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News

Explaining the complexity of the stock market with Lego minifigures

GameStop, Wall Street, and Reddit: a summary

By now you’ve probably seen what has been happening the past few weeks with GameStop, Wall Street, and Reddit.

Frankly, it’s a complex situation with some insane potential complications. Well, have no fear dear reader, for I am going to try and explain the situation in simple terms while still answering plenty of overarching questions.

First, an oversimplified explanation: users on a subreddit called r/wallstreetbets collectively decided to purchase GameStop (GME) stock in mass, which drove up the price per share and cost hedge funds who bet against GameStop lots of money.

Don’t worry, I’ll explain each part of that sentence.

Starting off, what is Reddit? It’s a social media site that focuses more on following communities rather than people. Imagine if Facebook only had groups, and your newsfeed was made solely of the groups you joined.

A group on Reddit is called a subreddit, they’re identified by starting with an r/. So for example a subreddit devoted to pictures of cute animals is called r/aww. Users are similarly identified by starting with u/.

These groups or subreddits are managed by moderators who manage the content for their group and establish rules for users to follow.

The subreddit in the spotlight is called r/wallstreetbets (Wall Street Bets). This group of self-described delinquents often use coarse language to make joke stocks into real purchases, often also posting the disastrous results of said jokes on their stock portfolios.

The subreddit’s description reads: “like 4chan found a Bloomberg terminal.” Their popularity exploded in April 2020 when the US stimulus checks for $600 landed, and lots of people decided to take that windfall to the trading floor to alleviate boredom and possibly make that $600 into something more reasonable.

Okay, now for the more technical stuff, the financial terminology.

r/wallstreetbets users employ a stock trading process called retail trading, which is the process of independent individuals purchasing small volumes of stock, the volume that a normal person is capable of (compared to a retirement portfolio or hedge fund, which have much more volume). They often use an app called Robinhood, which has had its problems with this community, but there are others from across the world. Essentially retail traders don’t trade stocks for a living, it’s more like purchasing a product, hence the terminology.

There is a process being employed by hedge funds and other Wall Street institutions called shorting a stock. Yes, it is the term “short” from the movie The Big Short, which is based on this mechanic. This process is why huge investment firms are losing money. It’s best explained in an analogy.

Imagine for a second that your friend collects Lego minifigures (the little plastic people). They have lots of different figures, ranging from Harry Potter all the way to Star Wars. You go onto eBay one day and see that this minifigure, the spaceman, is worth $10. You figure that the $10 is more than it will be worth in a year, after all the space race is over. Being the excellent friend you are, you ask to borrow the spaceman with the promise to return one to them in a year. They agree and lend you the figurine and you promptly sell it on eBay and pocket your $10, feeling pretty smug.

A year later you go onto eBay to fill your promise. One of two things is going to be true: 

1) Your original bet was right, the figure now costs $6, and once you purchase the figure to fulfill your obligation, you pocket a cool $4. Nice.

2) The SpaceX launches have increased the popularity of the spaceman, and now the figure costs $20 to replace. You made a promise so you’ve got to find the cash somewhere and just swallow the difference. Ouch. You’re out $10 from this transaction, but you made your promise so there’s that.

Here’s the fun part of that second scenario. The spaceman could cost anything, $20, $40, $100… You see the problem here. There’s no price ceiling. You could lose an infinite amount of money making your promise back. You only make money if the item goes down in price.

Institutional investors have been shorting GameStock stock for years. They believed that the retail games store would only fall farther and farther off, making them money. 

Up until a few days ago, that continued to be true. The members of r/wallstreetbets agreed to purchase large volumes of GameStop stock, driving up the price. This is basic economics; the more people want something, especially if there’s a limited quantity, the more money it’s worth.

The coordinated effort by the r/wallstreetbets community resulted in a stock price hike from about $77 on Jan. 25 to a peak of almost $350 on Jan. 27. That’s a 354 per cent increase.

So if you had a large bet that the GameStop price would keep going down and the day comes that your bet is due, and you saw that the price went up hundreds-fold, you’d be out a lot of money, and that’s exactly what happened.

 

 

Graphic by @ihooqstudio

GameStock: the digital revolt of the Third Estate

What are we investing in next?

Scrap New Year’s resolutions, I’m starting a new February resolution: getting financial advice from r/WallStreetBets.

By now I’m sure you’ve heard the havoc that Redditors have wreaked on the fortune of some hedge fund owners over the past week. The David and Goliath metaphor has been frequently used to describe small investors’ move to purchase GameStop (GME) stocks in hopes of taking down companies like Melvin Capital, who has lost $4.5 billion since the beginning of the month.

There has been pushback on both sides, with some saying this is just more evidence that short selling should be considered illegal, while others think rallying hordes of people to pump up the price of a stock should be considered ‘market manipulation’, which is already illegal.

What stands out to me the most in this whole fiasco is the sheer magnitude of what a group of people were able to accomplish with just their phones and a good Wi-Fi connection. 

We’re at a point in the digital era where internet users are understanding the power of public forums. Instead of being used for just individual support, these platforms are now able to reach and rally enough people to topple billion dollar hedge funds.

The internet is still in its stage of infancy; it’s still new to the world and has only recently become understood as a powerful voice for the common people. The Arab Spring in the early 2010s showed how social media could be used to carry and spread a political message more effectively than ever before.

And beyond being used as a way to round up support for a political cause, more and more people are making various types of media primary didactic tools. Recently, platforms like TikTok and Reddit have increasingly shifted into a go-to place for expert advice about anything, from legal counseling to, well, stock market investment advice.

We’ve first used the internet as a way to fast-track globalization, in connecting people from all over the world. Now that this concept is firmly anchored into our lives, online spaces are transforming into democratizing tools. 

We’re seeing a growing focus on bringing people’s strengths together to overcome others’ weaknesses and empower the ‘small guys’. The phrase “Twitter/TikTok, do your thing” to bring attention to an issue or a cause has become common on both platforms.

The soaring stock prices brought along by Redditors is more evidence of an internet revolution. Individuals mobilizing to take down Goliath-like organizations is nothing new, but it’s never been so easy to find advocates for a cause, let alone to incite action on it.

GameStop investors have begun chasing after other stocks targeted by short sellers, now attempting to short squeeze the silver trade. 

This has never happened before. Economists are uncertain what happens after a takeover like this, all possible outcomes for hedge funds and shareholders are hypothetical. But inspired by the principle behind what we’ve seen with GME, I predict more such gatherings are going to take place throughout 2021.

In the meantime, you can catch me scrolling through my newly downloaded Reddit app seeking stock symbols to invest in next.

 

 

Graphic by Taylor Reddam.

Categories
Student Life

Some handheld help for school

Screenshot courtesy of Danielle Gasher

Three apps to help you through that final end-of-semester push

It’s that time of the semester when you feel like you might be drowning. As university students are forced to juggle adult responsibilities, end-of-semester deadlines and exams, time management becomes more important than ever.

For us students, it sometimes feels like there simply aren’t enough hours in a day to tick off every item on our to-do lists.  Luckily, the app store is never short on useful apps to help guide us through our studies, and help us survive the end of our semester.

Get Revising

Screenshot courtesy of Danielle Gasher

This app and website allow you to quickly create a schedule tailored to your individual study needs. The app lets you fill in information about the classes you’re taking, your target grade and the classes and assignments you deem a ‘priority.’

Get Revising also allows you to block off time slots when you are not available to study. These blocks of time can include hours during which you have class, work or other important commitments, and the app essentially helps you work around those commitments. Deadlines and exam dates can also be added to the schedule.

Students can then choose the time they want to begin their study sesh, and set a target for the number of hours they want to dedicate to that session. The site then combines the student’s priorities, deadlines and available study time to create coherent and realistic weekly study schedule.

 Headspace

It can be difficult to set aside time for breaks during your study sessions without feeling guilty.

Sometimes, a spontaneous, 10-minute break is all you need to power through the rest of an essay that’s due tomorrow.

Here’s where the Headspace app comes in handy.  You can have access to 10 free meditation exercises, and each session is 10 minutes long and guided by the soothing British accent of former Buddhist monk, Andy Puddicombe.

The sessions guide students through the process of deconstructing, decluttering and, eventually, reorganizing their mind in a more orderly manner. This app is perfect for when students need to take a step back from homework.

The sessions are organized by levels, allowing you to work your way up to more independent meditation sessions with less guidance.  It also creates a sense of achievement as users move up through the levels. Headspace allows listeners to reap the benefits of meditating without possessing the intellectual discipline of a Buddhist monk.

 

myNoise 

Screenshot courtesy of Danielle Gasher

Even when you’re sitting at a desk with every intention of getting work done, it can be difficult to actually focus. Some people study most efficiently in complete silence. Others need a little white noise. The myNoise app and website offer a plethora of realistic soundscapes and noise generators to fill the silence in a way that won’t distract you.

Among countless others, these include natural noises, such as rain on a tent, streams or the sounds of a rainforest.  You can also choose the calming sounds of a winter walk, an exam hall or a coffee shop, or synthetic noises, such as the classic white noise generator.

Additionally, each noise is highly customizable, allowing users to manually adjust which particular sounds they want to enhance.

With a strategic schedule, a clear head and a stimulating environment, the final weeks of the semester are sure to be more bearable thanks to these helpful study apps.

These free apps are available on iTunes for both android and apple phones.  

Categories
Student Life

Top 10 best time-wasting apps

Screen cap from Candy Crush Saga, available in the AppStore.

If you have a smartphone you know that having apps basically comes as a packaged deal. Today, you can find an app for just about anything. Sadly, for a lot of us, we use these apps just to kill time. Here is a compilation of the top 10 best time-wasting apps out there:

Screen cap from Candy Crush Saga, available in the AppStore.

10. Snapchat: Take photos and videos and share them with your friends. The catch: you can only share them for up to 10 seconds. Talk about taking it all in in a matter of seconds. This app can help kill the time by getting creative in your conversations with friends. Show them instead of writing to them what you’re up to.

9. iBooks: Download and read books straight from your iPhone for free. It may not literally be a page turner, but this app will do the trick if you’ve got some free time while on the go. Catch up on some reading from a selection of bestsellers, classics, fully illustrated books and more.

8. Flow: This puzzle-like game has over 1,000 levels where the main objective is to connect matching colours with pipe. Pair the colours and cover the grid. This game starts out simple, but definitely picks up as you move on, passing the time while testing your puzzle skills.

7. Hanger:  This game app is very Spider-Man-esque in nature. Guide your stick figured buddy through 2-D levels by holding and releasing cables. Hit anything — I mean anything — and your buddy will suffer serious injuries, dribbling blood the rest of the way. But fear not, as long as your figure has a head and an arm to hold the cable you can still make it to the finish line.

6. Vine: These videos may only last a few seconds, but they get to the point of the message they’re trying send in a timely fashion. Vines, tending to last between five seconds to a full minute, display something either hilarious that everyone can relate to or instantly recognize, or merely capture a memorable moment.

5. Twitter: Thoughts and feelings expressed in 140 characters or less, Twitter has a whole world of opinions waiting to be noticed and retweeted. Short and to the point, Twitter tweets can be funny, informative, and sometimes downright weird or offensive. But with hashtags and trends forming every day, it’s an easy app to find exactly what you’re into if you need to kill time.

4. Buzzfeed: Get the stories and lists that interest you first on this app by customizing your own feed. Whether it’s 100 things you need to know or 25 things you must see, Buzzfeed will be a great source of news and entertainment to pass the time.

3. Instagram: The app that takes photos to a whole new level of creativity. Enhancements, frames, and focus capabilities offered with 20 different filters to choose from allow us to make our pictures that much more eye-catching. With hashtags as a key aspect of the app, people can search whatever they are intrigued to see.

2. Facebook: Let’s face it. Facebook is a never-ending story that you can easily get lost in for hours if you want to and even if you don’t. With more friends come more bios, pictures, pages, statuses, and — lest we forget — games. The time-killing capabilities of Facebook are truly endless.

1. Candy Crush Saga: If you aren’t already playing this game, know that you are saving yourself copious amounts of time. This addictive candy themed game is similar to the legendary game Bejeweled. The goal: line up three or more candies to either clear all the jelly or bring down the ingredients. You can also see how many you can line up in a designated time span. With hundreds of levels to play, this app is sure to keep you hooked for as long as your lives last you.

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