GameStop Reddit-rally sends Wall Street tumbling to its worst week in months

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In late January, a handful of unlikely Wall Street stocks began to skyrocket in value. It has led to big market volatility, and that will be the subject of a special meeting tomorrow with Treasury Secretary Janet Yellen and other government regulators. As Paul Solman reports, the spike in these stocks was driven. By an unconventional group of traders who banded together on a buying spree determined to take on the market for their own reasons. It is the latest in our economic Syriza's making sense. The frenzy. Obviously, this thesis is based largely on the fundamentals, Internet chatters hyping and buying stock and seemingly more a bun companies and you're right. It doesn't make any sense at all. AMC Bed, bath and beyond, and the bubble Gamestop crazy, and we're not as dominant as everyone thinks we are. We know what we're looking for. Is the regular Joes versus Wall ST Joe's using the free app Robin Hood to buy Gamestop, a money losing brick and mortar monger of video game disks that seems obsolete now that games are bought and downloaded online. And yet the stock skyrocketed last month, we're going to try to explain what's been happening with Alex Seamus from the University of Chicago Business School and my grandson show violas 17. So Alex set the scene for us What's been going on? There's people on this platform called Reddit, who decided to buy up a lot off the stock a lot of shares, partly because people hedge funds on Wall Street started short selling it. Okay, before we get into that, Joe, So I remember taking you to game stop when you were younger to buy you video games as kind of nostalgic appeal. Absolutely. And I think a lot of people my age in a little bit older grew up with Gamestop and I'm seeing a lot of people on platforms such as red It were saying isn't bye Bye Bye and Gamestop Two reasons one to make money, and the other was to stick it to the rich elite of the hedge funds. Hedge funds that have been betting against retro games stop by shorting its stock that is Now. In keeping with the retro theme, Alex suggested a retro product to visualize short selling. So here I've got an iPod, which I scrounged from somewhere in my basement, right, so on iPods kind of late game stop, it was very popular in the two thousands. And, you know it's not a bit obsolete because you know everybody's got music on their cell phones. So how do you short sell an iPod? So let's say I'm a hedge fund, and I think that the iPod is worth less than what it's being currently sold for. I go to you, Paul and I say, Can I borrow your iPod? So what I do is I sell the iPod that I just borrowed from you. And then buy it back for the future price. So if the price goes down, I make money because I'm basically getting the difference between that You just want me to lend it to you. I'm gonna borrow your your iPod. And I promise I'm gonna give you a little bit extra money whenever I return it. And to promise contractually to return my iPod by a certain date or whenever I ask for it back, So now you get wind of this short selling Joe. And what do you do? Okay. I grew up with this product. It's got a certain nostalgic value. I'm going to tell lots of my friends on social media may be read it to go out and buy iPod so we can all get in on the trend. What happens to you The hedge fund, Alex so because I Embedding that the price as actually going to go down in the future. If it ends up going up. I end up losing money because I have to buy it for Maura than what I sold it for initially and as you buy it, you're driving up the price even higher. Exactly, And that's what happened with game stop. $18 a share just last month. My grandson bought one share last Wednesday. And what price $293 I want to point out that I did not advise on this trade. I'm thinking that as more people are saying on social media that they're going to buy the value is going to go extremely high. Well is that I want to continue to stick it to the man, these people in Wall Street who have been running everything. And sure enough out on the street. I think it's great that rich people are losing money because capitalism is destroying this world. I look at the whole game stop with stocks is a revenge of the nerds. Kind of attack. This is one of the most complex attempts to coordinate on a single strategy that I think we've ever seen a sort of people's hedge fund says he must coordinating on the Reddit Forum. Wall Street bets. Urging one another to buy with rocket ship Emoji is which is to say, Look, this asset is going to keep going up so everybody should buy and toe hold with diamond hands. We are not going to break. We are going to keep the price up, and there's even a buy and hold sea shanty with diamond hands. They knew they profit if they could only hold But hold on most Wall Street. Hedge funds aren't short sellers. They bet on stock's going up. And in this case, some hedge funds have actually profited hugely from the so called revenge of the nerds, as have Robin Hood's paying customers, big investors, many of them hedge funds, who, by information from Robin Hood, about what people there are trading As for short sellers, are they bad actors? Sure, they bet against a parent losers like Gamestop, but also against frauds like the infamous end Ron, which short sellers helped take down nearly 20 years ago. By exposing its phony

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