Business & Investment

Gamestonk !! Warning Emper: Gamestop Story and FOMO Bubble

“GameStonk !!” Everything you need to know about the amazing GameStop stock story-and the stock market situation in early 2021-is wrapped in that one nonsense tweet from perhaps the wealthiest man in the world. I am.

The words, tweeted by Elon Musk on Tuesday night, add to the trading frenzy that saw struggling US computer game retailers become the hottest stocks in the world, along with a link to the Reddit thread r / wallstreetbets. Fanned.

GameStop is now also the battlefield between small investors and Wall Street, a plan for a fortune, a story for a fortune, and a parable of the FOMO rally era.

Stonks is a stock joke in a new breed of trader chat room. And the absurd portmanteau tweet from Mask, who is the wealthiest person in the world and enjoys the status of an outlaw, summarizes the whole crazy situation.

GameStop has become a battlefield between organized small traders and Wall Street this week … and Elon Musk tweeted “Gamestonk !!”.To burn more fire

Elon Musk is the wealthiest person in the world and enjoys the status of an outlaw.

Elon Musk is the wealthiest person in the world and enjoys the status of an outlaw.

If you are working on it, you will know what is happening. If you are an investor looking to social media, it will have been registered in the last day or two. And if you’re consuming news at a slightly more enthusiastic pace than the modern world demands, you might wonder what this column is all about.

The short story is that GameStop (Securities Code GME) is a long-standing U.S. video game retailer struggling to be hit hard by the coronavirus and blockade that announced plans to close a number of stores last year. That is.

In the fall, new activist investors intervened – Ryan Cohen, the successful founder of the multi-billion dollar internet pet supplies store Chewy – and GameStop’s status as a revival-ripe beaten company is Gear Has been strengthened.

Cohen was trying to place GameStop to take over Amazon for the sale of online games, much like he fought the same Goliath against Chewy.

But, as is often the case, not everyone supports the story. Many hedge funds and other large investors have taken short positions to bet on GameStop. He published a treatise on why he was convinced that stock prices would go down and how they would benefit, as well as their way of doing things.

So far, value investment. Other than that, some strange things started to happen.

About two weeks ago, it was announced that Cohen would join the GameStop board.

This is a kind of good news that pushes up stock prices, officially rising from $ 19.95 on January 11. It rose 50% within two days and almost doubled to $ 39.12 by January 20th.

So far, value investment.Other than that, some strange things started to happen

But since then, the momentum has risen dramatically and GameStop’s share has begun to skyrocket. It reached $ 76.79 by Monday and $ 147.98 on Tuesday, reaching $ 332.02 at the time of writing.

That’s an increase of about 1,600 percent in 16 days.

Behind it is a systematic attack from members of the Wallstreetbets Reddit forum. This has also spread to social media, where small traders buy GameStop to raise stock prices and squeeze short sellers.

A feedback loop is created, shortsellers have to buy their own stock to cover their position, and as prices go up, more individual traders join the frenzy and make money, so GameStop stock The more you increase, the more severe the squeeze becomes.

Called a deal armed by a small trader inspired by Reddit threads, GameStop's share has risen almost 1,600% in just 16 days.

Called a deal armed by a small trader inspired by Reddit threads, GameStop’s share has risen almost 1,600% in just 16 days.

The dramatic increase in effectiveness is that many small traders are buying call options rather than actually buying GameStop stock. This is a derivative that gives you the right to buy at a set price within a specific time frame and you can make a profit if you have shares. At that point the price is high.

This allows people to trade with the borrowed money (with margin) and increase their profits.

The message on the Reddit thread is a combination of hostility to the financial system, easy-going trading jokes, and chat hoping to get rich.

It’s the same flavor found in the Bitcoin and cryptocurrency debate, lacking the true believer element of evangelicalism in the crypto world, but supplemented by the enthusiasm of the beliefs of some participants. They are destroying the financial system.

Momentum trading is not new. If you want to learn about the techniques of buying stocks upwards and trying to sell out before they fall, a classic recollection of stock operators, a lightly fictional biography of trader Jesse Livermore, and his at a bucket shop trading company. Read Life in the early 20th century.

The novelty of GameStop is that it gives small traders the power to raise prices on a large scale.

It is described as a weaponized deal and is likened to how an ant can move a huge volume compared to its size.

It is described as a weaponized deal and is likened to how an ant can move a huge volume compared to its size.

A trader with Wallstreetbets said a Monica called DeepF *** ingValue was posted that changed the long-standing YOLO (you lived only once) long position of $ 50,000 to just $ 23 million at GameStop in late 2019. Insist.

Melvin Capital Management, one of the US hedge funds betting on GameStop, reportedly withdrew from its shortage yesterday and lost 30% of the $ 12.5 billion it has managed since the beginning of 2021.

Another hedge fund, Citron, which suffered because chat room traders tried to punish the short position, had already been withdrawn.

Weaponized deals are trying to target other companies to raise stock prices, dealing with older tech names such as Blackberry and Nokia and the US movie chain AMC.

There is growing debate about whether the SEC should intervene, or whether small men and women who are aiming for hedge fund tycoons should avoid their noses.

GameStop is also a story broken down from the world of chat threads and social media into mainstream media headlines and regulator plates.

Whether U.S. financial regulators should intervene in the SEC, or whether small men and women gathered to target hedge fund tycoons should keep it, is much slower than the talk unfolds. Is intensifying. Nose.

Veteran financial commentator John Authers explains this in a Bloomberg column:Anger at financial institutions‘And the first’angry bubble’he saw in his time on the market.

“Angry has the ability to draw us attention to the wind more than greed,” he said, although many may be very naturally angry with the financial system of the last few decades. Emphasized.

And for me, this is at the heart of why the problem matters.

On the surface, GameStop is an interesting stock market story when we all need to laugh: if people want to take part in a fool’s momentum deal bigger than Daft-they make money when they’re the last fool I know I’ll lose-and yes.

But at the root of it is a huge speculative bubble in equity and high-risk options trading, from tulips to the 1920s and finally to the dot-com era, when these bubbles burst. It is the individual investors who lose much.

Gamestonk !! Buyer responsibility.

Some links in this article may be affiliate links. Clicking on them may incur a small fee. This will help fund This Is Money and make it freely available. I have not written an article promoting the product. We do not allow commercial relationships to affect editorial independence.

Gamestonk !! Warning Emper: Gamestop Story and FOMO Bubble Gamestonk !! Warning Emper: Gamestop Story and FOMO Bubble

Back to top button