Everybody’s been talking about GameStop this and GameStop that. Shorting stocks and hedge funds. And Reddit? Oba! But what does it all mean yet? Well thankfully we’ve got Kjnels Reima, Kleine Gemeinde church treasurer, to explain it all to us for once.
Well, so, the first thing you need to know is this is not like you’re usual stocks like stocking up on margarine containers or stocking up on used pickle jars that you rinse out and use again. This is a bit different. Let me explain.
First let’s say you want to invest in Roger’s Golden Syrup or even knackzoat, and normally, you’d just to the Co-op and back up the truck. But, let’s say, you happen to have a friend on the inside, someone who works at the zoat factory, and you happen to know that the next batch of zoat is not very good. Well, how could that be a good thing? Well, it can be if you short the stock.
Shorting a stock. It’s just like what it sounds. When the jeans are used and used and so patched up that they are barely useable then you short them. It’s simple. A pair of scissors can do it. That way, you’ve now got something valuable for using in the barn or what have you.
So, let’s say you don’t want to short a pair of jeans, but you want to short a stock. Well, you first have to got to the guy selling the knackzoat and just “borrow” the knackzoat for a while, promising to pay him back in a month or so. I know, they won’t let you do this at the Co-op, but on Wall Street, you can. Those Walls are so much more generous than the Goertzens that run the Co-op.
Anyway, you’ve got some inside knowledge that the zoat is stale, remember? So then you sell the zoat as soon as you’ve got it. Now in a month when the zoat is worthless, you buy it cheap and give it back to the guy you borrowed it from and you’ve got a profit!
So here’s the math. You borrow a bag of zoat from the Co-op, then sell it to Mr. Peters for market price of 6.99 a bag. You still owe the Co-op a bag of zoat, so you wait a month until the zoat price has sunk, buy one for 1.99 and give that to the Co-op and, Jauma, what do you know, you’ve got a profit of nearly five dollars per bag of zoat.
Now, this seems a bit mean, doesn’t it? Well that’s what the people on the message board thought. So they all banded together to buy zoat and drive the price up so that when the man went to buy a bag of zoat to pay back the one he owed, it actually cost him more, not less. Now he’s buying a bag of zoat at 21.99 and is out a bunch of money.
So, that’s it.
Oba, that was exhausting. I think I’ll head to the backyard and crack open a bag or two.
(photo credit: yoppy/CC)
