Captain Kinopio wrote:Question about this Reddit thing, since I'm seeing people gleefully gloating online about Internet memes trumping Wall Street hedge funds. I only know superficially what's happening, but while people are laughing at costing hedge funds a lot of money, are these funds not made up of 100s of thousands of ordinary people's savings and pensions?
It's all well and good creating a joke of a failing company's stock to make a few people a quick buck and give Wall Street a punch on the nose. But are they just not hurting ordinary people?
Or is that not the type of hedge fund this is or am I misinterpreting things.
Most ordinary people will have the default employer provided pension which is likely to be globally diversified and contain a mixture of equities and bonds (which tend to offset each other e.g. People want bonds when the stock market tanks as a safe haven).
These tend to be with normal pension companies, L&G, Aviva, Nest etc and there's no chance a Meme stock like Gamestop makes up anything other than the tiniest fraction of a percentage (and likely isn't even a part of the portfolio as often only large cap stocks feature in the default pension fund everyone is enrolled into).
Gamestop has a tiny market size in comparison to the total US Stock Market, let alone the global stock market.
Shorting a company is how you can discover fraudulent companies like Enron and Wirecard so it does have a role of sorts in financial markets but the issue with Gamestop is they shorted 149% of the shares so they get absolutely strawberry floated if people buy up all the available shares and reduce liquidity by holding. They are forced to either close their position and take losses or buy what few shares are being sold but in doing so they create a reverse free fall situation with the shares sky rocketing upwards.