By now, you’ve likely heard about the “battle” between the “regular people” of WallStreetBets on reddit and the “industry” of hedge funds. GameStop, a struggling retail store, found themselves in the middle of a crazy event.
Put simply, a bunch of people in that subreddit group noticed that the GameStop stock (among some others) was heavily shorted. Without going into details, it means people were betting on the share price to fall.
And it wasn’t just a little bet; the exposure was massive (over 100% of the shares, which is legal and possible).
Short Squeeze – Putting on the Pressure
So this online community made a plan to take on the Goliath of hedge funds. They would collectively buy up shares of GameStop. This makes bets that it will fall go south. In fact, it means the hedge funds are on the hook for paying the difference.
This is why shorting stocks is an extremely risky strategy that you should only do if you really understand what’s happening.
What they did is called a “short squeeze”, and it put the pressure on the hedge funds to sell out of their shorts. To do so, they end up buying back the shares, making the stock price rise again.
Since shorts are the traditional market in reverse, the “crash” it caused made the price go up. Thus, the crazy begun.
Get the (Stock) Info
Plenty of great sites have entertaining and informative analyses of the whole episode. By the time this is published, they’ll be more, as I’m sure it will change by the minute. So I’m not going to go into any more detail here.
What matters for us in the credit union world is the exposure. People are talking about the stock market. It has memes galore. It’s trending on every social media network. People. Are. Interested. In. Stocks.
So take advantage of this opportunity! Advance your mission of financial literacy and education (and get a bit more member cred) by talking about it.
- Help members understand what is happening
- Show them how they could do the same (responsibly)
- Connect them with your own investment solutions or advisors
- Create mini-quizzes to present stock concepts
- Let members discover “what kind of investor are you?” through questions
You have your member’s attention. Use it for good.
Let Me Explain
To make it easier, I said most of this in a video. Watch, learn, share, and act!
Yes, that is most definitely a Weeping Angel on my shirt. Don’t Blink.