Has anyone been following the short sale chaos happening on Wall Street with GameStop, and AMC theaters? Thanks to Twitter, I have known about all of this craziness since Monday, but it only seems like today that it hit the news. The NYTimes did a little story on it yesterday, but outside of that, no major news media was reporting it.
If you don’t know what is happening, it sort of breaks down like this; a few hedge funds had decided that GameStop’s stock price was going to fall, and had set up a “short sale” of the stock, which means if the stock price continues to fall, then the hedge funds make huge amounts of money. But, if the GameStop stock price were to go up, then the hedge funds would lose money. Once word got out that this is what these hedge funds were doing, individual investors, normal people who use a Reddit group, started buying GameStop stock, which caused the price to go up, like 200% at one point yesterday, and that caused the hedge funds to lose BILLIONS of dollars. Now, the Reddit people are buying up AMC stock, doing the same thing to the hedge funds today, and looks like the funds will lose billions more today.
Here is the NYTimes story on it.
There are lots of interpretations of this story flying around the news and internet right now, from this is a David versus Goliath story, to the free markets at work, to how the stock market doesn’t reflect the real economy, as to why Wall Street needs to be regulated.
The way I see it; this just proves that economics is not a science, but a man-made machine; a device that can be manipulated to create whatever outcome you want. It’s just the Wizard of Oz. The con is believing that the system is fair, when in reality, you can game it.
I don’t know how this will end, but it is very interesting to watch.
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