What Happened With GameStop & How To Find the Next One
Let’s talk about GameStop! My inbox has been on fire since the video game retailer started dominating headlines. Many people are seeking clarifications and explanations about what is happening and advice on how to find the next one.
So, read on to get my take on what happened with GameStop and how to find the next one!
What The Heck Happened?!
So, what happened between Wall Street, GameStop, Reddit, Robinhood, the Securities and Exchange Commission (SEC), Elon Musk, and countless internet traders with names like “Roaring Kitty”?
Here’s my breakdown…
For a while Wall Street has been making big bets against video game retailer, GameStop, in the form of short stocks, where they borrow stocks hoping their price continues to drop so they can buy them back at the lower price, return them with a lower value, and pocket the profit.
It’s a common practice that “typically” generates Wall Street hedge funds more wins than losses.
Except some people hadn’t given up on Game Stop yet, people like internet investor and YouTuber “Roaring Kitty,” who actually starting buying GameStop stock in June of 2019 for about $5/share because he believed there was hope for the retailer and as he told The Wall Street Journal, a “gross misclassification of the opportunity.”
Then, in January of 2021 chatter around GameStop stock began building on Reddit. Internet investors that rely on online apps began buying the stock at alarming rates, rapidly and unstably driving up the price. Then, Elon Musk tweeted about it, sending even more people to dig into what was happening and join the GameStop buying train. With the stock price rapidly increasing, the Wall Street hedges had to get more at a higher price to try and protect their bet.
That’s when Robinhood, one of the most used trading apps, for internet investors, froze the ability to buy certain stocks, like GameStop and others that began to trend, such as AMC and Blackberry.
This freezing led to members of Congress and the Securities and Exchange Commission getting involved to hold hearings regarding the entire situation.
This leaves us with where we are now…a volatile market, new wanna-be investors flooding to platforms to try and join in the craze, headlines across every media channel, other random internet crazes like Dogecoin investments popping up across Reddit and memes, and everyone wants to know…what’s the next one going to be?
If you want to know how to chase the next GameStop opportunity and predict the next one, my short answer would be that you don’t.
First, the odds of the exact same thing happening again are rare. This is a pivotal moment for internet investors and Wall Street, so big that it has the power to potentially change regulations and laws in the near future, but chasing a recreation of it is not smart investing.
Could it have been an instant moneymaker for some and a devastating loss for others? Absolutely.
Is it a smart, long-term income-generating strategy? Nah.
I’m guessing most of the people chasing the next one are searching for other falling stocks that Wall Street has been short selling.
For me, I didn’t jump on GameStop, it’s too risky.
There are the polarizing opposites on both sides of this one; those who put everything in and are showing massive gains and on the flip side there are those who are dealing with a big bet gone bad.
I believe most investors, like me, lie in the middle. We aren’t in this game to be the center of life-changing, headline-grabbing events. We are in it to fund our income, pay our bills and build generational wealth. No one knows what will happen with GameStop, but for me, it’s a huge risk to take with the money we use to live our life.
And replicating it, that’s chasing a possibility that could never happen. Instead, I will choose to play the smart game. The reduced-risk, income-generating one that I’ve been teaching and practicing thus far.
I’m in this investing thing for the long-haul and will ride it in times of highs, lows, and unexplainable chaos.
My strategies are about longevity, not novelty.
If you want to join me, check out The Wealth Transfer Course, where we dive deep into everything you need to know to use investing to fund your dreams and create a legacy of wealth for the long-term.