Gamestop Stock: The Awakening (Season 2 Finale)

GameStop stocks created a whole lot of stir and a strange new set of questions. Is this normal? Could it happen again? Should I have been a part of it?

There has been a rise in interest for investing in the stock market on a smaller scale for the average person. This interest increased more after this surge. This episode is for those that saw it happen, and have a new interest in wanting to learn about investing.

Transcript

Chris Holling: 0:00

My boss told me to have a good day. So I went home.

Sean Cooper: 0:06

I like that one.

Chris Holling: 0:08

This is kind of cool. Okay, I like this one. What do you call a dog that does magic?

Sean Cooper: 0:19

I got nothing.

Chris Holling: 0:20

Elaborate. Kadabra door dang it that's

Sean Cooper: 0:22

so hard to say.

Chris Holling: 0:24

Elaborate cadabra door.

Sean Cooper: 0:28

That's tough. That's up there with some of those. Those like tongue twisters and stuff that you're supposed to use to get your get your mouth ready for when you're going to perform or something like that.

Chris Holling: 0:39

To a tongue twister. I want to do a tongue twister.

Sean Cooper: 0:42

Yeah

Chris Holling: 0:42

because tongue twister best best. Google says the best tongue twister.

Sean Cooper: 0:50

Imagine an imaginary imaginary dang it I screwed that one up. Imagine an imaginary menagerie manager managing an imaginary Menagerie.

Chris Holling: 1:00

No. I do feel pretty confident about the old school. Peter Piper picked a peck of pickled peppers. A peck of pickled peppers Peter Piper picked. If Peter Piper picked a peck of pickled peppers, Where's the peck of pickled peppers Peter Piper picked?

Sean Cooper: 1:27

That was solid.

Chris Holling: 1:28

Thank you.

Sean Cooper: 1:29

I'm not going to do that one.

Chris Holling: 1:31

Actually, you want it? You want it you want to hear a party trick that I've got.

Sean Cooper: 1:38

Maybe

Chris Holling: 1:38

I've got this. I've got this down to muscle memory. So even like five drinks in a pretty good.

Sean Cooper: 1:44

Wow.

Chris Holling: 1:46

You want to do as you stand on one leg just because it adds for effect.

Sean Cooper: 1:50

Okay.

Chris Holling: 1:51

And then it's ZYXWVUTSRQPONMLKJIHGFEDCBA.

Sean Cooper: 2:02

Wow You've got that as well as most people have forward.

Chris Holling: 2:13

That's the problem. I don't have it forward. I don't even know how I'm gonna bounce back from that. Welcome to the truth about investing. Back to Basics. My name is Chris Holling.

Sean Cooper: 2:26

And I'm Sean Cooper.

Chris Holling: 2:27

Welcome to our season finale, our season two finale, which it's kind of wild that we got here. Actually, I feel like it's it's been. We've been we've got it. We've gone over so much stuff. In this thing. I'm, I'm I'm equally amazed that we've done so many episodes, and gone over so much stuff. And equally surprised that we we've only done two seasons, I guess is the only way to describe it.

Sean Cooper: 2:58

And how much stuff we still have listed to cover.

Chris Holling: 3:01

I know, aren't you excited. I'll bet you're excited. I bet you're super excited.

Sean Cooper: 3:05

I am excited for the rest of the stuff that we're going to cover. It's way more interesting.

Chris Holling: 3:10

So I've been boring you for a year. Is that what you're telling me?

Sean Cooper: 3:13

No, no, no, we I still had a good time. I'm just more excited for the topics that we're going to be covering.

Chris Holling: 3:19

Yeah, yeah, I think it'll be really cool. I think it's gonna be really interesting. Well, we we wanted to get together and this is a pretty simple get together on on just touching on this last season was all about framework. And we're really glad that everybody took the time to to listen to these things, make sure that you get these things figured out. Because what we want to do is we want to move forward, building into getting started in active investing. And, and having that framework set up in in the second season is an important way to be able to get started and do all of that. And I wanted to stress that for a minute and also kind of touch on a bit of a current event that happened that I'm not easily prepared. It's not like I have notes sitting here or anything but this this last week, we just had the fluctuation that was happening in the market where it was it was GameStop stocks and really other stocks too. But this this was a big one. The GameStop stock fluctuated, and that's that's also a tongue twister GameStop stock. I keep saying stock stock GameStock stock

Sean Cooper: 4:27

I'm gonna leave that to you man. I'm not going to try

Chris Holling: 4:31

but that one started fluctuating all over the place and and specifically why I wanted to touch on this today rather than just us go straight into the third season was partially to wrap up this series this season. And, and also because I had somebody that that was actually mentioning to me passively. Oh, man, are you following these things? Uh, yeah, I thought I thought the fluctuations were interesting. And he said oh doesn't it just make you want to go take some time and learn more about like stocks and investing and stuff. And so I sent him the link to the podcast, but it is not entirely fair of me to do that outright, because we also haven't touched on stocks yet. But that's, that's our next season. Not really getting into it, we will we absolutely will. And so instead, today, it's, it's gonna be it's gonna be a battle like I, I can feel it, I'm gonna I'm gonna have to like hold Sean on a leash here. But I want to talk about the fluctuation that happened a little bit on this last week so that people kind of know, what had happened in case in case you weren't paying attention to it, and how it affected the market and how some people made out from it and and made some good money in the process or might not or, or something like that, and just touch on current events, but trying to not go too far into the technicalities. Sean, because we're going to do that

Sean Cooper: 5:57

No promises

Chris Holling: 5:57

on this a future episode. Sean. Sean,

Sean Cooper: 6:02

you're not physically here to restrain me, you just have final editing, say and that's where your power really comes from.

Chris Holling: 6:08

But I, I am the king editor. If you say something

Sean Cooper: 6:12

I know

Chris Holling: 6:13

just it will just disappear, disappear into the fragment of the universe, you everybody might be listening here and then have it all of a sudden just cut from. But if you're okay with it, I haven't even taken the time to really do this. But I, I think the best thing to do is to Google what happened with GameStop stock and pull up an article somewhere, something that's relatively unbiased. And

Sean Cooper: 6:45

right. Good luck with that.

Chris Holling: 6:48

Shut up.

Sean Cooper: 6:49

Do you want me to provide a Cliff's notes version.

Chris Holling: 6:53

Yeah, why am I looking for news when I've got you

Sean Cooper: 6:56

You said you were going to so I left?

Chris Holling: 6:59

I am. And I just if if you if you just start going off on some technical stuff that that is going to be too much. I'm just going to use a safe word. How about I'll stick with pineapple juice. If I start yelling pineapple juice at you. You need to you need this. You need to realize that we're going to cover that in a future episode.

Sean Cooper: 7:20

Okay.

Chris Holling: 7:21

But yeah, give us give us the lowdown on what happened this last week with GameStop stocks.

Sean Cooper: 7:29

So very shortened version. And this is based on reading just an article Chris sent me a while ago. Well, last week, I guess about it. Basically GameStop has been suffering because sales are down, profits are down. gaming consoles are all transitioning to downloadable content. So physical discs and things like that are not in as high demand. It's all it's all used stuff at this point that they can really make transactions in. anyway, some hedge funds decided to short the stock based on the premise that they were going to continue to decline potentially even go out of business in the future. Whether or not they were had long enough positions for you know that to be realized is debatable or not, but they were selling the stock short, on the premise that it would go down, therefore they could buy it later at a lower price. It's basically doing the buy low, sell high, but in reverse order. A bunch of Reddit users got wind of it. Basically, their feathers got ruffled, and they decided, well, this is a company that we really like and we're all going to go in and buy it and there was some hype on the stock throughout Reddit. And so more people bought it and that sort of thing, essentially driving the stock up, thereby making the short sales really giant losses for the hedge funds. In fact, at the beginning of January, the stock was at like $17 a share. And it kind of went fairly flat for a couple of weeks or so. And then just a couple weeks before the end of the month is when this really started to happen. And they climbed to you know, the mid 40s 50s. And then it shot up in just a couple of days to about $470 per share. That was the day after the article Chris sent me came out and my response to Chris before I actually looked at the stock or anything was it was like that was it sounds like a good time to short it and I looked at the stock and it was 470 that morning and it dropped to almost 300 and that same day and then kind of bounced around for the next couple of days. And then as of yesterday, I think it was $90 per share again, so

Chris Holling: 9:56

Okay, we've touched on it a couple times what's shorting a stock

Sean Cooper: 9:58

shorting a stock. So I mean, the easiest way to explain it is to explain the traditional way of, of investing. I mean, typically you buy a stock and then later when you're going to exit the position, you sell it. However, if you have not purchased a stock, but you sell it, so you've sold something that you don't actually own, that would be called considered shorting it. So you're selling it short. As opposed to buying long.

Chris Holling: 10:29

Sure. Fair enough. Because if you think that it's going to go down in price later than you you would be, in theory trying to buy it later. Right?

Sean Cooper: 10:39

Exactly.

Chris Holling: 10:40

Right,

Sean Cooper: 10:40

yeah, you still have to close the position, ultimately. So they, you still have to have a buy somewhere, you still have to have a sell somewhere to, to round out the position. But in this case, they're just doing it in the opposite order. And they're, they're effectively borrowing shares, and, and selling them and they get the proceeds from it. And then eventually, they have to buy shares to return the shares that they borrowed.

Chris Holling: 11:07

Right. And so that's, that's what happens is that you had lots of lots of hedge fund managers that were happening on a stretch that they were expecting the stock to go down further. And they were, they were going to buy it when it's at that cheaper share. And then when they found out that the price had started to go up, that's when they started to lose their money in the process. Because their their bet in a way, their expectation that it was going to go down in price was incorrect, and they still have to buy those shares when that time came around. And it this this really was was kind of a fluke in the system. That's why it hit the news. And part of it was just organizing a bunch of people that were together through Reddit, and it was, it was a strange surge that happened. That's unusual. And the fact is, is that there are several people that that made a lot of money. In this process, there are several people that lost a lot of money in this process.

Sean Cooper: 12:04

Yeah, keep in mind with this type of market movement, for every person that made money, there's somebody that lost money like this, this is all netting out to zero, effectively.

Chris Holling: 12:16

Right. And, and that's, that's something that's important to understand on all levels, on the level of making sure that you want to make money on this, or on the level of making sure you're not going to lose out on money. And that comes with an understanding of how these things are going and I'm not expecting you to listen to this and, and go oh, that's what a short is, Oh, I got this. Like that's, that's not what we're getting after the fact is that we want to have the foundation from this previous season, the second season, so that you know that you can start investing, when we start getting into this third season, and we're addressing now these are the ways that you can do it, here are some of the things to watch out for. We want to make sure that when you do it, you do it intelligently. And being aware of some of these things when opportunities come up like this, because they do and clearly. They come up overnight. And strangely, there's no way anybody would have been able to say, Oh, yeah, I think in a month from now, we're gonna have a bunch of crazy redditors that gathered together and just decide to hold the line against a bunch of hedge funds. That's this stock here, money. But I mean, on the other side of that though, too, if you are attuned to it, if you are paying attention to these things, then you have a big leg up on being able to do so when you go over knowing how to invest which you can't do anything about knowing how to invest unless you have the framework, which is why the second season was so important. And I was I was reading a blip from from a book that I might buy that I haven't read it so I'm not gonna sit here and advertise or anything yet, but the blurb from it was essentially alluding to the fact that people that aren't involved in in, say hedge fund management all the time, people that are just you and me and we go to the store every day. And what's what's the term I put, I put my pants on one leg at a time or whatever, whatever the turn of phrase is. And we also have a leg up in things like investing and the stock market because we might see changes that are happening on a floor level, something that's happening in society and conversations with people in general public interest before the numbers come out. So this is not a only people that run hedge funds game that people are capable of doing. You, me Everyone is capable of doing it so long as you understand the why and the how. And that's why I thought it was important to address this current event quickly, because it's something that happened. It's something that demonstrates that it can happen randomly, and that you can also take advantage of these circumstances. But if you take advantage of it without the understanding of how it all works, you can also lose money in the process, which is why I appreciate taking the time and making sure that we are being thorough going over these things on the ins and outs and the whys and the hows and, and making sure that we give people the best information that that we can.

Sean Cooper: 15:26

Yeah, I would offer a couple of points of clarification in that. Number one, I would classify this whole thing as trading, not investing.

Chris Holling: 15:35

Sure,

Sean Cooper: 15:35

most of this

Chris Holling: 15:36

Stock market speculation

Sean Cooper: 15:37

Yeah, this is absolutely just this is speculative trading. That's all. A lot of what we will talk about is investing we'll cover the concepts of trading. Absolutely. But it is a very different mentality. It's a different way of being in the markets or being active in the markets. And then lastly, shoot, what was the. Oh, yes. So you had mentioned the idea of before the numbers are out. So technically speaking, this is acting on everything we're talking about is acting on public, publicly available information. This is all publicly available news to actually act on information that is not publicly available is called insider trading. And it's not something that we're going to be I mean, we can talk about insider trading and what it is, but it's illegal, you can't do it.

Chris Holling: 16:33

Sure.

Sean Cooper: 16:33

Speaking of illegal that,

Chris Holling: 16:36

I did not mean insider trading,

Sean Cooper: 16:39

right

Chris Holling: 16:40

Is everybody clear on that. is not what I meant at all. When I'm talking about I, I'm thinking very much like the movie Trading Places with Eddie Murphy and Dan Ackroyd Eddie Murphy's in there, he's like, Oh, no, you know, look, at this time, you know, the orange juice is about to shoot up in the market as Oh, you just made me millions of dollars. I'm saying that there's, there's a level of understanding that happens with people that are on the street, putting their their legs in their pants, one leg at a time, and

Sean Cooper: 17:09

Right,

Chris Holling: 17:09

and you can foresee some of these things. I'm not saying call your buddy. And let's, let's create an insider market, that's not what I was saying, okay?

Sean Cooper: 17:22

I didn't think you were, But I wanted to clarify.

Chris Holling: 17:24

No, I, I was saying that there, there are opportunities that are available to you that that you will possibly see that somebody else might not see. Because you're in a different perspective in the world. And that's, that's a good thing.

Sean Cooper: 17:42

Right.

Chris Holling: 17:43

And you can take advantage of those things that that was my purpose.

Sean Cooper: 17:47

Absolutely. Well, before we leave the topic of illegal though, one of the things

Chris Holling: 17:53

before we go back to the whole part where you think that you're being a good person, you're just talking about illegal stuff. I want to

Sean Cooper: 18:00

No, really. So one of the things that has come up in the the news that has followed this is the some of the legal ramifications and the investigations that are going to follow it. Because one of the the, the big questions is, has mark market manipulation been a part of this because market manipulation is illegal. So actually going out and trying to put news out there, whether it's, you know, true or not with the intent of trying to manipulate a stock's price is illegal, actually pumping the market by intentionally flooding it with buying shares and things like that, or selling shares to try to move the price and drive further action is also considered market manipulation and is illegal. So I would expect there to be some very interesting investigations that follow this action and probably are already occurring.

Chris Holling: 19:04

Yeah, I agree. I, I am kind of curious how that's, I guess provable is probably going to be the best word for it. I want to say that if I I'm not super well versed on this, but I feel like if I was remembering reading it correctly, that it was saying that the the act of of inflating the price of a stock. Jeez,

Sean Cooper: 19:33

I think what you're getting at is um considered a pump and dump strategy where you might, you know, talk a stock up, pump it up, maybe even buy some to encourage stock price movement, and then other people jump in, and they push it up further. And then you use that opportunity of the stock being up higher to sell the shares that you were trying to get rid of in the first place.

Chris Holling: 19:55

Correct. That is what I'm trying to think of. And and I'm trying to figure out out how they would prove because that's that's not what this was exactly. This was much more of a instead of a, oh, hey guys, it's gonna be great and it's gonna be, you know, the next best thing and then and then you dump that's that's the pump and dump. Whereas this is an an organized strategy where everybody knew that this wasn't, I don't know, it's it's gonna be super interesting to see how they come out with all this people that are way smarter with me smarter than I am with regulation stuff that I just, I don't know where where the technicalities fall on what is and isn't illegal on this whole thing.

Sean Cooper: 20:43

It'll really depend on what was said, on, you know, the platforms like Reddit and, you know,

Chris Holling: 20:49

right,

Sean Cooper: 20:49

what claims people were making if there were false claims, and if they're, you know, intentionally trying to drive, drive the price or anything like that. One of the hypotheticals that has been tossed out there is that it was actually the hedge fund managers that were trying to drive it up. And then by shorting it later, when the price is even higher, they make even more money. I think that's a stretch. But you know, one of the speculations and, again, it'll be it'll be based on what was said? what people actually said that the issue becomes tracking it down, since I think Reddit is anonymous, but I'm sure they still have some kind of accounts and way to track it.

Chris Holling: 21:35

Yeah, I don't know. Very interesting. Okay, whoo, wow. Rounding back to the front, having these things happen, they do happen, they will happen, and they'll continue to happen. And sometimes they're random. And sometimes you can see them coming from a mile away. But the point is, is that we want to give you every chance that we can for you to be successful in the stretch, whether it's investing or trading, to give you a better understanding of of what's happening. Because that's, that's why we're here is to help increase your, your education. And I and I touched on that, because, you know, when I say investing, and I talk about stock is the the turn of phrase is always I'm investing in the stock market. And, and I think Sean is absolutely right, that it's it's more trading than it is investing. But it it can

Sean Cooper: 22:32

It doesn't mean you can't make money off of it.

Chris Holling: 22:34

It can, it can be investing.

Sean Cooper: 22:36

Yeah, and it is a challenging part of investing. Because most the time, by the time you hear the news of something, the the potential profits, the trades, the big swings to be had on it have already come and gone, or the the different transactions become so expensive that you you can't, you can't actually make a profit, for example, in this instance, and we should probably cover options and derivatives at some point. You could also buy a put on the stock when it was high, and then you could profit from it going down, same as you would with pineapple juice, pineapple juice.

Chris Holling: 23:18

I was gonna have to reel him in, it's fine. It's fine, you're not wrong. And I'm super interested to hit on all those things.

Sean Cooper: 23:24

And my point was just that the price of the puts, had jumped to like, you know, depending on how far out you are with puts was like 130 150 bucks. So the potential that actually profit on the put became very, you know, minimal. Anyway, go ahead.

Chris Holling: 23:42

Pineapple juice.

Sean Cooper: 23:43

Yeah, go drink some.

Chris Holling: 23:48

No, that's, that's those are all great points. And again, you know, that's, that's why we want to touch on these things. Because we want you to have those options available to you that Sean's talking about

Sean Cooper: 23:57

Pun intended

Chris Holling: 23:59

Pun intended. Now it is.

Sean Cooper: 24:03

It wasn't.?

Chris Holling: 24:04

And that's, that's going to happen in the future. And we hope that you'll join us again, for that as we start to lead into some of those things in the third season. But otherwise, we we really just appreciate that you're taking time to continue to listen and appreciate the time that you're taking to continue to want to better yourself, because I feel like that's not always an easily found trait in people. And thank you for continuing to listen to us in the truth about investing back to basics. I'm Chris Holling,

Sean Cooper: 24:37

and I'm continuing to be Sean Cooper

Chris Holling: 24:40

continuing

Sean Cooper: 24:41

you just said it so many times I had to throw that at you.

Chris Holling: 24:45

I am so thrown off course now and

Sean Cooper: 24:49

you're welcome.

Chris Holling: 24:51

I am going to continue to see you it here you

Sean Cooper: 24:56

No you won't even see them and you won't hear them.

Chris Holling: 25:00

I'm going to continue

Sean Cooper: 25:01

They'll hear us, assuming they download

Chris Holling: 25:03

Shut up. I'm going to continue to talk at you in the third season and Sean will be there to. podcast disclaimer disclaimer. The disclaimer following this disclaimer is the disclaimer that is required for this podcast to be up and running and fully functioning and moving forward. This is going to be the same disclaimer that you will hear in each one of our episodes. We hope you enjoy it just as much as we enjoyed making it.

Sean Cooper: 25:42

All content on this podcast and accompanying transcript is for information purposes only opinions expressed here in by Sean Cooper are solely those that fit financial consulting LLC unless otherwise specifically cited. Chris Holling is not affiliated with fit financial consulting, LLC nor do the views expressed by Chris Halling represent the views of Fit financial consulting LLC. This podcast is intended to be used in its entirety. Any other use beyond its author's intent, distribution or copying of the contents of this podcast is strictly prohibited. Nothing in this podcast is intended as legal accounting or tax advice, and is for informational purposes only. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation. This podcast may reference links to websites for the convenience of our users. Our firm has no control over the accuracy or content of these other websites. advisory services are offered through Fit financial consulting LLC an investment advisory firm registered in the state of Washington and Colorado. The presence of this podcast on the internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute, follow up or individualized responses to consumers in a particular state by our firm in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant to an applicable state exemption for information concerning the status or disciplinary history of a broker dealer, investment advisor or their representatives. A consumer should contact their state securities administrator

Chris Holling: 27:32

Fuzzy Wuzzy was a bear fuzzy wauzzy had no hair fuzzy wuzzy wasn't fuzzy, was he?

Sean Cooper: 27:37

That ones not too tough

Chris Holling: 27:38

No, it's not. But I found it. So I wanted Okay. What is this? Betty botter bought some butter, but she said the butter is better. If I put in my batter it will make my batter bitter. But a bit of better butter will make my batter better. So twas better. Betty botter bought a bit of better butter. Whoa.

Sean Cooper: 27:57

I like that one.

Chris Holling: 27:58

Ramps up.

Sean Cooper: 27:59

Yeah.

Chris Holling: 28:00

Okay, I'll try one more time since that's the first time I've ever read it. Betty Botter bought some butter. But she said the butter is bitter. If I put it in my batter, it will make my batter bitter. But a bit of better, butter will make my batter better. So twas better Betty Botter bought a bit of better butter, butter.

Sean Cooper: 28:22

text message that helped. I think your oh that was you? I think your first one was actually better than your second one.

Chris Holling: 28:31

I think you're right. But my second one led up to that wonderful text message that was just so aggressively. The finale of that.

Sean Cooper: 28:52

Oh, speaking of I meant to tell you. My brother in law listens to our podcast.

Chris Holling: 28:57

Oh,

Sean Cooper: 28:58

and he really wants to meet you at some point. He said he thinks you're hilarious. You've got

Chris Holling: 29:02

What's his name?

Sean Cooper: 29:03

Kyle.

Chris Holling: 29:04

Kyle.

Sean Cooper: 29:05

Yeah,

Chris Holling: 29:05

Kyle your mind my new number one fan and I already like you better than Sean it's great.

Sean Cooper: 29:09

Oh, that wasn't hard. To like him better than me. I mean,

Chris Holling: 29:17

Kyle's the man. Like, Kyle, Kyle, Kyle, Kyle. Kyle Kyle Kyle

Sean Cooper: 29:25

Wow, we've really taken this too fa