Ok I told some of you I would explain what’s going on today and so I will. I wanted to make sure I remembered correctly from my MBA days so I checked it out and I did.

First let me explain what short selling is. If you think a stock is going to drop a lot, you borrow someone else’s shares with a promise to return them in a specific period of time, usually through your brokers. You then sell them at the current price and then buy them back at a much lower price and return them and profit from the drop. For example if you sold them at $100/ share and then bought them back at $20/share you make a tidy profit. And I’m not going to go into margins which allow you leverage your place even more because I want to keep this as simple as possible.

Now let’s talk about GameStop. It’s basically the Blockbuster video of today. It’s a brick and mortar company selling video games. It is failing because that’s not a good place to be today and even worse because of the whu flu. I have been to a GameStop but it was at least twenty years ago with my kids. I don’t play video games other than the original space invaders in an arcade many many years ago and I was quite good.

So to get back to the point, hedge funds decided to short GameStop and to hasten the decline of the stock, they used their positions with CNBC and other media outlets to trash the company. What they didn’t count on was that the little people would strike back at them.

Enter Reddit. They got a group of small investors to start buying up GameStop shares thus driving up the stock price and eventually costing the hedge funds billions because the stock went up instead of down. (For an example of how this works I recommend you watch Trading Places with Eddie Murphy and Dan Akyroyd and I would be remiss if I didn’t mention Jamie Lee Curtis’s double contribution.)

What you need to take away from this is that the stock market is constantly manipulated by the big guys and for once they got their comeuppance.

Hopefully this has helped explain this whole deal.