I know almost nothing about stocks.

Have been watching this Gamestop market manipulation thing for a couple days now.

Any of you long time stock investors care to explain this, as I am fascinated, and at the same time, a little scared scared by it.

Are some heavy hitters getting hurt bad enough that they are calling in all their markers, or is it all just smoke and mirrors?

Pretty volatile looking market in my ignorant opinion.

Stock manipulation has been going on since the 1800's. It's just very well publicized now thanks to our 24/7 news cycle and the internet.

As for Gamestop, I'm stunned that it's even still in business.

This is my day.

And right now, I haven't seen this much energy in the system since late 1999.

I feel like...

a) The market crushes higher
b) The market crashes

I don't think there's the third option of the market doing nothing. Not with the insane craziness I've seen from the main streeters the past couple of weeks. The only saving grace so far is that the news has continued to be bearish and wary of the market. When they go all in and say everyone should play stocks because the money is easy and real, that's when we in finance get really scared and sell.

The short version, pun intended, is that a couple heavyweight stock investors were shorting the Gamestop stock. This is where someone borrows shares from another individual and then sells them, hoping to buy them back later at a lower price and then returning them to the owner. This happens frequently, but is very risky due to the fact that your potential losses are uncapped if things go sideways. A bunch of small time players got together and started buying shares of Gamestop stock and driving up the price, the exact opposite of what the guys shorting the stock want. They finally had to tap out the other day and buy back the shares, absorbing huge losses.

Thanks Wolverine, that's pretty much how I understood it.

Also, like Panzer said, not a clue how it's still in biz.

Heck, even Radio Shack is still around but they are almost exclusively online only now.

This is a pretty good article on the issue.

https://www.msn.com/en-us/news/opinion/why-is-everybody-obsessed-with-gamestop/ar-BB1dbhwp

I think that the argument against the Reddit activities is that it is tantamount to collusion, which is an anti-market force. Large companies (i.e. oil & hedge funds) are not allowed to act cooperatively. Of course, it is hard to regulate, but that is the underlying principle. When gas companies set their prices, they are not allowed to consult their competitors and act in a united manner. They can always go out to the nearest gas station and see, before setting their own prices, but they cannot call one another on the phone and collude to set prices. This may be how the fund managers are interpreting the Reddit actions.

If allowed, this behaviour could carry over to other industries, like banking. Let's take a small bank as an example. A deposit of $100 means that only about $15 or less of that is actually kept in the bank as a reserve. The bank re-lends everything it can. If all the depositors came in on the same day to demand their money, this would cause a run on the bank resulting in a potential collapse.

Now, imagine if some entity(s) with a large balance of funds tried some scheme to collapse banks. They could open deposit accounts (up to the limit covered by the FDIC - Federal Deposit Insurance Corporation), then short-sell the bank's stock, and then demand their money in order to create a run on the bank and collapse it. Their deposits are all 100% federally covered and they get the benefits of the stocks sold-short.

Apparently this only hit the news this week, but it goes back to people shorting gamestop much earlier in the year and it was already backfiring before wallstreetbets jumped on the bandwagon. It all started backfiring when they got a new CEO, the new consoles came out and Microsoft started making deals with Gamestop. It caused the stocks to not drop as expected. The whole wallstreetbets buying and keeping the price high is just exacerbating the problem for short sellers.

Here's yet another video that explains it some: https://www.youtube.com/watch?v=sH_F7mQIM0M
and another one, because everybody has a version of it: https://www.youtube.com/watch?v=m-b3opvdYL4

Thanks everyone, I understand it much better now.

Robinhood's name is kind of Ironic at this point I guess.

edit: Oh, and "Sell Mortimer, Sell!"

I really don't see what the problem is. The ONLY reason it's big news is because some pencil-necked stock broker got soundly beat at his own game by 'outsiders'. If it's legal, and they didn't break any other laws, more power to them.

Ok, so I am completely uneducated on the subject of the stock market so these might be very naive questions, but I was wondering this: What these people did looks like this to me: A bunch of people come together and say "hey, lets all buy this stock, let's convince others to do so too". Isn't that essentially what stock investment firms do? Trying to get people to buy stock? The difference then would be that these are individuals all putting their own money in whereas a firm will try to get people to give them the money so they can buy it for them and make a cut.



But these are individuals and they don't have any direct control over the price of anything, they have no product at all, they can just buy and sell. And if they can't communicate with each other then every single individual would have to invest whithout any advice whatsoever. That would have dire consequences for anyone offering stock advive as a service, no?

Maybe that is really naive, but to me this whole hubbub sounds alot like "wait, plebs, you don't understand, WE are supposed to take YOUR money, you dummies".

Large companies (i.e. oil & hedge funds) are not allowed to act cooperatively.

Yeah, sure. That's why they bailed out one of the own today to the tune of $750 million.

Good thing Martha Stewart wasn't involved...

I like the way this explains it.

https://www.dailymail.co.uk/news/ar...s-astonishing-financial-story-years.html

Yes, the counter-argument is, "These activities are what hedge-fund investors do every day.


Individually, they may not exert much influence but combined, they might constitute an entity. How many people does it take to foment or form a rebellion? Technically, two guys blasting the government while drinking beer would be sufficient to meet the threshold. I think it is a matter of size. Your small business cannot operate as a monopolistic enterprise whereas Amazon can.

Question is, are them hedgefund managers really particularly hurt by all this? Sure short term for their initial short position that s bad news. And what do they do? Well, they invest now even more in shorts while the paper is artificially and unreasonably high, and they may likely win even more than expected with the initial shorts.

The bigger story here, is that Citadel is part owner in Robinhood. They forced Robinhood to disallow buying in Gamestop and several other heavily shorted stocks that WallstreetBets was playing. Disallowing buys means that the stock will fall.

However, Robinhood has reversed their decision because it was criminal in nature. Gamestop is currently over $400 pre market trading. And today, Friday, is margin call day, the day when the big boys have to cover their shorts.

I used to Day trade back in the 90's so I know all about this market stuff. We had a channel and we did the same thing.

If this is true, not saying it isn't but a link or two would be nice, the Feds should be arresting people now.

edit: Oh, can you imagine the shock for any long time Gamestop execs who had lots of "worthless" stock options?

Ding ding ding!