Skip to content

The Gamestop Short Squeeze in 4 Minutes

2021-01-29 · explainer · Hank · 3:59 · watch on YouTube

Topic: Economics · mode: News analysis · tags: timely hook, self correction

Angered by a former SEC head comparing the GameStop short squeeze to the Capitol siege, Hank explains how hedge funds' bets against GameStop became promises to buy more stock than existed, how a squeeze turned into a mini pyramid scheme and gamble, and argues the instability came from hedge funds, not Reddit; manipulators should be regulated out of existence but were instead memed out of existence.

What is said

The parts of the video and what is said in each (★ — how much it matters to the video).

00:00:00 — Why Hank made the video: a former SEC head compares the GameStop squeeze to the Capitol siege

  • ★★ Hank made this video because a former head of the SEC on CNBC compared the GameStop short squeeze to the siege on the Capitol, and he got too mad. — 00:00:00
  • ★★★ Hank says it is easy to explain why it happened, why it is no reason to lose faith in the stock market, and why it is nothing like the Capitol siege. — 00:00:00
  • ★★ GameStop is a struggling mall retailer selling video games, with a business model ill suited to a pandemic or the future. — 00:00:00

00:00:29 — How the bets against GameStop, the squeeze and the mini pyramid scheme unfolded

  • ★★★ Finance people bet GameStop would fall a certain amount in a certain time; as in Vegas, more specific bets pay more, and making the bets public drives the price down. — 00:00:29
  • ★★ Others noticed GameStop was not doing that poorly (cash on hand, PS5 sales, not going bankrupt) and bought its stock, stopping the crash. — 00:00:58
  • ★★★ The worried bettors made more bets, so many that they had promised to buy more GameStop stock than exists on the market. — 00:00:58
  • ★★★ Someone noticed that unless GameStop went bankrupt or was bought by private equity within about three months, the finance guys would have to buy at any price, and others could sell to them. — 00:01:27
  • ★★ People pushed the stock price up, probably closer to what a company that is not going bankrupt should be worth. (hedged) — 00:01:27
  • ★★★ As the rise became news and drew in more people, it shifted from squeezing value out of hedge funds to a little mini pyramid scheme. — 00:01:56
  • ★★ Even from the most optimistic perspective, GameStop is worth ten times less than its current trading price. — 00:01:56
  • ★★★ Hank says GameStop's price will eventually go back down to a rational number once the squeezes run out. — 00:01:56

00:02:26 — A gamble not an investment; hedge funds, not Reddit, created the instability; regulate the manipulators

  • ★★ Hank says that on the way down people are going to lose a lot of money. — 00:02:26
  • ★★★ For everyone involved this was a gamble, not an investment. — 00:02:26
  • ★★ In the Discords where it is organized, people bully each other not to sell while quietly selling to lock in profits. — 00:02:26
  • ★★ Hank says the excitement is dangerous and addictive feedback for certain brains, his included. — 00:02:26
  • ★★ The exuberance spread elsewhere: there was no fundamental reason Dogecoin was suddenly worth more. — 00:02:55
  • ★★★ The instability was not created by Reddit but by hedge funds that promised to buy more stock than existed. — 00:02:55 · Reddit
  • ★★★ Terrible arcane systems manipulate the world for the worst people, but they are just people and decipherable, and have little to do with how the market really works. — 00:02:55
  • ★★★ The manipulating agencies should be regulated out of existence; they should not be able to do what they do. — 00:02:55

00:03:42 — Memed out of existence; people will learn how powerful they are; sign-off

  • ★★★ Instead, in this one way, the manipulators were memed out of existence by a few hundred people who figured something out and a few million mobilized in an unprecedented financial action. — 00:03:42
  • ★★★ Hank says people will eventually figure out how powerful they are, and it will be interesting to see what we do with that. — 00:03:42

In the description and comments

  • ★★ The description admits Hank is not qualified to make the video, but neither are those who manipulate markets to harm the economy for their own gain. (playful) — video description
  • ★★ In a correction comment Hank says shorting can be very good, since short sellers are incentivized to find companies' lies and faults, which is why billionaire owners hate them. — creator comment
  • ★★ In a correction comment Hank says 'more than 100%' was a simplification: for GameStop it was something like 300% of available shares. — creator comment
  • ★★ In a comment Hank calls 'investing' in the stock market fancy doublespeak: buying an asset hoping it rises, only tentatively tied to creating new value. — creator comment
  • ★★ In a comment John welcomes news-driven viewers and calls Hank's An Absolutely Remarkable Thing his favorite novel about the social internet. — creator comment · An Absolutely Remarkable Thing
  • ★ In a comment Hank says he has heard shorting helps the market value companies; he does not feel it is true but does not know. (unsure) — creator comment

Threads in this video

Where the stories that moved here went next

Mentioned

Central: GameStop · Short squeeze

Also: Organizations: CNBC · Discord · Reddit · United States Securities and Exchange Commission

Concepts: gambling · Hedge fund · Market manipulation · Pyramid scheme · regulation · Short (finance) · stock market

Places: Las Vegas

Events: January 6 United States Capitol attack

Products: Dogecoin · PlayStation 5

Only in the description or credits: An Absolutely Remarkable Thing

← Previous: The Sycamore Tree: The Anthropocene Reviewed · Next → I Predicted the Pandemic (over and over and over again)