Why is Everyone Talking About GameStop?
The last 48 hours or so have been wilding out when it comes to the stock market. When the pandemic hit last year, the stock market also took a hit. I decided, mostly because I was bored, that I would suddenly become a Wall Street tycoon. I bought some stocks, lost some dollars, and decided I should stick to being in radio. I kept a few stocks, but I don't see myself getting rich on any of them in the near future.
I will not even begin to attempt to pretend like I understand the entire stock market's ins-and-outs, but I will tell you this whole GameStop situation is pretty interesting. If you need to really understand it, I suggest watching Trading Places. What is happening with GameStop, Nokia, and AMC is literally what happens at the end of the movie.
A post on Reddit kicked off the idea of normal buyers taking control of the stock market and profiting from it. It is based on trying to upset brokerage firms that control the market and stock values. The post picked a stock, GameStop, being shorted by a hedge fund and had everyone onboard to start buying it. In turn, this made the value of the stocks begin to rise. The hedge funds were forced to start buying the stocks back because they essentially borrow the stocks from a broker to sell at a higher price than they pay to buy them back before returning them to the broker. Consequently, the new juiced up prices meant they had to spend way more money to get them back. The GameStop situation actually forced one company to file bankruptcy. This entire process is called a short squeeze. It is perfectly legal, and the Reddit community is continuing to band together and are branching out to other stocks that are being squeezed.
Will it stop? Stock trading apps such as Robinhood and Acorn are removing these particular stocks from their app and putting a freeze on the ability to buy and sell them. There are still other ways to buy and sell, but to see these companies try to stop the action is quite comical, indeed.