The little guys start to fight back, and the oligarchy is left hurting from the bitch slap.

This post is a little tad boring in that it relates to money and how money is used to generate more money. I find that boring. I also find it trivial.

However, this mechanism is ingrained in the United States and the West as the ONLY way for people to move upward in the class-caste structure that has been constructed.

The "big news" is that "the little guy" (people who live outside the oligarchy class) have devised a way to "get even" with the wealthy oligarchy that has been "sticking it to the rest of us" for decades now. And this "get even" event is well... it's fucking awesome.

Game Stop Corp

Late in January 2021, a few amateur stock trading nerds decided to promote a stock that was heavily shortened by certain hedge funds. The idea was to raise the stock price of Game Stop Corp., a vendor for computer games, by having lots of small stock traders to buy into it. The hedge fund that shortened the stock, and thereby bet on a dropping stock price, would then make huge losses while the many small buyers would potentially profit.

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These people, who had joined up in the sub-reddit /r/WallStreetBets, were not driven by greed but by rage against the financial machine:

Instead of greed, this latest bout of speculation, and especially the extraordinary excitement at GameStop, has a different emotional driver: anger. The people investing today are driven by righteous anger, about generational injustice, about what they see as the corruption and unfairness of the way banks were bailed out in 2008 without having to pay legal penalties later, and about lacerating poverty and inequality. This makes it unlike any of the speculative rallies and crashes that have preceded it.
1990’s portrayal of teenage hackers.

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The movement was successful. The stock price of Game Stop Corp. rose from some $10 to over $400 within just a few days. The short seller had to take cover under a larger firm:

Hedge fund Melvin Capital closed out its short position in GameStop on Tuesday after taking huge losses as a target of the army of retail investors. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its finances.

Then the system hit back.

Discord, the company which hosted the server for the sub-reddit /r/WallStreetBets suddenly found that there was ‘hate-speech’ in the threads. It unplugged the server. (Discord had previously unplugged the sub-reddit /r/The_Donald.)

Glenn Greenwald @ggreenwald - 0:53 UTC · Jan 28, 2021

What an absolutely extraordinary coincidence of timing that Discord happened to decide the r/Wall Streetbets sub-reddit had too much “hate speech” to tolerate on the same day hedge fund billionaires declared them a huge threat for the crime of winning at their expense!

Next the trading app Robinhood, which many of the amateur traders use, blocked further buys into the stock:

Robinhood, the fee-free investment app that has helped Redditors and other retail investors pump dark horse stocks like GameStop, AMC, BlackBerry, and Nokia, has stopped allowing users to buy those stocks and others YOLO picks.

According to screenshots shared on social media, on Thursday morning a notification appeared on Robinhood telling users that they could close their position on GameStop's stock, but not buy any additional shares. 

Redditors are currently panicking, looking for ways to transfer their shares of GameStop off of Robinhood to other platforms, and are generally furious at the platform.

In a blog post, Robinhood confirmed that it has placed restrictions on several stocks due to volatility.

“Volatility” = the prols are messing up Wall Street by doing legal stock transactions our overlords do not like. What an irony that a company named Robin Hood is protecting the rich from the poor.

The many people who use Robinhood can now only sell their shares and not buy additional ones:

This is likely to have a massive impact on Robinhood users and ultimately the company. According to a popup on the app's homepage, 56 percent of all Robinhood users own at least some GameStop stock. They are now unable to freely trade it; the app is only allowing users to close out their positions, meaning they can sell it but not buy more. This is potentially devastating for novice investors or those who simply want to follow the general marching orders of the r/WallStreetBets subreddit, which is to hold (and buy more) GameStop stock until further notice.

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That outright manipulation of the stock markets was noticed and may even have consequences. Unlike Joe Biden it united legislators across the aisle.

Alexandria Ocasio-Cortez @AOC - 16:36 UTC · Jan 28, 2021

This is unacceptable.

We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.

As a member of the Financial Services Cmte, I’d support a hearing if necessary.

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Ted Cruz @tedcruz - 16:47 UTC · Jan 28, 2021
Retweeting @AOC
Fully agree.

House Speaker Nancy Pelosi will take care that nothing will comes from it. The system has proven again and again that it is rigged. No change to it will be condoned.

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As Glenn Greenwald noted yesterday:

Glenn Greenwald @ggreenwald - 13:49 UTC · Jan 27, 2021

To review:
- Politics is to be manipulated only by K Street.
- The stock market is to be manipulated only by Wall St.
- Dissemination of information is to be manipulated only by corporate media outlets.

Those are the rules.

The lesson they want us to learn: Don't even think of ever breaking those rules.

Posted by b on January 28, 2021 at 18:05 UTC | Permalink

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It’s all been brutal.

Furthermore, everybody “understands” what happened with GameStop.  Unlike some other Wall Street stories, this one isn’t complicated. The  entire tale, in a nutshell, goes like this. One group of gamblers  announced, “Fuck you!” Another group announced back: “No, fuck YOU!”  That’s it. Or, as one market analyst put it to me this morning, “A bunch  of guys made a bet, got killed, then doubled and tripled down and got  killed even more.”

-Suck It, Wall Street  by Matt Taibbi   

Why?

Well, because the oligarchy believe that they and their system were untouchable. That it was unassailable, and that they were forever free of the consequences of their actions. Does “Too big to fail” ring a bell.

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Guess that the response from Joe Average and Suzi Average has been a little brutal. But can you blame them?

A best-selling fiction author could not have spun a more ironic tale so completely representative of our time.

Just as an unprecedented situation—COVID and lockdowns—unfolded over the past year and led to massive gains for corporate titans like Walmart and Amazon. Meanwhile governments have crushed small businesses and individuals…

And a new, unprecedented situation has unfolded.

Spilling off the pages of Reddit to become a substantial threat to the stock market’s stability Is amazing.

It is a microcosm of this tale of big business quashing the little guy.

It is a tale of Wall Street profiting despite the best, most subversive efforts of the underdogs.

In short, what started out as a long stock play in a subreddit full of rocketship and “diamond hand” emojis and anti-elitist snark has fueled a form of class warfare that extends well beyond rhetoric.

Big Tech and Wall Street are fighting back, and right now it appears they’re winning.

But in the long run, you do know, you can only tread water only for so long.

The subreddit has shown us the way forward.

You Do Need Some Background

The background of this story may seem dry to some, but as with “The Big Short” of ’08, the full extent of malfeasance and recklessness by big Wall Street players can’t be understood without some working knowledge.

Reddit user “u/DeepF*ckingValue” has been touting the potential of GameStop (GME) for months.

Seen as a dying retail breed, its stock price had hovered around $5 per share for several years as people move away from brick and mortar for video games and more towards digital copies of games and online purchases of consoles.

Enter Ryan Cohen.

He is the founder of Chewy, which he sold for a cool $3 billion back in 2018. This was after successfully competing with Amazon for the e-commerce dog food market.

Then, after stepping away from dog food domination, he turned his sights towards GameStop. Where he endedup buying a 13 percent share in the company and joining its board of directors in mid-January.

This move boosted the stock price, but it was still trading under $20.

While a visionary joining a failing company has brought about spikes in stock price in the past, GameStop had another unique factor against it.

Its stock, GME, was shorted at an astronomical rate by several hedge funds, including Melvin Capital.

A short position is taken when a person or fund believes the stock price will go down. They borrow against the current market price with the intention of paying it back when the market price is lower.

For example;

Stock A is trading at $3. 

Bob believes it will drop to $1 and shorts 100 shares of stock. Meaning he "borrows" the 100 shares.

He “sells” those "shorted" (borrowed) stocks immediately for $300. 

In a week, if the stock price goes to $1 he can close his stock position and buy the 100 shares he “borrowed” for only $100. 

At the end of it all, Bob makes $200.

However, if a week later the price rises to $5 per share, he could close out his short position by paying $500 for 100 shares at $5 per share. In the end, he’d lose $200 on his bet.

Yikes.

But…

Bob has another option.

He can hold on to it longer.

If his short position isn’t looking too hot with a current price of $5 per share. He could stick with his short position and hope it drops back down to $3 or less sometime in the future to cover his current paper loss. The risk with this is that his loss potential is theoretically unlimited. If he holds onto his short position for another week and the stock price rises to $10, he’s even more in the red.

The longer you wait; and hold on to the stock, the greater the risk or gain.

Well, this is only one of the ways you can short a stock.

The bigger you or your fund is, the more complicated a short position can become, all the way into “naked” short (selling a stock you haven’t even borrowed yet, akin to listing and selling a home you don’t even own), which are illegal but hard to track and therefore rarely prosecuted.

SEC.gov | Naked Short Sales
https://www.sec.gov/answers/nakedshortsale.htm

2010-7-23 · In a "naked" short  sale, the seller does not borrow or arrange to borrow the securities in  time to make delivery to the buyer within the standard three-day  settlement period.As a result, the seller fails to deliver securities to  the buyer when delivery is due; this is known as a "failure to deliver"  or "fail."

Back to GameStop

GameStop was shorted at 140 percent of all the shares available to purchase, meaning it is likely more shares were shorted than there were to buy back to cover those short positions.

140 %.

140%

Think about it. 100% is all you have to work with.

This should never happen.

It suggests the types of shorts that were used were questionable at best and illegal at worst.

And the US government, and SEC looked the other way. They always “look the other way”.

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So “u/DeepF*ckingValue” and a group of redditors saw an opportunity: take advantage of those who are taking advantage.

What has unfolded over the past couple weeks has been a run on purchasing GME stock to try and buy up as much shares as possible to take advantage of this short position.

Buying all those shares naturally drove up the stock price, but it also did something else.

Every time the price went a little bit higher, hedge funds that had massive short positions took more and more of a loss as they were forced to buy an ever-increasing stock to cover their short positions.

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As reddit user u/myne put it:

[Hedge funds] short-sold AT LEAST 40% more shares than ever existed. 

They’re obliged to buy back more shares than is possible. 

The only way out of that self-made trap is a complicated mess of desperately buying, returning, rebuying from the people you borrowed them from, and returning them with losses at every step. 

Imagine if I sold you 10 cars, but only delivered 6. 

You’re standing there with your WTF face and I say ‘Hey! how much would you sell those 4 cars for?’ 

You can name your price at this point. 

I pay it. Then I ‘finish’ my ‘10 car delivery.’

At this point, some fund managers and individuals exited their short position realizing that as long as people who were long GME held their position, the stock price would continue to go up and there was nothing they could do about it.

This is known as a short squeeze.

As short positions become due and shorters have to cover these positions, they’re forced to buy at the price set by the shareholder.

Since these same shorters shorted more stock than was available to buy to try and make an extra buck, they’re now at the mercy of those holding the shares, leading to exponentially increasing prices.

Uh oh!

Punishing Hedge Funds for Cheating

While some shorters realized the potential losses could be catastrophic, others decided to double down on their position.

Melvin Capital lost 30 percent of their portfolio value by Jan. 25, or close to $4 billion. On that day, Citadel and Steven Cohen gifted Melvin Capital $2.75 billion to help cover their losses. They then doubled down on their shorts and their losses have skyrocketed.

On Jan. 25, they announced they finally exited their short positions.

This is when the war with individual retail investors started.

While it cannot be technically proven that Melvin didn’t exit their short positions, short positions on GME as a percentage of available float were still at the same 140 percent.

Statistically, this should’ve fallen off hard if Melvin really did sell their short positions. Thousands of retail investors thus doubted this news and continued to hold onto their stocks.

GME stock had continued to skyrocket.

On Friday 22JAN21, it closed at $65 per share.

One week later it closed at $345 per share.

Last night, u/DeepF*ckingValue’s initial $50,000 position grew to $50,000,000, and he’s continuing to hold.

Now, a lot of short positions will become due by the end of the week, and that’s when the much-anticipated short squeeze is expected to kick in.

What started out as a humorous stock projection has become a realistic prediction.

We might see GME share prices above $1,000. With this attention on targeting heavily shorted stocks, other stocks have seen massive gains as well, including AMC, BB, and NOSS.

Recent aftermarket trading pushed GME close to $500 and bankruptcy for funds with heavy short positions seemed to become more and more probable.

It appeared that the underdog small-time investors betting against the big hedge fund pessimists successfully dealt a blow to Wall Street know-it-alls.

Robinhood Turns on the Little Guy

Then suddenly, Robinhood suspended the ability to purchase shares of GME, AMC, and others due to “market volatility.”

Of course, you still can sell these shares, you just can’t buy them.

And what happens to a stock when you can only sell it or hold it? People sell it and losses start to pile up.

Within an hour, GME dropped from $469 to $132 and AMC dropped from $12 to $7. Several traders reported orders being cancelled.

This may seem like a responsible reaction to slow volatility, but one doesn’t need to look that deeply to see what’s really going on.

Mega hedge fund Citadel gave Melvin Capital, the company with the most to lose the higher these prices go, a $2.75 billion bailout. According to Yahoo News, “Citadel’s founder is Ken Griffin, who also founded Citadel Securities, a big investor in Robinhood that also works with TD Ameritrade and Charles Schwab.”

Citadel’s founder is Ken Griffin
Citadel’s founder is Ken Griffin.

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The company that touts “democratizing finance for all,” that many redditors have relied on to foil the fat cats’ plan to short a beloved videogame store, is really stealing from the poor to give to the rich.

Within an hour, billions have been transferred from individual retail investors to hedge fund managers in the name of Robinhood.

Its app store rating plummeted from 5 to 1.

This is a blatant act of market manipulation, and lovers of freedom on both sides of the aisle should be outraged.

In a free market, stocks should be able to be bought or sold at any time and foolish actions should reap negative consequences—even if those consequences come via spiteful “average joe” investors. Investors who’ve likely gone through a hellish year where they’ve felt squeezed and short-changed by establishment elites in government and big business.

You’re probably wondering what’s next.

That depends on the constitution of retail investors. The subredditors of r/wallstreetbets have received an overwhelming amount of support for the hold position as trade volumes indicate the price crash was caused by very few sellers but high-frequency small trades that artificially crashed the price.

This is Melvin’s/Robinhood’s/Citadel’s/Cohen’s last battle effort before the inevitable short squeeze.

As long as retail investors hold, they should see their position skyrocket.

But do they have the strength to do so as prices artificially tanked? Considering GME has recovered to $246, it appears they might. This is a once in a decade spectacle that has pitted retail investors against hedge fund managers, with irony off-the-charts: a platform called Robinhood screwing small-time investors?

Really?

Whether the trend of Big Business succeeding while the average American suffers continues through 2021 is anyone’s guess.

But we deserve a better ending than bitter irony.

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The key point in this, and the actions of the government, clearly demonstrate in clear and unambiguous terms that there are no absolute laws. There are just what they can do, and lip service about what YOU can do.

Laws? Only For You. Bend Over

Let’s start with the law: 

It is illegal to "manipulate" a stock or other security -- that is, it is unlawful to express an intent to sell or buy for any other reason than to actually sell or buy, and it is also illegal to intentionally mislead others about your reasons for doing so.

This is why “spoofing” (although almost-never prosecuted) is against the law.

“Spoofing” is the practice of laying in a bid or offer you have no intention of being filled on for the express reason of making other people think you want to sell or buy something, when in fact you want to do the opposite.  

They attempt to follow your claimed “expression of intent” only to find your offer or bid has disappeared, the price moves and they come in on the other side. 

It sounds like picking up pennies in front of a steamroller and it is, but it can be very profitable especially if your connection to the exchange is fast enough that the risk of getting filled is extremely low in that you can cancel your order before anyone can hit it.

This could be prevented on a trivial basis by the exchanges through a simple rule: 

All orders must remain valid for enough time for the signal to travel around the globe twice (once there and once back) or until executed and you may not have more open orders at any given instant than you can clear (e.g. margin capacity.)  

Now if you try to “spoof” you will get filled and the scheme fails. 

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But note that despite this being blatantly obvious not one exchange has implemented such a rule and neither has the SEC demanded it.  

Gee, I wonder why not?  Might it be that they really don't give a rats ass so long as only the "right" people cheat?

Spoofing is an extremely common practice, a practice that especially screws small retail traders because we are nowhere near as fast with our fingers as a computer and also not sitting next to the exchange either

… and a number of years ago one particular idiot was dumb enough to do it when the futures market was open over a holiday weekend. 

It was caught on video and put on Youtube, which got the CME very pissed off.

Oh by the way, they never have gone after the “big guys” doing the same thing nor changed the rules on order validity.

Just the “little guys”.

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Given how simple it would be to instantly stop this crap does that tell you everything you need to know?

But there is nothing illegal about bidding up (or shorting) a stock for a transparent and truthful reason that has nothing to do with its underlying value.  The only requirement is that you not lie; witness firms like Tesla that have crazy valuations for which there is no rational justification, or Amazon, or similar.  

They’re everywhere and always on the exchanges and always have been. 

Fundamentally a company that pays no dividend has no value beyond the liquidation value of its assets in the free market when it comes to common stock.  Therefore, if you want to get down to it every single stock that pays no dividend trades on nothing more than hype since there is no discounted cash flow to you as a holder, ever, and no expectation there will be.

That’s the dirty little secret that nobody wants to talk about when it comes to the stock market.

And that is why you can have a market that trades at 666 one year and a few years later trades at 3,700.  Did the economy expand by a factor of five over that period?  Did it even double?  Not even close.

The sort of short squeeze that we’ve seen occurred due to fraud — but not by the people causing the squeeze. 

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And don’t get your panties in a wad about this either; yes, the “at home” trading cadre has materially expanded with the pandemic lockdowns and such, and we’re sending “stimulus checks” to a lot of young adults with nothing to do with their time, so staring at a trading terminal attempting to make money sounds pretty good, especially if you win a few times.  But that’s not the whole story — not even close.

If you want to short a stock you are supposed to first borrow it. 

That is, ordinary people cannot sell what they don’t have, so if you wish to short you must first borrow that which you want to sell.  This is one of the ways brokers make money; they keep all the stock their customers have in “street name” and keep track of who has what. 

They can (and if supply is limited do) charge you to borrow that stock. 

There’s nothing wrong with this, provided the stock borrowed is real. 

It’s one of the things you agree to allow if you have a margin account; as part of the “price” of that privilege the broker can loan your stock to others for the purpose of shorting it.  However, since you own it if you demand it back because you wish to sell it the broker either has to find some other set of shares to replace what he lent out of yours or the short-seller is forcibly bought-in at the market because they have to return your shares. 

If that causes to take a loss, tough crap.

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There is an exception to this rule: 

If you are a market maker then you can short naked, that is, without borrowing first.  

Why?  Because a market maker’s job is, as the name implies, to make the market — that is, to take the other side of whatever the customer wants to do.  If I want to be long something in order to do it someone else has to sell it.  Now in the physical security market this is easy; there either is or is not what I want to buy out there on the sheet offered by someone else.  

But in the options market there is no physical security; the entirety of it is synthetic.  This means if someone wishes to buy a CALL someone else has to sell one. 

Well, that’s dangerous because naked short options positions are obligations to deliver. 

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Specifically if you are short an IBM CALL @ $100 (for example) then you are obligated to deliver 100 shares of IBM stock on demand at any time before expiration for $100 each. 

It does not matter what IBM’s stock is worth; if the holder of the CALL exercises their option you must deliver them.  If the shares cost $500 at that time you’re fucked.

Likewise I can buy a $20 PUT on some stock. This gives me the right to PUT that stock on the other person for $20/share up until expiration.  

IF the price is under $20 I of course have every reason to do that -- I can buy the shares for $10 and make you pay me $20!  

Who doesn't like that deal?  

Likewise, the market maker never wants that directional bet either since on the short side of an options trade you're obligated to perform if demanded by the long side.

Nobody would stay in business being a market maker if this sort of thing could happen to them, so as soon as they take the opposing side they execute a balancing trade on the other side.  

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In short if you’re a market maker you always want to be neutral on every security you make a market in; you make a (very) small profit on each transaction but you never, ever want to be exposed directionally because the amount you get paid is tiny compared to the risk, and one mistake will bankrupt you.

Therefore if you’re a market maker you can short without locating first for this explicit reason.  This doesn’t lead to a problem generally because nobody in their right mind as a market maker wants a directional exposure, ever.  As a result the failure to locate is transient and does not accumulate; you will lay that risk off and remove the imbalance if you have to since you can construct synthetic positions that perform financially the same as real ones.

So how do you get 140% of the available shares short? 

It would seem impossible and is…

…. unless someone cheats.

There are some players in the market who have “market maker” status but also trade their own books or have cross-interests with those who do. 

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Allegedly there are “Chinese walls” between those pieces (or interconnected entities.)  Quite obviously that is a load of crap because otherwise what you’ve seen would be impossible but it clearly not only has happened before but is still happening to this day. 

These entities are how you wind up with short sales where the locate and borrow hasn’t happened first and the position remains open across time.  This is supposed to be illegal but other than a few hand-slaps in the futures markets for physical commodities I’m not aware of any criminal prosecution for doing it.

And let’s be clear here: This practice is counterfeiting.

There is nothing wrong with borrowing a share of stock from someone and selling it, provided that if the person who you borrowed it from wants it back you are forced to deliver it.  That is, if there are 100 shares of stock in the world the only entity who have the right to control how many total shares there are is the company itself.  Provided there are 100 shares who loans them and on what terms is nobody’s business; that’s a private transaction and it’s perfectly legal.  If I own something I have the right to lend or sell it to someone on whatever terms I choose.

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But if you sell something without locating it first you are counterfeiting because you are now representing that there are 110 shares in the marketplace but the company never authorized the other 10. 

You thus are in fact diluting every one of the existing and real shares by 10% and pocketing the money from those sales.  In short you are stealing by partially destroying the value of everyone else's holdings in that stock.

Counterfeiting is a criminal offense — always and everywhere.

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So now you have some folks who have discerned that in fact there is more than 100% of the public float out short.  This cannot happen through lawful trading activity, but it leads to an interesting conundrum: If you drive the price up you force those who committed that offense to cover their bets and there aren’t enough shares to do it.  Oh, someone will eventually fork up their shares at ever-increasing prices to unwind the fraud but in the process the people who shorted naked get a telephone pole up their ass in terms of losses.

There is nothing illegal about targeting people who do this; you are not lying about your intentions and ramming someone’s criminal conduct up their ass is not only legal it’s what they deserve to have happen to them.  Remember that no company stock is actually worth anything beyond liquidation value at any instant in time when it comes to hard valuation; the entire remainder of the price is speculative premium — that is, the expression of belief in future prospects.

Further, the folks on Reddit aren’t the whole story of the pressure either. 

There appears to be a "gentleman's agreement" among hedgies that they don't go after this when done by their "friends."  The practice would never survive a day otherwise; competition is like that if it's honest competition.  The reason we ban collusion generally is because it destroys honest competition and that is bad.

But as with any thieves guild breaking ranks can make you a lot of money and when something like this gets going you can bet there are folks with lots of money happy to jump on the bandwagon and add a few telephone poles — or a few hundred — to the pile being shoved up the short side’s ass.  Why not if they can profit from it especially if they don’t get identified to the other guild members as the ones who broke ranks?

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So cry me a river, hedge fund mavens and screamers like Cramer — who, by the way, admitted on video many years ago how he used to manipulate markets before he had his own TV show.  He never went to jail for that, did he?

What’s the difference?

These folks on WSB are telling you exactly why they're doing what they're doing -- they intend to shove a telephone pole up some cheater's asses and break it off, making a profit at the same time, which is the truth.  

That's legal.  

There's no deception at all; every one of their "buy" orders is in fact a bona-fide intent to purchase and they're being entirely transparent as to why.

That their intent has nothing to do with their view of the underlying company’s value in its present state means nothing; basically zero of the stock and option trades on the market, ever, are about today’s state of a given firm — they’re all about tomorrow’s beliefs which by the very nature of that being tomorrow are speculative.

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Now one more thing: Why would Robinhood and others halt buys in a stock?

Not crank margin to 100% (or some multiple of it for a short), stop it entirely irrespective of cash in your account?

The broker does not care what the buyer and seller transact at and further, if there is no margin involved the broker also does not care if you grossly overpay and wind up with zero.  

He loses nothing and this was your own self-directed decision, not his recommendation. All an actual broker does is match buyers and sellers; they are not involved directionally.  

Well, not legally anyway.....

Further, there are claims that people not on margin were force-liquidated.  On what basis?  Legally, maybe you signed something saying they could liquidate you "if they believed you were placing at risk" or even "if they're at risk" (without you being the cause.)  

However the question still stands: Why did they liquidate the accounts if in fact they did?

National Review claims Robinhood and IB were “adults in the room.”  Bullshit.  Let me quote some of their nonsense:

Robinhood makes money by routing trades from its platform to large brokers, who compensate the company for its order flow. The larger the trading volume, the better for Robinhood. But Robinhood also makes money through various forms of lending, primarily margin lending to customers.

Which is immaterial, as they had already set margin to 100%.  In other words, there were no margin loans on GME stock.  You put up cash before you buy, or you don’t buy.  If you have an existing position you can’t borrow against it.  That’s perfectly legit and brokers do that all the time when things get volatile.

That generates no exposure for the brokerage.

From Robinhood’s perspective, the GameStop rally is beneficial insofar as it generates revenue from increased trading activity, but it is also extremely risky, because the brokerage platform is lending millions of dollars to retail investors buying a world-historically volatile stock. As more and more buyers have flocked to GameStop, Robinhood has lent out more and more money.

That’s a lie since they had already set margin to 100%.  They’re not lending money against those positions; those are cash transactions and, allegedly and if nobody is cheating, all Robinhood is doing is matching buyers and sellers.

It’s unclear how much GameStop stock Robinhood has lent to hedge funds, but whatever the amount, they’ve been lucrative, commanding as much as 80 percent in interest due to the massive amount of money betting against the stock.

Ah…. now we’re getting somewhere. 

You see, brokers do that; they lend out stock and, in cases of hard to borrow shares there is often a fee that can get quite steep.  

The brokerage would lose that income stream if the short was closed. 

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But….

…so what?  There’s no existential risk here — just lost opportunity.  Which doesn’t explain the clamp-down, does it?

NR goes on to try to excuse this as being the “adults in the room.” 

Nope.  Once you have margin set to 100% of a long position (and, I remind you, if there is no available float then you can’t short without breaking the law) then there is no risk to the brokerage.  If the bubble pops, it pops.  Your job is to match buyers and sellers and so long as you’re doing that and not doing something you shouldn’t be there is no problem.  The customer may lose his or her shirt but in a self-directed account with no margin loan outstanding against the position there is no risk to the firm provided everything you’re doing on the up and up.

THERE ARE ANSWERS TO THE “WHY” QUESTION and I’d love to hear one that doesn’t implicate criminal activity.  National Review is, to be blunt, playing cover for people; their “explanation” makes no sense.  So why publish it at all until and unless they can get the answer to the actual question: Why?

So why did certain platforms do what they did?

I’ll bet there’s a common thread in all of this, and you won’t like it if and when it comes out into public view….

Fallout

Um. Maybe. More than likely, however, nothing is going to happen.

A little review.

But so what?

Some teenagers found a missing clink in Smaug’s armor.

Smaug is portrayed as being psychopathic, extremely sadistic, confident, violent, cruel, arrogant, intelligent and greedy, possessing an unquenchable desire for gold. 

His most distinguishing characteristic (aside from his greed) is his arrogance, as Smaug proudly boasts of his superiority and impregnability to Bilbo during their encounter. 

However, this proves to be his downfall, as he unwittingly reveals the weak spot in his chest to Bilbo when showing the Hobbit how he had willfully coated…

-Smaug | The One Wiki to Rule Them All 

Smaug roared back, and burnt them all to a dark crisp. A lesson will be made of them, and business will continue as normal. Right?

Perhaps a little review about what we have been dealing with is in order.

Let’s consider the fantastic “stimulus” check that the US government ave Americans. This stimulus check per person was $600 dollars. And was intended to “help” Americans deal with being unemployed for nine months. The cost of this stimulus was $900 billion and it was labeled the ” coronavirus relief package“. The United States population is 329.45 million people. Thus, the actual and real amount that should have gone to each American should have been $2,735,000.

So, if you simply take the total amount of money allocated to helping Americans out, and divide it by the number of Americans...

...each American should get a check for $2.7 million dollars.

But truthfully, an stimulus should go to each family. Not to each individual. THis was, after all, how the United States was first intended to operate.

And since 83.68 million families were living in the United States, in 2020, each family should have been given 10,843,000 dollars US.

So, if you simply take the total amount of money allocated to helping Americans out, and divide it by the number of American families...

...each American family should get a check for $10.8 million dollars.

So why do Americans only get a fraction of that amount?

$600.

What. The. Fuck.

.

Well, it’s all fun and games.

Now, heads up, when historians write about the collapse of the United States, you can be quite sure that they will list this event as one of the signs of the eventual downfall. The sign of the pathetic attempts of the “little guys” to “take down” the massive fraud and corruption that runs rampant inside of America today.

No matter what…

Keep in mind that everyone is rooting for the little “normal” people, and enjoy seeing the oligarchy hurt. That is, everyone except the oligarchy themselves. Depending on how the government reacts, you can see this as either…

  • A minor skirmish of class warfare.
  • A pivot point that enacts some much needed change.
  • Or, a spark that contributes to a major event to follow.

Do you want more?

I have more posts in my Front Row Seat Index here…

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