John Do and the Internet
There has been a lot of buzz around Wallstreetbets in recent weeks. This is an online community on the Reddit forum that now has more than 8 million members. The group was created to exchange ideas and knowledge about the stock market and stocks. In this forum, small amateur investors come together in the hope of gaining a more general view of the stock market.
This group has been around since 2013, but with the actions that have taken place in recent weeks, it has become world famous. It all started with a share, called GameStop and can be compared to the Game Mania that we know here. This retail chain has been in bad papers for quite some time and this is reflected in the price of their shares. The price is in a downward trend and has been for a long time. It was so obvious that large hedge funds went heavily short on it, that the chain was going to go under, according to many. So how does this work?
If a hedge fund wants to short, they have to borrow shares from a broker or the competition. They sell these shares immediately in the hope that the stock will drop in value. When a fund then buys the shares back much cheaper at a later date and returns them to the lender, we speak of a successful short. You should know that these funds usually pay a small rent for the shares. If the price later goes up again, this must of course be compensated so that the lender does not lose money.
So what exactly happened, that caused such a commotion? People in the abovementioned Reddit group, had noticed that Wallstreet funds had gone heavily short on GameStop. So they collectively found nothing better to do, than to go massively long on this stock. The whole thing then took on such proportions, that many hedge funds got into trouble and lost literally billions on their short positions. This is why, as a reaction and out of fear, they stopped trading on this share for a while. It was no longer possible to buy GameStop shares, but only to sell them. However, the Wallstreetbet community stood firm and refused to sell. The situation was so remarkable that Janet Yellen, Secretary of the Treasury, even had a meeting with the SEC and the Fed about it. For them it became painfully clear, that when ordinary people join hands they can be a major threat to the institutions. And that, of course, is the last thing these institutions want.
I think everyone is curious about how this will end. However, GameStop was not the only stock that the Reddit group pumped. They also collectively jumped on the cryptocurrency Dogecoin. It has risen by hundreds of percent as a result. Elon Musk had something to do with that. However, because every time the tech mogul tweeted something about the coin, it continued its rise.
The silver squeeze
The next thing the group is working on is the #silversqueeze. This is all about buying physical silver in order to make the banks' mistakes clear. The fact is that every ounce of silver has already been sold 100 times. So if everyone wants to physically withdraw their silver now, then it will become painfully clear that this simply cannot be done. There will be a great shortage and this should send the price of silver skyrocketing. So this is currently a good investment. But if you buy it, be sure to do so in physical form. All the rest are derivatives, that are only a derivative of the silver price. When it comes to silver, you should also follow Maarten Verheyen on twitter and subscribe to his newsletter. That way you will certainly be able to learn a lot about silver. For the rest, the message is sit back and enjoy the show. How it will all end? Only time will tell!