North American stock market: what's happening?

[StocksAndScares]

Can anyone explain, or point to something that explains, what's happening in the US stock market?

Thanks everyone

I have the Trading 212 app, and it keeps freezing. It must be overloaded!

@picklemewalnuts I get it, it's exciting I don't have much invested (and certainly nothing I'm afraid to lose) but the drama of it all is an adrenaline rush after a year of literally ZERO adrenaline.

It's up and down like a rollercoaster.

I've been following this since Monday night. As @DGRossetti above said it's thousands of people with $30 chunks.

Most of them started this thinking about profit, a handful had been analysing GME for over a year, and now it's an emotional bubble. There were 2 million people just in that Reddit subforum on Monday before the big media started reporting on it.

Most of them would rather hold their shares and watch the hedge funds get squeezed. They feel like owning GME shares is a badge of honour now. Currently, you can't buy the shares on most platforms, only sell.

@picklemewalnuts - perhaps a copy of Freakanomics for your son will get him interested in a healthy way without encouraging risks. I studied Economics and this was a fun way to think about economics without it feeling like school work.

@StocksAndScares AFAIK multiple apps keep halting the buying of shares for retail customers, specifically for those stocks. That's basically why WSB is doubling down even more (one of the biggest apps in America, Robin Hood, locked all their customers out of buying this morning, but not selling, and other apps have been on / off all day.) I know Revolut in the UK has been "locked" multiple times today (i.e will not allow you to buy).

It's market manipulation and it's illegal. Rumours that the hedge funds are bribing the apps.

It's blowing up on Reddit and Twitter. 👀

Yep. DS had to explain how allowing you to sell but not buy, means you are selling to the big guys who run the markets and created this situation. Scandalous. Class law suits (or something).

Fascinating

I've been following this with interest! As pp have said there is nothing else to do and a lot of bored people with time and money to play with.

Is it over now then?

I tried to buy GME on T212, but it won't let me?

It's not over. You can still buy stock it's just a lot of places are refusing to sell. (I think it's just smaller apps... people I know in the US are still able to buy via Fidelity etc).

It won't be over for a wee while if everyone keeps holding.

Rumours are being circulated that the short stock has an "expiration date" on Friday and that if people don't sell it'll collapse or whatever, but this isn't true. It's being deliberately circulated.

Honestly there is so much to this it's hard to keep track of it 😂

I sort of understand this, the borrowing to sell it back and pocket the difference. What I'm missing is why would the original share holder lend it in the first place?

Good point.
Perhaps for short term finance, plus interest? Like pawning a ring.

Hmm.

Pawning a good idea.

I did understand this sort of thing during the crash in 2008. DD was a newborn and the best little feeder so I used to devour the business pages during night feeds. I even read a book on it .

Please please someone do this to Crispin Odey and Jacob Rees Mogg...

It’s fascinating. I threw in some cash on AMC - as another poster said I’m treating it like the Grand National. If I lose it, so be it - if I win then I’ll have enough to buy a few crates of my favourite champagne

My DCs are fascinated and have been giving me hourly updates on the situation.

asmuch I thought of Mogg too. Bring him down a peg or two.

Pawning the ring isn't strictly accurate, as the ring never goes anywhere. It's not about immediately accessing funds, it's just about generating an income off the share in addition to/regardless of how it's value changes. Brokers make money by lending their clients shares out.

DS has just explained walls to me. Dealers know what everyone is planning to do- what price people are buying in at, selling at etc. It makes a graph of walls showing what will happen at the different prices. Obviously that's the automated systems. Individuals can still move outside that.

And small free brokers like Robin Hood can be leant on in ways that bigger fidelity brokers aren't.

rokers make money by lending their clients shares out

It's such a strange system.

This lady explains it well: twitter.com/tessacoates/status/1354786660127535105?s=21

@chomalungma

rokers make money by lending their clients shares out

It's such a strange system.

This is the bit I don't understand - nothing in rhe explanations posted mentions the broker receiving anything in return for lending the shares to the short seller. So why do they lend them? Who, if anyone, pays them to lend the shares? How do they benefit?

The broker gets interest on the shares they lend out. The interest is paid by the hedge fund that 'borrows' the share. The same share can be passed on, and so several people can 'have' the same borrowed share. That's why this one is so spectacular. Many more shares have been 'borrowed' than actually exist. The hedge funds all expected to return the shares once their value was minimal, pocketing the profit. At this point however, they are worth several times more than expected (rather than a fraction as expected), and they will struggle to cover the cost of returning them.

So they are manipulating the market, forcing people to sell and refusing to allow people to buy, in the hopes of the value dropping which will make it easier for them to cover the cost.

(Disclaimer- I'm not claiming to fully understand it!)

The person who “sells the shares” is actually selling an option. The price of the option, or option premium, is kept by the seller. The option premium isn’t the full value of the share but if you sell a lot of them you make a lot of $$$.

I like chomalungma’s suggestion. Then maybe they could staple together all the riskier bets as a new AAA rated product?

This is a good explanation

www.ig.com/uk/trading-strategies/how-to-short-sell-stocks-181115

I guess you pay broker fees.

I have seen The Big Short and the Wolf of Wall Street - and even though I want to dabble in shares, my main interest would be simply buying a share and see what happens - rather than betting on whether a share would go up or down and doing a spread.

I think it gets really complicated with people investing in what they think the outcome of the short will be.

I think that the Big Short was taking 'bets' on the housing market - as they realised that the mortgages were risky so they took a short on the housing market - which eventually came true.

Big Short is a great film if a little complicated. A number of brokers realised it was a mathematical certainty that the mortgage market in the US was going to collapse due to the packaging of poor mortgages. They bet 100s of millions that the market would collapse - they shorted it. The big banks couldnt believe someone would bet $100 million on what seemed to be a guess. The Christian Bale character sees his funds investment rise by 489% . Film is/was on Iplayer

Ugh capitalism