 So if you give me just a few minutes, I'm gonna be going over the entire GameStop stock, Wall Street bets, Robinhood, hedge fund situation. I'm also gonna be going over what shorting a stock is, what a short squeeze is, and how the subreddit r slash Wall Street bets stuck it to the billionaire hedge fund managers and how this might end up being a turning point in world history. So I'm gonna be breaking this down like a story and like all good stories you have to start at the beginning and you have to talk about the main characters. Now GameStop is a video game retailer who relies a lot on foot traffic and because of that they struggled quite a bit during the pandemic. And billionaire hedge funds like Melvin Capital saw that GameStop was struggling and they decided to short the stock. And shorting is basically where you bet against a company. So let's say that a company's stock is this pen. Now right now let's say that this pen is worth $10 and in one month you think that it's a little bit overvalued so it's gonna be worth $5. So what you do is you borrow the pen from me so here you go you evil hedge fund manager and you tell me that you're gonna be giving me the pen back in about one month. So you take this pen right here and you go to a different place and you sell it to them for $10 because the pen is worth $10 right now. Then if everything goes to plan in one month when the pen is worth $5 you buy it back from that other place and then you give the pen back to me and you pocket the difference which in this case would be $5. So you basically made $5 out of thin air by betting that the worth of the pen will go down in a month. You didn't necessarily give any value to anybody or provide a service. Now something that shorting a stock isn't really morally right just because of the fact that you end up breaking down other companies in order to enrich yourself. And this is basically what these hedge funds did with the GameStop stock. It was the most shorted stock on the stock market. Now the subreddit r slash wall street bets noticed this and specifically a user named deep fucking value made a video on YouTube where he said this. What up everybody? This is gonna be the first video of the kitty corner and the market has kind of forced my hand on this one. The first stock that I'm gonna talk about is GameStop and I know it's a polarizing stock. Some people won't even tune into the stream right now when they hear that I'm bullish on GameStop at the current price point. It's trading about four bucks right now. Now you might ask why in the world would one single man plan to go all in on GameStop stock when all of these hedge funds are trying to short it? Well, shorting is a common practice that many hedge funds have used for a long time where they kind of just gang up on a single company. And then whenever the media and other people see that everybody's ganging up on that company, the stock tends to drop and it's just kind of a downward spiral. Many think that hedge funds actually do this on purpose and they have secret connections to a lot of the media outlets that basically shill for them. But it is technically legal just because of the fact that they're sort of just talking to other hedge funds and they all decide to short the same stock. Now, going back to the pen example, let's say you get this pen, you borrow it from me, you sell it to somebody else for $10, but then one month later, instead of going down to $5, it jumps up to 20. Then what happens? Well, the problem here is the person you borrowed it from, me, I want my pen back. And the only way you can get it back to me is if you buy the pen from the person you sold it to for $20 and that means you end up losing $10. Now theoretically, when it comes to shorting a stock, there's pretty much infinite risk because that stock could just keep going up and up and up and up. So if the pen goes up to $300, for instance, that means that you just lost $290 even though your initial investment was only 10. Now let's say theoretically there is a pen company where there's only 100 pens in the world and each one is worth $10. A hedge fund doesn't like this pen company for whatever reason, so they come along and they decide to short the stock and so they borrow 75 out of the 100 pens and then sell each of them for $100 to a third company. So let's say that this third company also does pen lending and they wanna sell their 75 pens to a fourth company. That means that there is 150 total short positions even though there's only 100 total pens. Now this would mean that over 130%, in this case, 150% of the total pens available are being shorted and that's basically exactly what happened with GameStop at about 130% of their total stocks being shorted. Now this is an extremely simplified example but this can basically lead to an endless cycle of borrowing and selling and borrowing and selling with a bunch of different companies involved. Now if the stock doesn't go back down in time then the company can either sell their position and take the loss or they can pay interest on the stock because they think it will go down in the near future. But when Wall Street bets bought in on GameStop they had zero intention of selling and what ended up happening is so many people bought in on the stock that it started to rise instead of go down. And this is just simple supply and demand. If there's a bunch of people that wanna buy this pen but all the pens are bought up and nobody is selling then the price of this pen is gonna go up. So deep value bought GameStop stock in around July of 2020 and by the time January 2021 came around it was already $17 from the $4 it was in July. Now that alone would have been enough of a win because that means that it pretty much quadrupled and in that short of a time span that is really good. And on Christmas day deep value on his YouTube channel Roaring Kitty posted this video. Cheers, happy Friday, happy holidays. I hope everyone's having a great week. Surprise, GameStop's up about five X from when I uploaded those videos over the summer. So that's great to see when you have a thesis and by and large it unfolds as you hope that it could. That's nice. So it shouldn't be taken for granted doesn't always happen. So hopefully by now you know what my thesis is how that downside protection has kind of felt like it's been locked in but how there remains that tremendous potential upside right and now you see Cohen getting more activist buying into the 16s. Hopefully that gives people an idea as to what is possible down the road. And on top of that over the holiday GameStop digital sales went up about 300% and investor Ryan Cohn decided to modernize GameStop so that it wasn't so reliant on foot traffic. Now at this point the hedge funds had heavy losses but they thought that they could outlast Wall Street Bets so they decided to hold onto their short positions. But little did they know they were dealing with professional hold-illers with diamond hands. And Wall Street Bets wasn't just interested in making money they also wanted to stick it to the billionaires. And this is where the short squeeze comes in because in order to cut their losses as the stock price went up some of these hedge funds started buying more stock. Now this is a dangerous game because yes it mitigates some of the risk but at the same time it's probably going to cause the stock to go up even more because again supply and demand. There's a lot of people who wanted to buy the stock but nobody was selling. So the more the price went up the more the shorts were getting squeezed out of their position which made the price go up even more. Now I know this is really complicated to understand so again let's go back to the pen. So I let you borrow my pen and then you went and sold it to a third party for $10 thinking that the next month it was going to be $5 so you could buy it back from them, give the pen back to me and you would have made $5. But unfortunately for you you evil hedge fund manager the next month this pen goes up to $20 and so instead of buying it back you decide to wait and pay the interest. Unfortunately for you again the next month it goes up to $50 so it's even higher this time but you continue on with your short position thinking that it's going to fall eventually. Then the next month it goes up to $100 and at this point you've lost so much money and again it could theoretically just keep going up and up and up to infinity so what you decide to do is buy back some of your shares at $100 just to mitigate the risk. And if it keeps going up it's going to be so expensive that it's going to bankrupt your company and so what you decide to do is just go ahead and buy the pen back at $100 and you take the $90 loss. But not all of the positions were liquidated and every single time a hedge fund decided to buy back one of the pens or one of the stocks then what ended up happening is the stock price went up even further because of the fact that there were more people buying than selling. Now you might think this was a bad idea to lose out on the $90 for some of these hedge funds but actually it turned out that it wasn't because just a few days later the stock price went up to over $469. And that means that Roaring Kitty's initial investment of $755,000 turned into over $48 million. What? What the fuck? And on top of that many members of the subreddit that also decided to hold ended up making millions. When the media caught wind of this they covered it and of course when that happened the stock price went up even more. Now this is where Robinhood comes into the story and Robinhood is one of the easiest apps that you can use to buy and sell stocks. They claim to be an app that is for the people they wanna open up investing for the common man and the common woman. However on January 28th Robinhood made the decision to suspend the ability to buy shares of GameStop and that ended up helping out the hedge funds. The stock which was at over $400 plummeted to $120 within just a few hours. Now they claim that this was to stop market volatility and protect their customers but what ended up happening is the hedge funds benefited. So obviously a lot of people found this to be a little hypocritical as Robinhood is supposed to steal from the rich and give to the poor and it kind of seemed like they were doing the opposite. Now as a result of this cover up the Streisand effect kind of kicked in and everyone went in on Robinhood. And when I say everyone I really mean it. Like all the politicians from both sides of the aisle business owners, celebrities, common people everybody went in on Robinhood hard. Robinhood then got downvoted on platforms like Google Play and Google had to delete over 100,000 negative reviews. The Discord server for R slash Wall Street bets and the subreddit itself were temporarily shut down. This caused the Streisand effect to kick in even harder and what ended up happening is a class action lawsuit. In fact several class action lawsuits were filed against Robinhood. Meanwhile many on R slash Wall Street bets are still holding firm with those diamond hands. Because at the end of the day this wasn't just about making money I mean everybody could just liquidate their position now and they would have stuck it to the big hedge funds but what they really wanted to do was turn the tables on these hedge funds and give them a taste of their own medicine. Now to be fair there were other brokerages besides Robinhood that blocked the trading of Game Stock and AMC and they do have some reasonably fair arguments for why they blocked them because it's not as simple as just you know they were trying to help out the hedge funds. There is more to it than that however Robinhood pretty much took all of the blame and this is an absolute PR nightmare for them. They are now getting sued, they have users leaving them left and right, everybody's leaving them a bad comment. It is a horrible situation for Robinhood. Now at the time of recording this video Game Stock is still over $300 and I think I can kind of speak for everybody here that it's not just about the money. I think lots of people are trying to buy this stock even outside of Wall Street bets at this point just so that they can kind of stick it to the big hedge funds. For the longest time these hedge funds have been using these tactics where basically it's just strength and numbers. A bunch of them will gang up on a company and sometimes it's for a good reason and sometimes maybe it's not for such a good reason and then again there's some speculation that they kind of coordinate with different politicians as well as the media in order to really gang up on these companies and it creates a situation where it's just very toxic and the company is almost always gonna have their stock go down. But this one time the little man was able to stick it to the suits and I think a lot of people are really happy about this. At the very least it's extremely interesting and I think this might start future trends. If you think about it this is kind of an incident where investing got decentralized so instead of all these big hedge funds these really powerful people all ganging up on one company a bunch of people, a bunch of random people decided to get together and they had an idea and they sort of ganged up on the hedge fund. Is this going to start a future trend? Nobody really knows. Right now game stock is still over $300 and AMC looks like it's also climbing. I will definitely be keeping my finger on the pulse of this entire situation. It's great to see the little man get some chicken tendies, get that W against the big guys every once in a while. But let me know what you guys think down in the comments below. I've heard some really good arguments on both sides. I do think that most people are pretty happy that this happened overall. And check out my other videos right here. I made them just for you. 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