Q. Dear Umbra,

I heard r/wallstreetbets loves clean energy. Is that good news for climate change?

– Seriously Tripping On Nihilistic Kangaroo Stocks

A. Dear STONKS,

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You are no doubt thinking about last week’s hedge fund-frustrating GameStop stock rally and wondering if Reddit’s market-moving lightning might strike twice. Well, buckle up, this is going to take a bit of explaining.

For readers who aren’t quite up to speed on the latest Wall Street drama, here’s what you missed: Several months ago, some users of the forum-based site (specifically those on a subreddit called r/wallstreetbets) noticed that a lot of hedge funds had bet against the video game retailer GameStop by borrowing shares of the company, selling them, and expecting to buy them back at a lower price before returning what they’d borrowed — a practice known as shorting. This bet kind of makes sense, since GameStop (a) closed hundreds of its stores in 2020 and (b) is still figuring out its place in a video game market moving toward downloads.

But Redditors bet otherwise, noting that if the share price rose a bit, some market feedback loops would kick into gear, and the companies that had bet against the stock would be forced — squeezed, as it were — into buying back the shares at ever-higher prices. And so when news trickled down from GameStop HQ that some executive shake-ups might be on the horizon, the share price started to tick up and more r/wallstreetbets members jumped on the train. When those market feedback loops took over, the result was a bit shocking: Even though hedge funds commit this kind of assault on one another’s portfolios all the time, the fact that a bunch of ordinary people on the internet lit the kindling around this stock rally was something new.

In one of his dives into the GameStop zeitgeist last week, Bloomberg columnist Matt Levine described the story as one of “utter nihilism.” It certainly has the contemporary trappings: Reddit day-traders, a gargantuan short squeeze, the rapper Ja Rule, complaints to the Securities and Exchange Commission, chicken tenders dunked in champagne. But to your point, STONKS, what does all that have to do with climate futures?

Well, indeed, beyond the other shorted stocks some r/wallstreetbets members are chasing down (including movie theater chain AMC and bat mitzvah dress emporium Express), a lot of the subreddit’s users are bullish on clean energy: They’re investing in BlackRock’s clean energy exchange-traded fund, or ETF (basically a vehicle to invest in green enterprises); electric vehicle-adjacent companies like Plug Power and Blink Charging; and Tesla, blessed on high from Papa Musk himself. And that’s significant given the community’s now-proven ability to move markets.

So if Wall Street-minded Redditors like the clean energy stocks, isn’t that good news for climate change? It’s a good question, STONKS, and not one that has an easy answer. For one, most of the clean energy tickers that have caught the eye of the subreddit aren’t heavily shorted — and thus can’t be squeezed in the same manner as GameStop. (One exception is SunPower, a photovoltaic company.) The BlackRock clean energy ETF in question, which is pinned to the value of a whole bunch of stocks, won’t move more than a couple points per month.

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In other words, the self-described degenerates over at r/wallstreetbets aren’t betting on clean energy in hopes of once again unleashing havoc in the financial sector, but because the future of clean energy is bright! They’re expecting a Biden presidency to boost the market for solar panels and wind turbines and electric vehicles, and they want to get in early.

Biden has already directed a handful of federal agencies to stamp out the practice of subsidizing the fossil-fuel industry. In the investment world, we’d call that decision “indicative of regulatory risk,” which means there’s a chance your fossil-fuel investments will go up in flames if the president indirectly slashes the industry’s profits. Markets are supposed to reflect these risks. If a company’s stock actually has some relationship with the firm’s future cash flows — as it’s supposed to — we might expect the regulatory risk of, say, banning fracking to be embedded in a gas company’s share price.

That would all make sense, wouldn’t it? But if the GameStop squeeze shenanigans illustrate anything, it’s the disconnect between the stock market and the “real economy” (whatever the Warren Buffett-loving heck that is). Just because GameStop’s stock was suddenly, magically worth $400 a share didn’t mean that a chain of brick-and-mortar video game shops had become fabulously profitable. But by the same token, why should we care if the Dow drops ExxonMobil? Or, perhaps more concretely, if that BlackRock ETF is up 160 percent over the past year (versus 18 percent for the S&P 500), does that growth represent speculation or real value?

That’s why your question is a hard one. If the stock market reflects arbitrary, speculative activity more than it reflects the consensus on expected future cash flows of real companies (also a form of speculation, I suppose), then how are we supposed to read “market signals” related to climate change as even remotely reflective of what’s actually happening on the ground? If it’s all truly just a casino, then looking to the market for evidence of climate action might be a flawed notion.

We use market signals to understand climate progress all the time, though, and my inclination is to take them with a grain of salt. Ultimately, what’s the r/wallstreetbets market signal telling us about climate change? Mostly that some people on the internet think clean energy stocks are going to make them some money, so they’re going to put up some of their own money as proof of their confidence. That fact alone probably won’t be the ticket to a net-zero future.

The last time clean energy got a serious cash infusion — around $90 billion — we were trying to keep the world duct-taped together via the Recovery Act after the big 2008 financial crash. Needless to say, r/wallstreetbets doesn’t have that kind of cash lying around. I’m not arguing that money doesn’t matter; rather, Reddit probably won’t save the day on climate change by staging a guerrilla takeover of the New York Stock Exchange trading floor. A Green New Deal (in whatever form it might take) probably comes with a heftier price tag than, you know, the market cap of Bed Bath & Beyond.

I disagree with the nihilism story, by the way. Just because the stock market is opaque and absurd doesn’t mean it doesn’t provoke meaningful consequences. Real people get hurt when bubbles burst and markets crash; real people are left holding the bag when hedge funds get to “recalibrate their positions” after-hours; and, to that end, real people are using the market to make a point right now. It might not be a point about the future value of GameStop — more likely, it’s a point about the future value of Wall Street.

To bring it back to the climate, STONKS, I’d say this: Working together, enough people can make themselves heard through the market. But the fact that the stock market frequently fails to reflect real life ought to remind us that climate progress will come through more mechanisms than investments and divestments. You also need organizing and regulation and (in my humble opinion!) advice columnists.

The common refrain on r/wallstreetbets these days is “hold the line.” Buy up — and cling to — enough shares of GameStop, and the hedge funds seeking to cover their shorts will have no choice but to buy shares from you at whatever price you name. I like to think I see a little “keep it in the ground” ethos there. For many years we’ve heard stories of climate activists buying up oil and gas leases with the sole purpose of holding them in trust: sitting on them in hopes that if enough people do the same, there won’t be any land left to drill.

A pipe dream, certainly. But imagine a Reddit army hoovering up these leases! If r/wallstreetbets really wanted to get in on the climate game, they could probably bankrupt the oil industry.

With a loving squeeze,

Umbra