The Personal Finance Podcast - What is Going on With Gamestop and the Stock Market? The entire Wall Street Bets vs. Melvin Capital (GME, AMC, Nokia) explained!

Episode Date: January 28, 2021

BONUS: What is Going on With Gamestop and the Stock Market? The entire Wall Street Bets VS. Melvin Capital (Gamestop, AMC, Nokia) explained! What is wall street bets?  What is happening?! Should You Get in? Stuff I Recommend!  M1 Finance Best Place to Invest  Personal Capital Free Wealth Management and Budget App  CIT BANK (Best Savings Account) ** Some links may be affiliate links and we earn a small commission at no extra cost to you. We only recommend products we truly believe in.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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And today on this bonus episode of the personal finance podcast, we're going to talk about what the heck is going on with the stock market right now. I have never gotten so many emails in my entire life on one single subject. And it's all over the news. And if you haven't seen it yet, I'm going to explain exactly what is going on. So this is one of the craziest, funniest situations I've ever seen with the stock market. And it's one of the wildest stories that I've ever seen as well. I can see this becoming a Netflix documentary very, very, very soon. And if you're out of the loop, get your popcorn ready, because this is exactly what

happened. So GameStop, if you're not familiar with GameStop, it's a video game store. It's a dying business because what happens a lot of times right now is a lot of people download video games online. Plus, with COVID hitting right now, a lot of malls are dead. And a lot of game stops are inside of malls. So it's a lose-lose situation for GameStop. So what happened was a hedge fund started shorting the stock. Actually, a lot of hedge funds started shorting the stock, betting that it would go down. So that's all shorting a stock is. is someone is betting that a stock is going to go down instead of up. Now, here on the Personal Finance podcast,

we never recommend that you ever short any stock because it's a very dangerous game to play because it can go down infinitely and then you're stuck holding the bag. But there's one fund in particular, which is Melvin Capital, and it's a multi-billion dollar hedge fund that has been putting together a very, very big short on GameStop.

And usually you don't have to disclose your shorts. That's not something you usually have to do. It hasn't have to be public information, but a group of Redditors discovered the position. What they figured out was Melvin Capital had $55 million shorting GameStop. And what happened was this Redditor group started buying shares of the short stock to make the stock go up. Now I'm putting this in as simple terms as possible so everybody can understand this.

So they started buying these shares and making the stock go up when the hedge fund was betting that the stock would go down. Now, that's all this is is a bet, because GameStop is not a profitable company, so they're basically trolling this hedge fund to make the stock go up. And now the borrowed shares that the hedge fund had that they bet were going to go down were due. But the Redditors refused to sell, and they commanded higher and higher prices. Because as this grew in popularity between the last couple of days, it started to explode in pricing.

And that's the wild thing, because it has nothing to do with GameSty. Stop as a business, which is how you should invest is looking into the business, reading the financials, those types of pieces. GameStop is just the middleman in this whole situation. They're stuck right in the middle. And it's a battle between basically a bunch of nerds and a bunch of doofuses on Wall Street. And if you read the subreddit Wall Street bets, there's one guy who had a quote who really just summed the whole thing up.

And I can't remember the exact quote, but he said something along the lines of we can remain stupid for longer than they can stay solvent. Because Melbourne Capital has lost like $2 billion the last couple of. weeks. And so far, they've had to get bailed out by a bunch of other hedge funds as well. But the wild thing is a group of Redditors just broke a massive hedge fund. That's exactly what they did. And trying to squeeze these short bets against hedge funds is extremely volatile. It's extremely stressful, especially if you're doing it in a serious way. I would never recommend anybody do anything like this. I remember when I needed to hire someone fast, but finding the right person quickly felt impossible. And if you've ever been there, you know how

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PolicyGenius.com to compare life insurance quotes from top companies and see how much you can save. That's policygenius.com. And if you're interested in this story, if you think, should I jump in, should I jump into something like this? My quick answer is no. If you're going to do something like this, if you're going to jump in, you do it with money like you would use at a casino, like betting money. This is not something to invest in for your future. Hey, it could go to the moon. It could go to $1,000 a share, which would be absolutely wild.

But getting into something like that with significant money would be absolutely stupid. Warren Buffett famously said, be fearful when others are greedy, and greedy when others are fearful. What he meant by that was buy low, sell high. Right now, you're looking at something that's going to go sky high and then come crashing down. This can't last for a long period of time. And an intelligent investor knows that if you're going to buy something, you need to look at the financials, it needs to be backed by the financials, and needs to be backed by the commodities that the company earns. But the stock market deals with individual people as well. And individual people are extremely emotional in their investments. And that's what's happening here. It's a rise of

people who want to get in and it's just going higher and higher and higher and it's the same thing for AMC which is now starting to soar nobody's going to the movie theater it's the middle of a pandemic so a lot of hedge funds are shorting AMC and it's starting to soar Nokia the last time i used the nokea phone i was playing snake on it all of these are examples of people rising up together and fighting against hedge funds and it's one of the most wild funny crazy stories that i've ever seen in the stock market so just remember If you want to get on the action just to have a little fun, I understand that. But don't do it with money that you're going to invest for your long-term future. Do it with fun money, do it with bet money, and have fun while doing it.

But that's just a simple explanation of what's going on right now. And I hope you guys enjoy the hilarity of the entire situation. Rosen lasagna, medium power, 15 minutes. Sounds like Ojo time. Let's play. Feel the fun with Play-Ojo. The online casino with all the latest slot and live casino games. games. What you win is yours to keep with no wagering requirements, instant payouts, and no

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