Potentially the
worst drivel of analysis I've seen with the GameStop short squeeze (maybe I should've put it in Outline first to even deny them clicks).
Without even following the link, I just hover to look at the title and see "gamestop-stock-surge-trumpism". The attempt to link stock market short selling with the political movement of a former US president, shows a terrible lack of understanding of both issues.
About the short-selling mess, I like the way Elon Musk tweeted about it. To paraphrase him,
Can you sell a house you do not own? No.
Can you sell a car you do not own? No.
But you *can* sell a stock you do not own.
A simplified explanation of how short selling works, is that you (the short-seller) sell a stock (which you do not own) to someone today. Then, you actually buy the stock tomorrow (or on some specified future date). A catch with these type of transactions is that you cannot guarantee what the future price of the stock would be. What happens if there is a small number of those stocks, but no one is willing to sell to you? You have a contractual obligation to buy the stock - no way out of it. Only option available? To offer a higher price and pray that someone sells to you. In a sense, its gambling.
A lot of "big money" hedge funds decided to gamble with Gamestop's stock and short sell it. A random guy on reddit noticed that they (collectively) sold (short sold?) more stock that was physically available in the market. He buys a large chunk of the stock, publicly talks (or brags) about it weeks ago - basically a reverse gamble. A lot of other random internet people see his analysis, check it for themselves, decide that it's good and do the same thing.
The story *should* have ended here with the hedge funds being forced to pay whatever high price the stock is currently being sold at.
Instead, the hedge funds use their influence on multiple brokers (the middle men between you and the stock market) to prevent people from buying Gamestop stock - they only allow the stock to be sold. Which is blatant market manipulation, if I ever saw it!
One part, I'm personally unsure of is with the US-broker named "Robinhood". What is unusual about them is that they do not charge comissions to their customers. A very unusual agreement. Here in Canada, I use Questrade as my broker - they let me buy/sell whatever I want on the Canadian market, but charge a 0.xx% comission on the sale (I do not remember the exact comission number). Robinhood ... does not charge anything - so it feels fair to me that they get to tell their customers "Sorry, but we can't let you do any more transactions". i.e. they are offering a free service - if they want to stop doing that, they should be allowed to do so.
-chronodekar