You probably have more than one dynamic going on at the same time here. For years, I have noticed with irritation these financial networks reporting something like this:
“Selloff (2 or 3%) in stocks today after Fed Chair signals possible .5% increase in federal funds rate!” (Sound of pounding hooves as the sellers run for the tall grass.)
Okay, fine. But the next day, there would be “A big day on Wall Street (2 or 3% increase) as Commerce Department reports 6% durable goods orders.” (Sound of pounding hooves as the same sellers rush back in … maybe)
And so it goes, every day, as news on inflation, mideast tensions, drought, tax policy, trade deficits, drug breakthroughs, etc. come and go, wax and wane.
I could never believe — and still don’t — that Warren Buffet was selling all of his American Express stock one day, on a “worrisome” report on interest rates, and then rushing right back in the next day on a buying frenzy on an encouraging report on durable goods orders.
What happens, of course, is that you have lots of different groups of investors with different goals, priorities and concerns. A buy signal to me is a sell signal to you. And it may also be that these occasional selloffs just happen to coincide with a report on an interest rates, the deficit, war, or inflation and reporters have to find a connection, when there may not be one at all; it’s just coincidence sometimes.
So, back to Reddit and Gamestop, I think you probably have a few rascally young millionaires here who hate hedge funds and are having fun scaring the short sellers to death, another group angrily punishing the shots sellers for trying to profit off the demise of a company, others who are buying on the way up with visions of selling when their shares go up “only” 10 percent, others who are just having a thrill, and then you have the shorts themselves who are having to buy to cover. Lots of pushing and pulling as Antifa meets Cops meets National Guard meets Proudboys on a narrow street. Cluster f—.
While billions may be lost collectively in this affair, the price of the stock is only $351 right now. I know, I know “1500%!!!” and all that, but if you buy 50 shares right now, the world won’t come to and end when it crashes and you lose much or all of your $15,000. Also, some of these people will sell on the way down. So you might sell when it drops 50% and only lose $7,500.
Not to say there aren’t some idiots who are putting their life savings into Gamestop right now. If they weren’t doing that, they’d be buying interests in Nigerian Tulip Farms.
I guarantee you that some people are buying 5 shares just to sell fast and try to make a few grand to buy dope or a bigger flatscreen. They’ll be okay in the crash. They probably already sold a few shares on the way up and have plenty to gamble with. The hedge funds, not so much, but few of them have very much of their portfolios in Gamestop. One fund reported “losses of up to 15% already!!” Who cares?
You might discount everything I say on the subject since I sold my Gamestop last year at around $19.00, LOL. But again, it was just a missed chance to make a profit that I did nothing to earn. I might as well regret all the mega jackpot lotteries I never played in as well.
P.S. Do not listen to me.