Let the GameStop begin!
I haven’t been this invested in losing money since I forgot the password to my bitcoin account.
Like everyone else, I have been enthralled by the recent runup in GameStop (GME) stock fueled by the populous potential for quick profits and, if you act right now, a chance to kick the manipulative hedge funds in the billfold where it hurts and perhaps bring down the rest of Wall Street and the global economy at the same time.
Rallied to a frenzy on the Internet, rag tag investors with a dollar and a dream have banded together to artificially drive up the price of GameStop, as well as floundering companies like AMC (AMC) and Blackberry (BB), to undermine the large scale bets on their demise made by big Wall Street investors. And even make a few bucks along the way.
And I thought social media chatter leading to government insurrection was scary. You can almost feel the Bern.
But this time around, instead of being a speculator, I am happy to be a spectator. As much as I desire the potential for a quick buck, this time I am more than happy to sit on the sidelines. Now that all of the Blockbuster and Radio Shack equities have been purged from my portfolio, I can watch the market games without agita.
I long ago gave up day trading stocks. During the dotcom craze I made a killing. Unfortunately, that killing was self-inflicted, more like suicide by chapter 11. And the Napster scars run just as deep as the “why didn’t I buy Google” laments.
Those were the good old days when it was financially stupid not to invest in companies without a discernable business model, contrary to everything I learned in business school. Before then I always thought the stock price reflected the present value of future earnings—the measure of a business to make money over time. But that was brick and mortar thinking in a new digital economy. I learned my lesson.
And then there was Enron.
Here is what I know about investing in the stock market. Nothing.
Here is what I think most people know about investing in the stock market. Nothing.
So as you pull up your arm chair and watch the financial bloodbath play out in the news, please allow me to sort through the esoteric trading vocabulary that you will likely encounter as you struggle to understand this rather unique David vs. Goliath ponzi scheme.
A GameStop Glossary for the Uninvested
Hedge Fund. A collection of alternative investments derived from the popular Sonic the Hedgehog games sold at GameStop retail stores in the 90s, including Sonic the Hedgehog, Sonic the Hedgehog II, and Sonic the Hedgehog Institutional Investor.
Short Selling. This is a bet that stocks will fall unless they are propped up by market undergarments known as undies, briefs, or shorts. Well known companies like Fruit of the Loom (FTC) have recently been the target of day traders who seek to stop the short sellers by going long on boxers.
Leading and Lagging Market Indicators. What shorts are supposed to cover in a bull market.
Covering a Position. What happens when you lose your shorts in a bare market.
Short Squeeze. Another name for Speedos.
Leverage. Leverage is using collateral, like your house, to purchase more stocks in GameStop than you can afford.
Options. Options are what you have at the end of the day if you make money trading GameStop.
Margins. Margins are what you don’t have at the end of the day if you lose money trading GameStop. Including your house. See Leverage.
Volatility. The bidirectional movement of your stomach when day trading GameStop.
Derivative. And OTC (over the counter) product to mitigate the effects of volatility. More commonly known as Scotch whisky. See Straight No Chaser.
Stop Loss Order. A directive given by your spouse when he or she discovers you are day trading GameStop.
Pump and Dump. An illegal scheme in which desperate, false rumors are circulated on the Internet about GameStop purchasing Fruit of the Loom with the explicit purpose of artificially manipulating the stock price so that you can make a boat load of money. Not to be confused with Dump and Run which is what you do the next day when the Federal Trade Commission contacts you.
Put and Call Options. Typically used when a representative from the Securities and Exchange Commission (SEC) phones. You put the call on hold to reach your lawyer.
Sanctions. A hefty federal excise tax on illegal returns often accompanied by jail time and public humiliation. See Dump and Run.
Arbitrage: How you spin your investment returns to the IRS.
Profits. A financial gain. Not to be confused with prophets, financial sages who tell you where to invest money without investing any of their own.
Broker. What you become chasing prophets.
I sure hope these people know what they are doing.