GME Will End Badly for Whom?

The meteoric rise of GME (Gamestop) has been fund and interesting to watch.  It has been a game of chicken between the "hoard" of individual investors going long, and hedge funds going short.   The pundits are saying it will end badly for the individual investors, as the meteoric rise of GME reverses and crashes down.   Classic fundamental analysis does not justify the current GME price.

On the other hand, GME owners on WallStreetBets (WSB) appear to be a "buy and hold forever" crowd.  They only seem to acquire shares, even if it's only 1 share at a time.  If this assessment is true, the shares available for selling is declining, which will drive the price up further.   Compound this with the fact that the  WSB group also owns deep in the money call options.  When the call options execute, I expect WSB group to take possession of the shares, requiring the market makers to buy more shares, and driving the price up further.  A death spiral upwards for the hedge funds, who will either need to close their short positions (driving up prices further) or liquidate some long positions, driving down the price of those shares.

My guess is GME will end badly for the hedge funds (and other shorters) first.  Later, it will end badly for some GME owners, those who buy into the position at the higher prices.   Last, there may be some contagion as other stocks are affect by those short liquidating positions to cover the losses from shorting GME.

Maybe I'll join the autists and retards (as WSB GME owners call themselves) and buy one share.  I always have a better understanding, when I have money on the line.

For more on Reflections and Musings, check back Saturdays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2021 Achievement Catalyst, LLC