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Gamestop stock may be fundamentally worth $10, or maybe even $20 if there is some hidden value in intangibles or some future prospects. But not $400. The only question is whether those buying at $400 truly had reason to believe that it was worth that amount (which is probably unlikely). Or were they just buying in the hope that the price would go up more irrationally, allowing them to make a profit before the stock tanked?

Those that were just blindly following the crowd simply deserve what will happen to them. If they are being induced to go along with a wrongheaded purchase by some forces merely trying to manipulate the market and/or squeeze out the short sale, there may be (I’m not an attorney) illegality going on. 

Anyone with any trading acumen should have been able to see through the hype that billionaire venture capitalist Chamath Palihapitiya was peddling. He surely knows that when hedge funds do momentum trading and shorting, and when other hedge funds follow those funds, they are keenly aware of the prices of their trades related to the fundamentals of the underlying security. I can only think that his intimating that anybody could have been doing research that could validate such a price level is less than honest.

The outrage expressed by some that the broker of choice in this mania, Robinhood, was acting to support the short-selling hedge funds also has no basis. That Robinhood restricted trading in Gamestop is purely to be expected in a situation when the volume of transactions shoots the moon. The fact that they needed an immediate capital infusion of over $3 billion proves this.

At last look, the stock is selling in the $52 area. Many of the people induced to buy the stock at much higher levels have suffered severe losses, and my guess is that some pretty sophisticated investors are shorting the stock at present levels.

The lessons to be learned from this:

1) understand the real underlying value of a company before you follow the mania and buy, and 

2) before you become a big short seller, remember that old adage – “the market can remain irrational for longer than you can remain solvent”