Naslednji GameStop sledi ...

So basically what's going on is that the guys who are shorting everything are losing a _lot_ of money. I mean quite literally **billions**. As a refresher, if you think a stock will go down you can borrow a stock from a market maker, sell it instantly, wait for the stock to fall, re-buy it at a lower price ("covering" your position), and then give the stock you borrowed back to the market maker. You pocket the difference between the price you sold at and the price you bought at, in a practice called "shorting."

If you borrow a stock and the price _doesn't_ go down, you can pay the market maker some interest to let you delay things longer. The amount of interest you have to pay is related to the current market value of the stock -- so if it keeps going up, you can keep delaying forever but you have to pay more and more each time.

We already had one hedge fund that was doing this run out of money from the interest they were paying, making them have to get a bailout from other hedge funds. That was when the stock was at like $160. Now it's in the $300 range easy after hours, pushing $400. It got to $580 Thursday morning. If they were losing money at $160... they're losing a **lot** more at $580.

There's only so much GameStop ($GME) stock on the market. A lot of it has gone to people in WSB -- even if people there just owned 1 share each they'd own roughly ~10% of all the $GME shares. But we know a lot of people own 10 shares, and a lot of people own 100 to 1000 shares.

Before this madness, WSB was basically a place for upper-middle class people to YOLO their extra cash and lose it all on stupid things like gourd futures and meme stocks like $PRPL, $PLTR, $TSLA, and so on. A lot of the older members (...aka the people that were in there like a week ago) managed to meme YOLO buy a _lot_ of $GME stock when it was like $4. The patron $GME saint /u/DeepFuckingValue YOLO'd $40,000 (his entire life savings) back in 2019 and everyone on the subreddit made fun of him. Now he's worth $49 million and everyone is convinced he's a time traveler (he's since realized $23 million in profit, so he is set for life even when the pop happens).

These are a bunch of little dudes, but together they can easily get a **huge** chunk of the stock out of the market. As more people join in, they take more and more stock out of the market (assuming nobody sells, hence why everyone on WSB is screaming ??).

These shorts are under contracts. They _have_ to buy the stock, at any price. **Any** price. Even if it makes them go bankrupt. WSB is essentially putting a monopoly on the price, saying "You need to pay us $69420/share" and the billionaires would have no choice but to pay.

The issue is, interestingly enough, at $69420/share times the number of shares the shorts need to buy... that's a _lot_ of money. More than most of them have. And the shorts **have to pay it.**

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So, obviously the hedge funds shorting the stock are going to run out of money. What happens when they run out of money?

Well, these hedge funds go bankrupt, and the people that funded them get the assets... and the debts (there's more to it than that -- [see here](https://www.reddit.com/r/bestof/comment... -- but it gets into the weeds and I'm trying to write a somewhat "simple" explanation. End results are similar... probably). Remember that these guys are _still_ under contract to get a share of $GME to replace the share sold by the short sellers. Not fulfilling that contract is a "failure to deliver." For reference, "failure to deliver" is not only illegal (and impossible to happen if everyone is following legal means), [but is also a big driving force behind 2008](https://www.investopedia.com/terms/f/fa..., when people started selling stocks they didn't have. This had impacts all up and down the chain -- delivering the thing you bought is _pretty much what the entire stock market is based on,_ so when it doesn't happen you get Bad Things™.

In 2008, you had some chain reactions occur with stocks that had more than 100% of their shares sold. Regulators didn't ban short-selling after 2008 because they "fixed" the problem by just making it impossible to sell more than 100% of a stock. However, this started when people noticed GameStop has 140% of its stocks shorted, which is... sketch. Possible with some weirdness like letting someone borrow a share that you already borrowed, but very sketch. On Thursday we started to see some cracks here [as some brokers suspended the buying of $GME with an official excuse of "liquidity problems,"]( which in English means they were either running out of $GME stock or they were running out of money. Given that WSB has been purposely trying to make them run out of $GME stock, well...

Either way, now the people that funded the short sellers have to either break the contract and live with _huge_ numbers of "failures to deliver" that could cause a chain reaction that tanks the entire stock market... or (on paper) theoretically come up with potentially infinite money. Nobody has that kind of money, so the people that funded the hedge funds go bankrupt. And then the dudes that funded _them_ go bankrupt. On and on in a massive domino effect, all because people didn't learn their lesson in 2008.

Will it get that bad? Probably not... but it _could_. The other day we saw a _massive_ sell-off across the entire market because the billionaires were taking money out of the stock market in anticipation of a market-wide crash just in case there's a ["black swan" event](Black swan theory) @ Wikipedia that starts to knock the dominoes down. There's already some catalysts in place that are pointing towards the stock market being completely detached from reality. A black swan event (which might look like _anything_) could easily just make GME the first domino to fall and cause a failure somewhere else.

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The most likely scenario here is that normal people are going to see a price that says to them, "Now I can pay my credit card debt." And then those ?? will sell, increasing supply. Supply goes up, price comes down. Price comes down, people start to panic that they're going to be left holding the bag. Billionaires will see the bubble popping 1-2 seconds before everyone else does and will buy the very expensive shorts, but that means they'll make money off of the bubble popping.

Nobody knows what the price is that will get the "normal" investor to start selling. It's _probably_ not $69420, but it could be. At some point, though, it will get too expensive for the billionaires to keep holding on to it -- the fabled "short squeeze" -- and the question is whether that mother of all squeezes will implode the entire market or not. Once the squeeze has squoozen there's going to be a rush for the exits. [And there's a good chance that most people getting in now will miss the boat.](https://www.reddit.com/r/wallstreetbets...

I don't think the most likely scenario is the market imploding, but it's one of those things that could happen on paper. [Reuters is also reporting that financial analysts are looking at the possibility of a market correction happening as a side effect of this](https://www.reuters.com/article/us-usa-..., with $GME and the rise of retail investing being a mirror of the 1990s dot-com bubble. I can really get into the weeds here since people are picking me apart and bring up the recent spike in the VIX "fear index" and stuff, but I'm trying to keep this simple and (somewhat) ELI5.

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**EDIT:** To clarify, I'm not saying WSB is in the wrong here. $GME was a meme stock and it was only after it achieved meme status that people realized "Shoot, in theory we can make some serious tendies." It's not the fault of WSB that the shorts overleveraged in a way that on paper could tank the stock market in an extreme circumstance -- it's a failure of the system and a failure of risk management by the shorts.

You're also seeing a side faction split off to target overleveraged shorts on purpose and attempt to "pump and dump" the stock (like what you see with $AMC). That's just taking advantage of this flaw at that point, and if that keeps up it's 100% going to make a hammer come down on WSB. Again, this is a subreddit which is all about "get rich quick" by buying massive amounts of ornamental gourds and then reselling them to someone else before they're supposed to be delivered (followed by the entire sub laughing at you when they get delivered early and you now own 1100 pounds of gourds).

Crash or no, within 2 years we're going to see regulations here to make sure this _cannot_ happen again. I don't pretend to know what that would look like, but I can't imagine the markets/regulators/lawmakers would leave everything unchanged.

**EDIT 2:** Bear in mind the market will (probably) only implode the way I describe if the price gets to something crazy, like $69420/share. Because technically the shorts have infinite loss potential, this is possible _on paper_, but highly unlikely. Something like that is called a "black swan" event, and we're basically 1 of those away from meltdown. The most likely scenario is a crash when some of the bigger holders on WSB start to sell. I'm also simplifying things fairly heavily here (as people have noted while this post exploded in my sleep), but this is /r/lotrmemes and not a stock/finance subreddit.

Vetrpiha je 30. jan 2021 ob 20:18 izjavil:

OP bi sel na zurko, pa sploh ne ve kje je zurka, kdo je tam, kaj se tam dogaja, kaj je fajn prinesti s sabo in kako moras biti obleceni.

Dej vsaj pravi link do youtube linka,..
Sem prebral, zame nič novega. Mladički, k ibi radi sam oan hitro zaslužilim ker so slišali,.. pa tega ne bodo brali, ker tudi razumeli ne bodo.

Glede srebra sem pa v pripravljenosti že nekaj let,.. Bring it On! :D

The plebs strike back!

Go Shorty!

Veliko uspeha pri pozicioniranju pred naslednjo krizo. Do takrat pa preberi kakšno knjigo ali mnogo njih, ker tole rundo karkoli boš naredil, bobore malo haska. Manjkajo ti osnove oz sploh začetek. Good luck.

bobby je 30. jan 2021 ob 20:34 izjavil:

Veliko uspeha pri pozicioniranju pred naslednjo krizo. Do takrat pa preberi kakšno knjigo ali mnogo njih, ker tole rundo karkoli boš naredil, bobore malo haska. Manjkajo ti osnove oz sploh začetek. Good luck.

Ja vešda kot da so ljudje kot Trump prebrali veliko knjig.

Thomas je nekoč rekel, da je borzno trgovanje povsem ok način "optimiziranja lastništva".

I'm afraid you were wrong my friend.
It's an entropy creating machine.