GameStop Fiasco

[Hagar]

@stevenash

For those of us totally ignorant of The Market, can you, in very elementary terms, explain what this is all about?   The News is making such a big deal of it, I have to wonder if it’s in any way analogous to the 1929 Stock Market Crash.   I read/heard it’s making millionaires.  I do know if some are making millions, some are probably losing millions, and with so many non-experts having phone apps & working at home with time on their hands, it sounds like a volatile situation.  Just hope you can get down to my level, lol.  😜

[SmashMouth]

2 hours ago, Hagar said:

@stevenash

For those of us totally ignorant of The Market, can you, in very elementary terms, explain what this is all about?   The News is making such a big deal of it, I have to wonder if it’s in any way analogous to the 1929 Stock Market Crash.   I read/heard it’s making millionaires.  I do know if some are making millions, some are probably losing millions, and with so many non-experts having phone apps & working at home with time on their hands, it sounds like a volatile situation.  Just hope you can get down to my level, lol.  😜

Try this link. It’s as close to a layperson’s explanation as you will find. 

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[tvc184]

It is not unlike the ammo and gun craze during the Obama administration. That was when it looked like they were going to try to outlaw guns, magazines and/or ammo or tax them to death where they would be legal to buy however too expensive to pay the taxes on. 

That gun/ammo buying frenzy was in effect, like a stock market bubble. People for example who are buying guns at Academy like an AR 15 for $650 and then selling them for $2,000. The store shelves were empty because of that panic. Many people saw this at their last chance chance to ever by a gun. Because of that buying spree, people could not get their hands on a gun or ammo and there was the fear that they would soon be banned and could never again buy any. If you could get your hands on a gun at retail cost to you, you could almost certainly turn it for a 200% or 300% profit. I bought three guns during this time at Academy as I was walking to the store and saw them put a couple on the shelf. This is about the only time you could buy because they would only stay there a few minutes. I still have those guns and did not buy them to sell but just to have my hands on them just in case.  Many people back then were buying guns just to sell which is not unlike stocks. You buy for a low price and hope you sell it for a higher price for profit  

When stocks rise in price because of a solid business performance (or speculation thereof) such an Amazon, Exxon/Mobil or Apple and it is for a long range gain in profit, it makes sense. That is what many or most people’s retirement is based on. You buy stocks from solid companies in hopes that 20 or 30 years later it will have increased in value more than The cost of inflation. 

What happens if the rise in stock prices (usually rapid)  is based on nothing but any irrational hope or fear? That is the bubble that will eventually pop. 

With a gun and ammo buying frenzy a few years ago, people paid $3000 for a $600 AR15 and then six months later we’re stuck with it because they frenzy faded away and guns were now back to a normal price. Sure they could keep the gun however have they waited a few months they could’ve gotten the same gun and saved over $2000. Now they can’t sell it because the prices have come down, to some extent even lower than what they were before the crazes because of these now glut in guns and ammo. I was buying 9mm ammo a year ago $8.75 a box and that was delivered to my house. That was tax, cost and shipping combined. A new gun and ammo bubble going on now has been created because it appears as though Biden and the Democrats are going to make a hard push to take away gun rights. Will they be successful? I don’t know but right now what was nine dollars a box for ammo a year ago is now costing $50 a box. People are actually buying at that price. So what happens a year from now if it returns to normal and you can buy that same box delivery for $8.75 again? You will still have the ammo but you will have spent a small fortune trying to get it because of the frenzy. That is what is happening with GME right now.

The stock market is based on volume of buying and selling and what do you think something will be worth. People started buying GameStop (GME) stocks and what appears to be a coordinated effort to convince people to keep buying. In a way it was almost like a pyramid scheme, but legal. The more people  bought, the more the prices went up. People buy stocks to make a profit and when you see profits going through the roof then you want to get in on the game. If you buy a stock at $1 and two weeks later it was $10, you made 1000% profit. So if you spent $1000 on a stock in that case, it would be worth $10,000 at the end of the week. Many people sell on the way up which is their intent and people continue to buy thinking they too will make money. It will s like this, a guy buys in stock and $1 and sells  at $10. The guy he sold it to at $10 hangs on until maybe $15 and then he sells. Another guy wants to get it on the action and he buys it at $15 in sales at $25. So GME went up 8,000% in a year. Have you been able to predict it and hold your poise, you could have spent $10 in stocks a year ago and had $80,000 last week. That is a pretty good return on a $10 investment… But it was based on wishful thinking and nothing more.

Again, if that was based on a solid business model and GME was looking to make a huge profit selling video games next year, it would make sense to rise in price. The problem is that GME is a troubled company and might even be declaring bankruptcy soon. So you were buying a stock for maybe hundreds of dollars but reality reality it’s only worth a dollar because the company is about to go under. You can bet that people became millionaires during this deal but what about the people that just bought after the 8000% rise when the bubble pops? Like the $50 box of ammo that is now worth $10, you lose. With the ammo at least you could go shoot it. If you bought a stock with $500 and a week later it is worth $10, you just lost a ton of money. Unlike bullets, there is no product in hand. You were just buying a stock hoping that the company makes money in the future. If that future does not exist then you just as well go set your money on fire in the front yard.

The bubble like that will always burst because there is nothing to support the frenzy. It is just emotional buying and selling and wanting to get in on the get rich quick scheme. If you get in early enough you might get your wish. At some point people are going to quit buying in the last people in our going to lose big-time.

it is exactly what happened in the 1929 stock market crash but it was not a single stock but pretty much have market wide incident. 

clear as mud?

[Hagar]

Sounds like a very expensive game for many. Unfortunately, if it’s not a penny stock, I’m out.

It does confirm what I’ve always told folks, especially those against gambling for religious reasons - the Stock Market is one big casino.  😄

[SmashMouth]

4 hours ago, Hagar said:

Sounds like a very expensive game for many. Unfortunately, if it’s not a penny stock, I’m out.

It does confirm what I’ve always told folks, especially those against gambling for religious reasons - the Stock Market is one big casino.  😄

Hagar, the big issue is that certain trading sites actually quit trading certain stocks (not all stocks) to try and manually correct and control the bubble...which is unethical and illegal. 

[WOSdrummer99]

4 hours ago, Hagar said:

Sounds like a very expensive game for many. Unfortunately, if it’s not a penny stock, I’m out.

It does confirm what I’ve always told folks, especially those against gambling for religious reasons - the Stock Market is one big casino.  😄

I'm with you old man. For every winner in the market, there's and equal and opposite loser. But the house always wins.