Skip to whatever section you need clarification in:
- Stocks:
A stock is just an entitlement to a small share of profit or revenue from a company. Businesses are after all, a collaboration of labor and capital (you're the capital) nd both are entitled to some share of the gains. These gains are paid as dividends.
- Dividends:
The dividend you may receive is set in reality. What they bring in is what they pay out, basically. The company can't pay out more than they make, but they can't afford to pay less than a certain amount because they rely on capital investment to run the business and no one is buying in if you 'aint paying out. But what should a "stock" be worth? Well, what share of a profit actually worth? Depends on how much profit a share will pay out right?
- Share Price:
It's easy to understand that if a "share" is paying out $1 per quarter, then it should be worth twice as much as a "share" paying out 0.50c per quarter, right? Well it's a little more complicated because there's no certainty what the pay out will be ahead of time. Did the company do good this quarter? Did it meet it's "projections" or did it fall short? Did something unexpected happen, like a pandemic, or a ill tempered tweet causing a boycott?
- Speculation:
Because of these risks, some known, some unknown, different people have different opinions on what the stock is worth because they have different views of what the dividend will be and how likely or risky it is to rise or fall. Some risks are commonly "factored in" to the price, (such as price of rice) since flooding and drought may not come this year but they'll come some year. Other risks aren't easy to predict, or even inevitable. But if you believe a war is coming, or a new product will be a success, you may decide that a given stock is over valued, or undervalued. By purchasing an undervalued stock, you don't just reap a higher return through a larger dividend than if you invested elsewhere, but if you later sell that stock you accrue the price difference after it's price "corrects" to reflect what becomes common knowledge. Similarly, "shorting" is how you make a profit off a stock you believe to be overvalued.
- Shorting:
Let's say a stock is selling for $20, and you think it's only worth $15. You believe this because you think the dividend paid out will be lower than what most people buying/selling think it will be. Well what you can do is make an arrangement to 'temporarily' hold onto someone's stock for them. You'll totally give it back at the end of the contract, say a week, so the original holder will still hold it when the dividends pay out. You offer to pay a small fee for the privledge and both parties are happy. The original holder is happy because they just got paid free money for doing nothing - they were going to hold the stock anyways. And you can now short the stock. Because all that stock you're temporarily holding? You sell it. You sell it at $20. It's only temporarily yours, but you sell it. Because remember, you think the price is going to drop and you don't have to give the stock back until next Friday. Well Friday rolls around and lo and behold the stock dropped to $15. You buy some of that stock at $15, and give it back to the person you borrowed from. You bought low, and sold high, you just did it in the opposite order.
- Hedgefunds
Now let's say you're a hedgefund and you think Gamestop is overvalued. So you 'short sell it'. Now you're sitting on some cash from your sale... hmm, what to do, what to do... well it was a good move with a few shares, so why don't we do it again with more shares? Like, a lot. Like, as much as we can get our hands on. So you borrow and sell, borrow and sell. Eventually you've borrowed and sold the same stock multiple times. That's how you get to 130% of all available shares being in this state. When Friday comes around and the price has dropped, you're going to make a killing. You'll just buy the shares to give back at the lower price and pocket the difference. Just like you've done before. And this time will be no different. The stock price will definitely be lower on Friday... right?
- INTERLUDE
Wait...
What's that...
A board of Chaotic Neutral autists with stimulus checks see what you're doing to their nostalgic brick and mortar from childhood? Well what could a few unwashed millennials do?
- Enter Stonky Bois:
Hey guys, what if we buy Gamestop, but like, keep buying it. We buy and buy and buy and never sell. We drive the price up well beyond anything the dividend is worth, but who cares, come friday all these short sells get called and they have to pay them back at literally whatever the stock price is then. We'll make a ton of money. So they did. They drove the price up and guaranteed a profit for them, and a loss for the hedgefunds.
But wait, what's that, these prices are getting ridiculous. $100? $200? We're not going to just bankrupt these hedgefunds, we're going to break the fucking market. We're going to break it so hard it exposes the shell game for all to see. What happens if the stock is worth $1k? Or a million? Guys the emperor has no clothes.
- It's not about the money, it's about the message.png (you are here)
To hell with profits, To hell with selling, or bankrupting a hedgefund, or even about just making our own money back. Let it all burn to the ground, I don't care if I see a cent of return, I want to drive this price so high that it costs so much to repay that the entire system grinds to an explosive hault. What will happen? Can it be ALLOWED to happen? Will the SEC (Securities and Exchange Commission) put a halt to trading? Reverse trades? If they do they expose the fraud for what it is - it's ok to rig the game when the rich profit, but not ok when the rich are fleeced? Would such moves herald the end of old money and the old financial systems? Centralized fiat relies on the appearance of fairness, and when you remove that you remove the foundation it relies on. Can they afford to step in? Can they afford not to? Is this the moment centralized fiat dies to be replaced by decentralized crypto? No one knows. But does it matter at this point? Buy and hold. Fuck 'em
They did that today through RobinHood's actions blocking Buys.
Exactly, it's glorious