Why GameStop's stock surge is shaking Wall Street

[Yo_Mama_Been_Loggin]

NEW YORK (AP) — It’s not just you. What’s going on with GameStop’s stock doesn’t make sense to a lot of people.

The struggling video game retailer’s stock has been making stupefying moves this month, wild enough to raise concerns from professional investors on Wall Street to the hallways of regulators and the White House in Washington.

The frenzy hit new heights Thursday when several trading platforms limited their customers from making certain trades with GameStop.

It’s all forcing hard questions about whether the stock market is in a dangerous bubble and whether a new generation of traders should be allowed to take full advantage of all the tools and free trades available on their phones, regardless of how reckless they may seem to outsiders. At the same time, champions of the 99% are cheering louder from the sidelines, saying the moves mean that hedge funds, Wall Street and the 1% are finally getting their comeuppance.

Here’s a look at how we got here:

https://apnews.com/article/gamestop-stock-surge-explained-fb377363d1b04809706619a6bcc9e549

[modrepub]

1. Like Holland's Tulip Mania

The higher it goes the harder the crash.

I may not like the speculative vultures out there in the finance world but this isn't going to end well. It's like getting drunk and trashing your apartment before break. It seems like a good idea at the time but the landlord isn't going to be forgiving when you come back.

[Mike 03]

2. Same here.

I can't stand activist investors like Bill Ackman who shorts a company like Herbalife and spends the next five years trying to destroy the company. I don't care if those guys are ruined.

But the "Russell 2000" weighted funds and ETFs are in a lot of pension funds and 401Ks. Those passive investors, who are mostly ordinary people, mostly retirees, woke up two days ago owning a shitload of unstable GameStop stock...

What if the Reddit crowd figures out how to ruin regular long investors?

[Sanity Claws]

3. One hedge fund has already gone under

I understand that another may also go under.
It was caused by a hedge fund selling short. How does the ability to sell short create anything of value? It doesn't. It is just a form of gambling. The hedge funders think they can make money selling short because they are large enough to manipulate the market.
This gambling by forces large enough to manipulate the market should be stopped.

[RANDYWILDMAN]

4. This and F hedge funds that face no regulation

Shorting means you think they will go under, a savage thought process. Scavengers

[Mariana]

7. Shorting on such a huge scale, as the hedge funds were doing

doesn't just mean they think a company will go under. It means they will try to make it go under.

[BComplex]

9. Hedge fund should not be allowed to exist at all in a stock market.

If they want to gamble, they need to fall in love with horses, dogs or wrestlers.

[calguy]

5. It's trading

I've shorted stocks many times. If I think it's going to go down, why not make money on the move?
There's no manipulation in any way. If there are more sellers than buyer the price goes down. If there are buyers than seller the price goes up. If I was short GameStop, and was dumb enough to hold my position while the market wiped me out, is it anyone's fault but my own?
Gimme a break. If a person doesn't know what they're doing, don't get in. A whole shit load of Reddit and Robinhood traders are going to soon find out they don't what the hell they are doing.

[Sanity Claws]

8. If I think a horse will win, why not make money on the race?

If you like gambling, good for you.
My issue is with hedge funds who can manipulate markets due to their size.

[calguy]

10. The guys behind Reddit are scammers in their own right

They have lead thousands or maybe even millions of unsuspecting novices into paying outlandish high prices for the stocks they have pumped up. These stocks aren't worth anywhere near the prices they're trading at. A whole lot of people have already gotten burned and a whole lot more will end up burned.

[Sanity Claws]

11. That I agree with

What I really hate about selling short is that it doesn't create anything. It is just gambling.
I have no problems with people buying and selling stock. This money provides capital to corporations and enables them to grow. This creates value. Selling short does not create value.

[calguy]

14. Short selling creates liquidity

It's just another component of what makes a functioning market. Short sellers got rich during the crash of 1929, investors got killed. Short sellers got killed during the dot com bubble, investors got rich.
This stuff has been going on since the invention of markets. Hedge funds don't always short stocks. I bet you didn't know that.

[Disaffected]

16. Artificial liquidity that is.

Do the markets really need it? Seems to me they can be "liquid" enough w/o short selling and, especially naked short selling.

The stock markets are a big enough casino as is - why add to it? What useful purpose to the economy is served??

[JustABozoOnThisBus]

6. I think the only way a hedge investor can sell short is ...

... if some other hedge investor is willing to buy that deal.

Both are managing risk.

Sometimes market forces will raise a stock price far beyond what makes sense if you look at a price/earnings ratio. Tesla, for example. It makes sense to buy if you think it will keep going up. But, its price/earnings is up around 140. The other automotive are around 15 or 20. Should buying Tesla be allowed?

[Sanity Claws]

12. Is your presumption correct?

I don't know. What I read is that the hedge fund on sold short on 130% of all the stock. I truly don't understand that.

[JustABozoOnThisBus]

13. I don't know if what I said was correct.

I buy/sell shares. I don't trade in promises to sell or buy at some future price.

It makes no sense to short 130% of all the stock. You can't promise to buy more shares than the company has issued, I don't think.

[Baitball Blogger]

15. The Code is Cracked: The Stock Market has been artificially buoyed over the

last few years. People are just beating the hedge funders at their own game.