What happened with GameStop, Reddit and Wall Street?

Right. So people, let's move on. [cough] Yeah. Right. Whoa. people. Right now, those of you, let's speak a bit about trade in the modern world, people. Allah, Allah, Allah.

Look at that, people. Look at that. Wall Street versus GameStop. What? Did you guys catch the drama? It's been crazy. Wow. Let me give you my a quick summary. [snorts] So, what's been going on um is basically you have these high-end Wall Street

Wall Street guys who, you know, have their tactic have their tactics, sorry, in in the way they trade and, you know, they they they quite there's a lot of kind of snobbery about them and and they have of rightfully so I think a terrible reputation.

They were challenged recently by this um what you have Wall Street betting on Reddit. Now this was basically a bunch of people. It's it's it's a Reddit thing that they've got with I think over they had over a million subscribers who don't like the way the Wall Street kind of um hedge fund people are operating.

So they decided to do something about it and it was crazy. So to understand how what what this is about you have to have a bit of uh a tiny amount of kind of knowledge of how trading whether it's with stocks and shares or in the crypto world how these things work with margin trade.

So margin trade is to where you put down a certain amount and the broker will leverage it and meet it with whatever you put down times whatever. So let's say you can do this in cryptocurrency as well. If I put down, I don't know, £1,000, I can only buy with £1,000 worth. So the profit I make is only from £1,000. But if I trade by margin, what that is is I put down £1,000.

Now, let's say the leverage is times three in, you know, common in, let's say, Binance or cryptocurrency, then I would have £3,000 worth of buying power. So, let's say I paid if in the normal sale I paid £1,000, I've got, let's say I made £100 profit. Yeah. Or let's say overnight or in two nights, I made £100.

But if I had bought with £3,000, it would have been exactly three times the amount. So what you do is you leverage it. You have greater profit and then you repay the leverage. Now obviously with this as well the risk of of the jump of for losses is equally great. So, but you don't actually end up owing the debt because what happens is as your margin amount that you put down starts to get eaten into due to the losses, the the broker will just liquidate whatever you've put there and because they won't [snorts] want to lose their amount.

So, you don't actually lose more than what you put down and you can put stop- losses and things like that into place. But anyway, that's important to understand for what actually happened because then you have this ability on margin trade to sell for sell short. Now what what does that mean? So what that means is you see in normal trade you you sell I mean it's it's it's for long trade as in you're buying.

Yeah. I mean you can sell something you have but you can't sell something you don't have in normal trade but in margin trade and in these kind of hedge fund uh kind of tactics you can so you sell short so what you do is normal buying is that I'm buying these shares of this company because it's going to profit it's going to go up and my shares will go up and then I can sell it but what you can also do with this kind of leveraging is you can sell short you can say I'm buying this with the hope that this is going to drop in price.

It's going to plummet. So what you do is you borrow the asset. So you know you're borrowing. Let's say obviously these are shares and you know uh abstract entities but let's just say it was a phone. So you don't need the phone to sell it. like I want to like I think this phone is going to lose pro profit. So this company is going to lose profit.

So what I do is I say well ah okay uh I would like to sell 100 of these phones right now. So I want to loan 100 phones. You get it? Like let's say I want to loan these shares particular ones not the money but these shares once I get these let's say these let's say this phone is now £100 and I've got a 100 I'm going to sell them.

So I've loaned them and I'm going to sell them but with the with the hope that this company is going to sink. So I sell them 100 for 100. I've got that this company sinks to let's say by 50%. Now I buy back a 100 and repay the loan to you and I have 50% profit. So this is called selling short.

Now the the problem with this is you can actually cause companies to plummet because when these huge bankers and these Wall Street guys get behind this and they you see because it's not just one person these people are like an alliance and they they kind of you know wield a lot of power because they will say things like okay we're going to short sell we're going to sell short on this company like Tesla, they tried to, you know, short Tesla.

They said, "Right, and they announce it." So people who have shares get worried and start to sell. So it fulfills their prophecy and that company loses radical shares and and money and they tried it. This is why Elon Musk obviously hates these people who short trade and and he uh because they tried it on him and this is why you know he's part of the saying that this is a crime except you know this is it's ridiculous that this is even possible.

So what now okay you understand that now fast forward. So, what it is, some of these Wall Street guys, they said that they we're going to short sell uh GameStop. And this is like a bullying tactic because what happens is you could cause the company to almost crash. So, and yes, you may make money in the process, but the company goes, you know, can go bust.

So, this is what they said. Now, some of these guys on Reddit, this WBS, this this kind of forum, this group that they've got, and they've got a reasonable following as well of over a million people, they said, "You know what? A big FU to these Wall Street bunch of, you know, stuck up whatever they are. Let's start buying shares in GameStop." Everybody buys shares in GameStop so we can inflate the value.

Because you see what's interesting, pause this for a moment. Go back to what I was telling you about short selling. You see when you buy long like normal trade, you see I I put down £1,000 and buy some shares in Tesla, let's say. Now, I'm hoping this is going to go up and my profit is unlimited. As long as it can go up, I keep profiting.

If it goes down, the maximum I can lose, let's say worst case the whole company collapses, never happens, but let's say can happen in some cases, I will lose my £1,000. So my loss still is finite, but my profit is potentially undetermined. Selling short has the opposite.

You see your profit is limited like as in it's I mean it's sure it's good like it's but you know there's a number but if that company starts making profit you will start becoming in debt in debt like without a limit. So now you come back to this thing. So these guys said look let's start buying shares. buy shares everyone because what's going to happen is the price gets inflated and these guys all these kind of fool street guys that you know I've got the head up the royal end they will fall into loss and because they're going

to get indebted they have to buy back the shares because you remember you've loaned I've loaned a 100 of these and sold them already so I need to buy back a 100red to sell them back but now the price has gone much more before what I bought it. So this is what started and then you get obviously so many people just jumped on it.

So the price of GameStop just rocketed taking it into the top 500 companies of the world. It became, you know, like a huge, it became a unicorn [laughter] company. So you've got and these people that these bullies, they obviously in turn got bullied. the whole thing got collapsed uh because they you know they they lost millions and millions and it really backfired and on the back of that as well you've got uh Dodgecoin overnight just rocketed because they said all of a sudden because there was this spur people said let's buy dodgecoin and

dodgecoin was originally a cryptocoin that was made as a joke it was it didn't represent anything it was a a meme and overnight it just rocketed and Elon Musk you know it's amazing he made one tweet he just said two words buy dodge and wow the power everybody that night was a roller coaster I'm telling you those of you that were awake that night uh on crypto it was just wow it was seriously it was so gripping the whole thing you could see it I mean the crypto world isn't

normally like that but that that's not a normal night on but it was just going and whoa you put money in put money it's people made millions people I mean that were made I'm I don't I'm not saying regular people but people made loads of money people made thousands regular people made thousands and thousands overnight but certain people would have made millions millions and The interesting thing is this is all being made on the back of let's say dodgecoin which represents nothing.

So for once like we are witnessing money being made out of nothing representing nothing. I mean, it's just wow, you know, [laughter] but yet it's made so many people much richer than they were before it. And that's just wow, you know, when you think about it, it blows the mind honestly. Uh it's it reminds me I shared this with some people as well.

I said it reminds me of the quote from this from that Netflix documentary on India's billionaire bad boys where one of the guys who trades in diamonds and he says you know he asks the question he says what's the price he says what's the value of a diamond what is the value of what value would you give what is the value of a diamond and he and he gives the answer he says it's the price the last person who bought it was prepared to pay and and that's in essence how value is created.