This GameStop stock fiasco is getting out of hand

The GameStop stock market fiasco has gotten so bad that the U.Due south. authorities is monitoring the state of affairs.

White House press secretary Jen Psaki told reporters on Midweek that, "our economic team, including Secretary Yellen and others, are monitoring the situation." She added, "Information technology'southward a skillful reminder, though, that the stock market place isn't the only measure of the health of our economy."

Senator Elizabeth Warren agreed with Psaki's comments, writing on Twitter that "it'south not news that the stock market doesn't reverberate our actual economy."

"For years, the same hedge funds, individual disinterestedness firms, and wealthy investors dismayed by the GameStop trades have treated the stock marketplace like their own personal casino while anybody else pays the price," she continued. "Information technology'due south long by fourth dimension for the SEC and other financial regulators to wake up and do their jobs – and with a new administration and Democrats running Congress, I intend to brand sure they do."

For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock marketplace like their own personal casino while anybody else pays the price.
— Elizabeth Warren (@SenWarren) January 27, 2022

GameStop has been at the eye of business news this week, not because of anything the company did but considering of booms in day trading that began on the subreddit r/WallStreetBets, other platforms like Robinhood, and people similar Elon Musk on Twitter. It's hard to explain for people who don't follow markets, but here'southward the rundown on why this began happening. Substantially, WallStreetBets noticed how shorted GameStop's stock (traded equally GME) was thank you to financial firms like hedge funds, which would sell stock they didn't have and so buy them dorsum at a lower cost.

This is where it gets catchy. If the stock doesn't drop when the traders have these shares that don't exist (they're typically borrowed), they get "squeezed" since they have to cover the shares they sold. They'll terminate upwardly owing money instead of earning it. GameStop is at the top of MarketWatch'south recent most shorted stocks list, followed by companies similar Bed Bath & Beyond, AMC Networks Inc., and fuboTV.

According to Motherboard, which has a smashing explainer up, GameStop was a specific target because the company issued more shares than were bachelor, so short sellers took the stock hostage. Then, WallStreetBets saw an opportunity. It's become so popular that WallStreetBets has had to monitor traffic. Reddit has also been experiencing some technical issues on Wednesday, just Reddit hasn't confirmed if it's related to increased traffic due to the GameStop story.

Gamestop Stock Google Screenshot Source: Windows CentralThe stock has skyrocketed over the by five days, although it's leveling out as of late Wed.

Now we're here but over a week later, and Gamestock is the biggest story in video games. Even CNBC commentator and Mad Coin host Jim Cramer is weighing in, telling people not to invest in GameStop.

"I've never seen the guns similar this. They can break shorts," he said.

It's tough to say whether this was a deliberate set on on hedge funds and other venture capital firms or if it was mostly a troll by a subreddit. I redditor said it was to transport a message to "market manipulators, and others agreed. Information technology'due south probable a combination of both. It'due south already had some impact, though. One of the hedge funds that was shorting GameStop, Melvin Capital, confirmed that it was closing out after suffering a huge loss. Gabe Plotkin had to raise billions in bailout money amidst the squeeze and has since left his position.

Brokerage houses like TD Ameritrade and Charles Schwab as well appear Wednesday that they are restricting trading for GameStop, AMC (another shorted stock), and others to mitigate "risk for our company and clients."

Meanwhile, at that place have been testimonials all over WallStreetBets from people who claim to take benefited greatly from the situation. I said that it was able to help them get through a "very crude twelvemonth."

GameStop itself has not all the same commented on the state of affairs.