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@_JamesAlmeida - James Almeida 🌐
@TheRoaringKitty Great explanation for those wondering why $GME https://t.co/BeIiQy7bxb
Video Transcript AI Summary
A detailed explanation of the GameStop situation is provided, focusing on short selling, market manipulation, and the impact on financial institutions. The speaker highlights how a group of investors targeted GameStop for short selling, but a turnaround in the company led to a surge in its stock price, causing trouble for short sellers. The strategy of holding onto shares to force short sellers to buy them back is discussed, leading to a standoff between investors and financial institutions. The speaker expresses a refusal to sell their shares.
Full Transcript
Speaker 0: So this homey said, I can't believe this GameStop thing is still going on. Can someone explain this to me? I love Ian and everything he stands for, but I literally have no idea what this is about or how one stock could have any real effect on impacting ultra wealthy people. I'm down to help. I just need to understand what's going on.
I got you, Matt. I'm gonna try to put it all into one video right now. I've made lots of videos about pieces of this, but I'm gonna try to, like, actually explain the real thesis of what's going on and why GameStop very well could affect the entire market, bring down corrupt financial institutions on a big scale. Yeah. I gotta put my hair up for this one.
Okay. Don't get scared of charts. We're gonna keep it really simple. When you buy stocks normally, you're buying at a lower price and you're hoping it goes up so you can sell it and make some money. Right?
Well, there's no rule in the stock market that says you're not allowed to, like, borrow something from someone. Right? So you're allowed to borrow shares from your homie. And if you borrow something, you're allowed to do what you want with it. Right?
Like, I can borrow some shares and then sell them on the market right now. I just have to return them later to make sure that homie gets his shares back. Right? So you're allowed to do this thing called short selling where you borrow some shares from whoever right now, and you sell them at the market right now hoping actually the price will go down, and then later you'll buy some and return them to your homie. And you actually make money because you return them for less money than you actually made when you sold them in the first place.
So short selling is this thing where you can bet the market will go down, and it's like taking out a loan. And when the market goes down, then you close out the loan and you make some money. You have to pay a little interest to keep that loan open, but you can make a lot of money doing that, especially if you see a company that's, like, obviously gonna die because it's a failing business model and you wanna make some money while it dies. But you want to be really careful because if you have all these loans open and you're paying interest to keep your loans open, you're hoping the price goes down, but then it starts to go up a lot, you could lose a lot of money because you'd have to buy them all back at a higher price to pay back your loan and you had to pay interest to keep your loan open and prices can go up infinitely theoretically. So short selling is pretty dangerous and everyone knows that.
And back in the nineties, all these rich people like at Bain Capital, like Mitt Romney, they realized that they can actually take companies down from the inside and basically loot a company from the inside, take all its money, give it to them and their buddies, the shareholders, and then bankrupt it and leave, and there's not really any consequences. You just buy into the company, buy a bunch of shares, get yourself on the board, take it over, start hiring people that'll do what you want, mismanage it, do a bunch of buybacks so the money gets paid back out to you and the shareholder buddies, and you can really just mismanage the company into the ground and basically loot it for all it's worth. And when it goes bankrupt, it's like, oh, well, whoopsies. It was destined to fail. We'll just move on to the next company.
Whatever. My mistake. And they made 1,000,000,000 of dollars doing this to Toys R Us, and everyone else was looking around like, damn, that was a pretty solid strategy, Bain Capital. Maybe we could do that to some other companies. And this was just after the dotcom bubble happened.
And so there's this whole Internet thing. Amazon was on the rise, and everyone kind of realized, like, you know, there's all these retail stores out there that are probably in big trouble, like Blockbuster and Sears and GameStop, you know, companies that are bound to fail. So why don't we make them fail faster and profit off of that? Plus, it turns out that these dudes that work at places like Bain Capital that can take these places down from the inside out, turns out they have a lot of friends in the market that like to short sell. And the thing about supply and demand is when I'm borrowing, like, 1,000 and 1,000 and 1,000 of shares and selling them into the market right now, all that selling actually makes the price of the stock go down because, like, when everyone's selling something, it gets valued less.
But when everyone wants to buy something, the value goes up. Right? So short selling actually makes a stock's price go down. And these guys realize that, like, you know, you like to make money when stocks go down, and I like to make money when companies get destroyed. And when we do those both at the same time, everybody wins, except the company, of course.
And then it turned out they were like, hey. We both know a lot of people in the mainstream media that like to report on failing companies. You know, the kinds of reports that make investors scared and make them wanna sell a stock. And they realized they kinda had the dream team for bankrupting companies and they could all make money on the way down and no one would ever stop them because it's kind of legal. And it actually started to work so well that they started to get really greedy and they started to naked short sell which means like no one's checking if we're even borrowing these shares that we're borrowing in order to in order to short sell.
So why even borrow them? We can just short sell shares and say we borrow them and the pan company is gonna go bankrupt anyways and when it does go bankrupt, we don't even need to pay that loan back because there's no shares to give back. They're gone. And fun fact, it's all tax free money too because there's no company to the shares are gone. Free money.
So some of them got really greedy and started selling without even borrowing the shares in the 1st place. But we'll come back to that in just a second. Because the other thing that's important to realize about the stock market is it's like this big casino game now. So it's not like the big boys aren't just playing with, like, a share of a company. They're playing with these things that are called derivatives, which is like leveraging your assets to take out loans to, like, make big plays, big gambles.
So they use all these special kinds of contracts where, like, they put up collateral in order for their bank or whoever to let them trade on a whole bunch of extra money they don't really have, but they've got collateral. So if it starts to go sideways, the bank can just take their collateral and it's all safe. But, like, this way, I can trade with 100 times the money of what I actually have. It's called leverage. And all these different tricks, they're called derivatives, and they let these big players gamble with huge positions in the market.
And so this now, when the stock moves by $1, they're leveraged 100 x. And so if the stock goes up by $1, they can make like 100x1 or if the stock goes down, vice versa. And this derivatives market has gotten really big, like 100 of 1,000,000,000,000 of dollars worth of these weird bets just all over the market. These are the top banks. It's like JPMorgan, Goldman Sachs, their names are over there.
And this is in 1,000,000 of dollars. So we're talking $49,000,000,000 That is $49,000,000,000,000 worth of these derivative bets open with just JPMorgan, the biggest bank. But the thing about these derivatives is they all have collateral backing them up. Right? And the thing they use for collateral, they're not like you and me.
It's not like they're putting up their car for collateral. They're putting up their other assets. So in over here, they're gonna be trading these assets on that collateral. And over here, they're trading the collateral on these assets. And so the whole market is now tied together by all these big financial institutions trading 1,000,000,000,000 of dollars worth of stocks that they don't actually have on leverage that's based on collateral that they're trading for 1,000,000,000,000 of dollars worth of stock over there.
You see what I mean? So, like, if they fuck this one up, then that one gets fucked. And there's all these dudes doing this, like, kinda criminal shorting businesses out of existence scheme in the market in kinda in secret. And they've been targeting GameStop for years now. Ever since 2014, the stock was on this endless ramp down.
They were short selling it. While they had infiltrated it and were mismanaging the company from the inside out, Amazon was licking its lips, ready to take over the video game online industry, and the people doing all this short selling also have all these other crazy bets open all over the market. And if any of them go wrong, a whole lot of things go wrong. And then out of nowhere this random dude that would like live stream to 4 people about his investment thesis noticed that GameStop had a lot of short sellers, and it wasn't necessarily a bad company. In fact, it had a future if it turned around.
And And then this really savvy businessman came and took over the company and started turning it around. And he kicked out all the bad people that had been trying to mismanage it to death. And suddenly, all the people that had just spent years years short selling millions and millions of shares and all those loans were still open because they were expecting it to go to 0 and they wouldn't have to pay them back, suddenly, the price is going up, and they're all in trouble. Because the thing is, when the price goes up and one of the other people that's short selling the company gets scared and closes out their trades, they have to buy all those shares back to get out of that. Right?
Because they borrowed and sold, so now I have to buy and give them back. But all that buying makes the price go up even higher. And there were a lot of people short selling this thing. And in fact, they had short sold it so much that they couldn't afford to buy it all back once the price started going up that high. I mean it was down to like 50¢ and they were opening short sales at 50¢.
Today, we're at what? $60 times 1,000,000 and 1,000,000 and 1,000,000 of shares that you have to buy back. Each one will make the price go up, and the whole stock market is tied together by all these crazy financial derivatives, and everyone's balance sheets are actually kinda sketchy in the first place. Yeah. And we all realized that all we have to do is buy the shares and just hold on to them because these guys need to buy them from us in order to close their trades out.
Whoopsies. And you know the more we thought about it the more we realized, no I don't really want to sell. Fuck you. So then they tried to trick us into thinking that they had already closed their positions and it was all over. And we were like, I'm pretty sure you're lying dude.
So we just held on for years and it turns out we were right. Shorts never closed and now we've all got the shares that they need in order to close. And you know, I still don't wanna sell. Fuck you.