Welcome back everyone!
This week has been one on the craziest ones since… ever?
From the beginning of times, the flow of wealth was a one way stream where big corporations do anything and everything they can to make a profit even if it costs the jobs, health, and the life of others.
It’s been a world where “The rich get richer and the poor get poorer” or as they say on one of my favourite shows, Peaky Blinders:
“BIG f*cks small”
But if 2020 was a mad year because of the Corona Virus, 2021 is a new contender to the “WTH is going on” title, because this is the year where
“SMALL f*cks big”
For the first time in history we are seeing a major wealth transfer from the elite to the common people.
Now let me tell you the story of how a reddit community changed the course of history.
A user by the name of DeepFuckingValue noticed that Game Stop stock ($GME) was being overly shorted, meaning that some major hedge funds where betting BIG that the stock would go down in value.
And here’s an example of how the hedge funds do this type of gambling.
Step 1: The hedge fund finds a stock that believes it is over valued and it will decline in price in the next days/months.
Step 2: The hedge fund loans a certain amount of stocks from that company with the promise that will give it back on a stipulated date.
Step 3: The hedge fund get’s the stocks for, let’s say $20 each, and sells them immediately.
Step 4: When close to the stipulated date the hedge fund buys back the stocks from the market and returns them to the original owner as was accorded.
If the stock is now valued at a lower price (less than $20), the fund will buy for a cheeper price than what it purchased, thus making a profit.
On the other hand if the price is greater than $20, they will have to buy it anyway and accept the loss.
This is what’s happening with Game Stop $GME.
The reddit community r/WallStreetBets joined together, turned #GME into a meme stock and created a massive movement so that everyone would buy and hold $GME stock. Doing this forces the hedge funds to offer more and more money to buy back the stocks they need pushing the stock value up indefinitely!
The longer people hold their stock (diamond hands) the higher it gets because remember on step 2, the hedge funds have to give back the stock to their rightful owner.
Check out the last month price chart
It’s a real life infinite money glitch.
Now things have escalated so much that some trading platforms like “Robinhood” blocked the users from buying more of these “meme stocks” causing an outrage and lawsuits on the grounds of market manipulation and that the platforms are against free market.
As many users are leaving these platforms and leaving bad views on Google Play, Google decided to remove all these reviews! On the Apple side, users are demanding that the app is removed from the App Store.
Yep… it’s that bad.
But the revolutionary army of retail investors are not alone!
Some major players like Elon Must, Mark Cuban, Kevin O’Leary aka Mr. Wonderful have Tweeted that they are on the side of the common people.
Wall Street dirt has been exposed, but it’s far from over as next week could potentially be short squeezing the retail investors are looking for.
Thank you for reading and don’t forget to
If you’re interested in joining the movement, I’m on eToro as pmendes88 where you can copy all my trades. I’ll be explaining all about my investment strategies here so make sure you follow the blog for weekly updates.