Community Chat

[godi]

The stock market was never fair to casual investors.  I for one am glad that they got schooled that people who don't invest are catching on to the game. They exposed a big hole in the system. Let the chips fall where they may. 

[World Traveler]

I've been following it and am glad that "normal" people, as the hedge fund managers are calling them, have figured out a way to beat the system and make big bucks too. Everyone should have equal chance to make the big money that the Wall Street people do.

I believe it started at $4/share when hedge fund managers decided to "sell short" and ordinary people figured out what they were up to, so they started buying the stock. That raised the price to around $400 (may have gone down by now, since it has become major news). This means the head fund managers are out BILLIONS of dollars, since they have to come up with money they hadn't planned to. They got beat at their own tactics. 

I thought about getting in on this, but by the time I knew what was going on, the stock had risen so much in price per share, I wouldn't have benefited as much.

One person who is a daily trader said he got out about a week ago so he could cash in on the rise from $4 to $400, as he felt it would start going down now that it is common knowledge.

Fun to watch! And hooray for the people who don't normally get the chance to make large money and were smart enough to spot what was going on with the market.

[gardenman]

Short selling has become an art form these days for the big hedge firms. In short what happens is they'll "borrow" a stock at the current market price say $10, sell it immediately and pocket the $10. They have to return the "borrowed" stock in a certain timeframe, but they're confident the price of the stock will fall within that timeframe. If it falls to $5, they'll buy it at $5 and then give that newly bought stock back to the people they "borrowed" it from and pocket the $5 in profit. 

How do they know the price will fall? Because everyone watches what they're buying and assumes they know what they're doing. "Experts" will go on TV and talk about how damaged the company is and how it's not a good investment. People who own the stock will sell it for fear the company is doomed and the price will drop which decreases the stock's price and the short-sellers will party on their yachts as they kill yet another otherwise viable company.

The Reddit crowd broke their game. They liked Gamestop and decided that if the short-sellers were going to have to buy back Gamestop stock, they should make the price as high as possible. So, despite experts talking of how Gamestop was a doomed company, the Reddit crowd started to buy the stock. The stock market is essentially an auction at heart. When you have a lot of buyers, things sell for more. Gamestop stock suddenly had a lot of buyers. It went from $4 a stock to somewhere around $315 as I write this. The short-sellers who "borrowed" it at $4 expecting it to drop in value, now have to buy back that stock to repay the people they borrowed it from at $315 so they lose $311 per share. And they "borrowed" a lot of shares. The "little people" who bought Gamestop are making the difference between whatever they bought it at (the lucky ones at $4) and the current sale price. 

The hedge firms that have made a career out of destroying businesses by driving down their stock prices are now very unhappy that the "little people" are ruining their game. Instead of running away from the stocks the short-sellers are targeting, clever buyers are now targeting those stocks and forcing the short-selling "borrowers" to buy them back at an inflated value. They've changed the rules of the game and the hedge fund managers are not happy.

Have the Reddit users saved Gamestop? Probably not in the long term, but they've stopped the short-sellers from killing it right away. Once the "borrowing" period has elapsed the Gamestop stock price will likely revert back to the original $4 a share. Companies can borrow money to stay afloat based on their stock price. Right now, Gamestop could borrow money pretty easily. Had the short-sellers succeeded in driving down the price of the stock, the company would have likely been forced to shut down.

I like seeing the little guys/gals win against the big, powerful institutions. Of course, those big powerful institutions are now demanding something be done to stop this from happening again. Lawmakers will likely try to come up with some way to protect their big, powerful, cash-contributing allies, but for now, the little guys/gals are winning and it's hilarious.

[millieshops]

I am less concerned about either of the sides in this particular war and more concerned about what the ongoing going effects of their battle might be on the overall market in the future.

[geezerette]

---

@MG Chris wrote:

Pretty interesting isn't it? My daughter explained it to me. She bought in and made $24,000 in two days. She sold her stock on Wednesday. My husband isn't a risk taker and he pressured her to sell. She was willing to ride it out. I am pretty proud of her.

---

Your husband was more than likely right.  

This isn't the first stock/company this has happened to.  The smart "little guys (and gals)" have gotten out by now.  Those that choose to stick with GameStop thinking they'll make out even better will probably be highly disappointed.

It never ends well.

[software]

Using any one of those Apps like RobinHood is like a blue collar mini Wall Street.

Working guys mostly throw a little money at it when they have it & generally make a little money.  It's a hobby.    But for those paying attention & jumped onboard, they made more than a little money

I've never thought these short sales were ethical, but they are legal.   The hedge funds betting on a stock drop now has to come up with an enormous margin call.  I've read where some unaffected hedge fund companies are helping out the others.

It was also wrong to halt trading, now there's a class action lawsuit, so it's back in business, with restrictions

[Linmo]

There's something else to consider here.  This isn't just David vs. Goliath (man vs. man), it's also man vs. machine.  A lot of high volume trades are automated and triggered by market movement.  The machines usually win out, leaving the little guy holding the bag.  For those little guys that made some money initially, good for them.  But for those who get on board late or are greedy and stay in too long, it probably won't end well.

[sunshine45]

i was in awe of this fascinating story.

the more i read, the more i understood what was going on.

i am a little sad that i did not hear about it sooner to take advantage of the pricing. i am also a big GAMESTOP shopper and would be so sorry to see them shut down.

[BadWolf]

---

@geezerette wrote:

---

@MG Chris wrote:

Pretty interesting isn't it? My daughter explained it to me. She bought in and made $24,000 in two days. She sold her stock on Wednesday. My husband isn't a risk taker and he pressured her to sell. She was willing to ride it out. I am pretty proud of her.

---

Your husband was more than likely right.  

This isn't the first stock/company this has happened to.  The smart "little guys (and gals)" have gotten out by now.  Those that choose to stick with GameStop thinking they'll make out even better will probably be highly disappointed.

It never ends well.

---

The purpose of these Redditers in purchasing Gamestop was never to make money.  They were purchasing specifically to bring down the hedge fund who shorted the stock and was bringing down the company.  I think it was brilliant despite the fact that a good part of my life savings are in the market, which is being proven to be as corrupt as everything else these days.

[FiddleDeeDee]

We are. 

One of the classes our HS freshman is taking this semester is "Everyday Finances"; they are using this situation as an opportunity to learn about short sales, investments, hedge funds, the stock market as well as how the class system works in the US. 14 year old son is finding it all VERY interesting.