This Twitter thread perfectly explains what's going on with the stock market and why everyone's freaking out 3 weeks ago

This Twitter thread perfectly explains what's going on with the stock market and why everyone's freaking out

Wonder why Margot Robbie in a bathtub is trending right now?

There's a lot happening with the stock market at the minute, a frenzy you could say, particularly with our old childhood haunt; GameStop. If you haven't seen The Big Short in a while, you might be confused as to why everyone is freaking out. A brief recap: The Big Short, follows a group of lads (for some reason they left out analyst, Meredith Whitney) in the run up to the US housing crisis of 2007 and the subsequent global financial crisis of 2008.

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The story follows somewhat fictionalised versions of real people concurrently, who essentially pre-empt the crash and bet against the banks in order to make a sh*t tonne of cash. They were "shorting" them.

In financial terms, to "short" or short-sell is when an investor invests in such a way that they will profit if the asset fails. In the 2015 film, these investors were betting that the housing market was about to crash, that the "bedrock" of what America was built on (the mortgage) was not long for this world. A risky move, because if they were right, everyone else would be wrong, and broke.

And yes, as we all know the housing market crashed in the US, there was a global financial crisis and banks across the world were bailed out, so they were right. If shorting a bond is a foreign concept, you're not alone, you can follow this twitter thread here, that explains things pretty well. Here's a taster below:

To give you a brief understanding of what's going on at GameStop, it's all to do with big hedge funds and individual traders being at odds. Here's the basics, GameStop was worth about $2 billion in December, by Wednesday of this week it was worth $24 billion, so what drove up the value of the stocks? Well, a couple of hedge funds began betting that GameStock was going to fail which, of course, would result in their profit. GameStop were being shorted, but why did the stock begin to rise?

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This is where Reddit and the amateur investors come into play. Armchair traders began to drive up the price, making free trades on platforms such as E-Trade and Robinhood. A lot of information is now circulating about what the motivations behind these amateurs are, on Reddit's Wall Street Bet's forum for example, there's talk of the short-squeeze happening just to stop the shorting by the big hedge funds, but you can be sure there's monetary gain involved as well as getting a 'message' across.

Whatever the motivations are behind this short-squeeze it's certainly worked. By Thursday, a trade restriction was placed on GameStop as well as other stocks that have been affected. I'm sure this has all changed in the time it's taken me to write this editorial, but it's always a good time to invest (unless it isn't) and perhaps start watching some YouTube stock experts to get in the game.

Here's a few of our picks - The Traveling Trader, Stock Moe, Sugar Mamma. Sugar Mamma is more personal finance, but there's an invaluable investing 101 section.

Happy trading!

 

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