power-couple that *isn't* getting a divorce) scolded the Wallstreetbets/Gamestop speculators and their abettors:
But as David Dayen points out, the action from retail investors is just a side-show. Take SPACs - a form of corporation-launder that allows companies with unsound financial to go public without normal scrutiny.
The majority of SPACs did not originate through celebrity endorsers - they were high-flying finance vehicles created by major investment banks and funds.
Even the Gamestop bull run - this year's poster child for retail investors moving markets - was mostly a wargame waged by titanic funds, with retail investors providing protective coloration.
The Trump stimulus included a promise government to buy up as many junk-bonds as the corporate sector could issue, pumping trillions into the casino economy (cities and states, meanwhile, were hung out to dry, left to fire teachers and firefighters):
Much of the money has been poured into anticompetitive mergers, as companies seek to own their own markets (horizontal mergers) and their supply chains (vertical mergers), and so far, the Biden admin has given them all a pass:
Thanks to the fed's "we'll buy your junk bond" policy, these mergers are largely debt-financed, leaving once-healthy businesses saddled with vast amounts of debt that put their employees, customers and suppliers at risk of collapse.
(Incidentally, the best commentary on Superleague has come from Musa Okwonga, whose Trashfuture episode on the teams' dodgy, ruinious finances is an absolute must-listen)
Despite Buffett's finger-wagging, the casino economy is being run by whales, not minnows. Even Hometown Deli, which looks more like a mob money-laundry than a high-finance gambit, was built on the fortunes of sophisticated, blue-chip investors.
Out of the $2.5m that Hometown Deli raked in from "investment" last year, $2m came from Duke University and Vanderbilt University, who invested through their multibillion-dollar endowments.
The fact that America's elite universities are now just "hedge funds with educational arms" is a leading indicator of the financial rot's spread through the system.
The same economists who brief against the elements of the Biden stimulus that will create structural changes in jobs, climate resilience, energy independence and food stability have no problem with this casino economy.
The only part they decry is the spectacle of the suckers at the table, because whether they're getting fleeced or collecting a rare jackpot, they bring the whole enterprise into disrepute.
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