February 3, 2021 • 55 mins
How did a handful of otherwise unremarkable stocks become some of the most closely watched things on Wall Street? In today's episode, the guys explore the strange series of events that led to massive price fluctuations in GameStop and more. The media portrayed this as the 'little guys' -- amateur traders -- banding together to take revenge on heartless hedge funds. But how much of this is true? What's the real conspiracy, exactly? Tune in to learn more.
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Episode Transcript
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Speaker 1 (00:00):
From UFOs to psychic powers and government conspiracies. History is
riddled with unexplained events. You can turn back now or
learn the stuff they don't want you to know. A
production of I Heart Radio. Hello, welcome back to the show.
(00:26):
My name is Matt, my name is Noel. They call
me Ben. We're joined as always with our super producer Paul.
We like the stocks decond Most importantly, you are you
who are here, and that makes this stuff they don't
want you to know. Gentlemen, one yeah, is the squeeze
cloes bro What a ride? Yes? So in an earlier episode,
(00:51):
we we referenced this episode fairly often. Actually, we explored
the concept of quote unquote economy, and in that up
episode we put out a call to all our fellow
listeners to tell us the difference between the current ideology
of the economy and the tactics of religion. At the
(01:12):
time of this recording, so far none of us have
discovered a differentiating trait. If if an economy is a religion,
and if that religion has a god, then that god
is the concept of energy over time. We'll call it value,
and exploiting that value over time is a multi billion
dollar business. And it gainst surreal pretty quickly. Like, do
(01:35):
you guys remember game stop? When's the last time we
were in a game stop? You know? I actually I
like to pop into a game stop every time I
go to a mall. Uh. And there's actually there are
some freestanding game stoff. People always assume they're only in
malls where there's one near me, um in the local
Target shopping center on Moreland Avenue in Atlanta. I don't
know why the nostalgia thing. Did you guys remember the
(01:57):
game stop used to be Babbage Is talk about? Remember
a mall store? Yes, and I too have a local
game stop, which I still frequent because I'm a thirty something.
You're old man that still plays video games. I dig it,
I dig it. I like I'm a physical copy guy,
you know what I mean, whether books or games. It's
(02:17):
the only way to make sure that you actually own
the thing you buy. It's a good point because if
you're getting it from a server situation, who knows if
the thing you get when you stream it or whatever,
or for all of a sudden be bricked because he
didn't do the latest update. So well, I guess that
could happen with discs too, but it's it's a really
good point. You make them shout out to Kendall for
their infamous deletion of George Orwell's after people bought it. UH. Look.
(02:44):
On Tuesday, the week we record this, we're recording January
twenty nine, game Stop, which is still around UH, saw
its fortunes turn in a very weird way. There's stock
price skyrocketed over the previous price, and this sent shock
waves through the stock market, through the world of finance overall.
(03:08):
And this is an ongoing event, meaning there's information on
the way that we don't have yet no one does,
and the story we're covering today continues. So by the
time this reaches the air, some of the information may
be outdated. But as the Matt Hatter says, let's start
at the beginning. We'll go through the middle and do
our best to find the end. Game Stop, Wall Street Reddit,
(03:33):
here are the facts. What the hell just happened? How
is how is this brick and mortar business suddenly one
of the hottest stocks on the planet. Yeah, it feels
very weird to even be talking about game Stop in
the news outside of something terrible happening to yet another
brick and mortar store. I don't know if any of
(03:53):
you guys got like messages from friends like what's going
on with game Stop? Because it was a little confusing.
It was like game Stop was trend and we do
something weird was going on with the stock market and
game Stop. But because of the kind of a little convoluted,
uh and and mysterious nature of the stock market, it's
not something that everybody can immediately wrap their head around.
So it definitely does do a little digging and requires
(04:16):
some kind of basic knowledge of some foundational yet very
odd concepts of the stock market. Yeah, I wanna on
that note, I want to thank everybody who reached out
via Twitter or Instagram or sent send a text. Uh.
This this story broke in the mainstream pretty much this week,
but there's there's a lot to it, and I think
(04:38):
you're right. We have to We have to first start
with the stock market, which is a ridiculous thing. We
all we all pretend it's not ridiculous, but it's it's
a ridiculous thing. So imagine your company. You have two
ways to raise money to cover your startup costs or
to grow your business. You can either borrow money that's
debt financing. Or you can sell stock, sell shares of
(05:01):
your company, that's equity financing. And a share of stock
is literally a little piece of ownership of your company,
whether that's Applebee's, whether that's Game Stock, BlackBerry, AMC Theaters, Nokia,
all the rest, all the good ones, Discovery Communications, Classic Stock. Yeah.
(05:23):
Well it's interesting too because even if you're not like,
say h, a Lion's share stockholder, you know, of a company,
you are still entitled to a lot of the same
information and uh privy to some of the same kind
of meetings that those people are. So even if you're
like just hold a little bit of stock, you get
prospectus is on what's going on with the company, um,
(05:44):
and you are able to sit in on these shareholder
meetings where like the CEO gives kind of the rundown
of what's going on with the company. And that's because
you have bought a share of the stock. So you
are you are part of you are part of the
ownership or the owner class. Uh. That means you're entitled
to a proportional fraction of the assets and the earnings
(06:06):
of that company. Assets or everything a company owns and
earnings or all the money brings in from whatever it's selling,
whether it's a product or a service. And this is
this is what happens on the stock market. The stock
market kind of mimics two other concepts. Number one insurance,
somebody cover us, somebody have our back. Number two gambling
(06:28):
Vegas baby, Uh it's uh. Wall Street is is in
some ways Vegas with a tie, you know. And an
investor uses money to support this given idea, this company,
this endeavor, and if the endeavor succeeds, the investor wins.
If it fails, the investor loses their influence. Ordinarily in
(06:52):
a basic buying a stock kind of thing, but there
are there are multiple ways to participate, to play in
this casino. For the vast majority of people, the vast
majority of individual investors what are called retail investors. This
means that you buy a certain stock at a certain price,
hopefully a low one, and then hopefully later on down
(07:14):
the line, you sell it at a higher price. So
you you get your let's see, what's what's a good one? Uh,
you get your coffee whatever, You get your coffee stock
at ten dollars, and next month you sell it for fifteen.
Good job, but as we said, that's just the beginning.
(07:35):
To understand what's happening, we have to understand the concept
of something called short selling, yeah, which is essentially the
reverse of that concept. Instead of buying low and selling high,
you're buying high and selling low. Kind of that's a little,
you know, oversimplification, but um, the idea is that you
(07:57):
borrow a stock that you don't actually own, and then
you sell it. You're making a bet that the stocks
price will go down, um, and then you can sell it.
You can return it back to the person the broker,
I guess that you've borrowed it from UM, and then
you pocket the difference in you know, in the stock
price from when you borrowed it to when the end
(08:19):
of that contract expires. It's a really weird concept, and
it's still difficult for me to wrap my head around
it necessarily UM, and so many different places have attempted
to explain it. Um. It still doesn't make sense that
there's money in it, except except for the fact that
you're the borrowing is really important, borrowing it and then
(08:43):
selling it in hopes of I I don't understand. God.
It's the old line from Popeye's right I'll gladly pay
you on Wednesday for a hamburger on Tuesday. Vulture has
a really good explanation of this that I hope is
how full for a lot of us in the audience today.
Let's say, um, Matt, Let's say Paul has a book.
(09:07):
That book is worth ten bucks. And so you go
to Paul and you say, that's that's a kick ass book.
Can I borrow it. I'm going to give it back
to you in a couple of days. And then you
take that book, which you do not own, and you
sell that book to someone else for ten dollars. That's
that's how much the book is worth. But you're thinking
(09:28):
this book is gonna be less valuable before you have
to give the book back to Paul. And so the book,
let's say the book drops um to four dollars. Everybody said,
this is not a ten dollar book. This is a
four dollar book. There's so many of them. And so
now you can go and buy the actual book for
(09:49):
four dollars and you can give it back to Paul,
and now you have six dollars. That makes so much
more sense. So that makes a much more sense. Okay,
So that's a very that's oversimplified. Um, what you're doing
in that example is you're closing that short position. You
(10:10):
were buying those shares. You're getting that book from the market,
and you're getting it cheaper than than it was when
you borrowed it and sold well. And it makes so
much more sense why you would have you know, uh,
firms that represent a bunch of people buying a ton
of stock in when they're shorting it. That makes so
(10:31):
much more sense. Okay, I would argue that the book example,
UH is almost like you're you're doing this without the
person's knowledge. You're you're you're essentially stealing their property, and
then if it doesn't work out, you're paying them back
for it without having gotten permission to sell it in
the first place. I am assuming that there is an
understanding when you're shorting these stocks that that's exactly what
(10:52):
you're going to do. This. This is a contract that
that sets some terms as to what the parameters are
around this relationship. Yeah, to make it to give people
a better sense of the stakes, let's let's get rid
of the book example and say that instead Matt has
borrowed Paul's Lamborghini and sold Paul's Lamborghini, and now as
(11:13):
ten days to find a cheaper Lamborghini because he has
to give the car back. So Jeffrey A. Borne, who
is a professor of finance and Associate dean of undergraduate
Programs in the Damore mckim's School of Business has has
a great explanation and it's it's kind of what you
were you were saying earlier, Nold. We know the way
(11:34):
to make money on the stock market is to buy low,
sell high. But you can do that in either order,
and shorting is the backwards order. That's where it gets risky. Okay,
because back to this vulture example with the book. Let's
say that Matt, the book you you got, you borrowed
ten dollar book, but now all of a sudden, a
(11:56):
few days later, it's a one thousand dollar book and
you have to buy that book. And you can only
buy it for a thousand dollars because you have to
give it back to Paul. So if the price increases
instead of declining, then you as the investor, as the
book borrower, are on the hook and you just lost money.
(12:17):
You just in this example, you just lost a ton
of money. It's a bad day to the person on
the other end doesn't matter to them because they're gonna
get the book back either way. They're gonna get the
stock back either way. They don't care what's happened in
the interim as far as they're concerned. They just let
you borrow the thing and then they get it back
no matter what. So it's up to you to make
sure that that thing is returned. It's going to be
(12:39):
returned one way or the other. There's no like, oh sorry,
I don't have it anymore that that's not part of
the arrangement. You absolutely have to get it and pay
whatever it takes to get it. But if you get
it back for cheaper, then you pocket that difference. And
that's how you make your money. And if you do
this a bunch successfully, you can make a lot of money.
But if if you're thinking at home, this sounds really
(13:00):
dodgy and kind of unethical and sort of sleazy. I mean,
there's an argument that that's the case, and it's a
very controversial practice even among high level Wall Street types.
Maybe that maybe would be considered like the ethical set
of of Wall Street. Yeah, just to jump back to
that book example of a second, if that book was
then worth a thousand dollars and then now I owe
(13:23):
I have to do like spend a grand to give
the book back to Paul. I'm definitely calling Congress or
the SEC and and asking for a bailout immediately. Oh yeah, yeah,
yeah yeah uh. And if you're the right kind of entity,
your chances of getting a bailout are much higher than
if the you know, if you were like Matt's mutual funds,
(13:44):
that's hedge funds, you probably have a better chance candidly
of getting getting some help from Uncle Sam than you
would if you were just Matt the person. So this
all brings us to Game Stop. This is the environment
in which Game Stops story is occurring. Yes, that game
Stop used to be Babbage is brick and mortar store.
They sell video games, new and used video game consoles, toys,
(14:07):
and movies. It turns out someone was attempting to short
sell game Stop, and that makes sense because game Stop
is in a mall. Game Stop is a physical store.
Those those are two very difficult things to navigate nowadays.
And as they say in Scooby Doo, the people attempting
to short sell game Stop would have gotten away with
(14:29):
it too. If it wasn't for some sharp eyed nerds,
and I say this with great affection with their eyes
on the market. There's a guy who was known as
Roaring Kitty or Deep in Value, who actually got docs recently.
So we're just gonna keep with his internet handles. Uh.
He he's the one who realized there was a hedge
(14:50):
fund shorting game stop stock. In July, he made a
video that's about an hour long where he explained his
logic and why he is bullish on the stock, which
is about I think about four dollars per share when
he recorded it. Uh, and which right right? And uh?
And we were talking earlier with with Paul and Paul
(15:15):
what was the stock at today? Did you check? Paul
has just told us the stock is as we record
at three hundred and forty eight dollars a little north
of that per share, So for four dollars to three
and forty eight dollars. Uh. This video came out in
twenty but he's been buying this stuff earlier, yes, since
(15:36):
twenty nineteen and as we record today, Uh, this kind
of packet of stocks including you know again, the whole
idea behind this this practice is to target stocks that
will likely fail to target companies that will likely fail.
It's not like doing this is going to make them
more likely to fail, because that would be extra crappy.
But it's it's it's just a practice of kind of
(15:58):
making bets that these stock and these companies are not
going to do well. So a lot of companies that
were affected by the pandemic, like Game Stop, like the
movie theater chain AMC are on the table for this
type of practice. Um So a lot of these stocks
have been bundled up and would have been widely reported
as something called a short squeeze, which is a combination
(16:21):
of it's basically a a way to screw over these
investors that make their money shorting stocks. What a step
back real quick though, because there's an important point and
I think a lot of our listeners are thinking this too,
which is what you said is absolutely correct in theory.
It's absolutely correct. However, we have to remember we're talking
(16:43):
about influence on a macro scale. If you have the
juice for it, and if you have the connections. Let's
say you're Matt's mutual fund and you're short selling books. Uh,
you can have Matts or one of Matt's employees where
someone who knows Matt from college or something go on
(17:03):
seeing it, go on Fox, go on MSNBC and say
something like, you know what sucks this book, and then
that can that can influence the price of that book,
and that does happen. Uh, there's not really. I mean
it's kind of you can see how it's tough to
regulate that. Uh, and that's yeah. Yeah, there aren't a
lot of regular folks showing up on CNBC to tell
(17:26):
you a viewer about their special stocks that they like
to trade in. Elon Musk got in trouble quite a
few times for saying things on Twitter that affected his
own stock price. Uh, and then he got in trouble
with his board and they basically said, yeah, you can't
do that. Stop stop doing that. Whether he was knowingly
doing it to game the system, as you know, he's
(17:49):
he's kind of an interesting mavericky type fellow. It's hard
to say I would lean towards he knew exactly what
he was doing. But you know, Donald Trump, for example,
and I can't think of any direct examples of um
using his presidential platform to directly call out an individual stock,
but he certainly did for sectors and certainly indicated that
you know, certain investments where we're gonna be going into
(18:11):
certain sectors, and that would absolutely affect stock prices, but
it would be harder to pend because again the language
that he used was more broad and vague. Yeah, it
gets it gets sticky real quick and does By the way,
have you guys, have you guys looked at what's been
going on with Tesla stock? Dear God, it's out of
control right, Like, it's just it's nuts. I don't like
(18:31):
I don't like being a person that thinks about stocks
a lot. I don't like this feeling that I've had
over the past couple of days thinking about money all
the time. Yeah, I don't even I don't particularly care
for casinos myself. I just, you know, if you have
fun with them, have fun with them, and just do
so responsibly. A short squeeze is another thing that's a
(18:56):
little bit difficult to regulate against. Is one a stock
or other asset has a huge jump in price, and
this forces all our book buyers in this example UH
to buy up the stock to try to stem the
flow of financial blood, and that scramble only drives the
(19:17):
stock higher and higher. And this is why At one
point recently, the cost of game Stop stock, which is
our tongue twister for the day, swared by like as
much as seventeen h percent, not a hundred and seventy
one thousand, seven zero zero percent. This can lead to
(19:38):
insane losses for those short sellers. These losses, by the way,
a little bit of foreshadowing could in theory be much
much higher than say an SEC fine for illegal market manipulation. Dude, dude,
you know what we're gonna do this Ben. Throughout this episode,
I'm just going to tell you what Game Stop stock is. Okay,
(20:00):
because we said before it's now three uh so it's
our It's like you know, obviously stocks fluctuate a ton
throughout the day, up and down like that. But we're
just gonna see where we where we land. Okay, let's
keep going, and what a good time to pause. We'll
be back after a word from our sponsor. Maybe Matt,
(20:22):
maybe you can kick us off by telling us if
the price is the same, Oh it's it's back down
now it's three fifty seven and we're back. How did
this happen? Someone got caught with their hand in the
(20:43):
cookie jar. As we said, Game Stop was ailing. A
lot of people thought it's demise was on the horizon
very near. Uh. Sales were sluggish because for all the
reasons that we just named, you don't really have to
go to a physical store to buy a new game
nowadays you can download it. Malls are the native environment
of Game Stop stores, and they were already in dire
(21:06):
straits way before a pandemic. And so traditional investors are
being rational about this and they're saying, hey, there's a
chance to do our short selling thing. But they overdid it.
In a worst case scenario, a lot of folks will
tell you that somewhere around five to ten of a
stock could be shorted. This was not the case with
(21:26):
Game Stop. No, those investors shorted one of Game Stop
stock more than one, and then and then it went
to more, and then you just kept going. But I
don't understand, how is there not a ceiling? How can
the I be Nope, sorry, the markets closed on Game Stop.
(21:46):
You can't do anymore. It's like it's like overselling a concert.
I've never understood how you can over sell a concert,
or it's on an airline. It just seems like the
very basic level of green kind of I don't know
what it is. So they're borrowing these shares, right, so
they're borrowing more shares than actually exists. And people initially
(22:11):
didn't really didn't really heed what Roaring Kitty or df
V was saying. He invested fifty three thou dollars in
the beginning, and people were kind of mocking them and
they were like, oh, wow, you're crazy. I mean, yolo
do you bro, but don't expect much. And then online
forms specifically read It eventually had his back and an
(22:31):
online community of stunk watchers that's s t O n
k Uh saw an opportunity to do a couple of
things with GameStop picture and you can see the memes
picture the famous Heath Ledger take on the Joker in
the Nolan Dark Knights series saying, it's not about the money,
(22:53):
it's about sending a message. Yeah, or the the other
Joker from the Joker. There's a fantastic video that you
can find online or it's I guess it's more of
a gift that's animated, but that goes throughout the whole
scene there at the end where the Joker does some
the thing that he does on that show. You know,
what I'm talking about. Uh, it's it's just fantastic, and
(23:16):
it does speak to millennials and people who are younger
than us, and it really hits home and it makes sense.
Why why a group of folks who are investing on
their own and don't have a lot of assets to
their name, and don't feel like they don't have a
lot of opportunities because the situations have changed since their
(23:39):
previous generation, Why that group of people would want to
do this? Yeah? Yeah, they had a couple of reasons.
Of course, there's there's a there's a profit motive, right,
we could make some money off of this. Uh. There's
also this ideological push that has has some kind of
like cognitive DNA in common with Occupy Wall Street if
(24:02):
anybody remembers that from a thousand years ago. Now, Uh,
they wanted to damage these hedge funds that make billions
of dollars by betting on the failures of these companies.
They also wanted to troll this industry, and frankly, if
you talk to a lot of people involved, they'll say
they like games stop, they have nostalgia for it, just
(24:25):
like many of us listening today. We like the stock
and they also wanted to show the collective power that
people without millions of dollars of capital could could exert
if they worked together. And that's where that's where a
subreddit called Wall Street mets comes in. And uh, you know,
(24:45):
we've all been having various conversations about this off air.
Wall Street mets is is getting portrayed in a weird
way in the mainstream media in some ways that are
either intentionally or accidentally misleading. But it it's a lot
of people who are identifying themselves as day traders or
retail investors, and they were keeping an eye on these
(25:07):
companies that had a lot of stock shorted, and they
coordinated their efforts having d f vs back to buy
tons and tons of Game Stop stock as much as
they could, and they wanted to to drive up the
price for this hedge fund and make it very expensive
(25:29):
for them to buy back these stocks and make good
on their short positions. That's the short squeeze, and it
it kind of well, the story is not over yet,
but it kind of worked. Financial data companies estimate short
sellers lost upwards of seventy billion dollars so far just
because of this short squeeze on Game Stop and on
(25:53):
other stocks. But this is not the crazy part. Let's
look at what happens uh, At what Wall Street did,
how they reacted when peasants invaded the casino. Here's where
it gets crazy. Yes, enter robin Hood, an app that
many of you may have heard of from this very show,
(26:13):
because we in fact have done some advertising with robin
Hood in the past. Robin Hood is a investment tool
APP that folks are able to use to kind of
get dip their toe into the stock market. It's sort
of presented as like for the people. Uh. They very
much aligned themselves with kind of the aftermath and the
(26:34):
fallout uh and public sentiment towards Wall Street after the
Occupy Wall Street movement. UM and and very much capitalized
on that, you know, the idea of robin Hood robbing
from the rich and giving to the poor or the people.
It's anyone's market out there, right. But unfortunately, the this
particular story, UH put some cracks in that facade that
(26:54):
they've tried so desperately to to cultivate. UM. Many of
the retail investors that drove up the price of Game
Stop and others in these bundles of short squeeze UM
positions were using robin Hood to do so. UM the
retail investors noticed something odd though, when this all started
to hit the fan. Robin Hood and other brokers like them,
(27:18):
we're restricting these stocks in kind of weird ways. And
when we say restricting we literally mean they were not
allowing users to buy them some to some users right
to buy existing game stop stock. It would only allow
them to sell the positions that they already had. UM
(27:40):
why would they do this, you might ask, was it
out of like some sort of you know, sense of
justice for the financial market to know this will not stand,
or is there something deeper at play, or you know,
why wouldn't they see this as a positive, Because it
really is an example of the poor rising up and
(28:01):
robbing from the rich. Is exactly what robin Hood as
an icon stands for. UM. So, by only allowing you
some users to sell the stock they already had, it
allowed this hedge fund, melvin Um, which was already in
dire straight at this point, to buy up the stock
that they had shorted in the hopes of kind of
(28:22):
reducing some of this damage. You know, both robin Hood
and another UM company called Interactive Brokers also raised margin requirements,
which means that the trader needed to have more collateral
in order to maintain that position. Um, if they didn't
have what these outfits saw as the necessary collateral, they
(28:44):
they would automatically have their positions closed out. That doesn't
seem very Robin hoodie, does it. Well, Yeah, it seems
like you're you're pushing out people who were jumping on
a bandwagon, or at least that's it. It It seems like
what they're attempting to do rum on the scale essentially,
So you're right, the outcry begins. A lot of people
(29:07):
who are you know, falling victim to this, are crime
foul and it's a it's a valid thing to have
a problem with. For the past few years, Robin hood
has spent a lot of time and energy. Marketing itself
is something born out of Occupy Wall Street were democratizing
finance for all. Uh, But it turns out a lot
(29:30):
of people are saying they feel this may not be
as impartial an institution as it appeared to be. There's
a very old cliche on the Internet, not a story
the Jedi would tell you if a service appears to
be free to a user. Facebook is a great example,
then it means that you're not the real customer, you're
(29:51):
the product. Robin Hood is popular because it's commission free,
meaning you can make trades and you don't have to
pay uh, you don't have to pay a little bit
of a vig to make those trades. So how did
that make money? How are they doing this for free? Well,
they're taking these trades that these users are making, and
they're selling the information about those trades to other firms,
(30:14):
to large firms before these orders are actually executed. And
that means that if you are positioned correctly as one
of these firms, you can see the trends, you can
see the wind moving through the financial forest, and then you,
as this large firm, can take that information and use
(30:35):
it to inform your own financial actions. It's it's pretty
neat when you think about the system, you get a
window into what's happening. It kind of reminds me of
the AI things that we've discussed in the past on
this show of attempting to find a way to tell
the future by looking at the past closely enough and
(30:55):
like right up to the moment um and being able
to simulate something right. Because it's almost like you can,
you can see it that way. It's strange, strange that
that's what it actually was, and that's all confirmed, Like,
that's that's that's what they were doing. That's the Yeah,
that's the business model. Jeez. So robin Hood's largest customer
(31:17):
is allegedly a firm known as Citadel Securities. They apparently
tried to bail out Melvin Capital. That's the hedge fund
they got, you know, the one that was popping up
in the headlines for this shorting of game Stop. So
the big fish are buying info from robin Hood and
they're inserting themselves into this process, into this kind of
(31:39):
chain of events between when you as a customer make
a deal on robin Hood and when it actually gets
executed on Wall Street. This is something called order flow,
and and Vice has a pretty good explanation of this.
Vice says Citadel Securities pay tens of millions of dollars
for this order flow, but makes money by automatically taking
(32:03):
the other side of the order, then returning to the
market to flip the trade, and then it gets to
pocket the difference between the price to buy and the
price to sell, and that's known as the spread isn't
that interesting that the term spread is another term that
you often hear and sports betting, horse racing, you know,
all that kind of stuff. I mean, they really are
(32:24):
relying on a lot of the same concepts in terms,
and there's there's a good case to be made that
some of this retail investment action may be happening because
of the decline in sports betting during the COVID pandemic.
You know. So there we there we are. Outfits like
(32:45):
Citadel are supposed to be honest dealers. They're supposed to
look for the best price for any particular order. Uh
and whether and that's whether they internalize the order themselves
or whether they send it to the market. Fortunately, this
has not always been the case. Back in they were
fined twenty two million dollars by the SEC because their
(33:07):
algorithms were taking advantage of retail investors when it was
purchasing those order flows. We're gonna pause for a word
from our sponsor, and then we'll be back to explore
more because the tail continues to unfold. And we're back,
(33:30):
which means it's time for I don't know about you guys,
but my new favorite game Matt Frederick what is the
stock price of Game Stop. Game stock at this moment
is three seven that's going up and down, baby, you
never know. Uh. Just to jump back really quickly to
the Citadel thing, it makes so much sense that it's
(33:53):
exactly what we're talking about. Citadel is getting all that
information from Robin Hood right, the order flow of what's
coming through, and they are they're literally going opposite to
whatever all of the retail peasants want, and so that way,
it's almost as if it's canceling out what retail UH
stock buyers and sellers are doing. It's interesting because now
(34:16):
since we're talking about game Stop, let's let's introduce the
next part. This way, a new player has injured the game.
The sound cue has this cause been co opted. Vice
has again done some excellent reporting on this, and there's
a narrative here that's presented online. It's the idea of
(34:38):
like the little guy, right, the person who is not
a Wall Street tycoon, banding together with like minded people
to get back to get revenge of some sort on
the big fish. But the truth of the matter is
probably more complicated. It's probably not just like a kind
(34:59):
of a star war is narrative of the rebels versus
the empire. Yes, and that's because the financial system has
a ton of moving parts. Uh. And these day traders
using robin hood who see themselves as you know, literal
kind of robin hoods freedom fighters, um, are really just
just kind of blips on the radar. They're just tiny
(35:21):
cogs in a massive, massive, very very expensive machine. UM.
So it's worth you know, mentioning that whatever profits some
of these day traders end up with on game Stop,
it's really ultimately a drop in the bucket. Uh. The
huge firms that own the majority of game stock stock
will likely in the end, still come out on top,
(35:43):
not to you know, rain on this whole freedom fighting
kind of stick it to Wall Street parade. But these entities,
these massive too big to fail type firms are are
folks like Fidelity and black Rock, and they all own
millions of game Stop shares each. Uh. For example, I
think black Rock owned around nine point two million shares
(36:05):
worth about a hundred and seventy four million dollars. That
was at its original price back in December. And that's
according to SEC filings that were published this week. UM,
that stake now is worth about three point one billion dollars.
I hope they sold. Yeah, this is at least me
(36:25):
to ask something that I asked off off Mike, and
I think it's something that maybe there isn't really a
good answer to. But obviously we can see how this
false inflation of the stock price can benefit these big fish.
But how does it actually benefit the company? You know,
because it's obviously like a an incorrect, you know, assessment
(36:46):
of how the company is actually doing. Because you think
a stock price would be reflective of how a company
is doing what they're you know, futures are their perspective
of growth, et cetera during their quarterly earnings or parts
and all of that. It should be tied to some
physical asset, whether it be a brick and mortar store,
you know, inventory or what have you. So, how does
(37:09):
this vastly over inflated stock price actually benefit the folks
that run the game stop company? Yeah, it's an interesting question, right,
How how closely associated are the stocks and the actual thing? Right? Um,
it's important to note that, you know, an economy alone
(37:33):
is not the health of a nation or a country,
and stock price alone is not always indicative of the
actual value of the thing, right, Because what we're talking
about at this point is kind of an article of faith.
We're circulating ideas and beliefs and values, right, we're betting,
(37:56):
we're believing in a thing where we're attempting to convince
other people to believe in a thing. Right and um,
you know, like the dollar is a coupon. You know,
we all just sort of believe that it will work.
It represents um energy and labor over time. That that
is the value of the dollar. You're really trading time
(38:19):
when you pay someone a dollar, when someone gives you
a dollar, and this, I would argue, this is kind
of similar, and you know it is. It is amazing.
We're seeing story after story of you know, a kid
just out of college that invested a little bit of
money and game stop and then was able to pay
off you know, his or her student loans almost immediately
(38:41):
over the course of a year, or you know, um,
someone who was able to buy their first home and
it didn't look like they were going to be able
to because they couldn't find steady income. Um. But you know,
it's just it's incredible that that is true and exists
and came out of this whole deal. It is also
weird to think that black Rock or whatever you know,
(39:02):
went from Scrooge McDuck level to buying a palace on
the Black Sea, right the Mansa Musa or Putin level. Yeah, this,
I think that's a really good point that we shouldn't
miss here. Um. Even if even if some of these
individual investors are at scale accurately described as a drop
(39:24):
in the bucket, that's a life changing drop. That's that's
amazing for so many people. Uh. And right now, as
as we record, there are many people on online forums
who are urging one another to hold as in, to
not sell game stop in these other stocks because that
would enable some of these short sellers to get some
(39:46):
stocks back, right, to get those borrowed stocks back and
close their position. And then there are other things that
are happening. They're really weird things. I don't know about
you guys, but I didn't I didn't expect neo Nazis
to show up. But people are recognizing opportunities and things
are getting even crazier. You're going to see some circulation
(40:08):
of anti Semitic conspiracy theories, the old stuff you know
that keeps coming back around throughout history. Uh. And some
people are just trolling. I guess, you know, in like
a four Chan level way. Other people are spreading what
I assumed to be their sincere incredibly misguided ideologies. And
then this is the thing we have to remember. We're
(40:31):
talking about the Internet. Anybody can make a Reddit account,
anybody can log into any number of forums and they
can say there whomever they want to say they are.
But that doesn't mean that's their real identity. It's it's
quite possible, I would say even likely that there are
professional traders involved. We were talking about this before we
(40:54):
went on air, But if you go into these forums,
you will see a lot of a lot of bots.
You'll also see a lot of people who are trying
to push a certain stock, like saying, hey, you know
what the real big thing is? Silver? Right nol? I think, um,
you you know, maybe you met I don't know. If
we talked about this, probably had some folks talking about
(41:16):
silver to us. Is that correct? Yeah? Yeah, I wanted
up to mention just a buddy of mine. We were
talking off air before we went on about this concept
of cryptocurrency and how it's reacting to all of this
hoop la um, and a buddy of mine yesterday I
was talking about how he just invested a little bit
of money in something called doge coin, which is just
another of these many different varieties of cryptocurrency, like what
(41:40):
is it ethereum that I make that one up? Something
like that. Obviously obviously the big one Bitcoin, but Bitcoin
is so expensive that there's it's really hard to buy
into now unless you've been you know, in it from
from the ground up. Uh. And this is um my
my buddies rationale, and I think it really holds tru
and it kicks into the silver thing, which thinks it
is a great used to go. He says platforms like
(42:01):
robin Hood, restricted trades of stock like game stop and AMC,
and the real short sell Extravaganza Silver. The metal hasn't
kicked off yet and may never, so lots of fired
up retail or day traders investors are ready to trade something.
Bitcoin is too intimidating because the price in is now
around thirty k. None of the other coins have any
(42:22):
sway with the general public except does coin, which opened
yesterday as we record this, at less than one cent
per share. When I got locked out of game Stop,
I looked at the cryptos that had the most activity
does was ahead by a country mile and already up
past point oh two, which is when I bought in.
The creeps on Reddit are targeting a dollar, which would
(42:42):
leave me more than debt free before student debt um. Yeah,
so it's it's it's an interesting, uh the way the
cryptocurrency market is reacting to this, because it's just another
market that can then be thrown into the mix to
kind of off lay some of these burdens, you know,
for these traders. But it causes a lot of action, right, Yeah,
(43:04):
that's one of the big that's one of the big
possibilities in the future. Is this going to lead to
even more mainstreaming of cryptocurrency? And there are tons of
cryptocurrencies out there. Uh, let us know which one is
your favorite and why? Uh short sellers. According to the
(43:27):
Retail Investors, short sellers were attempting to save themselves by
engaging in something called a short ladder attack. A short
ladder attack is just putting in lower and lower bid
prices between yourselves. So there's not really a lot of
volume on this trade, but it's it's a camouflage thing.
(43:48):
It's an illusory move because now it looks like the
stock is plummeting because a bunch of people appear to
be trading at lower and lower prices quite clever, quite clever. Uh.
And so this means that not everybody might be the
retail investor they purport to be. It's possible that other
(44:09):
factions Wall Street are involved. Wall Street maybe eating it.
So oh uh okay, okay, just full disclosure here. Uh.
Ben gave me a gift at at some point in
our past, and when I remembered it, I was thinking
about it when I was watching all of this going
(44:29):
down in the news, and I just want to share
with everybody in case you may be interested if you
like graphic novels. Were not sponsored by this this uh,
these writers or the artists or image comics, but if
you're interested in graphic novels, there's a thing called the
Black Monday Murders. Highly highly recommend. This is volume two,
by the way, but it's about the stock market and
(44:53):
the truth behind uh like Black Monday, uh and what
happened you know in two thousand eight. Anyway, it's really
interesting stuff. Highly recommend. And no, don't feel left out, man,
because spoiler alert, that's that's the gift. I got you too,
so surprised. Oh my god, that's awesome. I was I
(45:17):
was watching your expression. I don't want you to feel
left up. Oh no, idea, it wasn't. It wasn't an expression.
Thank you very much that as you said to the office.
I think. So it's either it's either at the office
of my you know what, you know what. I feel
like I'm almost a short seller. It will be there
by Monday, my friends. So yeah, Black Monday Murders. It's
(45:40):
it's a wild read. I love it. I do have
to warn everybody that that, like this story, Black Monday Murders,
is not yet complete. So creators of that, if you
are listening, Jonathan Hickman, let's go yes please. Uh. And
while we're waiting for that story to conclude, let's look
at some of the update for this, uh, this current saga.
(46:04):
There is a okay there, wow, jeez, it's ping ponging. Uh.
There is a class action lawsuit of foot yes, uh,
and and it's it would seem there's a pretty good
case to be made because, as we mentioned earlier, Robin
Hood has this business model where, like you said, Ben,
if you're getting something for free, look no further than
(46:25):
yourself to see where the where the product is coming from. Um.
And the way that robin Hood is situated where they're
essentially giving like a first look at these trades to
a third party that I'm sure somewhere in the terms
is acknowledged, but it does seem like a little bit sketchy. Uh.
And then this third party is it was directly affected
(46:46):
by this uh this run on you know, short selling
or this short squeeze. Um. So the case to be
made is that they misled uh investors, they misled their
user base, their customer base. Um. And there's also a
question of whether or not Citadel actually like pulled the
(47:07):
trigger on those actions. Right. That's right. There's even a
rumor that there was a call from the White House
and said, hey, stop letting people mess with game. Stop
stop letting people mess with the money. You know, that's
another unwritten American law. Uh. So, so Citadel comes out
very recently and denies any involvement with this. They say, quote,
(47:30):
Citadel is not involved in responsible for any retail broker's
decision to stop trading in any way. That's pretty explicit, right,
there's not a there's not much weasel language in there. Uh.
This lawsuit is directly in response to the restrictions that
were placed on game Stop. It was filed in the
(47:50):
Southern District of New York, claiming that Robin Hood was
rigging the market against its customers. You can see the
language of the lawsuit. You can see the website of
one law firm that's been engaged here, Chapman Alban lll
C out of Cleveland. UH. They specialize in investments and
(48:11):
financial fraud. And if you go to their website today
you'll see, uh, you'll see this message on the homepage
that says, like who's got a good lawyer voice? You know,
like a good good I want like a good ambulance
Chasey lawyer voice? Like, uh, are you Robin what us?
What suffered losses? Dial blow blah blah blah blah blah blah.
(48:34):
You put in your information on this website. And so far,
more than six thousand people have signed up, Yes, six
thousand people, and I'm sure that will grow as well
as others that are attempting to pile on on the
On the subreddit Wall Street Bets, there are numerous posts
right at the top right now having to do with
(48:55):
exactly that how to essentially jump onto a class action lawsuit.
And it's now we're getting close to the horizon, right,
We're in the we're in the present moment on the
precipice of the future, and you're probably wondering some of
the same things we are, namely what happens next. It's
tough to say, because, as we've established earlier, in some
(49:18):
cases there's a pretty good argument to be made that
crime and consequences can be seen as a cost of
doing business after a certain threshold of profit. Oh yeah,
we've hit on that way too many times over the
years here where it's just way, way, way, way too
profitable to make money in a slightly wrong way if
(49:41):
it's just a slap of the wrist for for like
two percent of what you made. But here's the thing,
you could end up being a lot more expensive to
actually follow the law and pay for the short selling
when that bill comes due. Right, think of it this way. Okay,
let's say you're driving somewhere. Um let's say like, uh, no,
(50:03):
you're driving. We're all in the car. We're on a
road trip, and we if we don't get to our
destination by like five pm, we have to pay a
thousand dollars, and we know that if we go the
speed limit, there's no way we're gonna make our destination
by five pm. Let's say, let's say we put the
gas on, we break the law, and we speed fast
(50:24):
enough that we can get there by four fifty seven.
Even if we get stopped and we get a ticket
for speeding. Our ticket is a hundred dollars, but we
got there before five, so we really saved nine hundred dollars.
And the best part, no one goes to jail ever. Sweep.
(50:46):
That's that's that's where at there's if there is one
unwritten law that all Americans, at least all all the
people in the US are expected to know and follow,
it's this don't mess with the money. So what happens
when people invade the casino messing with the money. There's
(51:06):
actually a really good line from from this show The Boys,
I think you both have watched as well, a great
comics series from Garth Ennis, and it's don't quit the money.
You never put the money exactly. And at this point
we want to thank everybody who reached out to us
as a group, as individuals. As we said at the top, this.
(51:30):
There's still so much in play right now. The situation is,
what's the diplomatic way to say it, fluid right, Uh,
And we're not quite sure what will happen, but we've
seen a nest of conspiracies, and you know, there's there's
also a pretty good argument to be made that the
(51:50):
stock market itself is a series of conspiracies. You're conspiring
to make money selling and and trading things and to
um to the early your point made today, Uh, how
closely associated is this with actual assets actual value? You know?
(52:10):
Mm hm. And we really need to think about the
apps that we use to access things into, you know,
make financial transactions on, and even with the best of
intentions or the best slogans or the best ideological framing
for an app, we've learned now that it doesn't necessarily
mean that's what's actually represented by the way. Did we
(52:31):
already mentioned that site? Is the Squeeze schools dot com
that Paul told us about. I think you said it
at the very beginning, but what Okay, Well, I don't
know exactly what the site is. It's from in flamati
inflammata o mia inflammataoia. I don't know what that is.
(52:55):
But anyway, it's it's just a quick little site here,
and it lets you know whether or not the squeeze
has been squows and currently it has not been squows.
And we have no idea who is creating the site,
whether or not it's accurate. It's just very fun to
go there and to say that phrase. And I guess
just just to be safe, Uh, lest anybody assume otherwise.
(53:17):
None of what we have said is in any way
financial advice. No, none of it. But we we do
think it's fascinating. We hope that you agree, and we'd
we'd love to hear your thoughts. We try to make
it easy to find us online. Yes, you can find
us on Twitter and Facebook where we are Conspiracy Stuff.
On Instagram we are Conspiracy Stuff Show. You can find
(53:41):
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You can meet up with all of the conspiracy realists
that are hearing this right now, as well as us
and some of the greatest mods in history on the
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(54:02):
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You can also find us on YouTube dot com slash
(54:23):
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Where we are conspiracy at i heart radio dot com.
(55:00):
Yeah Stuff they Don't want you to Know is a
production of I heart Radio. For more podcasts from my
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From UFOs to psychic powers and government conspiracies. History is
riddled with unexplained events. You can turn back now or
learn the stuff they don't want you to know. A
production of I Heart Radio. Hello, welcome back to the show.
(00:26):
My name is Matt, my name is Noel. They call
me Ben. We're joined as always with our super producer Paul.
We like the stocks decond Most importantly, you are you
who are here, and that makes this stuff they don't
want you to know. Gentlemen, one yeah, is the squeeze
cloes bro What a ride? Yes? So in an earlier episode,
(00:51):
we we referenced this episode fairly often. Actually, we explored
the concept of quote unquote economy, and in that up
episode we put out a call to all our fellow
listeners to tell us the difference between the current ideology
of the economy and the tactics of religion. At the
(01:12):
time of this recording, so far none of us have
discovered a differentiating trait. If if an economy is a religion,
and if that religion has a god, then that god
is the concept of energy over time. We'll call it value,
and exploiting that value over time is a multi billion
dollar business. And it gainst surreal pretty quickly. Like, do
(01:35):
you guys remember game stop? When's the last time we
were in a game stop? You know? I actually I
like to pop into a game stop every time I
go to a mall. Uh. And there's actually there are
some freestanding game stoff. People always assume they're only in
malls where there's one near me, um in the local
Target shopping center on Moreland Avenue in Atlanta. I don't
know why the nostalgia thing. Did you guys remember the
(01:57):
game stop used to be Babbage Is talk about? Remember
a mall store? Yes, and I too have a local
game stop, which I still frequent because I'm a thirty something.
You're old man that still plays video games. I dig it,
I dig it. I like I'm a physical copy guy,
you know what I mean, whether books or games. It's
(02:17):
the only way to make sure that you actually own
the thing you buy. It's a good point because if
you're getting it from a server situation, who knows if
the thing you get when you stream it or whatever,
or for all of a sudden be bricked because he
didn't do the latest update. So well, I guess that
could happen with discs too, but it's it's a really
good point. You make them shout out to Kendall for
their infamous deletion of George Orwell's after people bought it. UH. Look.
(02:44):
On Tuesday, the week we record this, we're recording January
twenty nine, game Stop, which is still around UH, saw
its fortunes turn in a very weird way. There's stock
price skyrocketed over the previous price, and this sent shock
waves through the stock market, through the world of finance overall.
(03:08):
And this is an ongoing event, meaning there's information on
the way that we don't have yet no one does,
and the story we're covering today continues. So by the
time this reaches the air, some of the information may
be outdated. But as the Matt Hatter says, let's start
at the beginning. We'll go through the middle and do
our best to find the end. Game Stop, Wall Street Reddit,
(03:33):
here are the facts. What the hell just happened? How
is how is this brick and mortar business suddenly one
of the hottest stocks on the planet. Yeah, it feels
very weird to even be talking about game Stop in
the news outside of something terrible happening to yet another
brick and mortar store. I don't know if any of
(03:53):
you guys got like messages from friends like what's going
on with game Stop? Because it was a little confusing.
It was like game Stop was trend and we do
something weird was going on with the stock market and
game Stop. But because of the kind of a little convoluted,
uh and and mysterious nature of the stock market, it's
not something that everybody can immediately wrap their head around.
So it definitely does do a little digging and requires
(04:16):
some kind of basic knowledge of some foundational yet very
odd concepts of the stock market. Yeah, I wanna on
that note, I want to thank everybody who reached out
via Twitter or Instagram or sent send a text. Uh.
This this story broke in the mainstream pretty much this week,
but there's there's a lot to it, and I think
(04:38):
you're right. We have to We have to first start
with the stock market, which is a ridiculous thing. We
all we all pretend it's not ridiculous, but it's it's
a ridiculous thing. So imagine your company. You have two
ways to raise money to cover your startup costs or
to grow your business. You can either borrow money that's
debt financing. Or you can sell stock, sell shares of
(05:01):
your company, that's equity financing. And a share of stock
is literally a little piece of ownership of your company,
whether that's Applebee's, whether that's Game Stock, BlackBerry, AMC Theaters, Nokia,
all the rest, all the good ones, Discovery Communications, Classic Stock. Yeah.
(05:23):
Well it's interesting too because even if you're not like,
say h, a Lion's share stockholder, you know, of a company,
you are still entitled to a lot of the same
information and uh privy to some of the same kind
of meetings that those people are. So even if you're
like just hold a little bit of stock, you get
prospectus is on what's going on with the company, um,
(05:44):
and you are able to sit in on these shareholder
meetings where like the CEO gives kind of the rundown
of what's going on with the company. And that's because
you have bought a share of the stock. So you
are you are part of you are part of the
ownership or the owner class. Uh. That means you're entitled
to a proportional fraction of the assets and the earnings
(06:06):
of that company. Assets or everything a company owns and
earnings or all the money brings in from whatever it's selling,
whether it's a product or a service. And this is
this is what happens on the stock market. The stock
market kind of mimics two other concepts. Number one insurance,
somebody cover us, somebody have our back. Number two gambling
(06:28):
Vegas baby, Uh it's uh. Wall Street is is in
some ways Vegas with a tie, you know. And an
investor uses money to support this given idea, this company,
this endeavor, and if the endeavor succeeds, the investor wins.
If it fails, the investor loses their influence. Ordinarily in
(06:52):
a basic buying a stock kind of thing, but there
are there are multiple ways to participate, to play in
this casino. For the vast majority of people, the vast
majority of individual investors what are called retail investors. This
means that you buy a certain stock at a certain price,
hopefully a low one, and then hopefully later on down
(07:14):
the line, you sell it at a higher price. So
you you get your let's see, what's what's a good one? Uh,
you get your coffee whatever, You get your coffee stock
at ten dollars, and next month you sell it for fifteen.
Good job, but as we said, that's just the beginning.
(07:35):
To understand what's happening, we have to understand the concept
of something called short selling, yeah, which is essentially the
reverse of that concept. Instead of buying low and selling high,
you're buying high and selling low. Kind of that's a little,
you know, oversimplification, but um, the idea is that you
(07:57):
borrow a stock that you don't actually own, and then
you sell it. You're making a bet that the stocks
price will go down, um, and then you can sell it.
You can return it back to the person the broker,
I guess that you've borrowed it from UM, and then
you pocket the difference in you know, in the stock
price from when you borrowed it to when the end
(08:19):
of that contract expires. It's a really weird concept, and
it's still difficult for me to wrap my head around
it necessarily UM, and so many different places have attempted
to explain it. Um. It still doesn't make sense that
there's money in it, except except for the fact that
you're the borrowing is really important, borrowing it and then
(08:43):
selling it in hopes of I I don't understand. God.
It's the old line from Popeye's right I'll gladly pay
you on Wednesday for a hamburger on Tuesday. Vulture has
a really good explanation of this that I hope is
how full for a lot of us in the audience today.
Let's say, um, Matt, Let's say Paul has a book.
(09:07):
That book is worth ten bucks. And so you go
to Paul and you say, that's that's a kick ass book.
Can I borrow it. I'm going to give it back
to you in a couple of days. And then you
take that book, which you do not own, and you
sell that book to someone else for ten dollars. That's
that's how much the book is worth. But you're thinking
(09:28):
this book is gonna be less valuable before you have
to give the book back to Paul. And so the book,
let's say the book drops um to four dollars. Everybody said,
this is not a ten dollar book. This is a
four dollar book. There's so many of them. And so
now you can go and buy the actual book for
(09:49):
four dollars and you can give it back to Paul,
and now you have six dollars. That makes so much
more sense. So that makes a much more sense. Okay,
So that's a very that's oversimplified. Um, what you're doing
in that example is you're closing that short position. You
(10:10):
were buying those shares. You're getting that book from the market,
and you're getting it cheaper than than it was when
you borrowed it and sold well. And it makes so
much more sense why you would have you know, uh,
firms that represent a bunch of people buying a ton
of stock in when they're shorting it. That makes so
(10:31):
much more sense. Okay, I would argue that the book example,
UH is almost like you're you're doing this without the
person's knowledge. You're you're you're essentially stealing their property, and
then if it doesn't work out, you're paying them back
for it without having gotten permission to sell it in
the first place. I am assuming that there is an
understanding when you're shorting these stocks that that's exactly what
(10:52):
you're going to do. This. This is a contract that
that sets some terms as to what the parameters are
around this relationship. Yeah, to make it to give people
a better sense of the stakes, let's let's get rid
of the book example and say that instead Matt has
borrowed Paul's Lamborghini and sold Paul's Lamborghini, and now as
(11:13):
ten days to find a cheaper Lamborghini because he has
to give the car back. So Jeffrey A. Borne, who
is a professor of finance and Associate dean of undergraduate
Programs in the Damore mckim's School of Business has has
a great explanation and it's it's kind of what you
were you were saying earlier, Nold. We know the way
(11:34):
to make money on the stock market is to buy low,
sell high. But you can do that in either order,
and shorting is the backwards order. That's where it gets risky. Okay,
because back to this vulture example with the book. Let's
say that Matt, the book you you got, you borrowed
ten dollar book, but now all of a sudden, a
(11:56):
few days later, it's a one thousand dollar book and
you have to buy that book. And you can only
buy it for a thousand dollars because you have to
give it back to Paul. So if the price increases
instead of declining, then you as the investor, as the
book borrower, are on the hook and you just lost money.
(12:17):
You just in this example, you just lost a ton
of money. It's a bad day to the person on
the other end doesn't matter to them because they're gonna
get the book back either way. They're gonna get the
stock back either way. They don't care what's happened in
the interim as far as they're concerned. They just let
you borrow the thing and then they get it back
no matter what. So it's up to you to make
sure that that thing is returned. It's going to be
(12:39):
returned one way or the other. There's no like, oh sorry,
I don't have it anymore that that's not part of
the arrangement. You absolutely have to get it and pay
whatever it takes to get it. But if you get
it back for cheaper, then you pocket that difference. And
that's how you make your money. And if you do
this a bunch successfully, you can make a lot of money.
But if if you're thinking at home, this sounds really
(13:00):
dodgy and kind of unethical and sort of sleazy. I mean,
there's an argument that that's the case, and it's a
very controversial practice even among high level Wall Street types.
Maybe that maybe would be considered like the ethical set
of of Wall Street. Yeah, just to jump back to
that book example of a second, if that book was
then worth a thousand dollars and then now I owe
(13:23):
I have to do like spend a grand to give
the book back to Paul. I'm definitely calling Congress or
the SEC and and asking for a bailout immediately. Oh yeah, yeah,
yeah yeah uh. And if you're the right kind of entity,
your chances of getting a bailout are much higher than
if the you know, if you were like Matt's mutual funds,
(13:44):
that's hedge funds, you probably have a better chance candidly
of getting getting some help from Uncle Sam than you
would if you were just Matt the person. So this
all brings us to Game Stop. This is the environment
in which Game Stops story is occurring. Yes, that game
Stop used to be Babbage is brick and mortar store.
They sell video games, new and used video game consoles, toys,
(14:07):
and movies. It turns out someone was attempting to short
sell game Stop, and that makes sense because game Stop
is in a mall. Game Stop is a physical store.
Those those are two very difficult things to navigate nowadays.
And as they say in Scooby Doo, the people attempting
to short sell game Stop would have gotten away with
(14:29):
it too. If it wasn't for some sharp eyed nerds,
and I say this with great affection with their eyes
on the market. There's a guy who was known as
Roaring Kitty or Deep in Value, who actually got docs recently.
So we're just gonna keep with his internet handles. Uh.
He he's the one who realized there was a hedge
(14:50):
fund shorting game stop stock. In July, he made a
video that's about an hour long where he explained his
logic and why he is bullish on the stock, which
is about I think about four dollars per share when
he recorded it. Uh, and which right right? And uh?
And we were talking earlier with with Paul and Paul
(15:15):
what was the stock at today? Did you check? Paul
has just told us the stock is as we record
at three hundred and forty eight dollars a little north
of that per share, So for four dollars to three
and forty eight dollars. Uh. This video came out in
twenty but he's been buying this stuff earlier, yes, since
(15:36):
twenty nineteen and as we record today, Uh, this kind
of packet of stocks including you know again, the whole
idea behind this this practice is to target stocks that
will likely fail to target companies that will likely fail.
It's not like doing this is going to make them
more likely to fail, because that would be extra crappy.
But it's it's it's just a practice of kind of
(15:58):
making bets that these stock and these companies are not
going to do well. So a lot of companies that
were affected by the pandemic, like Game Stop, like the
movie theater chain AMC are on the table for this
type of practice. Um So a lot of these stocks
have been bundled up and would have been widely reported
as something called a short squeeze, which is a combination
(16:21):
of it's basically a a way to screw over these
investors that make their money shorting stocks. What a step
back real quick though, because there's an important point and
I think a lot of our listeners are thinking this too,
which is what you said is absolutely correct in theory.
It's absolutely correct. However, we have to remember we're talking
(16:43):
about influence on a macro scale. If you have the
juice for it, and if you have the connections. Let's
say you're Matt's mutual fund and you're short selling books. Uh,
you can have Matts or one of Matt's employees where
someone who knows Matt from college or something go on
(17:03):
seeing it, go on Fox, go on MSNBC and say
something like, you know what sucks this book, and then
that can that can influence the price of that book,
and that does happen. Uh, there's not really. I mean
it's kind of you can see how it's tough to
regulate that. Uh, and that's yeah. Yeah, there aren't a
lot of regular folks showing up on CNBC to tell
(17:26):
you a viewer about their special stocks that they like
to trade in. Elon Musk got in trouble quite a
few times for saying things on Twitter that affected his
own stock price. Uh, and then he got in trouble
with his board and they basically said, yeah, you can't
do that. Stop stop doing that. Whether he was knowingly
doing it to game the system, as you know, he's
(17:49):
he's kind of an interesting mavericky type fellow. It's hard
to say I would lean towards he knew exactly what
he was doing. But you know, Donald Trump, for example,
and I can't think of any direct examples of um
using his presidential platform to directly call out an individual stock,
but he certainly did for sectors and certainly indicated that
you know, certain investments where we're gonna be going into
(18:11):
certain sectors, and that would absolutely affect stock prices, but
it would be harder to pend because again the language
that he used was more broad and vague. Yeah, it
gets it gets sticky real quick and does By the way,
have you guys, have you guys looked at what's been
going on with Tesla stock? Dear God, it's out of
control right, Like, it's just it's nuts. I don't like
(18:31):
I don't like being a person that thinks about stocks
a lot. I don't like this feeling that I've had
over the past couple of days thinking about money all
the time. Yeah, I don't even I don't particularly care
for casinos myself. I just, you know, if you have
fun with them, have fun with them, and just do
so responsibly. A short squeeze is another thing that's a
(18:56):
little bit difficult to regulate against. Is one a stock
or other asset has a huge jump in price, and
this forces all our book buyers in this example UH
to buy up the stock to try to stem the
flow of financial blood, and that scramble only drives the
(19:17):
stock higher and higher. And this is why At one
point recently, the cost of game Stop stock, which is
our tongue twister for the day, swared by like as
much as seventeen h percent, not a hundred and seventy
one thousand, seven zero zero percent. This can lead to
(19:38):
insane losses for those short sellers. These losses, by the way,
a little bit of foreshadowing could in theory be much
much higher than say an SEC fine for illegal market manipulation. Dude, dude,
you know what we're gonna do this Ben. Throughout this episode,
I'm just going to tell you what Game Stop stock is. Okay,
(20:00):
because we said before it's now three uh so it's
our It's like you know, obviously stocks fluctuate a ton
throughout the day, up and down like that. But we're
just gonna see where we where we land. Okay, let's
keep going, and what a good time to pause. We'll
be back after a word from our sponsor. Maybe Matt,
(20:22):
maybe you can kick us off by telling us if
the price is the same, Oh it's it's back down
now it's three fifty seven and we're back. How did
this happen? Someone got caught with their hand in the
(20:43):
cookie jar. As we said, Game Stop was ailing. A
lot of people thought it's demise was on the horizon
very near. Uh. Sales were sluggish because for all the
reasons that we just named, you don't really have to
go to a physical store to buy a new game
nowadays you can download it. Malls are the native environment
of Game Stop stores, and they were already in dire
(21:06):
straits way before a pandemic. And so traditional investors are
being rational about this and they're saying, hey, there's a
chance to do our short selling thing. But they overdid it.
In a worst case scenario, a lot of folks will
tell you that somewhere around five to ten of a
stock could be shorted. This was not the case with
(21:26):
Game Stop. No, those investors shorted one of Game Stop
stock more than one, and then and then it went
to more, and then you just kept going. But I
don't understand, how is there not a ceiling? How can
the I be Nope, sorry, the markets closed on Game Stop.
(21:46):
You can't do anymore. It's like it's like overselling a concert.
I've never understood how you can over sell a concert,
or it's on an airline. It just seems like the
very basic level of green kind of I don't know
what it is. So they're borrowing these shares, right, so
they're borrowing more shares than actually exists. And people initially
(22:11):
didn't really didn't really heed what Roaring Kitty or df
V was saying. He invested fifty three thou dollars in
the beginning, and people were kind of mocking them and
they were like, oh, wow, you're crazy. I mean, yolo
do you bro, but don't expect much. And then online
forms specifically read It eventually had his back and an
(22:31):
online community of stunk watchers that's s t O n
k Uh saw an opportunity to do a couple of
things with GameStop picture and you can see the memes
picture the famous Heath Ledger take on the Joker in
the Nolan Dark Knights series saying, it's not about the money,
(22:53):
it's about sending a message. Yeah, or the the other
Joker from the Joker. There's a fantastic video that you
can find online or it's I guess it's more of
a gift that's animated, but that goes throughout the whole
scene there at the end where the Joker does some
the thing that he does on that show. You know,
what I'm talking about. Uh, it's it's just fantastic, and
(23:16):
it does speak to millennials and people who are younger
than us, and it really hits home and it makes sense.
Why why a group of folks who are investing on
their own and don't have a lot of assets to
their name, and don't feel like they don't have a
lot of opportunities because the situations have changed since their
(23:39):
previous generation, Why that group of people would want to
do this? Yeah? Yeah, they had a couple of reasons.
Of course, there's there's a there's a profit motive, right,
we could make some money off of this. Uh. There's
also this ideological push that has has some kind of
like cognitive DNA in common with Occupy Wall Street if
(24:02):
anybody remembers that from a thousand years ago. Now, Uh,
they wanted to damage these hedge funds that make billions
of dollars by betting on the failures of these companies.
They also wanted to troll this industry, and frankly, if
you talk to a lot of people involved, they'll say
they like games stop, they have nostalgia for it, just
(24:25):
like many of us listening today. We like the stock
and they also wanted to show the collective power that
people without millions of dollars of capital could could exert
if they worked together. And that's where that's where a
subreddit called Wall Street mets comes in. And uh, you know,
(24:45):
we've all been having various conversations about this off air.
Wall Street mets is is getting portrayed in a weird
way in the mainstream media in some ways that are
either intentionally or accidentally misleading. But it it's a lot
of people who are identifying themselves as day traders or
retail investors, and they were keeping an eye on these
(25:07):
companies that had a lot of stock shorted, and they
coordinated their efforts having d f vs back to buy
tons and tons of Game Stop stock as much as
they could, and they wanted to to drive up the
price for this hedge fund and make it very expensive
(25:29):
for them to buy back these stocks and make good
on their short positions. That's the short squeeze, and it
it kind of well, the story is not over yet,
but it kind of worked. Financial data companies estimate short
sellers lost upwards of seventy billion dollars so far just
because of this short squeeze on Game Stop and on
(25:53):
other stocks. But this is not the crazy part. Let's
look at what happens uh, At what Wall Street did,
how they reacted when peasants invaded the casino. Here's where
it gets crazy. Yes, enter robin Hood, an app that
many of you may have heard of from this very show,
(26:13):
because we in fact have done some advertising with robin
Hood in the past. Robin Hood is a investment tool
APP that folks are able to use to kind of
get dip their toe into the stock market. It's sort
of presented as like for the people. Uh. They very
much aligned themselves with kind of the aftermath and the
(26:34):
fallout uh and public sentiment towards Wall Street after the
Occupy Wall Street movement. UM and and very much capitalized
on that, you know, the idea of robin Hood robbing
from the rich and giving to the poor or the people.
It's anyone's market out there, right. But unfortunately, the this
particular story, UH put some cracks in that facade that
(26:54):
they've tried so desperately to to cultivate. UM. Many of
the retail investors that drove up the price of Game
Stop and others in these bundles of short squeeze UM
positions were using robin Hood to do so. UM the
retail investors noticed something odd though, when this all started
to hit the fan. Robin Hood and other brokers like them,
(27:18):
we're restricting these stocks in kind of weird ways. And
when we say restricting we literally mean they were not
allowing users to buy them some to some users right
to buy existing game stop stock. It would only allow
them to sell the positions that they already had. UM
(27:40):
why would they do this, you might ask, was it
out of like some sort of you know, sense of
justice for the financial market to know this will not stand,
or is there something deeper at play, or you know,
why wouldn't they see this as a positive, Because it
really is an example of the poor rising up and
(28:01):
robbing from the rich. Is exactly what robin Hood as
an icon stands for. UM. So, by only allowing you
some users to sell the stock they already had, it
allowed this hedge fund, melvin Um, which was already in
dire straight at this point, to buy up the stock
that they had shorted in the hopes of kind of
(28:22):
reducing some of this damage. You know, both robin Hood
and another UM company called Interactive Brokers also raised margin requirements,
which means that the trader needed to have more collateral
in order to maintain that position. Um, if they didn't
have what these outfits saw as the necessary collateral, they
(28:44):
they would automatically have their positions closed out. That doesn't
seem very Robin hoodie, does it. Well, Yeah, it seems
like you're you're pushing out people who were jumping on
a bandwagon, or at least that's it. It It seems like
what they're attempting to do rum on the scale essentially,
So you're right, the outcry begins. A lot of people
(29:07):
who are you know, falling victim to this, are crime
foul and it's a it's a valid thing to have
a problem with. For the past few years, Robin hood
has spent a lot of time and energy. Marketing itself
is something born out of Occupy Wall Street were democratizing
finance for all. Uh, But it turns out a lot
(29:30):
of people are saying they feel this may not be
as impartial an institution as it appeared to be. There's
a very old cliche on the Internet, not a story
the Jedi would tell you if a service appears to
be free to a user. Facebook is a great example,
then it means that you're not the real customer, you're
(29:51):
the product. Robin Hood is popular because it's commission free,
meaning you can make trades and you don't have to
pay uh, you don't have to pay a little bit
of a vig to make those trades. So how did
that make money? How are they doing this for free? Well,
they're taking these trades that these users are making, and
they're selling the information about those trades to other firms,
(30:14):
to large firms before these orders are actually executed. And
that means that if you are positioned correctly as one
of these firms, you can see the trends, you can
see the wind moving through the financial forest, and then you,
as this large firm, can take that information and use
(30:35):
it to inform your own financial actions. It's it's pretty
neat when you think about the system, you get a
window into what's happening. It kind of reminds me of
the AI things that we've discussed in the past on
this show of attempting to find a way to tell
the future by looking at the past closely enough and
(30:55):
like right up to the moment um and being able
to simulate something right. Because it's almost like you can,
you can see it that way. It's strange, strange that
that's what it actually was, and that's all confirmed, Like,
that's that's that's what they were doing. That's the Yeah,
that's the business model. Jeez. So robin Hood's largest customer
(31:17):
is allegedly a firm known as Citadel Securities. They apparently
tried to bail out Melvin Capital. That's the hedge fund
they got, you know, the one that was popping up
in the headlines for this shorting of game Stop. So
the big fish are buying info from robin Hood and
they're inserting themselves into this process, into this kind of
(31:39):
chain of events between when you as a customer make
a deal on robin Hood and when it actually gets
executed on Wall Street. This is something called order flow,
and and Vice has a pretty good explanation of this.
Vice says Citadel Securities pay tens of millions of dollars
for this order flow, but makes money by automatically taking
(32:03):
the other side of the order, then returning to the
market to flip the trade, and then it gets to
pocket the difference between the price to buy and the
price to sell, and that's known as the spread isn't
that interesting that the term spread is another term that
you often hear and sports betting, horse racing, you know,
all that kind of stuff. I mean, they really are
(32:24):
relying on a lot of the same concepts in terms,
and there's there's a good case to be made that
some of this retail investment action may be happening because
of the decline in sports betting during the COVID pandemic.
You know. So there we there we are. Outfits like
(32:45):
Citadel are supposed to be honest dealers. They're supposed to
look for the best price for any particular order. Uh
and whether and that's whether they internalize the order themselves
or whether they send it to the market. Fortunately, this
has not always been the case. Back in they were
fined twenty two million dollars by the SEC because their
(33:07):
algorithms were taking advantage of retail investors when it was
purchasing those order flows. We're gonna pause for a word
from our sponsor, and then we'll be back to explore
more because the tail continues to unfold. And we're back,
(33:30):
which means it's time for I don't know about you guys,
but my new favorite game Matt Frederick what is the
stock price of Game Stop. Game stock at this moment
is three seven that's going up and down, baby, you
never know. Uh. Just to jump back really quickly to
the Citadel thing, it makes so much sense that it's
(33:53):
exactly what we're talking about. Citadel is getting all that
information from Robin Hood right, the order flow of what's
coming through, and they are they're literally going opposite to
whatever all of the retail peasants want, and so that way,
it's almost as if it's canceling out what retail UH
stock buyers and sellers are doing. It's interesting because now
(34:16):
since we're talking about game Stop, let's let's introduce the
next part. This way, a new player has injured the game.
The sound cue has this cause been co opted. Vice
has again done some excellent reporting on this, and there's
a narrative here that's presented online. It's the idea of
(34:38):
like the little guy, right, the person who is not
a Wall Street tycoon, banding together with like minded people
to get back to get revenge of some sort on
the big fish. But the truth of the matter is
probably more complicated. It's probably not just like a kind
(34:59):
of a star war is narrative of the rebels versus
the empire. Yes, and that's because the financial system has
a ton of moving parts. Uh. And these day traders
using robin hood who see themselves as you know, literal
kind of robin hoods freedom fighters, um, are really just
just kind of blips on the radar. They're just tiny
(35:21):
cogs in a massive, massive, very very expensive machine. UM.
So it's worth you know, mentioning that whatever profits some
of these day traders end up with on game Stop,
it's really ultimately a drop in the bucket. Uh. The
huge firms that own the majority of game stock stock
will likely in the end, still come out on top,
(35:43):
not to you know, rain on this whole freedom fighting
kind of stick it to Wall Street parade. But these entities,
these massive too big to fail type firms are are
folks like Fidelity and black Rock, and they all own
millions of game Stop shares each. Uh. For example, I
think black Rock owned around nine point two million shares
(36:05):
worth about a hundred and seventy four million dollars. That
was at its original price back in December. And that's
according to SEC filings that were published this week. UM,
that stake now is worth about three point one billion dollars.
I hope they sold. Yeah, this is at least me
(36:25):
to ask something that I asked off off Mike, and
I think it's something that maybe there isn't really a
good answer to. But obviously we can see how this
false inflation of the stock price can benefit these big fish.
But how does it actually benefit the company? You know,
because it's obviously like a an incorrect, you know, assessment
(36:46):
of how the company is actually doing. Because you think
a stock price would be reflective of how a company
is doing what they're you know, futures are their perspective
of growth, et cetera during their quarterly earnings or parts
and all of that. It should be tied to some
physical asset, whether it be a brick and mortar store,
you know, inventory or what have you. So, how does
(37:09):
this vastly over inflated stock price actually benefit the folks
that run the game stop company? Yeah, it's an interesting question, right,
How how closely associated are the stocks and the actual thing? Right? Um,
it's important to note that, you know, an economy alone
(37:33):
is not the health of a nation or a country,
and stock price alone is not always indicative of the
actual value of the thing, right, Because what we're talking
about at this point is kind of an article of faith.
We're circulating ideas and beliefs and values, right, we're betting,
(37:56):
we're believing in a thing where we're attempting to convince
other people to believe in a thing. Right and um,
you know, like the dollar is a coupon. You know,
we all just sort of believe that it will work.
It represents um energy and labor over time. That that
is the value of the dollar. You're really trading time
(38:19):
when you pay someone a dollar, when someone gives you
a dollar, and this, I would argue, this is kind
of similar, and you know it is. It is amazing.
We're seeing story after story of you know, a kid
just out of college that invested a little bit of
money and game stop and then was able to pay
off you know, his or her student loans almost immediately
(38:41):
over the course of a year, or you know, um,
someone who was able to buy their first home and
it didn't look like they were going to be able
to because they couldn't find steady income. Um. But you know,
it's just it's incredible that that is true and exists
and came out of this whole deal. It is also
weird to think that black Rock or whatever you know,
(39:02):
went from Scrooge McDuck level to buying a palace on
the Black Sea, right the Mansa Musa or Putin level. Yeah, this,
I think that's a really good point that we shouldn't
miss here. Um. Even if even if some of these
individual investors are at scale accurately described as a drop
(39:24):
in the bucket, that's a life changing drop. That's that's
amazing for so many people. Uh. And right now, as
as we record, there are many people on online forums
who are urging one another to hold as in, to
not sell game stop in these other stocks because that
would enable some of these short sellers to get some
(39:46):
stocks back, right, to get those borrowed stocks back and
close their position. And then there are other things that
are happening. They're really weird things. I don't know about
you guys, but I didn't I didn't expect neo Nazis
to show up. But people are recognizing opportunities and things
are getting even crazier. You're going to see some circulation
(40:08):
of anti Semitic conspiracy theories, the old stuff you know
that keeps coming back around throughout history. Uh. And some
people are just trolling. I guess, you know, in like
a four Chan level way. Other people are spreading what
I assumed to be their sincere incredibly misguided ideologies. And
then this is the thing we have to remember. We're
(40:31):
talking about the Internet. Anybody can make a Reddit account,
anybody can log into any number of forums and they
can say there whomever they want to say they are.
But that doesn't mean that's their real identity. It's it's
quite possible, I would say even likely that there are
professional traders involved. We were talking about this before we
(40:54):
went on air, But if you go into these forums,
you will see a lot of a lot of bots.
You'll also see a lot of people who are trying
to push a certain stock, like saying, hey, you know
what the real big thing is? Silver? Right nol? I think, um,
you you know, maybe you met I don't know. If
we talked about this, probably had some folks talking about
(41:16):
silver to us. Is that correct? Yeah? Yeah, I wanted
up to mention just a buddy of mine. We were
talking off air before we went on about this concept
of cryptocurrency and how it's reacting to all of this
hoop la um, and a buddy of mine yesterday I
was talking about how he just invested a little bit
of money in something called doge coin, which is just
another of these many different varieties of cryptocurrency, like what
(41:40):
is it ethereum that I make that one up? Something
like that. Obviously obviously the big one Bitcoin, but Bitcoin
is so expensive that there's it's really hard to buy
into now unless you've been you know, in it from
from the ground up. Uh. And this is um my
my buddies rationale, and I think it really holds tru
and it kicks into the silver thing, which thinks it
is a great used to go. He says platforms like
(42:01):
robin Hood, restricted trades of stock like game stop and AMC,
and the real short sell Extravaganza Silver. The metal hasn't
kicked off yet and may never, so lots of fired
up retail or day traders investors are ready to trade something.
Bitcoin is too intimidating because the price in is now
around thirty k. None of the other coins have any
(42:22):
sway with the general public except does coin, which opened
yesterday as we record this, at less than one cent
per share. When I got locked out of game Stop,
I looked at the cryptos that had the most activity
does was ahead by a country mile and already up
past point oh two, which is when I bought in.
The creeps on Reddit are targeting a dollar, which would
(42:42):
leave me more than debt free before student debt um. Yeah,
so it's it's it's an interesting, uh the way the
cryptocurrency market is reacting to this, because it's just another
market that can then be thrown into the mix to
kind of off lay some of these burdens, you know,
for these traders. But it causes a lot of action, right, Yeah,
(43:04):
that's one of the big that's one of the big
possibilities in the future. Is this going to lead to
even more mainstreaming of cryptocurrency? And there are tons of
cryptocurrencies out there. Uh, let us know which one is
your favorite and why? Uh short sellers. According to the
(43:27):
Retail Investors, short sellers were attempting to save themselves by
engaging in something called a short ladder attack. A short
ladder attack is just putting in lower and lower bid
prices between yourselves. So there's not really a lot of
volume on this trade, but it's it's a camouflage thing.
(43:48):
It's an illusory move because now it looks like the
stock is plummeting because a bunch of people appear to
be trading at lower and lower prices quite clever, quite clever. Uh.
And so this means that not everybody might be the
retail investor they purport to be. It's possible that other
(44:09):
factions Wall Street are involved. Wall Street maybe eating it.
So oh uh okay, okay, just full disclosure here. Uh.
Ben gave me a gift at at some point in
our past, and when I remembered it, I was thinking
about it when I was watching all of this going
(44:29):
down in the news, and I just want to share
with everybody in case you may be interested if you
like graphic novels. Were not sponsored by this this uh,
these writers or the artists or image comics, but if
you're interested in graphic novels, there's a thing called the
Black Monday Murders. Highly highly recommend. This is volume two,
by the way, but it's about the stock market and
(44:53):
the truth behind uh like Black Monday, uh and what
happened you know in two thousand eight. Anyway, it's really
interesting stuff. Highly recommend. And no, don't feel left out, man,
because spoiler alert, that's that's the gift. I got you too,
so surprised. Oh my god, that's awesome. I was I
(45:17):
was watching your expression. I don't want you to feel
left up. Oh no, idea, it wasn't. It wasn't an expression.
Thank you very much that as you said to the office.
I think. So it's either it's either at the office
of my you know what, you know what. I feel
like I'm almost a short seller. It will be there
by Monday, my friends. So yeah, Black Monday Murders. It's
(45:40):
it's a wild read. I love it. I do have
to warn everybody that that, like this story, Black Monday Murders,
is not yet complete. So creators of that, if you
are listening, Jonathan Hickman, let's go yes please. Uh. And
while we're waiting for that story to conclude, let's look
at some of the update for this, uh, this current saga.
(46:04):
There is a okay there, wow, jeez, it's ping ponging. Uh.
There is a class action lawsuit of foot yes, uh,
and and it's it would seem there's a pretty good
case to be made because, as we mentioned earlier, Robin
Hood has this business model where, like you said, Ben,
if you're getting something for free, look no further than
(46:25):
yourself to see where the where the product is coming from. Um.
And the way that robin Hood is situated where they're
essentially giving like a first look at these trades to
a third party that I'm sure somewhere in the terms
is acknowledged, but it does seem like a little bit sketchy. Uh.
And then this third party is it was directly affected
(46:46):
by this uh this run on you know, short selling
or this short squeeze. Um. So the case to be
made is that they misled uh investors, they misled their
user base, their customer base. Um. And there's also a
question of whether or not Citadel actually like pulled the
(47:07):
trigger on those actions. Right. That's right. There's even a
rumor that there was a call from the White House
and said, hey, stop letting people mess with game. Stop
stop letting people mess with the money. You know, that's
another unwritten American law. Uh. So, so Citadel comes out
very recently and denies any involvement with this. They say, quote,
(47:30):
Citadel is not involved in responsible for any retail broker's
decision to stop trading in any way. That's pretty explicit, right,
there's not a there's not much weasel language in there. Uh.
This lawsuit is directly in response to the restrictions that
were placed on game Stop. It was filed in the
(47:50):
Southern District of New York, claiming that Robin Hood was
rigging the market against its customers. You can see the
language of the lawsuit. You can see the website of
one law firm that's been engaged here, Chapman Alban lll
C out of Cleveland. UH. They specialize in investments and
(48:11):
financial fraud. And if you go to their website today
you'll see, uh, you'll see this message on the homepage
that says, like who's got a good lawyer voice? You know,
like a good good I want like a good ambulance
Chasey lawyer voice? Like, uh, are you Robin what us?
What suffered losses? Dial blow blah blah blah blah blah blah.
(48:34):
You put in your information on this website. And so far,
more than six thousand people have signed up, Yes, six
thousand people, and I'm sure that will grow as well
as others that are attempting to pile on on the
On the subreddit Wall Street Bets, there are numerous posts
right at the top right now having to do with
(48:55):
exactly that how to essentially jump onto a class action lawsuit.
And it's now we're getting close to the horizon, right,
We're in the we're in the present moment on the
precipice of the future, and you're probably wondering some of
the same things we are, namely what happens next. It's
tough to say, because, as we've established earlier, in some
(49:18):
cases there's a pretty good argument to be made that
crime and consequences can be seen as a cost of
doing business after a certain threshold of profit. Oh yeah,
we've hit on that way too many times over the
years here where it's just way, way, way, way too
profitable to make money in a slightly wrong way if
(49:41):
it's just a slap of the wrist for for like
two percent of what you made. But here's the thing,
you could end up being a lot more expensive to
actually follow the law and pay for the short selling
when that bill comes due. Right, think of it this way. Okay,
let's say you're driving somewhere. Um let's say like, uh, no,
(50:03):
you're driving. We're all in the car. We're on a
road trip, and we if we don't get to our
destination by like five pm, we have to pay a
thousand dollars, and we know that if we go the
speed limit, there's no way we're gonna make our destination
by five pm. Let's say, let's say we put the
gas on, we break the law, and we speed fast
(50:24):
enough that we can get there by four fifty seven.
Even if we get stopped and we get a ticket
for speeding. Our ticket is a hundred dollars, but we
got there before five, so we really saved nine hundred dollars.
And the best part, no one goes to jail ever. Sweep.
(50:46):
That's that's that's where at there's if there is one
unwritten law that all Americans, at least all all the
people in the US are expected to know and follow,
it's this don't mess with the money. So what happens
when people invade the casino messing with the money. There's
(51:06):
actually a really good line from from this show The Boys,
I think you both have watched as well, a great
comics series from Garth Ennis, and it's don't quit the money.
You never put the money exactly. And at this point
we want to thank everybody who reached out to us
as a group, as individuals. As we said at the top, this.
(51:30):
There's still so much in play right now. The situation is,
what's the diplomatic way to say it, fluid right, Uh,
And we're not quite sure what will happen, but we've
seen a nest of conspiracies, and you know, there's there's
also a pretty good argument to be made that the
(51:50):
stock market itself is a series of conspiracies. You're conspiring
to make money selling and and trading things and to
um to the early your point made today, Uh, how
closely associated is this with actual assets actual value? You know?
(52:10):
Mm hm. And we really need to think about the
apps that we use to access things into, you know,
make financial transactions on, and even with the best of
intentions or the best slogans or the best ideological framing
for an app, we've learned now that it doesn't necessarily
mean that's what's actually represented by the way. Did we
(52:31):
already mentioned that site? Is the Squeeze schools dot com
that Paul told us about. I think you said it
at the very beginning, but what Okay, Well, I don't
know exactly what the site is. It's from in flamati
inflammata o mia inflammataoia. I don't know what that is.
(52:55):
But anyway, it's it's just a quick little site here,
and it lets you know whether or not the squeeze
has been squows and currently it has not been squows.
And we have no idea who is creating the site,
whether or not it's accurate. It's just very fun to
go there and to say that phrase. And I guess
just just to be safe, Uh, lest anybody assume otherwise.
(53:17):
None of what we have said is in any way
financial advice. No, none of it. But we we do
think it's fascinating. We hope that you agree, and we'd
we'd love to hear your thoughts. We try to make
it easy to find us online. Yes, you can find
us on Twitter and Facebook where we are Conspiracy Stuff.
On Instagram we are Conspiracy Stuff Show. You can find
(53:41):
us on the Facebook group. Here's where it gets crazy.
You can meet up with all of the conspiracy realists
that are hearing this right now, as well as us
and some of the greatest mods in history on the
yield Facebook groups. Um, if you don't want to do
that stuff, we have a phone number where you can
hus it's right. You can call one three three s
(54:02):
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We've been getting slammed lately with messages and and the
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You can also find us on YouTube dot com slash
(54:23):
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It makes difference. We greatly appreciate it. And if none
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Where we are conspiracy at i heart radio dot com.
(55:00):
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Noel Brown
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