The recent fascinating GameStop saga has captivated the markets. And for a good reason. Something new in the stock market's history occurred: small Mainstreet investors took on the big Hedge funds and took Wall Street to the cleaners. But in this David versus Goliath battle, will the little guy win in the end? Please don't count on it.
I'm Curtis Chambers, CERTIFIED FINANCIAL PLANNER with the Chambers Financial Group.
Let's look at what happened with GameStop and what it means for the markets. In the final analysis, we'll see why - although this event may seem unprecedented - there's really nothing new under the stock market sun.
Back in the Roaring Twenties, "Pump and Dump" was a common scam. A group of traders would get together to manipulate a stock's price. They would pick a low priced, thinly traded stock. They'd create rumors that the price was going to rise. Then, the scammers would start buying the stock, "pumping" the stock up. When ordinary people saw this, they would then buy in, further pushing it up. When all the little investors had finished piling in at a high, the ring leaders would "dump" or sell. The stock would tumble, and the small traders would be left holding the bag.