What Is Going On With GameStop Stock? | Explained

So what is going on with GameStop stock? What has happened to the stock ticker NYSE: GME? Let’s break it down into layman’s terms and explain this roller coaster ride of a company.

GameStop Corp. went from being nearly bankrupt to seeing its shares up by 2,000% in less than a week — but how did it happen, what’s Reddit have to do with it, and is it even legal?

First, let us define some financial terms.

What Does This Have To Do With Hedge Funds?

Hedge Fund: A group of investors with large amounts of capital – think in terms of billions. These funds hire analysts to track trends in the market to “hedge” against changes in the future.

Point72 Asset Management, Melvin Capital, Citron Research, D1 Capital Partners, Maplelane Capital, and Candlestick Capital Management are all hedge funds that have suffered immense losses, some in the range of billions of dollars, due to the events that have unfolded around GameStop Corp.

How Does Short Selling Work?

Short Selling: Basically, you borrow a stock on credit, and sell it to someone else. Then, you offer to buy it back when the price decreases. Ultimately, you gain the difference in price and it has been the traditional way to gain money off a market crash or decline.

I’d recommend watching the movie The Big Short as it effectively delves into how short selling was pragmatically utilized during the Financial crisis of 2007–2008. The movie also helps to visualize how the economic collapse in America transpired.

In addition, it may be helpful to watch Season 1 Episode 4 of the HBO show Billions because the episode conveys a prime fictitious example of a short squeeze.

Short Squeeze: When two of these hedge funds get into a financial argument, one fund often shorts because they think the stock will go down, and one buys because they think it will go up. The one buying attempts to buy faster than the stock was dipping to put pressure on the shorter to buy back stock to cover its losses.

Okay, thank you for making it this far, very boring, I know.

GameStop Stock (GME) Frenzy

So what happened is there’s a group of individuals on Reddit that like to gamble on stocks (it is speculative gambling, some may argue investing, but advisors can assure you otherwise) called WallStreetBets (WSB). These guys are as young as 17 years old, using new apps like Robinhood that make investing cheap and easy.

WSB were tracking a regime change at GameStop (yes, that video game store). For those of you unfamiliar, GameStop is an American video game, consumer electronics, and gaming merchandise retailer.

What Is Going On With GameStop Stock Wolf of Wall Street

GameStop Corp. got a new investor that wanted to change the business strategy there, citing management problems being the biggest issue for the failing company. The investor started working on developing an online presence for the company to buy/rent/sell games for better prices than they were currently offering. This amelioration took the price from about $4 per share in June/July of 2020 to upwards of $10 per share in August/September of the same year.

This was a problem though… “But stocks going up are good, right?” Right… Unless you were shorting the stock due to a guaranteed decline on the back of an outdated business model turning negative revenue.

That’s right, our old friends – those aforementioned hedge funds, had shorted GME upwards of 140% of the available GameStop stock. This was actually such a heavy short that it was contributing to the decline of the stock price up until the regime change.

Meanwhile, on the subreddit WSB, some of these guys figured it out, and began buying the stock, simultaneously  encouraging others to buy as well. The stock even got an unexpected bump from Tesla’s / SpaceX’s CEO Elon Musk’s tweet.

See, the hedge funds were so confident they could keep the price down, they did not anticipate a short squeeze, but a couple hundred thousand people on the Internet got together and began squeezing anyway. And squeezing, and squeezing until BOOM…

Suddenly, GME hits all-time highs $100, $150, $200, $300, and $400 per share. At its highest peak, the company was valued high enough to be in the Fortune 500. Yes, you read that correctly. GameStop in the Fortune 500! This is all occurring while GameStop’s physical stores are closing down from lack of business during a global pandemic.

What Is Going On With GameStop Stock Fortune 500

This hit the hedge funds so hard that they borrowed (legitimately) almost 3 billion dollars to short against a couple hundred thousand guys on the Internet.

Some of these WSB guys (and teenagers) have made between $100k and $25 million. They are paying off student loans, medical bills, paying their way through college, etc.

And the hedge funds? Some of them are reporting a 100% loss (in the billions of dollars, mind you).

Why Is This Significant? Should I Care?

Why is this significant if there’s no way this can last? Yes, GME will go back down probably to $20 and there’s no way to tell when. It’s a ticking time bomb of a stock.

But, some of these same hedge funds were bailed out between 2008 and 2010 by the federal government. Guess what. These funds were just taken to the cleaners by a bunch of college-aged common folk with nothing but a free app and a Discord server so they could pay for college and also get rich.

Don’t let anyone tell you that this was some sort of illegal scheme or the poor fund managers are losing too much money. These games are played on Wall Street all the time. That’s just the way the system is set up. This anomaly proved that anything can happen.

What Is Going On With GameStop Stock Market Fire

How Much Money Are We Talking?

Here’s the original guy on Reddit posting his 20 MILLION DOLLAR gain in ONE DAY. For a grand total of 48 MILLION DOLLARS LEFT IN THE MARKET.

What Is Going On With GameStop Stock 25 Million Dollar Gain

He bought 500 call contracts (100 shares per contract ) at $0.20 per share and bought 50,000 shares at about 15 dollars per share. For context, if the trend theoretically continued, GME would hit $2k per share in a few weeks, and he will have more money than the entire market cap of GameStop was worth in July 2020.

Where To Go From Here

In modern times, it feels like everyone is day trading or hitting the jackpot. Remind yourself to stay on your own investing course. Boring and slow often is the way to wealth. These market success stories that trickle into the mainstream media are there to grab your attention.

For every person that’s winning big, there’s also someone on the other side of that coin that may have lost their shirt. You rarely hear about those stories because they are not “newsworthy”.

Some people have higher risk tolerances than others. It’s ultimately up to you to determine whether you can stomach the volatility of some of these individual stocks. Is it worth the stress? Can you sleep soundly at night?

As for FLA, we are going to continue touting the index funds that have produced sound returns since the beginning of the stock market. The great news is that we don’t have to be the world’s greatest investor to benefit from this phenomenon. I mean, if FLA lucked his way into this, I think the rest of us will do just fine.

With some of the index funds, you can also rationalize that you do in fact own a small portion of GameStop via the index, along with every other stock in the U.S. market. At least, that’s how I help myself sleep at night.

With enough time and patience, nearly every investment you hold can turn into a money printing machine. And that’s when the compound interest starts to go crazy.

End Game for GameStop Stock

The GameStop C-Suite and board of directors are indeed shareholders of GME and are most likely in awe of their stock’s dramatic increase. We can be sure they have had intense meetings to decide on the next company maneuver.

As of the recent short squeeze, there are simply not enough shares of the GameStop stock to meet the demand in the market. That’s exactly why the stock has skyrocketed. But if GameStop can fill this gap, by raising capital, selling stock, and supplying shares to the market, then they will make a hefty profit.

However, given that the shareholder base is a bunch of teenagers from a subreddit, GameStop should know better not to take money from these people at $200+ per share, let alone the huge commissions that will probably go to Wall Street in a capital raise like this.

All in all, this business is unlikely to support such a high valuation. GameStop is not suddenly the new Facebook, Apple, Amazon, Netflix, or Google. It’s still mostly a business that derives its value from brick and mortar stores in malls. If you look around, you know that this is not exactly a big growth area in the coming years.

The WSB community has made a quick buck from the power of technology and online forums, but will it change the way Wall Street operates in the future? I doubt it. To be determined.

These amateur investors have also targeted other heavily shorted names including AMC Entertainment and Bed Bath & Beyond, leaving Wall Street analysts’ targets in the dust.

Robinhood has now restricted users from buying GameStop, AMC, BlackBerry, Nokia stock to stop the madness. I do not see how Robinhood remains unscathed after limiting its users like this.

Disclosure: I / We have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. This site does not receive direct compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

What are your thoughts on the GameStop frenzy? Let me know in the comments below.

How Your DISC Personality Affects Your Spending Habits

How Your DISC Personality Affects Your Spending Habits

The DISC personality assessment shows us that there are four main quadrants or variants of personality, consisting of Dominance, Influence, Steadiness and Conscientiousness. Which category do you fall under? More importantly, how does your DISC personality affect your spending habits?

The four main DISC personality types stem between two dichotomies: Active or Passive, and Task-Oriented or People-Oriented. When combined in different ways, you get a person who responds drastically differently to a particular conversation, assignment, task, environment, or anything else.

A research white paper done by Bill J. Bonnstetter, Dave Bonnstetter and Ron Bonnstetter, PhD examines 10 different countries and their DISC profile makeup. The following chart conveys how the United States DISC profiles have changed over the last 20 years.

United States DISC Profiles Over Last 20 Years

Though it may seem shallow and superficial to categorize all human beings into only 4 categories, it really is remarkable how the combination of nature and nurture effectively influences your overall behavior.

It’s also important to remember that the DISC personality is not meant to judge, but it is intended to be utilized as a useful tool to help you deal and work with others that may or may not have the same personality as oneself.

Let’s take a look at each personality style and how it affects your spending habits.

Dominance (D)

The D-personality type characterizes people who are Direct, Decisive, and Determined.

They are both Active and Task-Oriented.

D-types ask the “what” questions, “What is the bottom line?” or ” What is in it for me?”

Those with the D (Captain) personality type, also known as Type A personality, tend to be assertive, intense, and ambitious. They are usually pragmatic, results-oriented executors who work quickly and make decisions with firmness and objectivity. With a position on the top left of the DISC, Captains prefer more independence and may be drained when others expect them to be more collaborative.

The D-type of person is most concerned with deadlines. These natural born leaders are afraid of running out of time. It’s very important for them to feel like they are in control to get things done.

Core Belief: I’m valuable if I can produce.

Here are some examples of famous celebrities with the Dominance (D) personality:

  • Barbara Walters
  • Beyoncé
  • Charlize Theron
  • Donald Trump
  • Franklin D. Roosevelt
  • Gordon Ramsay
  • Helen Mirren
  • Hillary Clinton
  • Jerry Seinfeld
  • Kamala Harris
  • Mark Cuban
  • Michael Jordan
  • Robert De Niro
  • Salma Hayek
  • Tiger Woods

Money Strengths: Dominant people love to take action. When you shop, you get things done efficiently. In-and-out. That’s also a great trait to have when others are fearful, let’s say, during a market correction. You’re not afraid to pull the trigger on buying an equity on-sale.

Money Improvement Plan of Action: You can be impulsive at times. Take a step back and take notes from observing your C-type counterparts. Do more research before blindly diving into investments you don’t fully understand. Take a breather and plan out a detailed budget. Once you lay the groundwork, you are ready to continue your “Go-Go-Go” attitude!

Influence (I)

The I-personality type characterizes people who are Interactive, Imaginative, and Involved.

They are both Active and People-Oriented.

I-types ask the “who” questions, “Who is at the meeting?” or ” Who else uses this?”

People with the I (Motivator) personality type tend to be enthusiastic, cheerful, and outgoing. They typically have an easy, relaxed, casual manner when speaking or interacting with others.

The biggest fear of each group can indicate a lot about that person. For example, the I-style’s biggest fear is rejection. It’s sort of an irrational fear because in many ways, the social butterfly I’s are the life of the party that bring a positive mood to the group or party.

Core Belief: I’m valuable if I can attract people.

Here are some examples of famous celebrities with the Influence (I) personality:

  • Bill Clinton
  • Britney Spears
  • Dick Van Dyke
  • Ellen DeGeneres
  • Elton John
  • Gene Wilder
  • Jack Black
  • Jeff Bridges
  • Jim Carey
  • John F. Kennedy
  • Justin Bieber
  • Taylor Swift
  • Robin Williams
  • Will Smith
  • Whoopi Goldberg

Money Strengths: Shopping is often a social activity for you. The positive spin here is that you know you’ll be making purchases you feel good about because you’ll have the affirmations of your friends, family, or significant other.

Money Improvement Plan of Action: Although, the 30% off deal on shoes may make you feel warm and fuzzy internally, you tend to go overboard and discover as many deals as you possibly can. Keep shopping a social event but bring a friend to hold you accountable to a limited number of purchases. Then, you will have leftover money to spend on other social activities that bring you joy, like a family-style dinner or even going out for a night on the town.

Steadiness (S)

The S-personality type characterizes people who are Sympathetic, Stable, and Sweet.

They are both Passive and People-Oriented.

S-types ask the “how” questions – “How are we going to do this?” or “How does this impact us?”

People with the S (Supporter) personality type tend to be calm, patient and respectful in their interactions with others. Rarely angered or excited, they are likely to work to maintain a peaceful and harmonious environment.

S-styles greatest fears are conflict and instability. In fact, S-styles worry about inconveniencing others or being a burden. Stability is important to S-style so it’s imperative to give them what they want. Contrary to how the S-personality thinks, conflict can be productive and healthy when working through prevalent issues.

Core Belief: I’m valuable if I can help others.

Here are some examples of famous celebrities with the Steadiness (S) personality:

  • David Beckham
  • Halle Berry
  • Jimmy Carter
  • Julia Roberts
  • Lana Del Ray
  • Mahatma Gandhi
  • Michael J. Fox
  • Mother Teresa
  • Mr. Rogers
  • Nancy Reagan
  • Nelson Mandela
  • Nicole Kidman
  • Tom Hanks
  • Stevie Wonder
  • Susan Lucci

Money Strengths: You live and die by the motto “If it ain’t broke, don’t fix it”. This is a great money-saving mindset when it comes to everyday consumer goods. Many highly regarded brands also reward these types of loyal customers with discounts and other types of dependable deals. The S-types are also aware that wealth building takes consistency – you invest periodically in the income producing assets, even when things get hectic and markets may be uncertain.

Money Improvement Plan of Action: Change can be hard for you. Although you like to stick to your guns, it can be advantageous to take the road less traveled sometimes. Look outside your comfort zones for other creative ways to invest and reduce your liabilities. And don’t be afraid to buy a new tube of toothpaste; no one should be putting in that much effort to squeeze out the last drop.

Conscientiousness (C)

The C-personality type characterizes people who are Calculating, Competent, and Cautious.

They are both Passive and Task-Oriented.

C-types ask the “why” questions – “Why does it work this way?” or ” Why is this step needed?”

Conscientiousness is the personality trait of being careful, or diligent. Conscientiousness implies a desire to do a task well, and to take obligations to others seriously. Conscientious people tend to be efficient and organized as opposed to easy-going and disorderly.

People with the C-personality type tend to be objective, skeptical, and logical in their behavior. They are usually fiercely pragmatic and frequently solve problems with an analytical, fact-driven approach. They are likely to be more reserved in groups and may take a long time before they build enough trust to open up.

A C-style person’s greatest fears are ambiguity and criticism. C’s are the biggest critics of their own work as they are often perfectionists. He or she always needs more time to perfect his or her craft. Make sure not to rush these C-types, as this is often their biggest pet peeve. Sometimes, it is necessary to constrain their time otherwise they may be working endless until the end of time. Prevent any distractions that may impede their ability to accomplish the desired task.

Core Belief: I’m valuable if I am competent.

Here are some examples of famous celebrities with the Conscientiousness (C) personality:

  • Al Gore
  • Alan Greenspan
  • Albert Einstein
  • Bill Gates
  • Diane Sawyer
  • Isaac Newton
  • J.K. Rowling
  • Jodie Foster
  • Kevin Costner
  • Mark Zuckerberg
  • Michelle Rodriguez
  • Richard Nixon
  • Tim Burton
  • Tom Brokaw
  • Warren Buffett

Money Strengths: You are thorough and careful, which helps to avoid falling for any get-rich-quick schemes. If there’s a stock you’re interested in, you’ve kept a watchful eye on the equity for countless days and have conducted all the research you possibly can conduct to minimize risk. You meticulously weigh the pros and cons before making any purchases.

Money Improvement Plan of Action: Your hesitance and precaution may be a downfall that leads to analysis paralysis. You may have missed a few once-in-a-lifetime shopping deals or stocks at an all-time low price because you were not 100% certain at the moment. While these regrets may haunt you, fret not as you can still adapt to be more decisive in the future. You always think you need more time to analyze the good and the bad. The truth is that there never is a truly “right time”. Don’t get caught up in the details; Carpe diem and chase your fiscal goals without delay!

 

How Do Personalities Differ at Work Infographic DISC Personality Spending Habits

From the above infographic, C-Suite employees have predominantly the same style personalities regardless of their country of origin. CEO’s and CFO’s in many different companies had D as their dominant personality style. Findings in the U.S. yielded similar results.

Albeit, D’s may be more geared to climb the corporate ladder, but every personality style has the capacity for excellent leadership. Moreover, every personality style lends itself to a different, but equally beneficial, leadership style.

COVID Effect on DISC Personality

The COVID-19 global pandemic is affecting every person differently. It can help to realize how you are handling the consequences.

For instance, an analytical C-style person may want to dive into the precise numbers and daily updated stats of the virus.

On the other hand, the I-style person may feel neglected and miserable from lack of social interaction with friends and loved ones.

Maybe the D-style person is demanding too much from his or her spouse and has too high of expectations of his or her kids to complete all of their schoolwork in a timely manner.

Finally, the S-style individual may have taken on a workload they can’t possibly handle, but will suffer in silence because they want to please everyone around them. 

Everyone has unique reactions to problems and issues they encounter day in and day out. It’s important to realize how we can help each other cope with the pandemic ramifications.

DISC Personality Interaction

As you would expect, the opposite personalities clash the most (i.e. D’s clash with S’s while I’s clash with C’s.)

Unsurprisingly, adjacent personalities get along more (D’s with I’s and C’s, I’s with S’s and D’s, S’s with I’s and C’s, C’s with S’s and D’s).

No matter how unique our parents or teachers tell us we are, each one of us can be categorized into four categories. At times, we may wander from one quadrant to the other depending on the situation or location (i.e. at work vs. at home), but our fundamental personalities are predominately anchored to one of the DISC letters.

Having the DISC personality information at your disposal allows you to effectively interact with different types of people as well as you possibly can. Once you can understand personalities, you can begin to depersonalize behaviors and realize a person is acting predictably based on the situation he or she is presented with.

As a result, one may decrease frustration, miscommunication, and error in judgement. This allows you to have more empathy and to improve relationships with friends, family, colleagues, and even strangers.

Where Does Your DISC Personality Fit In?

If you want to find out what DISC personality you have, feel free to take a free 5 minute DISC test right here (No email address or personal data required).

The test only consists of 28 groups of four statements.

For each group of four descriptions, you should have one most like you and only one least like you. Very simple and fun!

Which DISC Personality style are you? Let me know in the comments below.