Tag Archives: Gamestop

Robinhood Thursday and the Washington Idiots at Work, by David Stockman

Posted on February 21, 2021 | 2 comments

Central banks’ profligate production of fiat debt liquidity is behind the Gamestop fiasco and stock market valuations completely untethered from underlying economic value. From David Stockman at David Stockman’s Contra Corner via lewrockwell.com:

Today, especially, the “idiots at work” sign should be flying high over Capitol Hill.

We are referring to the boisterous congressional hearings about who is to blame for the crash of GameStop, the alleged nefarious machinations of the hedge funds and Robinhood and the purportedly innocent victims in mom’s basement who thought call options were the greatest new video game since Grand Theft Auto IV.

But among today’s silly foibles, the incessantly repeated idea that the Reddit Mob was a victim of a “pump and dump” scheme surely takes the cake. If these people were stupid enough to think that the value of a company dying in plain sight (i.e. GME) could go from $400 million to $23 billion in less than six months while its reported finances continued to deteriorate, they deserve to loose every dime of the stimmy money they threw into the Robinhood pot.

Still, the fact that the greedy, dimwitted Reddit Mob got its just desserts isn’t the half of it.

What was really on display Thursday in the recently christened (since January 6th) Holy of Holies of American Democracy is the utter cluelessness on both sides of the political aisle with respect to the financial elephant in the room: Namely, that the Fed has transformed Wall Street into a giant, destructive gambling den, which is now sucking a growing share of the populace into the pursuit of instant get-rich speculations that have no chance of panning out.

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Doug Casey on Robinhood, Hedge Funds, and Class Warfare

Posted on February 17, 2021 | Leave a comment

The Federal Reserve has turned financial markets into casinos so we’ll see more “all in” crazy action like we saw with GameStop and Robinhood. From Doug Casey at internationalman.com:

International Man: We seem to be entering a new paradigm in the financial markets. Social media has allowed a large number of small investors to band together and move markets in ways that were previously inconceivable.

What are your thoughts on this and what lies ahead?

Doug Casey: To start with, most of the people on Robinhood are ultra-unsophisticated—mostly unemployed kids living in their mothers’ basements. A lot of the money that the government sent them—the COVID checks—went into the market.

Of course, Robinhood itself is somewhat problematic with its commission-free trading and no minimum trade size. How can a company make money if it doesn’t charge its customers anything? It does so by having cozy arrangements with hedge funds. In essence, you get what you pay for, and if you don’t pay anything, you can expect to be treated like you’re a product, not a customer. I don’t have any problem per se with Robinhood’s business model, but Robinhood’s real customers are probably the hedge funds, not the public.

I don’t have any sympathy for anybody involved in this—hedge funds, the brokers, or the public. In the markets, eventually, everybody gets what they deserve. Still, the fact that some hedge funds have lost billions is front-page news. And the stock running from like $3 before collapsing from $450 to under $50 at the moment means plenty of late-arriving small fry will have been wiped out on the way down.

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“This is for you, Dad”: Interview with an Anonymous GameStop Investor, by Matt Taibbi

Posted on February 7, 2021 | Leave a comment

Never underestimate how deeply the unfairness and corruption on display during the 2008-2009 financial crisis still rankle. From Matt Taibbi at taibbi.substack.com:

Raised in a family devastated by bubble economics, one Reddit investor saw GameStop as a way to send a message to “cancerous rent-seekers”

Thursday, January 21st was a critical day in the story of the video game chain GameStop (ticker name: GME). Retail investors, including many subscribers to a Reddit forum called wallstreetbets, pushed the company’s stock from $6 to $43.03, but experts said playtime was over. It was time for the big shots to clean up.

According to Citron Research, one of many funds that had bet on the brick-and-mortar store to fail, those investing in GME were “the suckers at this poker game,” and would soon be sorry when the stock went “back to $20 fast.”

They were wrong. Instead of amateurs being shoved aside by hedge funds, it was the pros who had their backs broken, as GME soared to $65.05, beginning a steep ascent that would become an international news phenomenon.

It was the “We’re gonna need a bigger boat” moment for Wall Street. The pros had been sloppy. By late 2020, shares in GameStop were well over 100% short. A sudden rise in value would force shorts to pay exorbitant prices just to get out of the trade. By the afternoon of the 21st, all the “suckers” on Reddit had to do to beat them was nothing, and they did just that, behind the rallying cry “diamond hands,” signifying a determination to hold at all costs.

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The GameStop Rebels vs. “Too Big to Fail”, by Ryan McMaken

Posted on February 3, 2021 | Leave a comment

Will the nefarious “Too Big to Fail” policy that destroyed public confidence in financial markets during the collapse of 2008-2009 become “Too Big to be Hung Out to Dry by Small Traders Making Political Statements”? Probably. From Ryan McMaken at mises.org:

Last week, a large number of small-time investors drove up the price of GameStop’s (GME) stock a historic 1,784 percent. But this was no mere spike in some obscure stock. The stock’s price spiked in part as a result of efforts by “an army of smaller investors who have been rallying on Reddit and elsewhere online to support GameStop’s stock and beat back the professionals.” These professionals were hedge fund managers who had shorted GameStop’s stock. In other words, hedge funders were betting billions that GameStop’s stock would go down. But the price went up instead, meaning hedge funds like Melvin Capital (and Citron Research) took “a significant loss,” possibly totaling $70 billion.

There surely were plenty of insiders on both sides of this deal. Given the complexity of various schemes employed by seasoned investors, it seems it is very unlikely that this is just a simple matter of little Davids taking on Wall Street Goliaths. But it also looks like that’s not all that was going on. Had this only been just another scheme by some Wall Street insiders against some other Wall Street insiders the story would probably have ended there.

But that’s not what happened. Rather, it appears that, for many of the smaller investors who were involved, much of this “short squeeze” was conducted for the purposes of throwing a monkey wrench in the plans of Wall Street hedge funds which exist within the rarified world of billionaires and their friends.

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The Game Stop Fairy Tale And Its Lesson, by Michael Lebowitz

Posted on February 3, 2021 | Leave a comment

The big picture lesson from Game Stop is that financial markets are government-sponsored casinos designed to enrich one class of players at the expense of the other class. From Michael Lebowitz at realinvestmentadvice.com:

nce upon a time, there was a zombie corporation named Game Stop ($GME). For the last few years, it has been circling the bankruptcy drain. Similar to Blockbuster, its business model, renting and trading video games and equipment, is going the way of digital streaming. GME’s brick and mortar operations held a competitive advantage versus most competitors. Unfortunately, in today’s digital streaming world, they are minnows, prone to attack by the likes of Amazon.

We tell the story of GME because it’s fascinating. More importantly, however, it holds an important lesson about the level of speculation the Fed is fostering.

Preamble- Know Who You Are Squeezing

As we wrote this article, the short squeeze phenomena were shifting toward the silver sector. There are two essential differences between shorting SLV, an ETF, and GME. First, because SLV is an ETF, dealers can create shares. Such makes it more difficult to squeeze. To create shares, the dealer must deliver silver in exchange for the new shares.

Second, while squeezes in GME primarily only affect GME shareholders, SLV affects the price of silver itself. If SLV continues to rise, it brightens the outlook for silver miners but raises input costs for manufacturers that use silver in their production process. Silver is widely required to produce many high tech goods; therefore, a rising price has economic implications. As such, it is a more critical squeeze to follow, and no doubt the Fed is closely watching.

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Yellen Gets Ethics Waiver To Lead Regulator Meeting On Gamestop Insanity After Taking $810K From Citadel, by Tyler Durden

Posted on February 3, 2021 | Leave a comment

And they wonder why people don’t trust the government. From Tyler Durden at zerohedge.com:

Once it became clear – just a few seconds after AOC first rage-tweeted about RobinHood refusing to let “the people” trade more shares of $GME and $AMC before adding that she’d support a public hearing on what had just happened – that all the key players in the “WallStreetBets”/”Gamestop” trading saga would soon be dragged in front of Congress like a gaggle of tech CEOs, the newly elected Democrats and their hand-picked economic team were faced with a critical question: who exactly was going to preside over these proceedings on the regulatory side, since they are virtually all compromised by key connections to the financial services industry, and not just the big banks.

Over the past decade, a new category of financial beast has arisen. At Zero Hedge, we have been writing about them for years. They’re alternatively called “high frequency traders” “high freaks”, and “orderflow frontrunners” for those enjoy speaking the truth, or “market makers” for the political correct, but after the events of last week, millions of people were either asking Google, or their one IBD analyst friend, to explain what ‘Citadel’ is, and how it works…. the same Citadel which threatened to sue Zero Hedge last June for accusing it of frontrunning orders, just weeks before regulators punished Citadel for frontrunning orders (oops).

Now, barely days after being confirmed as President Joe Biden’s new Treasury Secretary, Janet Yellen must preside over a major media circus and the most glaring indication yet of just how broken the US stock market is (thanks in large part to her actions while she was head of the Fed).

Which is a problem because as a reminder, Yellen received almost a million dollars in “speaking fees” in the past two years from the firm that is the quasi-monopoly “market maker” in the US, responsible for half of retail orderflow thanks to its domination of Robinhood trades…

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Game Over, by Kevin Duffy

Posted on February 1, 2021 | 2 comments

Shorting stocks is not nefarious, and given the central bank-fueled fun and games that have gone on in financial markets for these many years, shorts should be more prevalent. From Kevin Duffy at lewrockwell.com:

It’s a big club, and you ain’t in it.”  – George Carlin

The GameStop frenzy has struck a nerve with so many because it represents a morality play: David vs. Goliath, outsiders vs. insiders, the downtrodden upending the corrupt financial elites.  To many long-time critics of bailouts, the Reddit crowd who made out like bandits signifies the beginning of a long-awaited populist revolt.  To the young and tech savvy, this is the passing of the old guard which offers a glimpse of the future.

Lost in all of the hysteria and spin is the real struggle taking place on Wall Street, that between bulls and bears.  After 12 years of nonstop Federal Reserve-abetted asset inflation, the bulls have been winning so often, their ranks have swelled while those of the bearish community have dwindled.  The short seller, that most extreme expression of skepticism, has nearly gone extinct.  It was he who the Reddit crowd targeted and whose grave they’re now dancing on.

Table 1: Bear funds, a dying breed

Markets are cyclical, but memories are short.  How many celebrating in stock forums like WallStreetBets remember the 2008 meltdown or dot-com bubble bursting?  As Jim Grant warned, “The only permanent truth in finance is that people get bullish at the top and bearish at the bottom.”  Kicking someone while they’re down is

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Market Weekly: Game Stop Revolution or the Matrix Reloaded? by Tom Luongo

Posted on January 30, 2021 | 1 comment

There’s no question that the Gamestop saga is a populist revolt, and there’s no question the establishment doesn’t like it one bit. The question is what will the establishment do about it. From Tom Luongo at tomluongo.me:

I have to say as revolutions go, this one is hilarious.

Game Stop opened this morning above $330 per share, a sentence I never thought in a million years I’d ever write.

This open nearly ensures that all the attempts yesterday to push the price back down to bail out the hedge funds desperately short have failed spectacularly.

There’s options expiration today which will fundamentally change the way we look at markets if Game Stop closes in this range.

Because it shows that when people act in the aggregate they can overwhelm the attempts by a few central planners to control you.

Your best proof that this is at least a part of what’s going on is the way Wall St. and the regulators in D.C. are reacting. Because they are screaming that this is outrageous, that we need stronger enforcement tools to ‘ensure the integrity of our markets.’

That’s just code for ‘only we’re allowed to game the markets not the little people.’

And with options expiring on Game Stop nearly every week in February and March this game isn’t over by any stretch of the imagination.

Populist is a Four-Letter Work

In fact, It’s the beginning of a new form of populist revolt.

We’ve seen what they think of populist revolts. They have utter disdain for them. They squash them and hope to ignore the consequences.

Vote for Trump? Can’t have that happen again.

Speak out against any facet of the Great Reset? Get censored.

Try to build a new platform not controlled by them? Get deplatformed.

Show up at the Capitol to peacefully assemble? Get caught up in a false flag to justify arresting you and shaming you into submission.

Today’s price action in Game Stop and other stocks heavily-shorted by hedge funds is simply the next iteration of the people finding ways to make their voices heard.

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GameStop, by The Zman

Posted on January 29, 2021 | 1 comment

Gamestop and other epic short squeezes are the kind of nonkinetic guerrilla warfare against the establishment that should be encouraged. From The Zman at theburningplatform.com:

Until a few days ago, most people had no reason to think about GameStop, a retail chain that sells video games and accessories. If you have kids, you probably know the place, because your kids like to go there. Otherwise, the only reason to think about the place was to wonder how they managed to survive as a brick-and-mortar operation in a world dominated by on-line retailers. They exist as a reminder that humans still prefer in-person shopping, even if it comes at a premium.

That is the funny thing about the GameStop story. While other traditional retailers struggled to maintain margins, they are an exception. This is a company with ridiculously high margins. Even with a drop in sales due to the great reset launched by the managerial class this year, they maintained their margins. Whatever they are doing in their shops, people think it is worth a premium. Despite this, their stock was a dog, falling below $4 until the recent explosion.

It is the explosion in their share price that has them in the news. The share price as of the close of business yesterday was $347.51. The pre-market ask is $489.00 as these words are being typed. That number keeps going up, so it is not unreasonable to think that shares will be trading at or above $500 today. Everyone now wants a piece of the winningest stock since the dot-com bubble. If you had this company in your portfolio six months ago, you are a very happy investor.

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“This is a financial revolution. . .” by Simon Black

Posted on January 28, 2021 | 3 comments

Nothing infuriates the corruptocrats quite so much as when the plebs manage to turn the tables on them. From Simon Black at sovereignman.com:

At precisely 2:32pm Eastern time on May 6, 2010, the US stock market started to drop.

The decline was sudden, and vicious. Within minutes, more than $1 trillion of market capitalization had vanished, with the Dow Jones Industrial Average losing nearly 10% of its value.

This event became known as the ‘Flash Crash’. And early explanations pointed to the big investment banks and their high-tech trading algorithms, i.e. software that could buy and sell stocks without human involvement.

When the market started its decline that day, banks’ trading algorithms went haywire and started selling everything. This caused the market to decline even further, which triggered the algorithms to sell even more.

The humans were powerless to stop it. There were stories of panicked tech teams at investment banks frantically ripping cables out of the floor trying to shut down the machines.

But the selling went on for 36 minutes… during which time the banks and big funds racked up enormous losses.

For me, however, the Flash Crash was great. I was ‘short’ the stock market at the time, meaning I had bet that the market would decline.

And when the market dropped by more than 1,000 points, I happily cashed in.

But two days later I received an email from my broker explaining that they were CANCELING my trade.

The poor little investment banks had lost money because their fancy algorithms didn’t work. So the exchange was giving them a ‘do over’ at my expense.

Incredible. It hadn’t even been two years at that point since the banks had to be bailed out at taxpayer expense during the Global Financial Crisis of 2008.

Then, 20 months later, the Flash Crash happened. And the banks were simply able to wipe all their losses away.

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