(01-27-2021, 08:01 PM)mal234 Wrote:

(01-27-2021, 02:57 PM)jagibelieve Wrote: I would dump every bit of it quickly and take whatever profit you might have at this point.  They are talking about putting a freeze on trading some of these stocks for 30 days (something I don't agree with).

Also keep in mind that depending on how your trading account is set up you possibly will have to pay brokerage fees and/or capital gains tax.

When all is said and done somebody is going to lose an awful lot of money over this.

I wonder if this will cause there to be more regulation regarding trading stocks. I hope not too much more. One of the things I like about Robinhood is that it allows a lot more people including working/middle class people the opportunity to invest.  I do believe that people especially working people should have the opportunity to invest regardless of what their income is. It shouldn't just be for the rich and wealthy.  People can really make money in the stock market, especially if they invest responsibly. I am concerned this articial driving up of prices will cause there to be more regulation and it will backfire and hurt a lot of us "little" investors. Some of us invest honestly/responsibly and do things like research and actually buy and hold a lot of our stocks and let them grow for a bit before we sell them. I don't blame people for selling quickly to get big gains (and I would do it in the right situations), but I think in the long run what is happening now with stocks like Gamestop may not pan out and could hurt some people besides the hedge funds guys.

(01-27-2021, 05:50 PM)jagibelieve Wrote: It goes further than that.

In all reality there was probably not very many people that thought that a business like Gamestop would be successful and have the price of the stock "legitimately" increase.  In all reality this company as well as many others were pretty much on their way out.

What drove the artificial run-up is the fact that many institutional investors were expecting the company to fold and go under (which it still will) so they shorted the stock.

I'll give a VERY basic example.  Say company XYZ's stock price is $20 per share.  The company is not doing well and is on the verge of folding.  If somebody shorts the stock for say 100 shares it means that they are "borrowing" the stock valued at $20 per share thinking that it's going to go down so they essentially "borrowed" $2000.00 ($20 x 100).  When the price drops to say $10 per share they "pay their debt" by buying 100 shares, but since the price dropped from $20 to $10 they only pay $1000 and made the other $1000 from shorting it.  That's a VERY basic example of how shorting a stock works.

Cue the day traders/gamblers on Reddit, Facebook and other platforms.  They decide to buy the stock which drives the price up.  The stock goes to say $30 per share so the institutions that shorted it have to "pay their debt" and end up losing $1000 since "paying their debt" means that they have to buy their 100 shares at market price ($30 per share).  This in turn creates more "demand" for the stock so the price continues to go up and the cycle continues.

The problem is that as the stock price goes up, people "buy in" and drive the stock price even higher.  However, the business model of the company is such that it loses money and is going to fold.  When that happens, people that own the stock will find out that it's basically worthless.

Again, this is a VERY BASIC explanation of what is happening.  If it's just one or two stocks it's not a big deal.  When it starts happening to groups of stocks it is a bigger deal.

This is something. I have seen people on another site I visit sometimes saying they are going to go and buy some more Gamestop shares. That stock is now over $300. Unless many of these people have large amounts of disposable income/savings lying around, they don't have the funds to buy a bunch of this stock. And I think it's a mistake to buy/try and buy a bunch of it up.

I actually bought some shares of a penny stock from a company called Genius Brand last year, where people drove the price up and then it ended up falling a bit, losing people money. Including me. Some people were predicting it was going to be the next Netflix but for children. They have a cartoon channel which has several children's programs. Well, people were buying up this stock because they thought it was going to do well and it drove the price up. I bought some more shares as the price was going up. At first some people made some money and I made a little bit, but it wasn't sustainable and the price of the stock fell very quickly. (I want to say within a few days). 

And it's been a very low price ever since. I lost some money on that, thankfully nothing astronomical. Maybe a couple of hundred dollars at the most, it wasn't too much, thank goodness. But that was a stock that ended up falling significantly and people were investing in that stock with good intentions. If that could happen there, I do think some of these other stocks that people are driving the price up now (and still buying into) could have bigger crashes.

At the end of the day, if you're going to play this gambling game, and it is gambling, just don't risk what you're not comfortable losing.  If i'm taking a risk on an investment, i.e. a gamble, I just assume I'm not getting that money back and that's the amount I'm comfortable using.

I don't do that often, most of the time I am buying what I believe are long term investments, so I'm typically spending money that I don't believe I will need for a long time, but eventually expect to get back.  That's also not always guaranteed, but over time, there are strategies that tend to work and make you solid/moderate returns as you let them sit for 10-20 years.

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