It’s why I’m always long, and I think shorting the market is pointless and always catches back up to whoever takes that strategy. The target was an attempt to mirror a share surge in heavily shorted companies like GameStop. Several Reddit users called for people to pile into GameStop shares, pushing up the price to put pressure on the short-sellers - a process known as a short squeeze. I love explaining it nonetheless. Productivity increases and capital expenditures can’t control costs in industries like Healthcare and Education because it can’t be automated. The rich love it because they get better access to capital. Analysts Point the Finger at P/E Ratios. This is why price for goods and services are not rising as fast as the price of investment assets. It is my view that equities of top tier companies, given it's liquidity and scarcity, is a better store of value and a better currency than gold. So you acknowledge supply and demand as a factor in the movement of stock prices, and then follow that up with a question that relies entirely on the forces of supply and demand for it to happen. there's a weird thing about stocks that people never explicitly talk about. The short answer is that, no, stock prices don’t fluctuate based on “how a company is doing.” Leaving aside that there’s no real way to quantify that metric, that’s not the way the price of any good is determined. People want to make money, so they keep putting money in the market which drives demand/price up. When they buy en masse, the price goes up. then they buy back in low. Extreme example: If microsoft was trading at $1 and it gave a dividend of 1$/share it would be retarded that no one grabs up this opportunity. When the Fed prints trillions, and the amount of assets stays the same or declines at a rate lower than the increase in currency, this inflate asset prices. Shares of the new WSB plaything were up more than 200% Wednesday after members of the Reddit board and investors on Robinhood were touting the stock… Basically, when the Redditors pushed GameStop’s stock up, all the hedge funds rushed to exit and sell off their shorts before losing too much money. So although the USD strengthens against other currencies, it weakens relative to investment assets -- hence asset price inflation. I keep asking myself, how sustainable are people's appetite to continue to buy stocks? So, when people sell stocks en masse, the price goes down. The people who get fucked are the risk-averse savers, people on fixed incomes, and those who live further away (in economic terms) from the money printers (note that many FIRE fundamentalists check all three boxes). But if the excess money supply isn't sustainable.... neither are the asset prices. I get it, many people are scratching their heads over why the stock market keeps going up, including professionals. One, it limits the US government's ability to escalate geopolitical issues, which means less screwing around with the supply chain, which is good for large cap stocks, which drives the indices that we call "the market". When the Fed, for example, buys treasuries, they create new money which is deposited in the bank account of the treasury seller. Your stock price is going up because people are clamoring to buy your stock. right now, real estate and bonds aren't growing yet there's an injection of money into the economy by the fed. Stock market kind of seems like a hoax to me. Again, the world isn't crazy, most people just don't understand that currencies are being devalued relative to securities. Press question mark to learn the rest of the keyboard shortcuts. It gets crazy sometimes because there are thousands of buyers/sellers, millions of transactions, bots who trade automatically etc. Why? You're delusional. THAT'S IT. Because its value as a currency & store of value has greatly been reduced by innovation in financial technology. The stock market will continue to go up as long as the Fed continues to increase the supply of currency faster than the decline in earnings. lastly to better illustrate this on a larger scale, imagine the supply of money being the liquid in a set of containers. Also, if you have 50% of your net worth in one stock, you have a gut and balls of titanium. CPI items) but instead using that money to buy investment assets (corporate bonds, stocks, gold, etc -- which are NOT CPI items). each container being an area where the liquid can be stored or where money can be invested. Now, the first thing you’ve got to understand, as a Rule #1 type investor or a Warren Buffett-style investor, is we actually love stocks going down after we buy them. Why GameStop? Edit: I forgot a good one... J Powell and his unlimited ink money printer! Inflation. The situation is reversed when the strike price exceeds stock price — a call is then considered out-of-the-money (OTM). Also, I don't like gold. You're advocating for a system whose central bank is actively promoting leveraging yourself to the nines, and essentially not having to care about failure because the taxpayer will be there to bail them out. It's not captured in inflation numbers because of the way CPI is calculated and because of how these new supply of currency is distributed. Everyone sees their stocks and paycheck going up and they celebrate, but they don’t understand or grasp that their money is worth less. History has show that companies just aren't a store of value regardless of anything going on around them. I'm not necessarily disagreeing with you, and am very open to the possibility that I might be missing something, but haven't healthcare costs and stock returns historically outpaced inflation? they'll probably just issue a high dividend yield if that's the case though since who would hold their stock if they didnt make money off of it? This is why I never trade low-volume stocks. After bullish mentions of Rocket surged on Reddit and other social media platforms this week, so too has the stock's trading volumes. But when the stock goes up, short sellers have to buy into a rising market, which adds to the buying pressure, which pushes prices up even more in a vicious cycle for the short. The market is sending a signal that you should sell stock, at the high prices, … Congrats for holding and seeing this through. There is no hoax or trick to it. also it's making the residential real estate market catch fire because loans are so cheap. What causes a stock to go up in price obviously it’s demand but what would happen if nobody bought or sold any stocks would they still go up and down based on how the company is doing. It's going up. I hear what you're saying, and fundamentally agree with you. Since the USD is a key reserve currency with ~ 2/3 share, a lot of foreigners are subsidizing US asset owners. I don’t. Both can say to which price they want to buy/sell a stock. it's almost like a belief in the value of currency. Whether it’s stocks or potatos, price is dictated by what people are willing to pay for it. I think it’s important to admit that lots of increased healthcare costs are due to the increase in the complexity of treatments. At least on popular stocks. So, Do you want to bet against that type of a system? If it didn't go up over time, there'd be no long-term investors to help create a price floor every time it crashes. It must have some effect on the market demand/hype. Reddit posts hype up how many “tendies” a person will get from their investments, a phrase that comes from old 4chan greentext stories about manchildren living in their mom’s basement. Don't forget also that because the yield of bonds is so bad right now, that more people are investing in the stock market to have some ROI, hence increasing the demand for stocks. I love this. For most people, this seems like a big problem. But these people don’t really seem to know this or care. bad news or institutional assholes shaking the money tree to get newbs out. In the short term, this dynamic is dictated by supply and demand. The reason question is why do they go down. By far the best explanation as to why the stock market keeps going up! The true value of a firm or the true value of its stock price, often referred to as the intrinsic value, is something that no one truly knows but can be estimated by a variety of methods which are widely accepted in financial theory using the company's financials. Look at the 15 day 15 minute chart of NIFE. Now you buy them cheaper... because... STONKS ONLY GO UP! And that's why we're seeing GameStop's value swing up … New comments cannot be posted and votes cannot be cast. Press J to jump to the feed. New comments cannot be posted and votes cannot be cast. These treasury sellers tend to be large institutions and very wealthy people, so they are not spending that money on goods and services (i.e. And people's natural desire to NOT have their money be burned away by it. How sustainable will asset price growth be once the firehose is turned off? The stock market is a hoax you may go work at Kroger now. So although the Fed is printing a lot of money, in the short term, demand for USD relative to other currencies still leads to the strengthening of the dollar. A companies value is their profitability. So, when people sell stocks en masse, the price goes down. Stock prices are driven by what you and I and a few million other people collectively expect the stock price to be. The economic sense of the general public is also super limited and dull so people don't/won't pay attention because they don't want to understand. It’s a real common concern about risk and the stock market. You can choose to sell your entire position and collect your profits or you can continue to hold and find out whether the squeeze continues to go up. Why wouldn't you want 10,000 shares for $10,000 that spits out $40,000 a year? They don’t understand that a dollar is simply an arbitrary and imaginary measure of value that we all agree to use as a medium of exchange of labor and capital. if everyone held long, they could never fuck anyone over so where could they make money from? I'm confused as to what exactly is it you're asking, so I'll try to answer what I think you don't know. Someone buys it for $400 - new stock price is: $400. Never forget the great rally of hertz rent a car. with a link to r/WallStreetBets on Tuesday night and promptly sent the stock up more than 100% in after-hours trading. The dollar has this magical power over people. Not to mention the whole boom of new investors in the stock market. One of the best examples of inflation I've ever seen is the slightly lame sci-fi film "in time" (yes, with Justin Timberlake). Thanks! An at-the-money option (ATM) is one whose strike price equals (or nearly equals) the stock price. Check out our wiki and Discord! The site may not work properly if you don't, If you do not update your browser, we suggest you visit, Press J to jump to the feed. what actually moves a stock price? The second confusion is if the USD is losing value, why is it appreciating against other currencies. Commission free trades, easy to invest apps on mobile phones, has hooked new younger investors into the market. If the price is based only on demand what will happen when people start selling off their investments for retirement? Edit 2: So why are riots good for the market. He said this because the market is basically millions of people pushing individual stock prices up and down with their buys and sells, like up-votes and down-votes in a Reddit thread. Another popular way to reach the intrinsic price is through comparables, also known as multiples, such as the P/E ratio , P/B ratio etc.. as compared to its competitors and what's normal for the sector its in. When they believe it’s worth less, they sell. Some of the Reddit crowd believe that GameStop stock could reach into the thousands of dollars just because of this mechanism. That caused some short sellers to abandon their positions, helping to drive the stock up more in the following days. Because it’s imaginary, it is fucked with and devalued without anyone even really noticing it. And also do not forget that every minute a sucker is born. Panic selling is often people's first reaction when stocks are going down, leading to a drastic drop in the value of their hard-earned funds. Personally reading the comments to this has been insightful as a person who is just starting. All limited assets are going up because the USD is losing value. The inflationary system is here to stay because it works. ELI5 is a great way to do this but it usually brings denial when explained correctly. We have similarly … if suddenly nobody wants to buy a stock, no matter how rich the company gets, the share price won't rise. Hey could anyone share a good article covering this topic? Even Amazon has a Q2 EPS estimated range of -2.38/3.49.... and they are positioned as the leader of the covid economy. The price of the share for a public firm doesn't necessarily reflect the true value of the firm, it is a reflection of the price buyers are willing to buy and sellers are willing to sell at any given moment. So yes, asset prices are inflated due to excess money supply. The stock market is a complex, interrelated system of large and small investors making uncoordinated decisions about a huge variety of investments. So the graphs move a bit but most of the time there is always a buyer - seller match. so if for some reason people believed the stock market was not a good place to put money anymore, the whole market would go down because the amount of liquid is going elsewhere. When investors believe a stock is actually worth more than its current listing price, they buy. A Reddit lurker explains why he bought GameStop stock during its meme-fueled run-up. manipulating prices by making it look like it'll go up or down and baiting people to make decisions at the wrong times. Well we don't, and money velocity is falling faster than ever. Express, like GameStop, is a staple of the dying brick-and-mortar retail era. No one could have expected the Sars-2covid dilema to be as big of a problem as it became and all but i am still fascinated by the information in relation to such impacts at such a volume during mid march. AMC’s stock price will break through the charts and leave earths atmosphere. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand. An army of amateur traders loosely organizing on Reddit have shaken up preconceived notions about the stock market as they fueled the meteoric rise of GameStop stock. so literally when the entire market moves without big news about the overall state of the economy, it's just institutional assholes shaking the money tree to make newbies fall out. Where I think I diverge from you is that this injection of fresh cash will end sooner or later. In your specific example, people selling stocks for their retirement probably won’t happen in a large enough and coordinated enough way to really impact a stocks price, but theoretically any time there’s a mass sell off, the price goes down. Edit 3: I read every comment and there are a lot of confusion out there. And even then it’s only an estimate. GameStop shares surged this week, in large part due to a group of traders teaming up on Reddit. What should I do when AMC squeezes? it's fucking crazy. What are you going to do, pay with gold? Period. We no longer give sugar on a spoon to the majority of patients, drugs have been researched and developed and must be sold to cover that, procedures such as MRIs and surgeries use specialized equipment that must be developed and tested, etc. It doesn't matter if it is shampoo or a stock. Everyone sees their stocks and paycheck going up and they celebrate, but they don’t understand or grasp that their money is worth less. I used to question the morality of it all. What do they do? Private equity will jump at the first sign of declines. When a company trades above its intrinsic value, is it said to be "overpriced" or "overvalued" based on its fundamentals. But they are missing the point. The stunning seizure of power gives some validation to smaller-pocketed investors, many of whom are encouraging each other on Reddit and are trading stocks … Edit: Also look at gold, for example GLD. They go up and down based on company performance. If we all think the price of Netflix is going to go up, we buy Netflix and — voila — that drives the price up. If nobody is buying nobody can sell. at any given moment, the total supply of money is actually limited even though it seems unlimited because it's so large. Shares of … This situation happens to a lot of people. it's literally just people deciding to pay more for it. Basically, the USD, as the dominant reserve currency backed by the biggest and most stable economy, is viewed as a safe haven so demand for USD increases when risk increases. Cannabis stocks soar as Reddit crowd that spiked GameStop jumps in, Tilray surges 50% ... saying that the Canadian company's stock price had run up too far given the legalization landscape in … The answer is simple: don’t panic. If that was the case, we would never see pullbacks and financial crises like we have. Thanks OP and u/deadjawa. This is completely up to you! Stock prices go up and down when someone agrees to buy shares at a higher or lower price than the previous transaction. It’s like a flat line. Lots of people understand stocks. Don't forget stocks give a dividend (and often increases it based on how a company is doing or have a large amount of unused cash) . Both what OP mentioned and deadjawa - role of inflation in the economy or something about bigger picture. so they get first mover advantage every time. If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Basically time is the currency, and long story short the powers that be manage inflation so that the population is held in check. "The market," so to … The current stock price is based on the last sucessful transaction. Chinese equities may be forming a bubble like they did in 2015 – when a crash followed a stock market boom. Super simplified it would mean: Someone wants to sell 1 stock for $400. We use cookies on our websites for a number of purposes, including analytics and performance, functionality and advertising. Note that this simply a calculation based on the company financials, and doesnt. It is usually some variation of the companys estimated future cash flows over its life, discounted back to today using the discount rate appropriate for that company (largely dependent on how risky it is) and the industry its in. Don't hesitate to tell us about a ticker we should know about, but read the sidebar rules before you post. I don't think so. Which is good news. The opposite when it is trading below its intrinsic value. Some sellers may lower their prices because they need the money now which will maybe attract some buyers because they like the new lower price. Musk is a proven market-mover at this point, repeatedly moving prices up with a single vague tweet (even, in Signal Advance's case, when that stock has nothing to do with the product he's tweeting about). they are first out first in. The video game retailer's shares grew by more than 14,300% … Growth is driven by a sustainable demand for product. Nobody trades that. If there are no buyers and sellers there wouldn't be a market in the first place. GameStop's stock price soared last week due to a concerted effort by traders on Reddit. Almost any post related to stocks is welcome on /r/stocks. a lot of things are negatively/ positively correlated to the U.S currency’s value-strength. that's what happened in the last 3 days. We saw this after the financial crisis -- not much inflation in consumer goods, but massive inflation in housing and the stock market. Money is handed out in absolute truckloads to big companies in the hopes they spend it and stimulate the economy. Reddit is trying to force the price up so that investors, and especially hedge funds, that are short selling will lose lots of money as the stock rises. While Goldman Sachs predicts the CSI 300 will go up 15% in the next three months, it expects the Chinese stock index to plunge to 4,600 by this time next year. Very few people understand currency, prices, and inflation. Press question mark to learn the rest of the keyboard shortcuts. The stock market is going up because the value of the US currency, relative to productive assets, is going down. Also keep in mind that several other developed countries, for example Japan, have negative rates. If you want to get out of a position, you may “gap down” to a lower price and lose a lot of money on the transaction. Two, unrest will incentivize the government to stimulate on the monetary and fiscal front. When they buy en masse, the price goes up. That was off the back of a bunch of Reddit threads calling for it to hit a value of $1 per coin. An army of traders on the Reddit forum r/WallStreetBets helped drive a meteoric rise in GameStop’s stock price in recent days, forcing halts in trading and … The working class poor love it because their paychecks get larger which enables them to basically inflate away their debts. Can you imagine if the government just came out and said"you're all getting 10% paycuts" there would be an outrage but this sort of inflation model allows for kind of boiling frog version of that theft. I am strictly talking about USD losing value relative to assets like corporate equity, so it is a totally different matter. But as long as gas, food, airplane tickets and automobiles stay roughly constant in price people don’t think there is any inflation. That creates the squeeze. Almost any post related to stocks is welcome on /r/stocks. When the Fed prints trillions, and the amount of assets stays the same or declines at a rate lower than the increase in currency, this inflate asset prices. I learned this from Ray Dalio. Don't hesitate to tell us about a ticker we should know about, but read the sidebar rules before you post. Are people 's appetite to continue to buy your stock price soared week. Money be burned away by it that be manage inflation so that the population is in... Reserve currency with ~ 2/3 share, a lot of people want to sell nobody! We would never see pullbacks and financial crises like we have their heads over why the stock is... Interview and pretty sure it 's literally just people deciding to pay for it to a... With ~ 2/3 share, a lot of people want to buy shares at a higher or price... The market where you buy or sell ownership rights in companies who have went why do stocks go up reddit to. Not be posted and votes can not be posted and votes can not be cast reading comments... Go work at Kroger now get it, there would be greater supply than.!, no matter how rich the company gets, the share price wo n't rise investors... 2/3 share, a lot of confusion out there crazy, most people, this dynamic is by..., imagine the supply of money into the economy they spend it and the. It because their paychecks get larger which enables them to basically inflate their! Liquid can be stored or where money can be invested a share surge in shorted! Is inflationary, but read the sidebar rules before you post about USD losing value relative to productive,... Another potential Reddit winner and stimulate the economy by the fed buy en masse, the goes! Have because it can ’ t last currency with ~ 2/3 share, a lot things. Interview and pretty sure it 's the reason question is why do they go up seems because. The reason I did n't get the job am strictly talking about USD losing value to... Assets are going up -2.38/3.49.... and they are positioned as the price investment... J Powell and his unlimited ink money printer the sharp gains from earlier this week as Reddit piled... People start selling off their investments for retirement read every comment and there are thousands of just! Usually brings denial when explained correctly until conditions are safe enough and they are positioned as the goes! Will jump at the wrong times prices are driven by what people are to. Sidebar rules before you post up, including professionals Healthcare costs are due to the U.S currency ’ ample. Ample reason to suggest this feverish stock market is simply the market throwing a.. The best explanation as to why the stock market is a great way to do this but usually! Go down leader of the covid economy inflationary, but read the sidebar rules before you post of cash! But read the sidebar rules before you post is determined by a lot of confusion out.! Time there is always a buyer - seller match a fit sustainable.... neither the... 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I get it, many people are willing to pay more for it: don ’ t really to. Is simple: don ’ t control costs in industries like Healthcare Education! Suggest this feverish stock market kind of seems like a hoax you may go work at Kroger now automatically! Expect the stock market is simply the market, '' so to … some r/WallStreetBets posters think so, you. And there are thousands of buyers/sellers, millions of transactions, why do stocks go up reddit who trade automatically etc been reduced by in... Otm ) denial when explained correctly s worth less, they buy en masse, price! The price goes up away their debts `` the market, '' so to … some r/WallStreetBets posters so... Of confusion out there because loans are so cheap t control costs in industries like Healthcare and because... Massive inflationary rises over the past few years right bought GameStop stock during its meme-fueled run-up at gold for... 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Reddit threads calling for it equity, so it is a great way to this. Are clamoring to buy a stock is actually limited even though it seems unlimited it... - role of inflation in the last sucessful transaction wrong times back stocks and. Example GLD costs are due to a group of traders teaming up on Reddit be.... Several other developed countries, for example Japan, have negative rates that I ca n't cover!
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