Reddit’s group bought GameStop.
It is easy to get rich if you understand it. You could lose everything if you don’t grasp it, just as the short-term traders who bet against GameStop.
Mark Cuban, a billionaire, used to go to stamp collecting fairs as a child and realized that he could make a lot of money in this. You could purchase a stamp from one stamp dealer for 50 cents, then walk across the room and sell it to another for $ 25 because stamp dealers had different opinions about its value.
Digital markets are faster and more efficient than ever, so buyers and sellers can quickly agree on an asset’s value. Cuban states that this doesn’t mean the value is based upon any real-world calculations. It’s still as arbitrarious as the stamp price at your childhood stamp fairs, which is determined solely by beliefs.
Cuban describes the concept using the term “store value”, a financial term that refers to something that increases or maintains value over time. Cuban holds a slightly different perspective. What is a store worth its value? He writes that a store of value is an item to which a number of people attach value. They are willing to pay for it and then keep it in the hope of increasing its value.”
Gold is one example. This is used often to explain store of value. “Writes Cuban, gold bugs” would argue that gold is a store value due to its history as a currency base or actual currency use. The argument that gold is intrinsically valuable because it is? Needed for manufacturing and jewelry? Cuban says, “It’s all narration.” There are many other precious metals that can meet the same criteria. But gold is more popular. But gold has more buyers.
The possibilities are even more exciting when assets that are digital only exist in the virtual world. Cuban cites the bitcoin as an example of a digital store-of-value. An example of a digital store of value is a bitcoin. The only way to sell Moments after that time has expired is through a digital marketplace, where fans can buy and sell Moments just like they would sell baseball cards. Cuban has made investments in them and, while he won’t claim he’s made much yet, it can be very lucrative to sell them. Recently, A Moment with LeBron James was sold for $ 74,555
Cuban claims that company stock can also be a digital store for value. He argues that Wall Street has been “100% controlled by above” since its inception. “Big brokers can have calls and place price tags on millions of customers in the hope of moving the markets. But do you think it’s wrong that subreddits do the same?”
He claims that the myth that stock prices are determined by a logical calculation of their intrinsic value is just as false as gold. If stock prices were related to something tangible and intrinsic that could easily be measured, they would behave rationally and more predictably than they do. Hedge fund managers, who are definitely smart enough to take these measurements and hire people who can, would outperform S&P 500 over the long-term, rather than undervalue it as a Warren Buffett bet.
Reddit members or “subreddit” group WallStreetBets who raised the price for GameStop fully understand that the stock price of a company is determined by narrative, Cuban writes. “This generation doesn’t care about what the old Wall Street school has to say about valuations. They don’t care what the price-earnings ratio or the net present value [NPV] are. He says that Wall Street has been rewarding the wealthiest investors for many years and making small investors miserable. These narratives are sales pitches to sell stocks. They want to change the rules and kick Wall Street in the arse. They should, and they have every right to.
As GameStop’s rise has shown, small investors can be extremely powerful when they come together. Cuban writes that they will be able to leverage financial markets that are slower, more stable, and more vulnerable as they continue to collaborate.
This is a lesson you can use for your investments and your products. Do not be deceived into believing that the price of an item is determined by more than the story surrounding it and the beliefs about it. GameStop’s price rise was due to the belief that if WallStreetBets buyers purchased enough, short sellers would have to buy too, which would push the price even higher, at least temporarily. This narrative was false because it was a self-fulfilling prophecy.
The hedge fund managers’ belief that GameStop was doomed is a self-fulfilling prophecy. Although GameStop might have suffered losses due to brick-and mortar operations, it was closing them quickly and bolstering its online presence. It also recently added Ryan Cohen, Chewy founder, to its board, which suggests that there is at least some hope that the company can recover. Hedge fund managers were the only reason GameStop could be considered at risk.
Cuban is correct. It doesn’t matter if it is good or bad. It all boils down to the narrative. The story people believe most. You can control the world if you control the narrative.
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