The Gamestop Saga

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Gamestop has been in the news a lot this past month. A short squeeze drove the stock price up from $17 to over $347 per share in one week. It has settled back to the low 90’s today. Hedge funds have been playing the short game for years. There is a place for shorts in the market, but not when they short over 100% of the float. As of today, the percentage of GME shares shorted is down to 88%. That is still very high. The limit should be around 50%. I’m not a big fan of Gamestop. I think they are going to have a hard time generating profits in the months and years ahead. The stock is too risky for my taste. In the end, I think the short sellers will find a way to get most of their money back and the retail investor will get left holding the bag. If anything comes from this, I hope that the SEC implements new rules to limit the percentage of shares that can be shorted.

Right now, for most of us, the stock market is the only game in town. You can make or lose a lot of money in a short amount of time. Watching a stock price go up feels like gambling. I used to get about $400 per month from a money market account. Now, I’m lucky if I get $2 each month. This is forcing everyone to invest in stocks to try and make up the difference. I say invest, but GME stock, and others like it, are being used for day trading. There is a big difference. I typically buy a stock or mutual fund and hold it for years. On occasion, I will sell a stock after a few weeks, if it has gone up enough. Those kind of stocks are only a small percentage of my holdings. The goal is to have an exit plan. You need to lock in gains and always be on the lookout for new investments with the potential to increase in value.

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