Hottest Stock On Wall Street: Struggling Video Game Store GameStop
Hottest stock on wall street is a struggling video game store. You walk past in shopping malls game. Stop its share. Price has spiked over a thousand percent in recent days all because of amateur day traders who gather in a red forum. Mary childs is the co host of. Npr's planet money podcast and well talked with her. Hey mary hi. So i found myself up at ten o'clock at night texting with my kid brother about game stop stock and i realized i really need to know what is going on here. What's going on here so it starts in a place on the internet known as wall street. That's it's this forum on read it. We're all these day trader types. These non professionals get together and trade stock tips as well as memes and screengrabs of their trades and a ton of rocketship emojis. This places become really active since the start of the pandemic with people kind of trapped at home looking for something to do and back one of these reta traders started arguing for why everyone should buy game stop. This was a weird argument. This is an old mall brand with exposure to commercial real estate. It's not exactly natural by right now but that actually became part of the argument for why you should buy it because the argument against game stop made it a good stock to bet on because there was so much interest betting against it. All these big establish hedge funds were betting against it so that turned into this rallying. Cry that you know. We should take on big wall street and from there took off so the hedge funds are short selling it which is something that hedge funds do and then it takes a twist right yes. Basically these big hedge funds were betting that the shares would go down right. They were shorting it so to do that. They have to borrow the shares of the stock and sell it and if the price goes down then they can buy it back at. The lower price borrowed stock and pocket. That price difference but as price goes up. If they're wrong they have to go buy back that stock at new higher price and that leaves them vulnerable to if the price shoots up really fast then all of a sudden that's called a short squeeze and that's exactly what happened here. It kind of amplifies the effective and more so it makes sense. Inherently that big hedge funds might be able to move markets right. They have like billions of dollars but this is a case where small investors moved to the market. How did they manage to do that. Basically wall street bets has learned how to weaponize the tools that they're using so they're using options and functionally. You can buy options for way less money than you need to buy the actual stock so that means that you can take your pennies on the dollar and go play in the market. And the way that they're playing they found ways to lean on the banks that seldom the stocks to lean on these hedge funds in such a way that exploit the mechanics of options and that can amplify everything that doing and get the most bang for their buck. Mary what does this tell us about. How wall street works and who actually has power versus who. Maybe we assumed has power absolutely. This has all these kind of same stresses occupy wall street where people are saying these big hedge funds. Why should they get to control the stock market the systems rigged and this has been a weird way for people to forcibly. Take that back to up. End those structures and up that power dynamic so it's not clear to me where this ends up and certainly there are going to lose a lot more money than they necessarily have but at this moment it feels like popular opinion is a little bit more with wall street bets. Mary tiles is a co host of. Npr's planet. money podcast. Mary thanks so much thank you.