Just in case you’ve been sleeping under a rock, let me tell you about the BIGGEST story going on right now! An army of Gen-Z and Millennial day traders have figured out a way to f@%k over the hedge fund “suits.”
The young rowdy traders—who call themselves “autists” and “retards”— found a weak spot in the big money managers’ investment style. The swaggering wealthy hedge fund honchos engaged in aggressive short selling. This investment approach makes money for the hedge fund bros when a stock price dramatically drops.
The guys got a little too greedy and over-shorted stock in companies like GameStop. Here’s the thing—when you sell a stock short, you need to first borrow it, sell the security, wait for the price to plummet, then buy it back at a lower price. They pocket the big difference between the higher price they sold it and the much cheaper value when they buy it back.
This strategy worked very well until a horde of anti-establishment— much smarter than people gave them credit for—rose up against them. The “Robinhood day traders” started buying stock of the companies the hedge fund gurus sold short. This pushed the big-money guys to frantically buy back stock to “cover” their positions. The more they tried to buy it back, the greater the price moved upward.
It became so bad that one of the targets of the trading-gang, Melvin Capital, needed to get a cash injection from two major hedge funds, including the one run by the new owner of the New York Mets, to keep from closing.
The trading was so heavy and furious that “outages and interruptions” took place Wednesday at “the largest online brokers,” including “Charles Schwab Corp., Vanguard Group, Fidelity Investments and several other online brokerages.”
According to the Wall Street Journal, “The Securities and Exchange Commission said it was monitoring the volatility and working with fellow regulators to ‘assess the situation and review the activities of regulated entities, financial intermediaries, and other market participants.’”
We’ll keep you posted. In the meantime, here are the stock symbols of some of the companies that the Reddit dudes and other traders are “pumping up’”: 🧑🏻🚀 GameStop #GME, AMC Entertainment #AMC, Bed Bath & Beyond#BBBY. 🧑🏻🚀