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Day Traders on Reddit Totally Blew Up the Stock Market

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The stock market is essentially gambling. I think we’ve all suspected this, but it’s really been laid bare in the past week.

Theoretically, the purpose of the stock market is to allow businesses to raise capital by selling shares in their company to a large number of small investors who then all share in the profits the business makes instead of having to rely on a few extremely wealthy investors to put in large dollar amounts.

But then there are stock buy-backs and short sales. Stock buybacks are when a company takes its profits and instead of investing them in the business or paying it out to the employees who did the work that created that wealth, they buy shares of stock to take them off the market which allows them to push the price of their stock higher and make more money for their shareholders.

Short sales are essentially betting that a business will fail. You take a stock someone else owns and sell it with a promise to buy those shares back in the future when you think it will be at a lower price and you can keep the difference in price.

Elon Musk hates people who short Tesla and it seems to be the reason he keeps getting into trouble with the SEC. Reddit loves Elon Musk and the day traders at r/wallstreetbets have taken his cue and have gone after short-sellers at major hedge funds who drove down the stock price of GameStop, the video game retailer, to about $3 a share.

What they figured out, essentially, was that if they bought all the GameStop stock they could, when it came time for the short sellers to buy back that stock, they would not only take a huge haircut, but that money would go to the day traders.

And it did. To the tune of billions of dollars.

The thing about short selling is that it doesn’t have any positive benefit other than it makes money for the people doing the shorting if they’re right. And those people are a bunch of whiny little bitches who are crying for Redditors to go to jail because they made the money that was there to be made in this gamble instead of the big Wall Street banks.

Jon Stewart signed up for Twitter to comment on that.

I’m with Jon here. The little guys took billions from people looking to get richer off of the collapse of a business that employs around 50,000 people.

I wouldn’t buy GameStop stock now, though. They really don’t have a sustainable business model in 2021 and it’s not a $300 stock.

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