Hedge funds have been squeezing the life out of small investors for years, but now the worm has turned. Internet crowd organizing isn't just for burning down police stations; all those unemployed young men who moved back to their parent's basements have money in their pockets, college degrees on the wall and time on their hands. Earlier in the week, my grandson called his mother after making $700 on his first day of trading and got her to join in. Now they're both making thousands along with my nephew. What they're doing is identify a heavily shorted company on the verge of bankruptcy, like AMC or GameStop, then pile in with thousands of other small investors to buy the stocks or their Call options... This forces the price up... Which forces the short sellers to cover their bets by buying more stock... Which forces the price of these stocks up even more. Last week, GameStop was selling for $18. This morning it hit $640. Wall Street wolves are facing an army of clever boys who're hell bent on taking them down.
It's a risky business ...as this article points out. https://nypost.com/2021/01/28/22-year-old-risked-parents-mortgage-on-gamestop-you-only-live-once/ it opened today at 197$ twice got to almost 500$ before closing at 112$
I don't know much about the stock market except what I've witnessed over the past 50+ years. One thing is obvious to me from past incidents not unlike this one: What goes up fast tends to come back down faster. I wouldn't touch this. Another thing I believe is true but can't prove it: The Wall Street wolves can absorb a million dollar loss easier than the "amateurs" (no disrespect intended) can absorb a $500 loss.
I have an old friend who is wrapping up a career as a highly successful hedge fund manager for a large firm in NYC. He grew up in a little run down house in Dayton Ohio and we went to the same Catholic HS and played side by side as LBs on the same defense for four years. After high school I moved on to Ohio State where I majored in beer blast nights and pizza for a year before my father re-matriculated me to Wright State where I started my maturation and college education process anew. My buddy went straight to Columbia University where he earned two advanced degrees in Finance and on to Wall St. He has appeared several times on CNBC Squawk Box and on Lou Dobbs show over the years and has a palatial mansion in Westport Ct. Oddly enough, he recently bought a second home in the same little town I have property in Hobe Sound, Fl. My place does not a have its own dock with a 48' sportfisherman on a hydraulic lift behind it. Big money in hedge funds
Last week I bought a stock called FUBO. It's a target of the Reddit revolutionaries and I'm making money so far.
I see that GME is down 50% so far today, underlining the risky nature of this sort of thing. You have to time it right, get in at the right point and get out at the right point. Tough to do.
If you play this game, you can't get in late. Knowing when to sell is the hardest thing to do. I sold my FUBO today at a small profit after owning it less than a week. I never felt comfortable the entire time. Buying something I didn't believe in is not for me.
LOL. That's not for me either. If I'm going to game the system, it won't be for nickels and dimes. Even a retired guy has better ways to use his time than to sit at a computer all day hoping to catch a few pennies on the up-tick of an arbitrage between two stock deals.