The GameStop Short Squeeze and Robinhood Issues

Published Feb 21, 2021 3 min read
Stan Corey
Brains Compliance Advisor
Man Shaking Money from Another Man

The GameStop Short Squeeze: Taking money from the poor and giving it to the rich!

A group of mostly young investors came together via a group called “WallStreetBets,” and using social media like Facebook and Reddit they were able to go against the Giants of Wall Street and upset the apple cart. The big guys, hedge funds and the like, were shorting the stocks of certain companies like GameStop in a short squeeze strategy that has them win as the value decreases. The problem was that the small investors had figured out a way to take advantage of the hedge funds strategy, and Wall Street was not happy! The hedge funds lost an estimated $70 billion! 

The other issue that came to light was that Robinhood decided to halt trading of GameStop, but only for buying. That created the opportunity for the hedge funds to recapture some of their losses. A number of other brokerage firms got pulled into the frenzy and placed restrictions on GameStop and other companies that were being “played” in this new game. So much for allowing individual investors to make their own decisions. 

In addition, Facebook and Reddit closed the chat rooms that the groups of young investors were using to communicate about the stocks. This only added to the belief that only the big guys were allowed to play in the Wall Street sandbox.

This is exactly why Brains was created, to allow young investors to participate in the markets based upon their own world view without being controlled by Big Brother. Many of the FinTech firms have evolved to attract young investors to take risks and invest in stocks and using margins to increase their buying power. However, this creates a large group of investors who may not be as sophisticated, and the majority end up loosing money, and some losing everything. 

Brains was created for those young investors who wish to direct their own investments, primarily using Brains proprietary funds, based upon their own particular view of the world. By doing so, they end up investing and building a strong base upon which to grow their financial independence. There is nothing wrong with investing in individual stocks, but doing so in a more organized and diversified manner generally will allow you to build wealth as you navigate through life’s challenges. Brains is a great place to become involved in the overall investment marketplace without worry that you will have restrictions placed upon you for doing well!

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