TruthArchive.ai - Tweets Saved By @BossBlunts1
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
Wutang album going to Tasmania, Australia 2 days after the June $GME shareholder meeting & right before the ~200,000 $20 call Contracts expire Black swan native to Tasmania Tinfoil hat: mystery buyer of calls may be #Gamestop itself Hooded figure in photo was RC COINCIDENCE? https://t.co/AyTrW8amx2
reSee.it AI Summary
Banks urgently borrowed $200 million through the overnight repo facility, the highest since COVID-19 began. This signals a massive need for cash to prevent margin calls. Money market fund usage collapsed, with excess cash dropping below $800 billion. Bank usage of repo skyrocketed, indicating overleveraging and under-capitalization. Both trends are bearish, leading to liquidity issues, margin calls, fire sales, and surging heavily shorted assets like precious metals and meme stocks.
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
EMERGENCY 🚨 BANKS BORROWED $200 MILLION IN OVERNIGHT REPO FACILITY‼️ 🙊 THIS IS THE HIGHEST REPO SINCE THE ONSET OF COVID SHUTDOWNS AND SIGNALS A MASSIVE NEED FOR CASH TO PREVENT MARGIN CALLS FROM 0 TO $200 MILLION OVERNIGHT 📉 REVERSE REPO: MONEY MARKET FUND USAGE COLLAPSING AS EXCESS CASH PLUMMETED TO UNDER $800 BILLION 📈 REPO (NOT REVERSE): BANK USAGE ROCKETED, INDICATING WITHOUT A DOUBT THAT BANKS ARE OVERLEVERAGED AND UNDER-CAPITALIZED 🙉 BOTH ARE CORRELATED IN OPPOSITE WAYS. DECREASE IN REVERSE REPO IS BEARISH. INCREASE IN REPO IS BEARISH. BOTH HAVE BEEN OCCURING EXACTLY AS PREDICTED. CALL YOUR PARENTS 😬 LACK OF LIQUIDITY LEADS TO MARGIN CALLS, FIRE SALES OF BLUE CHIP STOCKS AND BONDS, AND SKYROCKETING OF HEAVILY SHORTED EQUITIES AND ASSETS SUCH AS PRECIOUS METALS, MEME STOCKS, INVERSE ETF'S AND INDEXES. #amc #gme #silver #gold #uvxy #vix #sqqq #vvix #sjim #bbbyq
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
BREAKING 🚨 REVERSE REPO OPERATIONS TODAY FELL OVER $100 BILLION‼️ MONEY MARKET (MUTUAL) FUNDS AND BANKS USE THE REPO/REVERSE REPO TO STASH CASH IN HIGHLY LIQUID US TREASURY NOTES. THIS ALLOWS THEM TO RECEIVE THE FED FUNDS RATE + 0.05% APR IN OVERNIGHT LOANS IN EXCHANGE FOR T BILLS AND DO THE OPPOSITE THE FOLLOWING DAY. THE FED HAS IMPLEMENTED NEW INCREASED INITIAL MARGIN REQUIREMENTS THAT HAVE RAISED THE MINIMUM CAPITAL LEVEL REQ'D FOR AMERICA'S TOP FINANCIAL INSTITUTIONS. AS LIQUIDITY IS SUCKED OUT OF THE SYSTEM BY THE #RRP, THIS LEAVES BANKS WITH LESS CAPITAL WITH WHICH TO MEET #MARGIN COLLATERAL REQUIREMENTS. THIS HAS THE POTENTIAL TO CAUSE A FIRE SALE OF ASSETS SHOULD THE BANKS BE MARGIN CALLED BY THE DTC, OCC, NSCC, etc, AND/OR THE HEDGE FUNDS & FAMILY OFFICES TO WHICH SAID BANKS LEND SHARES & CASH TO BE MARGIN CALLED BY THEIR PRIME BROKER (BANK). WE ARE SEEING THE BEGINNINGS OF A LIQUIDITY CRISIS MEANWHILE THE FED HAS ONLY UNWOUND 10% OF THEIR #MBS VALUED OVER $2.7 TRILLION. A HOUSING CORRECTION HAS BEGUN AS NEW HOME SALE PRICES ARE DOWN 20% YoY, EXISTING HOME SALE NUMBERS HAVE COLLAPSED TO 2009 LEVELS, AND EXISTING HOME SUPPLY HAS JUST BEGUN TO INCREASE. BANKS HAVE A MASSIVE AMOUNT OF RESIDENTIAL AND COMMERCIAL MBS AND A VALUE AT RISK FOR THE TOP 4 U.S. BANKS OF OVER $719 BILLION. MEANWHILE GOLDMAN HAS 45% OF THEIR DEPOSITS UNINSURED BY THE FDIC, AND JPMORGAN 55% UNINSURED. THEYRE ALL BETTING ON A FEDERALLY FUNDED BAILOUT WITH YOUR MONEY IN THE FACE OF THE POSSIBILITY OF THE WORST RECESSION AND STAGFLATION THIS COUNTRY HAS EVER SEEN DUE TO THE PONZI SCHEME THAT IS EXACERBATED BY THE RECORD LEVEL OF C19 MONEY PRINTING BAILOUTS GIVEN TO INSTITUTIONS IN 2020 IN RESPONSE TO THE COLLAPSE OF THE #RRP ON SEPT 19, 2019 WHEN THE FED HAD TO TAKE OVER THE REPO OPERATIONS TO PREVENT A FULL BLOWN #STOCKMARKET COLLAPSE AT THAT TIME‼️ THESE ARE THE DEATH THROES OF A MONETARY SYSTEM PONZI SCHEME THAT WILL HAVE AN INEVITABLE IMPACT ON THE GLOBAL ECONOMY AND ALL OF OUR FINANCES, EVEN IF INVISIBLE AT FIRST GLANCE MUCH LIKE THE INFLATION OF THE LAST 2 YEARS. SILVER LINING? HEAVILY SHORTED STOCKS, FUNDS, AND PRECIOUS METALS TEND TO 🚀 IN TIMES LIKE THIS. I.E. #VW, #GOLD, #SILVER, #VIX ETC IN OCT 2008 & ONWARDS JUST 13 DAYS AFTER THE WORST DAYS IN #SP500 HISTORY SAW A 13% LOSS ON A SINGLE DAY. #AMC #GAMESTOP #PSLV #SILVER #GOLD #VIX #UVXY #MINERS #HYMC #SLV #SPROTT #PRECIOUSMETALS
reSee.it AI Summary
China's second-largest real estate developer, Evergrande, faces dissolution in bankruptcy court on December 4th. Global banks hold nearly $1 trillion in bonds and loans of Evergrande, including its failed electric vehicles division. If bondholders reject Evergrande's proposed solution, the heavily indebted company will be dissolved, leaving debtors with as little as 0% to 5% repayment. Evergrande's solvency relied on a Ponzi scheme, which has now collapsed. The potential losses for ISDA banks could reach nearly $1 trillion.
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
CHINA'S 2ND LARGEST REAL ESTATE DEVELOPER #EVERGRANDE FACES DISSOLUTION IN BANKRUPTCY COURT TOMORROW, DECEMBER 4TH‼️ GLOBAL BANKS HOLD NEARLY $1 TRILLION IN #BONDS AND LOANS OF EVERGRANDE R.E. COMPANY AND THEIR FAILED ELECTRIC VEHICLES DIVISION. IF BONDHOLDERS ON DEC 4TH DONT ACCEPT EG'S POOR SOLUTION OF TAKING EQUITY IN THE INSOLVENT COMPANY, EVERGRANDE WILL BE FORMALLY DISSOLVED AND ALL REMAINING ASSETS OF THE HEAVILY INDEBTED RE DEVELOPER WILL BE SOLD OFF EN MASSE LEAVING AS LITTLE AS 0% TO 5% REPAYMENT TO DEBTORS😆 🤣 JUST FKING DIE ALREADY YOU PONZI SCHEME POS COMPANY‼️ FOR THOSE UNAWARE, EG ONLY REMAINED SOLVENT DUE TO THE LITERAL PONZI IN WHICH MORE NEW INVESTORS WOULD NEED TO BUY APARTMENTS FROM THEM IN ORDER TO FUND THOSE THAT HAD ALREADY BEEN ORDERED AND PAID FOR IN THE PAST. THIS HAS ALREADY COLLAPSED, AND NO CHINESE PERSON IS STUPID ENOUGH TO INVEST ANOTHER #RMB INTO THEIR SCAM. #ISDA BANKS WILL BE FORCED TO WRITE OFF NEARLY $1 TRILLION IN LOSSES FROM THAT 1 DEVELOPER ALONE, SHOULD THIS OCCUR. #AMC #GME #VIX #UVXY #SPY #TSLA #MINERS #GOLD #SILVER #METALS
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
🚨BREAKING NEWS🚨 1. China reduces capital gains tax on stock trading by 50% to prevent market collapse. 2. Evergrande down 87% on first day of resuming trading. 3. Chinese government orders state banks & funds to buy stocks to boost failing markets. 4. Global banks and crypto exchanges like Tether hold massive numbers of Evergrande bonds as ISDA contract collateral at the original historical value. 5. Evergrande filed chapter 15 bankruptcy protection to prevent international banks from pursuing repayment of nearly $1 TRILLION in losses. 6. Upon bankruptcy case completion whenever that may be, these bonds & commercial notes will become 100% worthless, no longer allowing ISDA members (the world's largest banks and funds) to use them as collateral. 7. They can't sell the bonds because no fund is willing to buy them. 8. Margin calls across heavily shorted asset classes are highly likely. #amc #silver #gold #hymc #pslv #creditdefaultswaps #CDOs #meme #stocks #metals 9. Blue chips, real estate, and crypto highly likely to collapse to fund their need for collateral. 10. This is not financial advice, just educational information. Do your own due diligence. Follow me @bossblunts1 for more, and my upcoming stock brokerage firm @LitXchangeLLC as we bring you the first ever stock broker for retail, by retail in the coming months ‼️ Sign up here to become a beta tester & LET'S GET LIT🔥http://litxchange.com #FuckDarkpools
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reSee.it AI Summary
Reverse repo operations fell over $100 billion, causing a liquidity crisis. Banks have less capital to meet margin requirements, potentially leading to a fire sale of assets. The Fed's unwinding of MBS is slow, while a housing correction is underway. Banks hold a significant amount of MBS, and Goldman and JPMorgan have uninsured deposits. The monetary system's Ponzi scheme will impact the global economy. Heavily shorted stocks and precious metals tend to perform well in such times. UBS lacks liquidity and can't participate in the reverse repo program due to legacy costs from the Archegos fallout. The RRP drain of funds to the bond sector poses a problem as long-term bonds are illiquid.
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
BREAKING 🚨 REVERSE REPO OPERATIONS TODAY FELL OVER $100 BILLION‼️ MONEY MARKET (MUTUAL) FUNDS AND BANKS USE THE REPO/REVERSE REPO TO STASH CASH IN HIGHLY LIQUID US TREASURY NOTES. THIS ALLOWS THEM TO RECEIVE THE FED FUNDS RATE + 0.05% APR IN OVERNIGHT LOANS IN EXCHANGE FOR T BILLS AND DO THE OPPOSITE THE FOLLOWING DAY. THE FED HAS IMPLEMENTED NEW INCREASED INITIAL MARGIN REQUIREMENTS THAT HAVE RAISED THE MINIMUM CAPITAL LEVEL REQ'D FOR AMERICA'S TOP FINANCIAL INSTITUTIONS. AS LIQUIDITY IS SUCKED OUT OF THE SYSTEM BY THE #RRP, THIS LEAVES BANKS WITH LESS CAPITAL WITH WHICH TO MEET #MARGIN COLLATERAL REQUIREMENTS. THIS HAS THE POTENTIAL TO CAUSE A FIRE SALE OF ASSETS SHOULD THE BANKS BE MARGIN CALLED BY THE DTC, OCC, NSCC, etc, AND/OR THE HEDGE FUNDS & FAMILY OFFICES TO WHICH SAID BANKS LEND SHARES & CASH TO BE MARGIN CALLED BY THEIR PRIME BROKER (BANK). WE ARE SEEING THE BEGINNINGS OF A LIQUIDITY CRISIS MEANWHILE THE FED HAS ONLY UNWOUND 10% OF THEIR #MBS VALUED OVER $2.7 TRILLION. A HOUSING CORRECTION HAS BEGUN AS NEW HOME SALE PRICES ARE DOWN 20% YoY, EXISTING HOME SALE NUMBERS HAVE COLLAPSED TO 2009 LEVELS, AND EXISTING HOME SUPPLY HAS JUST BEGUN TO INCREASE. BANKS HAVE A MASSIVE AMOUNT OF RESIDENTIAL AND COMMERCIAL MBS AND A VALUE AT RISK FOR THE TOP 4 U.S. BANKS OF OVER $719 BILLION. MEANWHILE GOLDMAN HAS 45% OF THEIR DEPOSITS UNINSURED BY THE FDIC, AND JPMORGAN 55% UNINSURED. THEYRE ALL BETTING ON A FEDERALLY FUNDED BAILOUT WITH YOUR MONEY IN THE FACE OF THE POSSIBILITY OF THE WORST RECESSION AND STAGFLATION THIS COUNTRY HAS EVER SEEN DUE TO THE PONZI SCHEME THAT IS EXACERBATED BY THE RECORD LEVEL OF C19 MONEY PRINTING BAILOUTS GIVEN TO INSTITUTIONS IN 2020 IN RESPONSE TO THE COLLAPSE OF THE #RRP ON SEPT 19, 2019 WHEN THE FED HAD TO TAKE OVER THE REPO OPERATIONS TO PREVENT A FULL BLOWN #STOCKMARKET COLLAPSE AT THAT TIME‼️ THESE ARE THE DEATH THROES OF A MONETARY SYSTEM PONZI SCHEME THAT WILL HAVE AN INEVITABLE IMPACT ON THE GLOBAL ECONOMY AND ALL OF OUR FINANCES, EVEN IF INVISIBLE AT FIRST GLANCE MUCH LIKE THE INFLATION OF THE LAST 2 YEARS. SILVER LINING? HEAVILY SHORTED STOCKS, FUNDS, AND PRECIOUS METALS TEND TO 🚀 IN TIMES LIKE THIS. I.E. #VW, #GOLD, #SILVER, #VIX ETC IN OCT 2008 & ONWARDS JUST 13 DAYS AFTER THE WORST DAYS IN #SP500 HISTORY SAW A 13% LOSS ON A SINGLE DAY. #AMC #GAMESTOP #PSLV #SILVER #GOLD #VIX #UVXY #MINERS #HYMC #SLV #SPROTT #PRECIOUSMETALS
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
BREAKING 🚨 REVERSE REPO PROGRAM FELL BY $65 BILLION TODAY‼️ WHY? BECAUSE UBS LACKS LIQUIDITY THEREFOR DOESNT HAVE THE FUNDS TO USE THE RRP‼️ THE RRP SIGNALS A COLLAPSE IN LIQUIDITY‼️ @UBS HAS INCREDIBLY MASSIVE LEGACY COSTS THAT REMAIN FROM ARCHEGOS FALLOUT IN WHICH CREDIT SUISSE WAS LEFT HOLDING A GIANT BAG OF ODOROUS EXCREMENT THAT NOW BELONGS TO #UBS‼️ THE SWAPS AND SHORTS BY ARCHEGOS AGAINST #GAMESTOP AND #AMC HAVE NOW BECOME THE ADOPTED CHILD OF #UBS‼️ 🤣🤣🤣 THE TOTAL NUMBER OF COUNTERPARTIES ALSO FELL FROM A HIGH OF ~110 TO UNDER 94 USING THE RRP‼️ #WGBSFR
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
To follow up, the RRP drain of funds moving to the bond sector poses the same problem. Long term bonds aren't highly liquid during times of duress and therefor aren't quickly convertible to cash. That's why this is a problem even tho MMF and Banks are moving some of the cash to the long term 2Y bonds for example, the risk of illiquidity remains.
reSee.it AI Summary
Bitpanda's futures token for #AMC shares may be used illegally by short hedge funds. They can issue tokens while holding the shares, selling them without taking away the futures contract. This allows endless share locates, suppressing borrowing costs. The lack of transparency raises concerns. It's time for the criminal division to investigate. Bitpanda's actions resemble a synthetic money printer, benefiting from high trading volume and artificially low borrowing costs. The depot belongs to Bitpanda, not the investors. #AMC
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
This attached S.S. PROVES that #AMC Futures can be illegally used as fake share-locate for Short Hedge Funds by Bitpanda's TOKEN‼️ Explained; THIS IS THE SMOKING GUN 🔫 IVE BEEN LOOKING FOR BEFORE MENTIONING BITPANDA AND THEIR FUTURES TOKEN UNTIL NOW. IF THEY ARE "HOLDING" THE SHARE IN THEIR DEPOT, THEY CAN ISSUE A TOKEN ✅ THEY CAN THEN SELL THE SHARE WITHOUT TAKING THE FUTURES CONTRACT (TOKEN) AWAY FROM THE TOKEN HOLDER ✅ RINSE & REPEAT = ENDLESS SHARE LOCATES FROM BITPANDA'S DEPOT THAT A HEDGE FUND CAN BUY IN ORDER TO PROVIDE AS A "SHARE-LOCATE" TO ANOTHER BROKER DEALER TO "COVER" (BUT NOT CLOSE) A SHORT POSITION, THUS KEEPING COST TO BORROW ARTIFICIALLY AND ILLEGALLY SUPPRESSED‼️✅ They aren't telling anyone how many tokens have been issued so they can lie without retail knowing their supposed holdings. There may be 1 billion tokens and they may only hold 10 million shares for example. That's 1 billion potential share locates. THEORY? NO. THESE ARE SIMPLE MARKET MECHANICS THAT ARE BEING ABUSED BY THIS LOOPHOLE‼️ Time to prosecute via CRIMINAL DIVISION, SOUTHERN DISTRICT OF NY! @DOJCrimDiv @TheJusticeDept @USDOJ_Intl @USDOJ_OEJ @DOJNatSec @JusticeOIG @SECGov
@herb_83 - Samuel Clemens
Bitpanda with a similar product as FTX. They just created this same product today for over 200 stocks, ETF’s and commodities. These are future contracts. #AMC https://t.co/0x7uLA02Wt
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
This is literally a synthetic money printer by Bitpanda if this is indeed what they're doing with the holdings. Buy #amc share, create futures token contract, sell token, sell amc share, repeat. It would make sense when you consider the elevated trading volume on #AMC, the increasing short interest causing a decrease in price, meanwhile the cost to borrow remains surprisingly low, in fact, artificially low‼️
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
This is the depot explained in layman's terms. They work for bitpanda, not for you. #AMC https://t.co/Des17FfXay
reSee.it AI Summary
A hedge fund manager reveals AMC and Gamestop secrets to Citadel employees. Melvin Capital CEO complains about retail investors. Robinhood CEO's behavior draws criticism. IBKR CEO advises retail investors on squeezing shorts. Janet Yellen warns about overleveraging by hedge funds. Another hedge fund manager predicts a massive wealth transfer with AMC and GME. TLDR: WGBSFR.
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
Hedge Fund manager spills the beans on AMC & Gamestop in front of 2 citadel employees. Melvin Capital CEO cries that retail investors were mean. Robinhood CEO acts like a lying little bitch from Bulgaria. IBKR CEO tells retail how to squeeze shorts via calls. Janet Yellen testifies HF & shadow banks overleveraging are the greatest risk to global financial stability... HF Manager explains that AMC & GME will be the greatest transfer of wealth of all time. TLDR: "WGBSFR"
Video Transcript AI Summary
The video provides a comprehensive analysis of the GameStop and AMC stock frenzy, covering various perspectives and key events. It explores the risks and system failures caused by high volumes of short positions and call options, with speakers advocating for daily reporting of short positions and increased margin requirements. Janet Yellen and Jerome Powell highlight the risks posed by overleveraged hedge funds and shadow banks. The controversy surrounding Robinhood's decision to restrict trading during the frenzy is discussed, with the CEO defending the decision based on financial requirements and market volatility. The tension between retail investors and institutional players in the stock market is emphasized, along with the role of short sellers and the need for improved settlement processes. The potential conflict of interest between prime brokers, hedge funds, and banks is examined, with a call for real-time settlements and a level playing field. The video also touches on wealth redistribution, taxing capital gains, the importance of free markets for GDP growth, and the dangers of socialism. The ongoing nature of the situation and the mention of insider information are also highlighted.
Full Transcript
Speaker 0: And we're so goddamn rich.
Speaker 1: Okay. Fucking
Speaker 0: rich.
Speaker 2: You
Speaker 1: fucking Listen, I
Speaker 2: want my fucking money.
Speaker 3: You're an original. Right?
Speaker 2: Yo. How the fuck? Leave the fucking
Speaker 1: Great.
Speaker 0: What's going on, fellow retail investors? Butcher Wall Street here. Let's take a look at a few things right now. We're gonna take a step by step walk through from broker dealers, hedge fund managers, And even the United States Treasury, Secretary Janet Yellen, as well as What other broker dealers have to say? I think you guys are gonna be Surprised if you haven't seen this before and convicted if you have, but I've got about 7 videos lined up for you.
We've probably got about an hour here. So Grab your bucket AMC popcorn. Check this shit out.
Speaker 4: Let's just start with a simple question. How close we were to this system breaking, something failing? How close were we, Thomas?
Speaker 5: We were frighteningly close on January 28th, when we had 60,000,000 registered shares at the same time we had 70,000,000 shares short and 150,000,000 150,000,000 shares short, via short call options. So if the call options had been exercised, The shorts would have had to deliver 270,000,000 shares, while only 50,000,000 shares existed. So as the rules are today, the loan broker has to if he can't get the shares, he has to go into the market And buy the shares at whatever the price is. So that could have pushed the price further up into the 1,000. When that happens, obviously, the shorts cannot pay off.
So the brokers, They default on the brokers, the brokers default on the clearinghouse and the whole thing is a huge mess that's impossible to untangle. So there is a simple solution for this the way I see. Number 1, we would have to get the short positions published once a day because we currently have it only twice a month. And second, we would, the SEC would have to require brokers to charge an additional 1% of margin, for every, 1% of short interest. And that would Now
Speaker 0: let me run that back for you in case you're unaware. This is the chief executive officer of Interactive Brokerage. That's IBKR for short. In this, he is specifically telling, the news and retail investors in this interview that investors in AMC and GameStop, Because even though as you can see, this was, amidst the GameStop turmoil, it was both AMC GameStop as well as Koss, KOSS that had the buy button pulled as well as a handful of other, stocks on January 28, 2021. This congressional hearing was the one in which, the one in which, you know, Keith Gill and other people were all Basically interviewed in front of congress over a period of days.
So, We exercised for Notice what it says about the numbers sharing real.
Speaker 4: Something's failing. How close were we, Thomas?
Speaker 5: We were frighteningly Close on, on, January 28th, when, we had 50,000,000 registered shares at the same time.
Speaker 0: 50,000,000 registered shares by the brokerage by all brokers.
Speaker 5: We had, 70,000,000 shares short.
Speaker 0: There are short positions of over 70,000,000 shares. That's obviously 20,000,000 more than they even had available.
Speaker 5: And, 150,000,000, 150,000,000 shares short, via
Speaker 0: Short call options are call contracts that retail investors held. If retail investors have exercised There are 150,000,000 shares worth of short call options that would have made it impossible for the broker dealers and the shorts to get out of their positions whatsoever. Even without a buy button, retail investors are still able to exercise Call contracts.
Speaker 5: So if the call options have, been exercised, the insurance would have had to deliver two hundred 70,000,000 shares, while only 50,000,000 shares existed. So as the rules are today, the loan broker As to, if he can get the shares, he has to go into the market and buy the shares at whatever the price
Speaker 0: is. Notice he's only talking about GameStop because that's what this question was about. That doesn't include all of the shares that were unavailable and the number of shares that were also outstanding in AMC And all of the call contracts that were now in the money when AMC went from $2 a share in the beginning of January to, $18 a share Or so on January 28th.
Speaker 5: So that could have pushed the price further up into the 1,000. When that happens, obviously, the shorts cannot pay off. So the brokers, they default on the brokers. The brokers the Solution for this, the way I see, number 1, we will have to get the the short positions Publish once a day because we currently have it only twice a month. And second, we would, The SEC would have to require brokers to charge an additional 1% of margin, for every, 1% of short interest.
And that would then raise the margins progressively so high that people will stop shorting
Speaker 4: So margin requirements would have to increase as short interest increases. That seems a bit of view from you, Thomas. I'm just wondering from your perspective, overseeing a broker, is there anything you can do to protect your clients before the SEC or the regulator has to tell you to do it?
Speaker 5: Of course, we can. That's exactly what We increased our margins. So
Speaker 4: So why does the regulator need to make that decision on your behalf, Thomas? So I'm just speaking out loud with you, thinking out loud, trying to Work through this process when you're wanting to get the regulators to make that step.
Speaker 5: Right. So first of all, I do not know the short interest daily, and that that would be important for me to be able to know how much to increase the the margins by. So the regulators could require that the short interest be reported Daily, that's very simple. Secondly, the regulators tell us the minimum margin we must charge. And we are free to charge more, and that's exactly what we did.
But, some brokers may not Be able, may not know how to deal with this. And that's why I think it would be good if the SEC required or broke.
Speaker 0: Thomas Peterffy here is saying that there's a a major problem with the financial system. The fact that shorts only have to report their positions twice a month Basically every 15 days or so allows them for massive amounts of manipulation in, they're hiding their positions and rolling their positions and moving them around with swaps and contracts and futures and married puts and calls and all sorts of other things, including marking shorts as long and marking, shorts as short exempt when it's not actually exempt, etcetera.
Speaker 5: All goes to ties for our insurance. Thomas, another issue that came up as well was
Speaker 4: the conflict of interest issue as well. And I know for you that you have a different model. You're not reliant on payment for order flow in the same way the brokers are. But, Thomas, can you speak to that? The Explosion of commission free trading that we've seen over the last several years and in some parts dependent on the payment for order flow.
Can we have one without the other?
Speaker 5: Can we have the explosion of interest in trading without payment for order
Speaker 4: Can we have the closing in commission free trading or at least the democratization of markets that we have seen over the last several years without the payment fraud afloat factor in all of this.
Speaker 5: But, but look, I mean, the commission between 0 and, for example, we charge less than like $1.95 on the average trade. That's that that that difference is almost negligible. Right? So, I don't every trade is is probably about, you know, 40, $50,000. So whether you pay there or you pay $2, That's not frustrating, sir, at this time.
Speaker 4: So do you think the conflict of interest is not an issue?
Speaker 0: Of course, no. I don't think so.
Speaker 4: Thomas, what would you like to see asked today? And who would you like to see those questions aimed at?
Speaker 5: I would like.
Speaker 0: Robinhood has been fined 45 $35,000,000 for using payment for order flow. They were actually fined $65,000,000. Back in December of 2020, Robinhood had agreed to pay a $65,000,000 fine to settle charges by the SEC that they were misleading customers. They failed to inform customers about payments that are received from trading firms to route customers' orders through them, a move that resulted in customers paying higher prices to execute trades. As a matter of fact, it cost customers $34,100,000 more than if it would have, if they were just paying a few bucks a trade because they claimed that they were not paying commission at all.
But as you all know, Nothing in life is free. Again, that's why we're coming out with LitExchange. Go to litexchange.com, if you want more info.
Speaker 5: Hi, Bill. I basically would like to ask the SEC Why they didn't act on on on, the morning of of of January 28th because, I I was so scared. I can't tell you how scared I was.
Speaker 0: Here's a billionaire telling you, he's so scared, he can't even explain in words how scared he was as to the possibility of losing every dime he's earned and he's worked for, for his entire life because of how over leveraged these short hedge funds are and how deep underwater these broker dealers and clearing houses And prime brokerages were and are. What occurred back in January of 2021 was just A small insight into what is still happening today with heavily shorted meme stocks such as AMC and GameStop.
Speaker 6: What were you
Speaker 7: scared about? Just, what does
Speaker 4: the failure look like? You said we can't close the breaking. What were you scared of? What do you think was going to happen?
Speaker 5: I was scared of a domino bankruptcy. I tell you, the rules require the long brokers to go into the market and buy the shares of whatever price. Any price. So that drove the shares up to $480, and then suddenly, it I I guess,
Speaker 0: He was going to say, and then suddenly they pulled the buy button, but he didn't because he knows that that would implicate his firm, IBKR because they also pulled the buy button from retail.
Speaker 5: So that drove this guys up to $4.80 and then suddenly, I I guess, they they it didn't go further, but it could have gone further. So if the shorts had known I mean, the longs had known that they have the right to ask for the Longs are retail. Yeah. And and and they really wanted a short squeeze, that's what they would have done. You're not tested.
Speaker 0: Because retail exactly What they should have done if they really wanted a short squeeze. Listen to what he's saying right here. Again, I'm going to play this one last time. It's 30 seconds that you need to understand.
Speaker 5: They're long bounces. I mean, I was scared of a domino bankruptcy. I tell you, the rules require the loan brokers to go into the market and buy the shares at whatever price. So that drove the shares up to $4.80 and then suddenly, I I guess, they they it didn't go further, but it couldn't come further. So if the insurers had known, I mean, if the loans had known that they have the right to ask for their shares.
Yeah.
Speaker 0: I exercise in car contracts.
Speaker 5: And they really wanted a short squeeze, that's what they would have done.
Speaker 4: You're not testifying today. Have you spoken to the House Financial Services Committee?
Speaker 0: You heard it here directly from the CEO of IBKR. If retail really wanted the short squeeze, they would have exercised their call contracts. Think about that. Now let's move on from IBKR Chief Executive Officer to Thomas Peter Phee Over to Janet Yellen. Thomas Peterffy was telling us that the system is broken, the markets are broken, the short hedge funds and the broker dealers are overwhelmed, the prime brokerages, the clearing houses and they could not deliver the number of shares required for AMC and GameStop, Right.
GameStop went up from $60 a share to $4.80 a share. AMC went up from $2 a share to $18 a share and so on. Here is Janet Yellen testifying in front of Congress, on September 28, 2021 During the CARES Act testimony along with Jerome Powell telling us exactly what is going on with shadow banks and hedge funds.
Speaker 8: COVID nineteen pandemic, of course, the most significant shock to the U. S. And global economy
Speaker 3: in the last 2 years.
Speaker 8: Beyond COVID, what do you assess are the most significant systemic risks or threats Financial stability in the U. S. And globally? When I think about systemic risks to the financial system, I always think about cyber risks Really more than anything else, we have a very highly capitalized banking system, one that is much better at measuring its risks so that more traditional Making bad loans, losing money and things like that, that'll happen, but the banks are really well fortified against that. The risk that we haven't really face the full brunt of yet is is a successful cyber attack on a financial institution of some kind, be it a financial market utility or a bank or another financial institution.
And, you know, we we work closely with treasury and other agencies all around the country on that. You you never have the feeling you're Doing enough, but we it's a very high priority priority to be ready for. But that that that will be the number one thing. Madam secretary, the same question for you, please. Other than the ongoing COVID nineteen pandemic and the terrible economic toll that it's taking and the terrible health toll that it's taking.
Looking more broadly, what do you assess to be the most significant systemic risks or threats to financial stability?
Speaker 9: I think I think there are threats to Financial stability that have come from the growth of activity in the shadow banking sector. We saw some of those spreads, emerge during the onset of the pandemic. We, have, for example, open end, bond funds that guarantee daily redemption, So massive withdrawals, by individuals who wanted to flee to cash and That can trigger fire sales of assets with systemic consequence.
Speaker 0: Here she's talking about money market funds, people leaving money market funds and institutions as well as well as the RRP. Overnight redemption. Alright. Janet Yellen is telling us that financial runs were occurring because people were withdrawing their liquidity out of the system. And here comes the best part.
I'm just going to back it up so you can hear that real quick and understand it. City in the shadow banking sector,
Speaker 9: We saw some of those threats, emerge during the onset of the pandemic. We, have, for example, open end, bond funds that guarantee Daily redemption, saw massive withdrawals, by individuals who wanted to flee to cash and That can trigger fire sales of assets with systemic consequences. The Financial The Layoversight Council that I had is taken that up as a topic that we're looking at and examining. There were issues relating to hedge funds, and the possibility of leverage there They can trigger, financial runs. That's another topic.
And More broadly, climate change over time is, I believe, could be a significant risk to the financial sector and the economy.
Speaker 0: When Janet Young says climate change, she's not actually talking about the weather. She's talking about the financial climate. There are issues relating to hedge funds and leverage there.
Speaker 9: Hedge funds, and the possibility of Leverage there that can trigger, financial runs. That's another topic and
Speaker 0: So we got Thomas Peterffy, the chief executive officer of IBKR, telling us that he was scared of domino bankruptcies And he can't explain how scared he was on that date because there were so many more shares and options call contracts that were required to be covered and closed and paid out and exercised for retail investors, have the broker dealers not pulled the buy button. And then you've got Janet Yellen just a few months later explaining to people how shadow banks such as the mutual money market funds, excuse me, and over leveraged hedge funds are the greatest risk to financial stability in the world. Now, let's take a look at what happened, Charles Grandante. Charles Grandante is a hedge fund manager since 1986, basically, and he explains in front of these 2 assholes that worked for worked or work for Citadel Securities. They both are working for Citadel Securities and he's working for another hedge fund.
This was at a Corp. Gov. Event panel, and he lays out exactly what was going on with GameStop and AMC. Check it out. His microphone is a little shoddy for the first, like, 3 minutes and then it clears up really well from there.
So Bear with the audio. Keep up with the kilo's captions for, like, 3 minutes, and then it'll kick in and you'll be able to hear the rest of the 7 minutes very But it's just a little echoey. It's not on my end. It's his audio at this event, but it's worth listening to. Trust me.
He just said the first thing he says, it's not reported in the media. That's for sure. Surprise, surprise,
Speaker 3: The media will let you believe that there's a, that we regulate these stocks, we need to regulate Retail traders, but in fact, there's a there's a another side of
Speaker 10: the story which points in a different direction. I think we've all been suspicious when we've seen high volume, cold volume followed by the stock Rising within a week or so, maybe days sometimes. Couldn't even amount flip.
Speaker 0: Look, he said There's a correlation between high volume call binding. He didn't say coal. He said call, like as in call contracts, and that how that equals High stock price changes.
Speaker 3: Coal mining. Suspicious and what
Speaker 10: we've seen, high volume coal mining followed by the stock rising within a week or so, maybe today sometimes. Could be even a month, but We we associate the the rise of the stock with the excessive coal buying and sort of a conclusion that is is very suspicious. The excessive coal volume leads to, the underlying stock increasing. That is true in part, but there are other things going on. When 1 party As long the call, we have an asset.
If there's a counterparty that is shorter call, we have a liability. The market makers typically marry people that are doing covered calls with traders that are going long a call.
Speaker 3: So you have 1 somebody doing long a call. The
Speaker 0: Here we have Charles Brudante, Hedge Fund Manager explaining the, intricacies of married calls and puts, okay, divorced calls and puts. And he's explaining how, sometimes these market makers can avoid having to hedge by buying more shares or calls by marrying these positions.
Speaker 3: And makes a market. If you have high volume coal burning, which is not illegal, The market maker takes the position himself. And as I'm reading the media, I cannot hear much about market makers doing this. I knew they pointed to Citadel, but it only explained what goes on. The the the excessive coal mining forces Citadel or any other market maker to take Forces, Citadel or any of the market makers to take care of the sound positions.
So now you have the retail traders And GameStop long the call and you have Citadel or some other market maker short the call. The market maker has An option to do nothing or hedge. Typically, market makers don't like to take overnight positions and most of these calls were for at least one day or more. So they will hedge that position. And the hedge of being short a call is to buy the underlying stock.
That is what moves the stock. So in as much as we can marry long call buyers with covered call sellers, nothing happens to the underlying stock. Other than information flow about the stock causing the stock to go up for fundamental reasons or technical reasons, momentum, moving day hours, whatever. But insofar as the volume on the long side exceeds the natural offsetting volume on the short side, the selling side, the market maker sits in, must hedge their position and that creates The balloon up. Now I watched CNBC.
I watched Bloomberg. I read all this stuff. And I don't has anybody heard that explanation? Great. But, I'm very disappointed in this.
And it's not uncommon That even the regulators are just starting to I think they understand this than me, the ones in senior positions, But they don't know how to handle it. Now there are other things and I'll give it back to you because, but there are other things that need to be discussed in the situation because the the market maker what is
Speaker 0: the concern on his face? This Citadel employee is extremely concerned as to what Charles Berlante is about to say.
Speaker 3: In an effort to support now the short seller, Melvin Capital, they will typically borrow the stock as I think everybody here knows that. They borrow the stock, give it to the Short seller, they actually sell it, never goes to the short seller. Everything stays on the books of the market maker. They sell the stock. They put the cash on their books, memo credit to Melvin Capital, and that's collateral against the short.
And that's the typical short selling. But that's not what happened with GameStop. It did in the beginning. But when the shorting got out of hand On the hedge fund side of the fence, the market makers created synthetic shorts. And that's a whole other issue, and we can talk about that.
But the synthetic shorting and naked shorting, which is illegal, You can a market maker can do can execute naked shorts insofar as they're facilitating a trade. They're not to facilitate someone shorting a position for an extended period of time. So the regulators are looking at that now as to whether or not there was this naked shorting by the market makers on behalf of the hedge funds In order to facilitate the shorts and I think they're going to uncover that there were some issues there, which gives
Speaker 0: I believe he's right seeing as how, what was this? September 22, 2023, just about 3 days ago, we saw that the Securities Exchange Commission has charged Citadel securities for marking shorts as long, for marking shorts as short exempt, and for marking longs as short. So there this has happened over a period of over of 5 years, and they marked millions, if not Hundreds of millions of trades like this, illegally. This is indicative of abusive short selling and naked short selling activity. And this regulatory framework for Red Show, was it being violated by Sezzle Securities.
That's why they settled the charges for $7,000,000, which is just fractions of a penny per, dollar that they made in profit. And these records, as you could tell, are used by regulators in policing prohibited short selling activity. This is literally the whole point, and that's exactly what Charles Grandante is saying here. Compliance with the order marking requirements of Red Show is a key component of regulatory efforts to curtail abusive marketing practices, including naked short selling, Said, the director of SEC, Division of Enforcement.
Speaker 3: Let me to a final point and I'll give it back to you. The penalty for naked shorting Is really not significant enough to stop it.
Speaker 0: You're right. As I just told you guys, we just saw that Citadel Securities LLC paid only $7,000,000 for mismarking millions and millions of trades. And on that same date, gain sorry. Excuse me. Goldman Sachs was fined, $6,000,000 for marking a 153,000,000 trades, incorrectly.
They did the same thing. They're short selling, naked short selling, And literally only having to pay a few $1,000,000 for marking 100 of millions of trades incorrectly and naked short
Speaker 3: Citadel and Goldman and all of the players get
Speaker 0: he literally just named these. This was in 2021 when this came out. So November 1, 2021, he just named the 2 players Right there that we just saw 3 days ago, September 23rd of 2023 were fined 1,000,000 of dollars, only 7,000,000 and 6,000,000 each respectively for mismarking these trades and for naked shorting. This is not a conspiracy. This is not Up for debate.
These are facts, and that's why the Securities Exchange Commission allowed Citadel and Goldman Sachs to settle for merely pennies on the dollar because they understand that they're going to continue to do it And they're just gonna keep getting these minuscule charges against them. That's why I don't really worry when I see people that are being paid to talk poorly about AMC or GameStop Because none of that matters to me. I know what my due diligence has led me to, and it's led us Directly to where we are now after having seen on multiple occasions now that AMC and GameStop can blow up at any moment. And it is one of the greatest risks to market makers, clearing houses, brokerages, banks And everybody in between, short hedge funds and family offices that possibly exist because they've had to create so many synthetic shares and so many naked shorts to maintain their positions from becoming absolvent that there's no way that they can just close out all of a sudden and move on. There's not, there's an insufficient number of shares.
Speaker 3: Fine constantly for, doing this as long as it's not intentional and never is intentional, they get fine. And I think one of the things that we need to do is discuss Increasing the fines for this lapse of memory and inefficiency in the system to the point where people wake up and pay attention. Right now, the, you know, the fines are insignificant. So I have more to say on that, but there's just the taste of where I'm going. Well, it's it's gotta be technology.
I mean, we were very paper intensive. In, my early days, you had trade date plus flat five to settle.
Speaker 0: And it was paper. And when
Speaker 3: we had the crash in 87, It took 2 weeks to settle trades that happened on the day, the Friday and the Monday after the crash. So that's, that's the main thing. I think technology is the answer to any question like what's, what's the difference between now and before we would
Speaker 8: Right. Right. So, so everything has, It greatly increased in speed.
Speaker 3: Yeah. Yeah. But I think getting back to my points and Retail now is a big player, on the street and GameStop, shows How important it is to address that sector? Well, Charles, is that because trades are again,
Speaker 0: Soon as those securities had to collateral had to collateralize 55.5 billion out of their entire $63,000,000,000 worth of assets to counterparties in order to secure debt and loans. These can be seized or pledged at any time if they do not meet their margin requirements. Looks like you can't see all that there. Let me move it to a smaller window for you. There you go.
This is in, millions. So it's 57,000,000,000,526,000,000 In supposed securities owned at fair value, securities owned approximately 55 1,000,000,000 have been pledged as collateral to counterparties on contract terms which permit the counterparties to sell or re pledge these securities to others. That means securities owned and securities sold, not yet purchased. So these securities owned and sold, not yet purchased are recorded at fair value. That includes this number here.
That's how they've been able to come up with it up with it. And those can then be rehypothecated or sold even though they don't own them. And then the other parties can also do the same. And again, as you can see, these are pledged assets. And should the borrower's default, the lender has legal recourse to take ownership of whatever assets are left over and pledged.
Speaker 11: For 3 now? I mean, back in 'eighty seven, it would have cost $50 to call your broker a trade. Right? Is that why you need to Well,
Speaker 3: their trading was more expensive. The bid offer spreads were wider. And most of the, velocity trading was done by institutions that that had a moral compass. They are not not that the I as a matter of fact, I'm in favor of what, what the Reddit boys did and girls. Who these guys faced?
They were right in what they did, So I'm not knocking them. And this
Speaker 11: is coming from a hedge
Speaker 0: fund manager. So that's But
Speaker 3: but an institution would never push the system that far Because the regulators would come down on them and saying in other words, the question you have to ask yourself, well, why didn't the hedge fund do What Keith Gill did and his followers because a hedge fund would do that to a certain point And then cut it because the STC will be in a home.
Speaker 11: I see. So when they when the retail players rallied together, there was no I guess, there wasn't a single target? Or is that why the why wouldn't they be, why wouldn't they go after the
Speaker 3: Well, if Goldman Sachs tried to Execute a short squeeze. They have executive management that at some point would have said, we've made enough money, not cut it out Because the SEC will be on our backs, and we don't need those 2 bit no good. So that's the point. One of the retail guys just said, hey, if Plotkin can short You know, over 100% or Plotkin and his cohorts could short over 100% of the float. Why can't we by enough calls equal to a 100% of the outstanding or the flow.
So, it wasn't even up Plainfield is that the moral compass is different. The hedge funds got a little bit of a moral more moral compass, not that much more, but
Speaker 11: And Charles, I think you told me that it didn't that it doesn't take a rocket scientist to realize there's a risk of a squeeze when you have over a 100% of
Speaker 5: the Yeah.
Speaker 1: You know,
Speaker 3: I was surprised when they had the congressional hearing that they didn't they they they tried to set the retail side up for a fall, But it's really the, you know, the the hedge fund world. I mean, they poor risk management. You know, once you see, the exchange is reporting that a 100% of the float is being shorted, and you know there's synthetic shorts to carry it up to 140% or thereabouts. It only takes a 10% move in the stock to start some shorters to think about covering the short. Most hedge fund managers will start covering their losses if they're long and the stock goes down 10%, at 10% is sort of The demarcation.
And if they're short and it goes up 10%, they start covering. This is a simple mathematics. If the stock goes from 100 To 90, you only need 10%, 10.5% to get back to break even. So you start cutting the most of that point. At 20%, you either double down Or cut the position altogether.
Now Charles, I want to ask you about something I
Speaker 11: think we've discussed in the past. We're big we're obviously very, very big fans of NASDAQ But I was talking to a nicey market maker and he said he felt sick to his stomach that day when you could only put in sell orders to that list of stocks. How did that come about?
Speaker 0: Well, like I was alluding, even the market makers on the New York Stock Exchange were sick to their stomach that broker dealers and clearing houses were not allowing retail investors to buy. Did you just hear that?
Speaker 11: Well, he didn't say NYSE, he said NYSE, NYSE, New York Stock Exchange. Nice, the market maker. And he said he felt sick to his stomach that day when you could only put in sell orders for that list of stocks. How did that come about? Well, like I was alluding to before,
Speaker 3: the market makers, we're basically selling to Robinhood and and the Reddit crowd Naked calls, long. And they were short the call because it's double entry accounting. Somebody's long and somebody's short. And the market makers did not hedge in the beginning. But then when they started hedging because the volume of calls went to the point where it became dangerous, The hedge to a short call is to either buy another call or buy the stock.
Speaker 0: I want you to know right now that if you watched any YouTuber or Rumble or anybody else on social media that told you that buying calls is not the way and that buying calls just gives free money to the market makers, that person is either 1, uneducated in the manner or 2, a paid shill Because call contracts force hedging by the market makers. Mom's down there with her. Don't worry about her. She'll be okay. You're just a little pissed off.
But if you ever heard any YouTuber say that you should not buy calls, You need to reassess if that's someone that you should be listening to and if they even have your best interest in mind. I'm not telling you to go out and buy weekly, you know, Call contracts expire in a week. But I'm telling you that anybody that was pushing that agenda was either 1, uneducated or 2, purposely trying To get you to stop buying the call contracts because they are the biggest threat to the market makers and short hedge funds. Because when retail buys Call contracts, the market maker can do 2 things: they can either do nothing or they can hedge for it. And a lot of times, even up until now, they've done nothing.
But when that volume gets out of control, they have to hedge for it as well as the broker dealers and clearinghouses, etcetera.
Speaker 3: And it's much easier to go in and buy the stock electronically than buy another call, became dangerous. But then when they started hedging because the volume of calls went to the point where it became dangerous, the hedge to a short call Is to either buy another call or buy the stock and it's much easier To go in and and buy the stock electronically than the stock. So they bought the stock and in buying the stock, they were moving the price up. And their attitude was this call buying will stop. So let's buy the stock, hedge our current position and hope that The buyers of these calls stopped, but they didn't.
They just kept going and going and going. So the buying of the long stock on the short call became the issue. And so it got to
Speaker 6: the point where the
Speaker 0: exchanges and regulators were aware that market makers becoming illiquid, they have it. Now, you just heard the chief executive officer of Interactive Broker tell you that call contracts and exercising call contracts
Speaker 1: are the most dangerous thing for short hedge
Speaker 0: funds and broker dealers and so on. Then you heard Janet Yellen, and Jerome Powell state that, Overleveraged hedge funds and, shadow banks are the greatest threat to global financial stability. And now you're hearing a hedge fund manager of over 40 years explaining to you that call contracts and volume buying of call contracts and exercising, is literally the worst thing for a short hedge fund and a market maker.
Speaker 3: Settle these trades and they need capital to do that. And they were spending their capital, which is on the, To cover the short call. And then that's what blew it. And then they had to tell, stop buying the stock, no more buying the stock unless you're a plot Ken or hedge funds.
Speaker 0: William, look at dollar store Liam Neeson over here. This motherfucker works for Citadel, and look at his gulp When Charles Grandante states that they they forced the broker dealers to pull the buy button. Watch this. Look at his Adam's apple. Right?
Speaker 3: Cover the, the, the, the short call. And then that's what blew it. And then they had to tell, stop buying the stock, no more buying the stock unless You're a Plotkin or a hedge fund where you're short. Right. And you want to reduce your risk, but no more buying for speculation.
You can buy to cover a short.
Speaker 0: That's right, ladies and gentlemen.
Speaker 3: This man is a fucking alpha.
Speaker 0: And look at dollar store d Liam Neeson and his cohort over here that work for Citadel, absolutely Nervous as all hell, hoping that this guy would shut the hell up. Here's a hedge fund manager. This is unrelated to AMC and GameStop, I think because I don't know who this guy is, but here's a hedge fund manager that this year is down $3,500,000.
Speaker 1: I'm just doing a hedge fund. I own a trading firm at Ox Trading. And how much did you make per year or did you make this past year? Oh, you don't wanna know. Down about 3 and a half $1,000,000.
You're down about 3 and a half million? And how long have you been in the stock trading industry for, managing a hedge fund? Oh, managing a hedge fund? Twenty plus years. I've been in the industry before you were born.
1986, MBA from Morgan Stanley. And why has this year been such a bad year for you
Speaker 12: with the current market conditions? What what happened?
Speaker 1: So I make money when things go up and down, but, unfortunately, things went straight down. Positions, some of them are down 70, 80, 90%. It's very
Speaker 0: Even hedge fund managers can find themselves in positions where they're down 70, 80, 90%. And, it's unlikely that they have as much upside as a great value stock Like AMC or GameStop.
Speaker 1: Very hard to hedge and make money when things go straight down.
Speaker 7: I don't have time
Speaker 0: Now we've heard from Thomas Peterffy of IBKR, we've heard from Janet Yellen, we heard from Jerome Powell, we heard from Charles Gridante, hedge fund manager $100
Speaker 13: is a Big number to start with. Very few
Speaker 0: And his tool bags over at Citadel. Now you're gonna hear, Hedge funds and Robinhood get grilled in front of the, committee on United States Committee on Financial Services.
Speaker 7: I just need a yes and no answer. Wall Street hedge fund managers and the CEOs of Robinhood and Reddit were among those grilled by U. S. Lawmakers Thursday about the recent Reddit fueled trading frenzy that sent shares of GameStop soaring. But amid the often fiery exchanges and finger pointing, the most clarity may have come from Reddit user Keith Gill who promoted his investment in GameStop on social media and who was otherwise known as YouTube streamer Roaring Kitty.
Speaker 14: A few things I am not. I'm not a cat. I am not an institutional investor nor am I a hedge fund. I'm just an individual whose investment in GameStop and posts on social media were based upon my own research and analysis.
Speaker 7: He's one of 5 men at the center of the saga, which which roiled Wall Street in January prompted probes by several federal and state agencies. Billionaire Republican megadonor and Citadel CEO Ken Griffin was among those who defended their businesses to the Democratic led House Finance Committee, which probed how Reddit users trading on retail such as Robinhood squeezed hedge funds that had bet against shares of GameStop and other companies. Griffin, majority owner of Citadel Securities, a Robinhood market maker, was castigated for evading his question about whether market makers provide the same prices to All brokers.
Speaker 15: The Robinhood order comes from a community a community of traders who tend to trade in smaller size.
Speaker 6: That isn't my question, sir. You're abating my question by making some other questions.
Speaker 7: The Reddit rally drove massive volatility in GameStop and other shares, prompting the post trade clearinghouses that guarantee trades to call for 1,000,000,000 of dollars in extra collateral from Robinhood and other retail trading platforms. In response, Robinhood and other platforms suspended buying in GameStop and other affected stocks on January 28. Lawmakers from both parties were outraged and questioned if the trading platforms were siding with hedge funds over retail investors something
Speaker 0: Of Of course, they were. That's why we're working on Lit Exchange. We've been working on it for over 2 years. You can go to litexchange.comorlitexchange.app, with no e at the beginning of exchange in order to sign up for more information when we are able to release it, our founders program, so you can an owner in the company if you'd like and for beta testing opportunities as well. We are almost out of slots.
We have almost 15,000 people signed up, and we will no longer be allowing, sign ups to occur once we hit that number. So if you wanna pop your email address there, feel free to do that. But this I didn't start doing YouTube or Twitter or anything like that with the intentions of creating a corporation or a company or a brokerage firm. But I realized that if we want to make the changes that we want to see in our stock markets we've got to do it ourselves because nobody's going to do it for us. Not this fucking asshole.
Not that asshole. None of these guys are gonna could could give a shit about us or whether we're making money or whether we're losing money. They are only looking out for themselves. That's why Ken Griffin didn't wouldn't answer question, that's why the little boy from Bulgaria pulled the buy button, that's why Thomas Peterffy, the CEO of IBKR, was so fucking scared that's why Janet Yellen says that over leveraged hedge funds and shadow banks are the greatest threat to financial stability. That's why Charles Grandontay and his 2 cronies over here, These 2 cronies of Citadel, I should say, were freaking out when Grandontay was spilling the beans on what's actually fucking happening.
Lootexchange.com.
Speaker 4: Hey. We
Speaker 12: don't answer to hedge funds. We serve the millions of small investors who use our platform every day to invest.
Speaker 7: Tenants said the situation would have been significantly worse had Robinhood not suspended buying. Speaking of which, Buyers briefly scooped up GameStop shares on Thursday, reversing the stock's morning losses after Gill, a. K. A. Roaring Kitty, said he remained bullish about the stock following its recent rally and sell off.
Speaker 14: As for me, I like the stock.
Speaker 7: Behind him while he spoke was a poster of a kitten with the caption, hang in there, and a parent message to fellow GameStop investors.
Speaker 0: Badass. In case you're unaware, There are 5 entities that have $2,100,000,000 invested in Choluchy Capital. Of that, 2,100,000,000, Over 28% of that entire $2,100,000,000 is short AMC stock. They have over $590,000,000 worth of puts. These are people who are absolutely desperate to win or lose on this because they don't have any other choice.
John Ackerby is with formerly with the Harbour Trust, it seems, And he is with this company here in the Cayman Islands called Carney Group. Here's his photo right here so you can see what this guy looks like. Oh, that's not the right one anyway. Oh, would you look at that? There's his contact details.
But don't reach out to him. I I don't think that's a good idea. Oh, well, it's just out there on the web. And this is Leanne Golding. She's a former vice president for Goldman Sachs and now works for the Harbor Trust.
There she is with with the Hedge Fund Association, hedgefund association.org, board of directors. For the Cayman Islands, They have over $590,000,000 short position against AMC currently. As you can see here, this might be a little small, but it says here the Choluchy Offshore Fund is the master feeder arrangement to Choluchy, Capital. And this is Leanne Golding and John Ackerley are the general partner, manager, trustee, or director of the Triluci Offshore Fund. This is the address in Puerto Rico for Triloci capital.
Here's their phone number. They're open 9 to 5, Monday through Friday. They have another address at 250 Park Avenue, New York, New York, Suite 1476, to be specific, with their other offices. But when you look online, you can't find out who's in that office. They have 1 employee, actually 2 employees now, a website with 0 pages, just a splash page, and 16 followers on LinkedIn.
It was created by Jared Dubbin. He's currently with was with ExodusPoint and he left ExodusPoint to start this company, Trolluci, January 13, 2021. That was 2 day sorry. Yeah. That was 2 days before AMC completed their share issuance.
And just about 2 weeks before they pulled the buy button on January 28, 2021 of AMC and GameStop. He was then joined by Paul Michael Zucker in April of 2023 as the c o o, CFO of that company. Let's backtrack a little bit here. These broker dealers and these corporations that were created in January of 2021 have held that same short position that almost half a $1,000,000,000 plus. It's more than half a 1,000,000,000 in short position against AMC since January of 2021 because as I've said before on this channel they can't close their position.
They don't have enough shares. And if they do close the position, they will have to buy contracts and or shares or both. Mr. Plotkin, you're not right. Looks like Gabe Plotkin believes he was not bailed out Bye, Citadel.
Here's Robinhood CEO, Vlad Tenev, getting grilled Again on CNN.
Speaker 6: I want you to address the obvious. This looks like a move by an outfit called Robinhood, which is supposed to be taken from the rich and given to the poor and doing exactly I want you to address the obvious. This looks like a move by an outfit called Robinhood, which is supposed to be taken from the rich and given to the poor and doing exactly the opposite. That when the big guys including one of your main investors in your company started to lose, you shut down the game to starve the little guy. Fair criticism.
Speaker 12: That's not what it is at all. And I know you started this segment. It really resonated with me because you described the story of Robinhood. Robinhood started 5 years ago by pioneering commission free no account minimum mobile investing And we've been the spokesperson of the individual investor, and our whole goal as an institution is to enable those customers, empower them, and give them access to the markets because for the longest time, markets have been only accessible to the wealthy. And so Do
Speaker 0: you feel empowered when the broker dealer takes away your right to trade, takes away your right to buy the stock, colludes with hedge funds and market makers and clearing houses To make you lose money? Does that empower you?
Speaker 12: The entire industry adopted our business model in 2019. And in 2020, We added millions of new customers. The entire industry added millions of new customers who took advantage of the market rally and became investors for the very first time. So, you know, we had to make a very difficult decision to protect, our Our customers and our firm. Why?
But we in no way, when they
Speaker 6: Explain why you had to do it if it wasn't to protect the guys Who had shorted, the stocks which are the big hedge funds. How are you helping the little guy investors?
Speaker 12: Well, I know that there's rumors around that, you know, we were directed by market makers or other market participants to do this. And I wanna be a 100% clear. This decision was not made on the direction of any market maker or, other market participants. So why'd you do it, Sajid? Robinhood, as a brokerage, has lots of financial requirements, As we see requirements, we have to put up money at clearing houses.
The amount of money that we have to put up depends on market volatility. And We're in historic, we're in a historic situation where there's a lot of activity and a lot of buying concentrated in a relatively small number of symbols that are going viral on social media. So we haven't really seen anything like this before. And to to prudently manage, The the risk and the deposit requirements, we had to restrict buying in these 13 stocks. What customers that held them could sell?
Speaker 0: 13 stocks, not just AMC and GameStop. 13 stocks like I told you guys. And Vlad Tenev says that they did not collude with anybody else. But it looks like the chief operating officer and the president of Robinhood joined Jim at 5 PM, on a call with Citadel, I should say. So they had a call with Citadel on January 27, 2021.
They reached out and want to speak this evening, and we believe that they will make some demands on limiting payment for order flow across the board. Black Tenev says, maybe this would be a good time for me to chat with Ken Griffin. And then they said that anecdotal evidence says that several very large firms are having very bad nights 2. And Jim Swartwart, 2 hours later comes back and says, everyone is. You wouldn't believe the convo we had with Citadel, total mess.
Speaker 12: There's a lot of activities I made on the direction of any markets to do this. And first, around that, You know, we were directed by market makers or other market participants to do this. And I wanna be a 100% clear. This decision was not made on the direction of any market maker or, other market participants. So so why did you do it?
Robinhood, as a brokerage, has lots of financial requirements. SEC requirements, we have to put up money at clearing houses. The amount of money that we have to put up depends on market volatility. And we're in historic, we're in a historic situation where there's a lot of activity and a lot of buying concentrated in a relatively small number of symbols that are going viral on social media. So we haven't really seen anything like this before.
And to to prudently manage, The the risk and the deposit requirements, we had to restrict buying in these 13 stocks. What customers that help them could sell throughout, thousands of other securities and stocks on our platform were available to freely trade. And our number one priority, as you mentioned, is to make sure our platform is reliable, stable for our customers. We're serving our customers and giving them the tools
Speaker 3: That's exactly what the question Everything in our power
Speaker 12: to turn it back on as soon as rooted.
Speaker 6: But that's the thing is that the trust is in question because it seems like The only people who are getting hurt were the big shots. And that if they were benefiting from this, your small investors now believe that you wouldn't have shut down the game. And just one thing without getting in the weeds, here. You don't control the listing venue for game stuff. Now, I used to work in finance, so I know this stuff, but the audience doesn't need to.
The New York Stock Exchange
Speaker 0: Listen to this. This guy makes an amazing point right here. Says, Oh, well, you guys don't control the listing venue. So well, just take a look at
Speaker 6: Change to work in finance. Roll, the listing venue for GameStop. Now, I used to work in finance, so I know this stuff, but The audience doesn't need to. The New York Stock Exchange does. So if anybody was gonna control the listing and shut it down, It should have been them, but it wasn't.
It was you. And the reason that they do it is very limited. They do it because they think there's evidence of fraud Or they think that there needs to be a material disclosure by the company that hasn't been made. And that's done to protect the investor. You check none of those boxes here because you don't control the venue.
You didn't know about any information that GameStop or any of these other stocks needed to put out. You don't have any reason to believe there's fraud that you've articulated and you're certainly not protecting these people who've been living the dream of making money, Especially, it's been expensive to the big guys. So why should people believe you did this for the right reasons?
Speaker 12: Well, we we have no choice. We have to comply with all financial, requirements and Yes.
Speaker 4: The FTC hasn't said you had
Speaker 0: he said we have to comply with financial requirements. That means we got margin called, Couldn't handle it, had to pull the buy button in order to get ourselves back under control and request from FINRA an exception of 1,000,000,000 and 1,000,000,000 of dollars in margin call requirements.
Speaker 12: You comply with all financial, requirements and Yes.
Speaker 4: They they as you said, you
Speaker 6: had to do this.
Speaker 12: Well, lots of brokers, have to comply with these financial requirements. Margin calls. Restriction issued restrictions on The
Speaker 0: The NSCC margin called Robinhood for tens of 1,000,000,000 of dollars and they had to go to the NSCC Asset Center a moment ago, I just misspoke. The NSCC, the Clear Corporation, gave them an exception to a limited extent. And in order to meet the rest of that, They've pulled the buy button so that you can no longer buy shares of stock in AMC or GameStop or at least 13 secondurities?
Speaker 12: Some of these names, and This is a industry wide thing. You yourself met mentioned that other brokers this week have imposed restrictions. And not speaking for other firms, but For Robinhood in particular, this isn't because there's, you know, deals happening with market makers we route to your market participants
Speaker 3: Why did you allow people
Speaker 6: to keep selling but not buying? The reason that is so troubling to people is that they were making money buying the stock because they were against the short side. And so by enabling them to sell but not buy, It sounds like you were allowing the hedge funds. And again, one of them owns a piece of you. And they had a big short position.
And that looks like the stinky conflict that you didn't come out straight on from the start. Address that.
Speaker 12: Well, none none of that had anything to do with our decision to do this. Again, this is Just looking at regulatory requirements, financial requirements. And we, 100% will always protect our customers where the entire business is operating to empower individual investors and has been since its founding. And that's what is committed to continue to do. So we want we don't wanna restrict buying these 13 stocks.
We're doing the best we can to re enable it As long as it's operationally and, and and proven from a deposit standpoint.
Speaker 0: There was absolutely no choice because they were margin called. And if they hadn't done it, They would have gotten they would have been bankrupt and insolvent anyway. Take now for 5 minutes to present your oral testimony.
Speaker 8: Chairwoman Waters, Ranking Member McHenry and members of the Committee, I would like to thank you for this opportunity To share Melton Capital's perspective on the recent trading activities in GameStop. I'm the Founder and Chief Investment Officer of Melton Capital. I'm humbled by these unprecedented events. My investors on all many investors on all sides have experienced losses. I'm here today to share my own personal experience and be helpful in this conversation.
I understand that part of the focus of this hearing is the decision of stock trading platforms to limit trading in GameStop. I wanna make clear at the outset that Melvin Capital played absolutely no role in those trading platform decisions. In fact, Nelpin closed out all of its positions in GameStop days before the platforms put those limitations in place. Like you, we learned about those limits from news reports. I just wanna make clear at the outset that contrary to many reports, Melvin Capital was not bailed out in the midst of these events.
Citadel proactively reached out to become a new investor. Similar to the investments others make in our funds, there was an opportunity for Citadel to buy low earn returns for its investors if and when our funds value
Speaker 0: Remember, this guy says they weren't bailed out, but, that's not the case. The hell is going on with this thing? The firms of billionaire investors, Steve Cohen and Ken Griffin, On January 26, 2021, poured $2,800,000,000 into a GameStop short seller that had already lost 30% that year. They invested $2,750,000,000 in Melvin Capital that was 0.72 and Citadel on January 26, 2021 Because they needed to bail them out. On GameStop, Bed Bath Beyond, AMC and other short positions, They plowed at $2,750,000,000 and they have received non controlling revenue shares in Melvin in return for their money.
AMC was up 39% 2 days before 28th. GameStop was up 145%. And as we all know, over the following 2 days after this article and that this occurred, the stocks went up thousands of percentage points. So, yes, they were absolutely bailed out.
Speaker 8: And went up. To be sure, Melvin was managing through a difficult time, But we always had margin access, and we were not seeking a cash infusion. I am here testifying today far removed from my background. Grew up in a middle class family in Portland, Maine. I went to a public high school.
I studied hard and got into a good college. Upon graduation, I did not have a job. Today, I'm married with 4 children and my time is spent with my family and our Melvin Capital, which I founded 6 years ago. I named Melvin after my grandfather who ran a convenience store. I wanted the firm to represent his values, integrity, hard work, taking care of customers and employees, and commitment to excellence.
Mellon Capital manages a hedge fund. Investors such as academic institutions, medical research and other charitable foundations, Pension funds, retirees and others invest with us. We have 36 employees and hundreds of investors, and I feel a personal duty to all of them. Melton specializes in the consumer and technology sector, including companies like GameStop, AutoZone and Expedia. Most of our investments are long.
In other words, we buy stock in companies that create jobs, grow the economy and develop new products for consumers. We do this after extensive fundamental research, sometimes literally for years. When our research convinces us that a company will grow relative to expectations, We make a long term investment. When our research suggests a company will not live up to expectations and if stock price is overvalued, we might short a stock. Like with our long positions, our practice is to short a stock for the long term after extensive research.
We also short stocks because when the markets go down, we have a duty to protect investors' capital. There are laws governing shorting stock and, of course, we always follow them. In addition, it's very important to understand that analysts not have been in short positions as Part of any network to artificially depress and manipulate down the prices to stop. Nothing about a short possession prevents a company from achieving its objectives. It is just Melvin's view about whether or whether
Speaker 0: Everything this guy has said is a lie. Listen to him read his script. It could not be more bullshit. They were bailed out. Their short position was ridiculous.
They were trying to short AMC and GameStop out of business because then they could keep all the profits from selling those shares and never having to buy them back and therefore, not having to pay any taxes on it either because they never had to buy back any of the shares to close those short positions. They received the bailout, and then they had to close down their, their fund. But that doesn't mean that those positions weren't simply transferred over to another entity, to another broker dealer, to another family office, to another short hatch fund. That's very easy to do.
Speaker 8: Partly got into a good college. Upon graduation, I did not have a job. I named Melvin after my grandfather who ran a convenience store. I wanted the firm to represent his values, integrity, hard work, taking care of customers and employees and commitment to excellence. Melvin Capital manages a hedge fund.
Investors such as academic institutions, medical research and other charitable foundations, pension funds, retirees and others invest with us. We have 36 employees and hundreds of investors And I feel a personal duty to all of them. Melvin specializes in the consumer and technology sector, including companies like GameStop, AutoZone, and Expedia. Most of our investments are long. In other words, we buy stock in companies that create jobs, grow the economy and develop new products for consumers.
Sure. We do this after extensive fundamental research, sometimes literally for years. When our research convinces us that a company will grow relative to expectations, we
Speaker 1: We make a long
Speaker 8: term investment. When our research suggests the company will not live up to expectations and if stock price is overvalued, we might short a stock. Like with our long positions, our practice is to short a stock for the long term after extensive research. We also short stocks because when the markets go down, we have a duty to There are laws governing shorting stock and of course, we always follow them. In addition, it's It's very important to understand that absolutely none of Melvin's short positions are part of any effort to artificially depress or manipulate down the price of the stock.
Nothing about a short possession prevents a company from achieving its objectives. It is just Melvin's view about whether it will. Specific to GameStop, we had a research supported view well before the recent events. In fact, we've been short GameStop since Melman's inception 6 years earlier.
Speaker 0: You just heard this man say that they've been shorting GameStop 6 years before 2021. These guys do this for the long haul. And it took 6 years, 7 years actually, for Melvin Capital To 1, get margin called and then 2, have to close out, have to close their company after losing 53% in 1 month. They went from 12,000,000,000 to less than 6,000,000,000 very, very quickly and needed a $2,750,000,000 bailout from Citadel and 0.72 just to maintain what they had left so that it wouldn't blow up in the faces of the other shorts and the other market makers.
Speaker 8: Because we believed and still believe that its business model, selling new and used video games in physical stores, is being overtaken by digital downloads through the Internet. And that trend only accelerated in 2020 when because of the pandemic, people were downloading video games at home. As a result, the gaming industry had its best year ever but GameStop had significant losses. In January 2021, a group on Reddit began to make posts about Melvin's specific investments. They took information contained in our SEC filings and encouraged others to trade in the opposite direction.
Many of these posts were laced with anti Semitic slurs directed at me and others. The post said things like, we're clearly we need the 2nd Holocaust. The Jews can't keep getting away with this. Others sent similarly profane and racist text messages to me. In the frenzy during January, GameStop stock rose from $17 to a peak of $483.
I did not think anyone would claim that the price of any relationship to the intrinsic value of the business. The unfortunate part of this so it is that ordinary investors who were convinced by misleading frenzy to buy GameStop at a 100, 200, or even $483 have now lost significant amounts. When this frenzy began, Melvin started closing out its position in GameStop at a loss, not because our investment thesis had changed, but because something unprecedented was happening. We also reduced many other Melbourne positions at significant losses for long and short that were the subject of similar posts. I'm personally humbled by what happened in January.
Speaker 0: Notice how he tries to make himself seem like a good guy. How the retail investors are such bad people who are calling him names and being so mean to him. They made him lose 1,000,000,000 of dollars that belonged to pensioners and other investment funds because we were so evil As retail investors for buying up stocks of companies that we love like AMC Entertainment and GameStop. Absolutely not. This piece of shit along with the rest of the short hedge funds and the market makers that are doing this, are the ones that have invested that money to try to break these companies, so that they can keep those profits without having to pay taxes on them if they go bankrupt.
Just like what happened to Toys R Us, just like what happened to Blockbuster. Retail investors have had enough. They said no fucking more. These stocks have squeezed multiple times Since January 28, 2021 and multiple times since this video. And in my opinion, they were just getting started.
That was just the beginning. It was just a taste of what's really to come because the short interest has not gone down significantly. Not the real short interest anyway.
Speaker 8: Investors in Melvin suffered significant losses. It is now our job to earn it back. And while I do not think that anyone could have anticipated these events, I've learned much from them, and I'm taking steps to protect our Yeah.
Speaker 0: Shut the fuck up. As you guys can see here, On May 18, 2022, they closed the fund down, right. Gabe Plotkin and Steve Cohen of 0.72 That, went short AMC and GameStop GameStop and AMC and other mainstays during the 19 nineties. Instead, Stocks skyrocketed. Melvin lost had more than $12,000,000,000 and lost 53% of it all in January of 2020, one.
And they scrambled to close their short positions. It was propped up by a $2,750,000,000 bailout from 0.72 and Citadel as well as requiring fresh capital from new investors. Citadel redeemed their investment a k a taking the money those pensions that were left in, in that company so that they could get their investment back. 0.72 also redeemed the infusion that they made. And then they gave what little was left back to the retail investor, to the retail investor that was invested in Melvin Capital.
Here are Another interview with Charles Granante in which he talks in-depth about the AMC and GameStop situation. This is the last video that I'm gonna play tonight, and I'm gonna play this one without speaking because I think that you guys need to hear what he has to say. This is another interview from CorpGov, with Charles Gridante, the hedge fund manager of, like, 40 plus years. Historical context. Charles, as a story Enjoy, ladies and gentlemen.
I wish you peace and wealth. WGBSFR.
Speaker 11: Great history on Wall Street going back to Drexel Burnham in the eighties. I'll let him tell you a bit about his his history, including some
Speaker 16: of that, wooden hedge funds like LTCM, and then he can weigh in on what he saw happening in the last couple of weeks. Charles?
Speaker 3: Well, I think, I think the write up on my hello, everybody, First of all, but I think the write up on my background covers Drexel Burnham and and long term capital. I'll weave in long term capital and some points I'd like to make. This historic event is is historic in in in one dimension, and that is the retail side of the fence, played a major role in, in moving the market. I'd like to talk about 3 areas, the efficiency of the markets, Risk management and clearing and settlement, all 3 are involved in in the GME debacle. I'm using GME as just a generic term for the whole situation.
With respect to efficient
Speaker 0: As you can see, they're well aware that this occurred in multiple stocks, 13 different stocks and he's using GME as the generic term this entire situation.
Speaker 3: Or involved in in the GME debacle. I'm using GME as just a generic term for the whole situation. With with respect to efficient markets, they always correct excessive behavior. And I think With the GME situation, we saw that, the hedge funds were muscling retail holders of GME and AMC.
Speaker 0: I said I wasn't gonna speak during this one, but I think I remember I've watched this in the past. There are some parts in which he's very clear and others in which he's talking like a hedgie. That's not to be diminutive to Charles whatsoever, but the man speaks like a professional. And there are some things, some financial terms such that are pretty hard to understand. So I will try to clarify those when I hear him say something that I think is really important and you guys need to understand in different terms.
Speaker 3: And the other stocks, retail holders of GME and AMC and the other stocks into submission. And, they got a little greedy, and this this usually, precedes A major correction in the situation, and I read it, and and Robinhood day traders saw an opportunity for the short squeeze. But let's be clear. The short squeeze was was executed by the retail side, but it was but it was created by the institutional side. The hedge funds created their own debacle, and that's a great segue into the concept the risk management.
And In my mind, it's the something I learned at Drexel Burnham. It's the most important aspect of money management. You know, picking stocks is is a difficult game, but, risk management is the is the most difficult, the most important, and greed usually trumps risk management, and we're getting back to the concept of of How does a hedge fund get into a situation where they have to run to mommy and daddy for $3,000,000,000 to bail them out? Long term capital, same situation. And at the essence of their issues I mean, they had structural issues in their portfolio.
We can talk about the Russian default in 1998, which led to the, debacle with long term capital. You can talk about other things with respect to the hedge funds, shorting GME, but the bottom line is greed. They overshorted. They they they shorted so much of the stock That, it wasn't it didn't take too much of, mediocre mathematics to figure out how to conduct a short squeeze. And, black swine events usually precede a liquidity crisis, and this whole GME thing, It's really a liquidity crunch.
We could talk about how many shares were sold short of the whole the entire flow, which is evidence of of the greed. You don't I mean, I would never have a guy trading for me, a Drexel Burnham, wanting to show up a 100% of the float, and it's just I find it just amazing. It's it's it's greed. It's avarice. It's hubris.
It's all of those things, and And, the GME was essentially a liquidity crunch, to get the as the bottom line at the stock level with Shorting the float at the hedge fund level with being over levered and over devoted into one position And at the broker dealer level, I mean, Robinhood wasn't prepared for this from a a capital point of view. And on all 3 levels, we had a liquidity crunch which resulted in, the fiasco, and everybody was pointing their fingers at everybody else. And The hedge fund guys were saying, what the hell are retail guys coming up against us for? And the retail guys are saying, what the hell are you guys Shorting the stock is it is worth more than $10, and and, you had, you know, And then you have the the broker dealer saying, do I have enough capital? Now the bottom line of all of this is and this is not the only, solution, but is that if they had same day settlement and clearing, the broker dealer would have known exactly what their risk were and they wouldn't have had to shut down trading.
So I'm sure they shut down trading for many more reasons than that. I don't have the the the facts. I have opinions, But I do know that if you peel away the facts, you'll find out that, trading on a t plus two basis Results in in a in a dilemma. I mean, the dilemma is the day traders are generating profits on a real time basis. They're using those profits.
They're plowing them back in whether they're making them on the derivative side using options or on the cash side using positions and stocks, And they're plowing those profits back into more positions. Meanwhile, those trades have not cleared and settled. The assumption is they will clear and settle, and you had the backing of DTC and the government behind that. But in reality, If somebody on the street is going to default, go under, go into liquidity, all those trades get busted, and you have a domino effect. So it It's it requires every broker dealer to take that settlement risk, and that's what we call it now, settlement risk, to a degree, and, they couldn't, you know, take it beyond what they did.
Just as a as a backdrop from a commentary point of view, back in 1987, I was around when the crash happened. And, those days, it was t plus 5. So it took 5 days to clear and settle, And we had to shut down Wall Street for, I think, 3 3 days in order to for the back office to catch up with the trading. So that is an anecdote. So you can imagine when you have t plus 2 and you had all this wild trading going on, and the hedge funds got into a frenzy too, insurance companies and and other things.
So so, the no one knew their balance sheet. The hedge fund wasn't sure of his balance sheet. The retail guys weren't sure of their balance sheet. Were they making money or losing money? And what their what was their margin?
How much were they paying for the margin? And would the margin last, and would they be allowed to continue, buying calls and all that stuff? So, clearing and settlement It's something that I haven't heard on CNBC. If anybody has heard that discussed, I'd like to hear what they've heard. But that, to me, is one area that I'd like to contribute that needs some work in the system.
They had to get it down to, same day clearing a settlement, and blockchain technology in my mind is the only way to go. Of course, it'll take, a couple of years to do all this, maybe a decade, but that is the vision that the people running Wall Street should have for, the environment when if you're gonna have real time trading, you gotta have real time settlements. So with that, I give it back to John. Alright.
Speaker 16: Great. Charles, that's that's that's great. You might not hear it on CNBC, but you're we're hearing it from you, Charles. That's that's perfect. Why don't we why don't we bring Lawrence back in here too and, open us this up to a little bit more of a discussion.
I mean, one thing I was gonna ask is, You know, is and maybe hope you can kick this off with them. Do we know I mean, I the people I've spoken to all seem to agree unanimously that After settlement would work. But I guess as Charles mentioned, you know, there's some structure in in place there that can't just be ripped out and replaced instantly. So maybe we just it's just gonna take some time. Hope?
Speaker 13: Why is it still t plus 2? I mean, why don't we have it yet?
Speaker 3: It's it's it's a it's a matter of technology, you know, the process. The, on trade date, everybody sets up to settle the securities and the money. So let's assume there's 2 broker dealers involved. Someone at Robinhood is, buying, GME, and someone at Charles Schwab is selling it. So Robinhood is is buying for their client, and they have to have the cash.
And Charles Schwab is selling the security for their client, and they have to come up with the securities. Now mind you, the security could have been loan lent out on a on a short sale borrow. So if that's the case, I think there was some of this, buy ins, we call them, where a short seller and I'm sure it happened in this case. If you're short a 100% of the float And people start buying the stock, the stock has to come up somewhere for settlements. So the short sellers got bought in.
In other words, they had to give up their their securities, and that starts a snowball. But It's it's t plus 2 because on day 1, everybody sets up. Robinhood has the money to buy the stock. Charles Schwab has the stocks. And then on Trade date plus 1, the money and the shares cross over, and the trust on on trade date plus 2, everybody reconciles their balance sheet.
Charles Schwab says, I got the shares, and they wire, Robin's I got the and they wire Charles Schwab. And Charles Schwab says, I got the money, and everybody is is whole. In the middle of that whole process, you have DKs, which stands for don't know. So one side of that trade could say, wait a second. We didn't do that trade, or we didn't do that at that price, or we didn't do that many shares.
The frequency of decays is a lot lower. I don't know the number, but that is, a monkey wrench that can come in and delay the process more. So right now, with with all of the, as John put it, the old world processing steps, which had been automated as as well as possible in my mind. The next level of automation is gotta be a complete wipe out of the old way of doing things.
Speaker 13: And and you mentioned to us yesterday it's like doing manual accounting when you have the ability to, you know, order McDonald's within half an hour. So we're we're living in in sort of a a world that that seems especially for the Robinhood users of the world, Very, incongruous to what we expect. How did we get to this point?
Speaker 3: Point. But phone call. I wanna just, the thing is we didn't have day trading at we always had day trading, but we never had it at the level we have it now, and it always existed At the institutional level, you had day trading at Goldman Sachs and and those guys, the investment banks, and and you had day trading in in the hedge fund world. But the retail world, the the amount of day traders was few and far between. So what I'm saying is those other day traders could have been controlled.
They were controlled by the internal risk risk management system and the regulators. The retail day traders had no oversight.
Speaker 16: Hope it's almost time for us to move on. But Charles, let's just give you a Chance to weigh in here. I mean, Charles, you seem like a free markets kinda guy. I mean, presumably you think the market should acts, according to what the participants wanna do. I mean, do you have any thoughts on, you People making trades when there's obviously something artificial happening.
Speaker 3: Well, you know, I am a free market guy, but I do see the need for You know, supervision on these things. And, well, we we were talking a moment ago about Floating more stock. I was thinking about GME, and and the question comes up, why didn't they float some stock when it was trading at $300 a share? And, that's been a that's been a question that's I've seen quite a bit, come up these past few days, but Probably, let Lawrence, address the legal side of it, this potential class action lawsuit by issuing stock on GME when that was up at several $100 a share, especially if you feel there's there's no way to use the money to save the company. So if you if you take if you if you float more equity And you take the money in and you use that money to delay your bankruptcy and you can't use it to grow your business or reshape your business, Then you're opened up to lawsuits for, you know, taking advantage of the of the situation, only to go to 0 anyway.
Speaker 16: Right. Okay. Hope, why don't you jump back in here? I think I think we got a couple questions, coming in maybe for Charles and the others.
Speaker 13: Yeah. Charles, while we still have you for, this portion and we're all having more time with you, We'll have more time with you in in the 2nd hour. I I guess, just remind us how we got to this point where these short sellers became so confident in themselves that they were floating Or they were shorting more than the float?
Speaker 3: Well, typically, a short seller, you know, does the analysis. I'm I'm a firm believer that short sellers know the stock better than guys that own it long. So they they do their analysis, And 9 times out of 10, 99 out of a 100, they're right. Then they test the water. They short some stock and see what the reaction is, The price volume action.
And, obviously, they hit Jell O and they just kept shorting more and more. And The retail investors, you know, were dumping the stock out of fear the stock was going in down, and They also come out with their research. We we know now that several hedge funds publicize their negative research, which was really targeted not at institutional money but at retail investors, you know, why are you holding the stock? And they list all of the issues with the company, And and they just keep shorting, and nobody was was backstopping it on the long side, So they kept shorting it, and that's when the greed comes in. Because there is a point where you should stop.
From a risk management point of view, you always have to worry about What's the black swan of this short? And the black swan is a short squeeze. The question is then at what at what size of a short In aggregate, everybody in the street, does it open the way for short squeeze? Find out the hedge fund even. I'm sure there were hedge funds, involved on the, short squeeze side, and they didn't I can't believe they didn't make the calculation properly.
It's not a difficult calculation on what what it would take to move the short against you, and, That's how we eat bottles. So like I said, it's it's it's risk management that's just trumped by greed. They felt they had the retail side against the wall and they pressed it. And then when in his John's point, and here's the free market, when the reverse was put into place And the retail day traders went against the hedge fund managers who were short. They should have let them ride it, And I think they did because a certain hedge fund, had a had to seek more, capital, And they're likely going to, you know, dissolve.
And so on that way, the the retail investors won, but The other point is regulators stepped in because the street was at risk.
Speaker 9: Right.
Speaker 1: So
Speaker 3: I think the system worked the system worked fine. It it can be better With the settlement issue, that was the that's the thing. I get back to the settlement issue.
Speaker 13: Well, it sounds like you believe that short sellers do still play a role in this marketplace.
Speaker 3: Yeah. That came up in the 29 crash. Yeah. Short sellers play a role because they help make the market efficient. Now I'm not, you know, short sellers that speculate because they see a price like day traders can short stock Because the price volume action indicates the stock is going down, they don't do the analysis, and, those are the ones that get hurt.
But short sellers play a role. They provide liquidity. They provide, pricing, and, you know, I think they they're value added. I I think there needs to be some sort of, limitation placed on To prevent someone from shorting a 120% of the flow.
Speaker 16: I wanna just go back to that fateful Friday a couple weeks ago when we saw Robinhood, shutdown trade of lot of stocks and all of a sudden you had Charles Schwab, Merrill Lynch, Morgan Stanley. All of them were stopping by orders in at least this list of a dozen stocks. And so, you You know, people are, you know, talking amongst themselves. Is this fair? Is it the right thing?
So, Nasdaq was not able to be with us today, but we've got a a comment here from Karen Snow, head of US listings And capital services at Nasdaq who says one of our main responsibilities, the exchange to ensure the capital markets are operate fairly and efficiently for all participants. Right now we're seeing the ecosystem try to balance some optimization in the markets with investor protection. But I'll tell you this, some people I spoke to who didn't wanna be on the record Told me it was frankly disgusting when you could see hedge funds cover their shorts and retail investors couldn't buy stocks that they liked and wanted to wanna support and learn more of. Charles, what what did you feel about that when you saw it happening?
Speaker 3: Well, you know, I agree. I I think It was unfortunate that while the the institutional players were trying to muscle the retail side by shorting stocks, Inviting them to sell into the short, publicizing their research that they were holding on to weak paper, pressing the short continuously when the retail side, Namely Reddit.
Speaker 0: You noticed that, Charles says that the shorts were trying to convince retail that they were holding on to weak paper. What that means in financial terms is that the short hedge funds and the mainstream media were pushing the agenda, that AMC and GameStop were bad investments.
Speaker 3: It was tend to sell into the short.
Speaker 0: Inviting people to sell into the short By pulling the buy button
Speaker 3: Publicizing their research that they were holding on to weak paper, pressing the short continuously When the retail side, namely Reddit and and Robinhood, traders, Did their own analysis. They realized that they could execute a short squeeze. As I said earlier, the the the hedge fund side of the fence created their own problem. So I I believe the retail should have pressed their bets the same way the short side pressed their bets. The short side pressed their bets to a 100 plus percent of the float.
Obviously, they were using more, synthetic shorts, to get above a 100%. And the retail side, when they started going long using calls and buying stock in the cash market, they were cut off short, and could not execute their strategy, to the fullest. Now it remains to be seen how much of a street problem existed In terms of the balance sheet, that would be the only excuse to have stopped the retail side from buying the stock. And the second factor is, I'm sure the the short sellers had buy ins. Here they are short the stock, And the true owner of the stock, say, it's some, institution, say it's a it's a pension plan.
The stock hits $300 a share, and the pension plan says, sell my 40,000 shares at $300. Meanwhile, the hedge fund I'm not gonna name hedge funds, but they were sitting on the stock. They had borrowed it, shorted it, and now they had to go out and get it. Maybe they didn't have cash. Maybe they had to go back to their broker deals and say, we've we've gotta borrow money against our other positions with you To buy the stock and return the borrow, that ends up creating a a cog in the street.
And so, with the as we said earlier, with the t plus two settlements, it doesn't take much for the street to say, Wait. I don't know where the risk is. I don't know who is holding a balance sheet filled with margin risk. We're not even sure these hedge funds can meet their margin call. Their LPs are not gonna come up and give them more money.
You're not dealing with the Citibank or JPMorgan where the government will bail them out if they get into a margin squeeze. You're dealing with a hedge fund that will say, I'm out of business.
Speaker 16: Right.
Speaker 3: So, in summary, I agree with the retail side. I think they got, hammered a little bit too much, But once we get to see the whole picture, there may be a very good reason why it had to happen.
Speaker 13: Charles, there's a related question here for you from an audience member, Tony, if you're still on, this is your question. The question is what happens with a short when the stock becomes delisted? Do you know?
Speaker 3: Well, that's a good question. When the the short is still in place, But typically, when it's delisted, you have, once again, the original owners of the stock that have lent their stock out to the short sellers calling for the stock to come back because they wanna dump it. So you get you get a lot of buy ins or the hedge funds gotta cover their shorts to close out the position. And I think the prime brokers, that's another area that hasn't been talked about at most. The prime brokers knew should have known the balance sheet even though Hedge funds use multiple prime brokers.
They should have known the balance sheet in terms of what their short position was. And and the problem with shorts is that as the short goes against you, it becomes a bigger portion of your portfolio. It's it's a lot better to be long a stock going down than to be short a stock that's going up. So, as the short became a bigger percentage of the hedge funds portfolio, the prime broker had to know it. And I haven't heard I haven't read anything yet.
Maybe somebody has where It's
Speaker 0: a lot better to be longer stock when it's going down than to be shorter stock when it's going up.
Speaker 3: Any of the prime brokers or the hedge funds stepped in and, and stopped them from from acting, as well. So The the the main thing is that the whole system came to a screeching halt, and I get back to my t plus 2. If we have blockchain settlements And we can do it if we can trade real time, why can't we settle real time? We can't, but that's the ideal world so that everybody knows where they stand From a balance sheet point of view and a portfolio point of view, when you have t plus 2, there's too many question marks. That's a good point, Michael, and I think, there's a potential conflict of interest because you had You had somebody who's involved with Citadel, who was also involved with the hedge fund, right, that was shorting the stock.
And 1 other player we need to bring into the picture who I I know made a phone call when They got the wind of this fight between the short sellers and the retail side, and that is the banking system. You know? The prime brokers are funded by the banks, Citibank, JPMorgan, and they make a phone call to, Citadel or to other players. And if they didn't give them a comfortable feeling that they understood the risks, Then the bank says, well, your credit line is going to be, you got 42 hours
Speaker 1: Mhmm.
Speaker 3: 48 hours to resolve this question because we're pulling the credit line. So you get that kind of, you know, cog in the wheel too. So there are a lot of players. And, Michael, that's a good point. The the banks behind all of that, had a play and should be at the table as to what their role was.
Yeah. I think the the the key phrase here is Redistribution of wealth. The left let's use AOC as just a metaphor for the entire crowd. That side of the fence will start with the following rationale. What percent of the population Own stocks directly.
What percent own stocks indirectly, but not directly? It's for like a pension plan. And what percent don't own stocks at all? And they will focus on the 3rd, party. And I don't know the number, but I imagine it's millions and millions of people that don't have any stock investment either through a pension plan.
Obviously, no four zero one k, no hirer. And, these are the people that they represent. These are the people that they live across the border. So that'll be the focus. I mean, if I was advising her, I would say, let's get the numbers.
And let's then talk about how can we help those people by taxing capital gains more, number 1. How about they're even talking about taxing, unrealized capital gains. I don't know how they're gonna do that from my county point of view, but that's come up. So, I mean, Janet Yellen said she's She's willing to think about it. So they're gonna think about ways of taxing the people in the markets, especially those directly in the markets like us, And, that is not good in a not so much from a selfish point of view, but From a GDP growth point of view, you want free markets that are regulated so that we have a level playing field, but you want free markets so that Capital, formation can take place and and flow where growth is.
Now it happens to be technology, and you want that that play to take to take on. They'll stop that or slow it down tremendously By, by changing the tax structure, look what happened to Europe. I mean, Europeans didn't elect own equities until about 20 years ago, Did not own any equities directly till about 20 years ago. So, that's what socialism and that kind of thinking brings.
Speaker 13: Alright, Charles. I think we'll have you leave us with these last
Speaker 0: Alright, ladies and gentlemen. There you have it. Really good insider information from hedge fund manager Charles Ferrante speaking directly on the AMC and GameStop situation when it occurred, starting months after it occurred, and give you some really great insights and pretty much letting you and I know That this isn't over. This isn't the kind of thing where companies just close their positions and move on. For example, Melvin Capital was short GameStop for 6 years before the issues that happened in January of 2021 and AMC as well.
And then it took them another year and a half on top of that, seven and a half years before they finally shut down and Lou lost over $6,000,000,000 of their clients' funds. So I want to leave you with that. Please make sure you do me a favor, drop a like, Feel free to subscribe if you want to learn more and check out lootexchange.com. I wish you peace and wealth. We're going to be so fucking rich.
That's the TLDR. Let me show goddamn rich.
Speaker 8: Okay. 3, 2,
Speaker 2: I want my fucking money. Griffin, I want my fucking Listen, I want my fucking money.
Speaker 3: You're an original. Right?
Speaker 2: I'm yelling. How do I put me the fucking money?
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
Cede and Co doesn't need to own the shares in order to loan them out. Stop listening to superstonk and do your own due diligence
reSee.it AI Summary
DRS and Computershare are criticized for their practices. Shares held by cede and Co can be lent out at their discretion, regardless of Computershare's claims. Gamestop's borrowing cost is 10 with 21 short interest, while AMC's is 1000 with 238 short interest. DRS is seen as a farce, allowing easy borrowing from cede and Co, owned by the DTCC. Many fell for the superstonk hype without doing their own research. Look into cede and Co instead of relying on Computershare. DRS is not an option for some.
@BossBlunts1 - The Butcher of Wall Street Marcel Kalinovic
DRS is trash as is Computershare. Those shares are held by cede and Co which can be lent out at their discretion regardless of what Computershare claims is happening in their brokerage. Take a look at Gamestop cost to borrow its around 10% with 21% short interest. In contrast look at AMC with +1000% cost to borrow at 23.8% short interest. DRS is a farce used to find easy to borrow share locates held on cede and Co books which is owned by the DTCC. THE DTC can do whatever they please with those shares. Too many people bought into the superstonk hype and didn't do their own due diligence. Fuck what Computershare says, go look into cede and Co. I have and I'll NEVER DRS my shares