2021 (aka 2020 part 2) is coming in HOT. Only a month in and a Reddit group has hedge fund employees scrambling for their careers over surging stocks in dying companies. What the fuck is going on?
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The stock market has been knocked off its axis by an elite group of Reddit bingers, teenagers on their mom’s computer, and college students. Do I know exactly what is going on? No. But I’m not going to bullshit you like TikTok’s “financial experts.”
It started when an uprising Reddit page, r/wallstreetbets, created a commotion recently by inflating the GameStop stock. Led by Keith Gill (known as DeepFuckingValue on the page), GME’s near bankrupt company’s stock surged to a peak of $483.00. To put that in perspective, the stock hit a low of $2.57 before the meme came along (source: Macrotrends.net).
My business major housemate, Lance, told me, “This is a classic short squeeze.” I don’t know what the fuck that means and really don’t want to; that shit just goes over my head.
Here’s the simple version:
So, the big guys–the hedge funds, the old men with slicked back hair and fancy suits–are betting that the stock will fall. They’ve been right for years because GameStop was a financial wreck of a company.
But, people on Reddit like Keith Gill saw value–excuse me, deep fucking value–in GameStop. Gill found the stock over a year ago, but it wasn’t until recently that meme culture took this stock and thrusted it into the atmosphere.
More people bought the stock, so it went up in price. Remember, this is against the bet of suits on Wall Street. So, they must bet against - or “short” - the stock even more. Hedge funds like Melvin Capital are losing billions of dollars. This January they lost over $4 billion in assets value (source: Mashable.com).
I know, wayyy too technical. Look at it this way: It’s David vs. Goliath, and David is absolutely sticking it to Goliath right now.
So, yea, that happened, but now shit is really hitting the fan. Others outside of Reddit realized the influence social media and memes can have on the market. Now people are getting behind other heavily shorted stocks like Bed Bath & Beyond and AMC.
Others are investing strictly because of the joke; Like with the cryptocurrency, Dogecoin. The hope is to get in on it early and watch it go to the moon as others hop on the bandwagon. That’s what this all is: random people following on the coattails of those that started the trend. The trail blazers will make some good money, but the stragglers won’t get much - that’s if they don’t break even or lose money.
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Still, people continue to throw their cash into these stocks. Including another housemate of mine, Carter. His luck so far?
“I have invested around $4000 in Dogecoin, GameStop, Bed Bath & Beyond, and AMC,” he said. “I haven’t made shit. I’ve lost a little money.”
This is the sad realization these fad investors will come across soon enough; the train left the station awhile ago. In the end, a few early investors will get rich, some Wall Street guys will lose their jobs, and some kids will blow their allowances, but it will all return to normal. Or, it may take a steep dip, who knows. I’m not on Wall Street.
Invest if you want, but I think that meme stocks are just another trend.