Here's a great analogy by Wes Christian I added a bit to. Should resonate well with a 7th grader thinking about when they get a driver's license.

You borrow mom's car, then show it off to your friends and tell them it's yours. You also grab the title and Xerox it a hundred times, telling the kids at school they can buy it from you for $100 now, but you'll give it to them after summer break.

What you're banking on is that the car breaks down over the summer and gets scrapped. That way no one will want it, and you get to keep the money they paid up front.

Except... over the summer, Dad took it and pimped it out, painted it in Competition Orange, threw in a hemi and a boomin' sound system. The one kid you sold a fake title to rides his bike by the shop and sees the work being done, he knows it's an awesome ride and stoked to take delivery. So he tells his friends.

Now it's the first day back to school and there are a hundred kids surrounding your locker, and they all want the car. You know you can't deliver, so you pay them back in cash, which you do by Xeroxing the title again and selling it to kids in the high school, telling them they'll get the car next month. Except, you have to give the original buyers $150 each to avoid a beatdown after school.

Before next month comes, you print 300 copies and have to sell them in the next town over- to pay off the 200 angry 10th graders coming to your front yard. Meanwhile, that kid on the bike is onto your scam, and buys another copy every time you panic and print more, knowing he's going to get another car every time you try and hide what you did. So do his friends.

Eventually, the scam is going to end. The entire town is going to be standing on the grass, demanding an awesome car. The town judge will be standing there with the cops and is going to make you get a car for every single xeroxed title out there (all shorts must cover), no matter what your cost of a new car is.

• In the analogy, the car is the stock.
• "You" (as the 7th grader) are the hedge funds.
• You've sold interest in the car with the expectation its value will go down, which is "short selling", and mom doesn't have extra cars to sell, so these are "naked shares".
• You got the extra "cars" to sell by xeroxing the title, which makes them "synthetic". Another way of saying it is "counterfeit".
• Dad is the new Chairman of the Board, Ryan Cohen. He has a plan to make the company awesome again.
• The kid on the bike is Keith Gill, aka RoaringKitty, aka u/DeepFuckingValue.
• We (the townspeople and angry 10th Graders) are DFV's friends (apes).
• The judge and cops are the SEC and DTCC, but the analogy breaks down a bit here.

All shorts must cover = you need to pay up, no matter how many xeroxed titles are out there, unless the car is destroyed and in the scrapyard. In reality, if the company went bankrupt, you don't have to cover the loss of a worthless stock.

Gamestop is not going bankrupt. They're worth billions and have enough free cash on hand to run the company for another three years if they never turned a profit.

If you run out of money, Mom and Dad won't step up to help you- you're still getting grounded for the rest of your natural life- but the town council will cover your debt.

In reality, the DTCC has a fund to handle this, it's funded by every company allowed to trade on the market, and backed by the FED. Everyone will get paid, eventually, unless they get bored and walk away (paperhanding).

Here's a great analogy by Wes Christian I added a bit to. Should resonate well with a 7th grader thinking about when they get a driver's license.

You borrow mom's car, then show it off to your friends and tell them it's yours. You also grab the title and Xerox it a hundred times, telling the kids at school they can buy it from you for $100 now, but you'll give it to them after summer break.

What you're banking on is that the car breaks down over the summer and gets scrapped. That way no one will want it, and you get to keep the money they paid up front.

Except... over the summer, Dad took it and pimped it out, painted it in Competition Orange, threw in a hemi and a boomin' sound system. The one kid you sold a fake title to rides his bike by the shop and sees the work being done, he knows it's an awesome ride and stoked to take delivery. So he tells his friends.

Now it's the first day back to school and there are a hundred kids surrounding your locker, and they all want the car. You know you can't deliver, so you pay them back in cash, which you do by Xeroxing the title again and selling it to kids in the high school, telling them they'll get the car next month. Except, you have to give the original buyers $150 each to avoid a beatdown after school.

Before next month comes, you print 300 copies and have to sell them in the next town over- to pay off the 200 angry 10th graders coming to your front yard. Meanwhile, that kid on the bike is onto your scam, and buys another copy every time you panic and print more, knowing he's going to get another car every time you try and hide what you did. So do his friends.

Eventually, the scam is going to end. The entire town is going to be standing on the grass, demanding an awesome car. The town judge will be standing there with the cops and is going to make you get a car for every single person out there (all shorts must cover), no matter what your cost of a new car is.

• In the analogy, the car is the stock.
• "You" (as the 7th grader) are the hedge funds.
• You've sold interest in the car with the expectation its value will go down, which is "short selling", and mom doesn't have extra cars to sell, so these are "naked shares".
• You got the extra "cars" to sell by xeroxing the title, which makes them "synthetic". Another way of saying it is "counterfeit".
• Dad is the new Chairman of the Board, Ryan Cohen. He has a plan to make the company awesome again.
• The kid on the bike is Keith Gill, aka RoaringKitty, aka u/DeepFuckingValue.
• We (the townspeople and angry 10th Graders) are DFV's friends (apes).
• The judge and cops are the SEC and DTCC, but the analogy breaks down a bit here.

All shorts must cover = you need to pay up, no matter how many xeroxed titles are out there, unless the car is destroyed and in the scrapyard. In reality, if the company went bankrupt, you don't have to cover the loss of a worthless stock.

Gamestop is not going bankrupt. They're worth billions and have enough free cash on hand to run the company for another three years if they never turned a profit.

If you run out of money, Mom and Dad won't step up to help you- you're still getting grounded for the rest of your natural life- but the town council will cover your debt.

In reality, the DTCC has a fund to handle this, it's funded by every company allowed to trade on the market, and backed by the FED. Everyone will get paid, eventually, unless they get bored and walk away (paperhanding).