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The Complete Moron’s Guide to GameStop’s Stock Roller Coaster
The Complete Moron’s Guide to GameStop’s Stock Roller Coaster:
Last week, an epic short squeeze had driven GameStop stock up to $40 a share, a roughly 1,500 percent increase from its low point nine months ago. Little did anyone know at the time that this would only be the beginning of the story.
As I write this, GameStop's stock price is hovering around $350, up another 775 percent or so since I wrote about this situation eight days ago. By the time you read this, that number may be horribly outdated, as the stock continues to bounce up and down with extreme volatility hour by hour (it dipped down as low as $61 and peaked as high as $159 on Friday).
The current stock price now gives the company a market cap of about $26 billion.
On the surface, that means the market currently thinks GameStop is worth more than twice as much now (during a potentially existential threat to brick and mortar game sales) as it was during the height of the Wii boom in late 2007, when console game downloads were barely a thing.
Also at: Business Insider.
Melvin Capital, Hedge Fund Targeted by Reddit Board, Closes out of GameStop Short Position
Melvin Capital, hedge fund targeted by Reddit board, closes out of GameStop short position:
Melvin Capital closed out its short position in GameStop on Tuesday afternoon after taking a huge loss, the hedge fund's manager told CNBC's Andrew Ross Sorkin.
GameStop, hedge funds' most-hated stock, was targeted by an army of retail investors who marshaled forces against short sellers in online chat rooms. In the Reddit forum "wallstreetbets" with more than 2 million subscribers, rookie investors encouraged each other to pile into GameStop's shares and call options, creating massive short squeezes in the stock.
CNBC could not confirm the amount of losses Melvin Capital took on the short position. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its finances. On Wednesday's "Squawk Box," Sorkin said Plotkin told him that speculation about a bankruptcy filing is false.
GameStop shares have soared more than 400% this week alone to $347.51 apiece, driving its January gains to 685%. The stock was worth just $6 four months ago.
Reddit's WallStreetBets is locked as AMC, GameStop stocks fall after-hours
For the past week, Reddit's WallStreetBets community has been the center of an epic war between large Wall Street investors and small scale social media betters. Now, it's been locked, and spooked investors appear to be dumping their shares.
Shares of GameStop and AMC dropped dramatically in after-hours trading shortly after Reddit's community was made only viewable through an invite.
See also: Reddit traders cause Wall Street havoc by buying GameStop
GameStop and Elon Musk send Reddit and Robinhood to the top of the App Store charts
'Dumb Money' Is on GameStop, and It's Beating Wall Street at Its Own Game (archive)
(Score: 1) by khallow on Friday January 29 2021, @12:13PM (1 child)
But that misinformed notion is a straw man. It's possible that AOC believes that, but we can't tell from what she wrote. I certainly don't nor gave that impression.
There was also massive problems with the S&P 500 companies back then. These events are all different - their causes and consequences. As a result, what investments are perceived as more or less reliable and secure change as well. You are trying to use a simplistic model to claim that there is no correlation. But there's no reason to expect a simple one-way correlation (positive or negative) between economic activity and stock price.
(Score: 0) by Anonymous Coward on Friday January 29 2021, @07:01PM
Ahh... So YOU admit that it is a misconception that the stock market and the economy are the same thing.
The fact that AOC is always very direct combined with the fact that it is a very common misconception the stock market and the economy are the same would strongly suggest that AOC is misinformed.
Not exactly. There were massive problems in the economy. Nevertheless, the 2008 crash didn't exhibit the same symptoms, and 2020 was a different situation from both of those crashes. There are countless other disparate examples, especially in the last few years.
Again, the economy and the stock market are generally two independent entities, unless there is a huge catastrophe.
You keep parroting my arguments. What is your point?
Of course, but there were never a lot of "reliable" investments -- not ones that would consistently return huge percentages over a long term.
Again, what is your point? How does this argument relate to the common misconception that the stock market and the economy are the same thing?
No. I am not using a "model" -- I am simply providing facts. The fact is that there is no solid correlation between moves in the stock market and moves in the economy, except when the economy takes a huge downturn.
By the way, here is a chart that shows the S&P 500 overlaid with the US GDP from around 1960 to 2020:
https://www.isabelnet.com/u-s-gdp-and-sp-500/ [isabelnet.com]
Here is an article from 2015 that gives a 45.9% correlation between the S&P 500 and the GDP (from 1958 to 2015):
https://seekingalpha.com/article/3053626-u-s-real-gdp-and-s-and-p-500-price-performance [seekingalpha.com]
A 45.9% correlation means the the S&P 500 and the GDP move together less than 50% of the time.
Exactly my point! The stock market and the economy are two different, independent entities!