Lawsuits and Future Market Consequences

Heellllow conspiracy realist, in tonight's classic episode, we're exploring a bit a bit of an artifact, something everybody but maybe Reddit forgot. We called this one Reddit versus Wall Street. Peasants invvade the casino. Question mark Was this game stonks This is game stog. Yeah and a bed bath and beyond. gets looped in with this, We are exploring a series of events that led to these massive price fluctuations in game stop spepecifically Yeah, it was interesting too, because it almost had this sort of anarchist quality to it, like a bit of a protest. but it was also of course about making money and embrassing Wall Street Yeah, quite a few people made a lot of money if they sold at the right time Yeah, you know, watching those market fluctuations that we're seeing manipulation of right now Oh my gosh, yeah. But I think the thing that most interested me about this was that it sort of eliminated this longstanding vision of like the Wall Street types being the only ones that could ever do anything like this It is weird to see how many different companies have gotten this game stonk treatment since doing this episode and in this you know, evaluation of what was happening where it does seem Like as you're saying guys Maybe the individual human investor when working together does have more power than we thought There are more of you than them. Let's roll the tape This is an IHart podcast. Guaranteed human I turned off news altogether I hate to say it, but I don't trust much of anything. It's the Range bait. feeles like it's trying to divide people If we got clear facts, maybe we can calm down a little NBC News brings you clear reporting Let's meet at the facts. Let's move forward from there NBC News. orting for America This july fourth, comes celebrate at America's Block Party, hosted by America two hundred fifty. America's Block Party is a canampt miss fourth of July concert happening at the Los Angeles Memorial Colosseum. Experience music performances by major artists, patriotic tributes, and the kickoff to Giving forth, helping to make july fourth the largest day of giving in American history. It's more than just fireworks. Join this landmark celebration and get your America's Block Party tickets now for seventeen dollars seventy six cents at America two fifty dot org slash L What's up, y' Summer's got a different tyip of Everything's a little looser, brighter O plan turns into another. you hear something, you stay a little longer. Fixing it no is somewhere you didn't plan to be. It's those in between moments. That's where the ideas hit Conversations strech out Little memories sneak up on you Sometimes it's just about what's in your hand. color. Chill, the new tropical butterfly refresher from Starbucks Wava and passassion fruit flavors with mango pineapple flavoreor pearls Yeah That feels like summer before you even taste it. Funny out one small stop becomes the best part of the day Start your summer rhythm with Starbucks. Try the new tropical butterfly Refresher from Starbucks. Hey everyone, it's Kell Penn. I'm inviting you to join the best sounding book Club you've ever heard with my podcast, Earsay, the Audible and I Heart Audiobook Club. Every episode, I nerd out with amazing guests and dive into the best new audiobooks available on Audible. It's the book Cub for your ears. Listen to EarsSay, the Audible and I Heart Audio book Cub. On the Artheart Radio app or wherever you get your podcasts. From UFOs to psychic powers and government conspiracies, history is riddled with unexplained events. You can turn back now or learn the stuff they don't want you to know. uction of IHarR rado Hello, welcome back to the show. My name is Matt. My name is Noel. They call me Ben. We're joined as always with our super producer, Paul, We like the stalks Decket. Most importantly, you are you. you are here, and that makes this stuff they don't want you to know. Gentlemen, twenty twenty one Yeah, is the squeeze squs broke? What a ride Yeah, so in an earlier episode We referenced this episode fairly often actually. We explored the concept of Qote unquote, economy And in that episode, we put out a call to all our fellow listeners to Tell us the difference between the current ideology of the economy and the tactics of religion At the time of this recording, so far None of us have discovered a differentiating trait. if an economy is a religion, and if that religion has a go, then that go is the concept of energy over time. We'll call it value. And exploiting that value over time is a multib billion dollar business and it gets surreal pretty quickly. Like do you guys remember Game stop when' the last time you were in a game stop You know I actually I like to pop into a game stop every time I go to a mall. And there's actually there are some fre standing game stop. People always assume they're only in malls, but there's one near me in the local target shopping center on Moreland Avenue in Atlanta. I don't know why. The nostalgia thing. Did you guys remember the game stop used to be babbages Talk about remember. A mall store? Yes. And I too have a local game stop, which I still frequent because I'm a thirty something year old man that still plays video games. I d it. I d it. like I'm a physical copy guy, You know what I mean? Yeah Whether book or games, it's the only way to make sure that you actually own the thing you buy. It's a good point because if you're getting it from a server situation, who knows if the thing you get, when you stream it or whatever or for all of a sudden be bricked because you didn't do the latest update I guess that can happen with discs too, but it's a good point you make, Ben. Shout out to Kendall for their infamous deletion of George Orwell's nineteen eighty four after people bought it. Look, on Tuesday The week we record this, we're recording january twenty ninth GameSop, which is still around, saw its fortunes turn in a very weird way. Their stock price skyrocketed over the previous price, and this sent shockwaves through the stock market, through the world of finance overall And this is an ongoing event, Ming there's information on the way that we don't have yet. no one does. And the story we're covering today continues. So by the time this reaches the air, some of the information may be outdated As the Mad Hatter says, let's start at the beginning. We'll go through the middle and do our best to find the end Game stop Wall Street. Reddit. here are the facts. What the hell just happened? How is How is this brick and mortar business? suuddenly one of the hottest stocks on the planet. Yeah, it feels very weird to even be talking about GameSop in the news outside of something terrible happening to yet another brick and mortar store. I don't know if any of you guys got like messages from friends like what's going on with GameSop? Becauseuse it was a little confusing. It was like GameSop was trending And we knew something weird was going on with the stock market and Game stop, but because of the kind of a little convoluted and mysterious nature of the stock market, it's not something that everybody can immediately wrap their head around. so it definitely does do a little digging and requires some kind of basic knowledge of some foundational yet very odd concepts of the stock market. Yeah, on that note, I want to thank everybody who reached out via Twitter or Instagram orent seented text. This story broke in the mainstream pretty much this week, but there's a lot to it. And I think you're right. have we have to first start with the stock market, which is a ridiculous thing. We all pretend it's not ridiculous, but it's a ridiculous thing. Imagine you're a company. You have two ways to raise money to cover your startup cost or to grow your business. You can either borrow money, that's debt financing, or you can sell stock, sell shares of your company. That's equity financing. And a share of stock is literally a little piece of ownership of your company, whether that's Applebe's, whether that's Game stop Bry AMC theaters, Nokia, all the rest, all the good ones. Discovery communications Classic stock. Yeah. It's interesting too, because even if you're not like say a lion's share stockholder, you know, of a company, you are still entitled to a lot of the same information and privy to some of the same kind of meetings that those people are. So even if you're like, just hold a little bit of stock, you get prospectuses on what's going on with the company and you are able to sit in on these shareholder meetings where like the CEO gives kind of the rundown of what's going on with the company. That's because you have bought a share of the stock. So you are part of the ownership or the owner class. That means you're entitled to a proportional fraction of the assets and the earnings of that company assets or everything a company owns. and earnings are all the money brings in from whatever it's selling, whether it's a product or a service. And is this is what happens on the stock market. The stock market kind of mimics to Other concepts. Number one, insurance, somebody cover us, somebody have our back. Number two, gambling, Vegas, baby. Wall Street is in some ways Vegas with a tie, you know? And an investor uses money to support this given idea, this company, this endeavor And if the endeavor succeeds, the investor wins. If it fails The investor loses their influence ordinarily in a basic buying a stock kind of thing. But there are multiple ways to participate to play in this casino for the vast majority of people The vast majority of individual investors, what are called retail investors, this means that you buy a certain stock at a certain price, hopefully a low one. And then hopefully later on down the line, you sell it at a higher price. So you get your let's see, what's a good one? You get your coffee, whatever. You get your coffee stock at ten dollars and next month you sell it for fifteen Good job. As we said That's just the beginning to understand what's happening, we have to understand the concept of something called short selling. Yeah, which is essentially the reverse of that concept. Instead of buying low and selling high, you're buying high and selling low, kind of. That's a little know oversimplification, but the idea is that you borrow a stock that you don't actually own and then you sell it. You're making a bet that the stocks price will go down. And then you can sell it, you can return it back to the person the broker, I guess that you've borrowed it from. and then you pocket the difference you know in the stock price from when you borrowed it to when the end of that contract expires. Yeah, it's a really weird concept. and it's still difficult for me to wrap my head around it necessarily. And so many different places have attempted to explain it it still doesn't make sense that there's money in it except except for the fact that you are The borrowing is really important. borrowing it And then selling it. in hopes of I don't understand. God It's the old line from Popeyes, right? I'll gladly pay on Wednesday for a hamburger on Tuesday. Vulture has a really good explanation of this that I hope is helpful for a lot of us in the audience today. Let's say A Matt, let's say Paul has a book. that book is worth ten bucks. And so you go to Paul and you say, that's a kick ass book. Can I borrow it? I'm going to give it back to you in a couple of days. And then you take that book, which you do not own and you sell that book to someone else for ten dollars. That's how much the book is worth. but you're thinking this book is going to be less valuable before you have to give the book back to Paul. And so book let's say the book drops Um dollars. Everybody said, this is not a ten dollarars book. this is a four dollar book. There are so many of them. And so now you can go and buy the actual book for four dollars and you can Give it back to Paul And now you have six dollars That makes so much more sense. Thank you, Vulture and Ben. So that makes so much more sense Okay. so that's a very that's oversimplified What you're doing in that example is you're closing that short position You were buying those shares, you're getting that book. from the market and you're getting it cheaper than it was when you borrowed it and sold. Well, and it makes so much more sense why you would have, you know firms that represent a bunch of people buying a ton of stock in when they're shorting it That makes so much more sense. Okay. I would argue that the book example is almost like you're doing this without the person's knowledge. You're essentially stealing their property. And then if it doesn't work out, you're paying them back for it without having gotten permission to sell it in the first place. I am assuming that there is understanding when you're shorting these stocks That's exactly what you're going to do. This is a contract that sets some terms as to what the parameters are around this relationship. Yeah, to make it to give people a better sense of the stakes, let's get rid of the book example and say that instead Matt has borrowed Paul's Lamborghini and sold Paul's Lamborghini and now has ten days to find a cheaper Lamborghini because he has to give the car back. Jeffrey A Born, who is a professor of finance and associate deean of undergraduate programs in the DMour McKim School of Business has a great explanation. And it's kind of what you were saying earlier, Noel. We know the way to make money on the stock market is to buy low, sell high, but you can do that in either order and shorting is the backwards order. That's where it gets risky, okay? Because back to this vulture example with the book Let's say that Matt, the book you You got, you borrowed ten dollar book. But now all of a sudden, a few days later, it's a one thousand dollars book And you have to buy that book. And you can only buy it for one thousand dollars because you have to give it back to Paul. So if the price increases instead of declining, then you as the investor, as the book borrower are on the hook. And you just lost money. In this example, you just lost a ton of money. It's a bad day. Yeah the person on the other end doesn't matter to them because they're going to get the book back either way. They're going to get the stock back either way. They don't care what's happened in the interim. as far as they're concerned, they just let you borrow the thing and then they get it back no matter what So it's up to you to make sure that that thing is returned. It's going to be returned one way or the other. There's no like, oh, sorry, I don't have anymore. That's not part of the arrangement. You absolutely have to get it and pay whatever it takes to get it. But if you get it back for cheaper, then you pocket that difference and that's how you make your money. And if you do this a bunch successfully, you can make a lot of money. But if you're thinking at home, this sounds really dodgy and kind of unethical and sort of sleazy. I mean, there's an argument that that's the case, and it's a very controversial practice, even among high level Wall Street types, maybe it would be considered like the ethical set of Wall Street Yeah, just to jump back to that book example for a second. if that book was then worth one thousand dollars and then now I owe I have to do like spend a grand to give the book back to Paul, I'm definitely calling Congress or the SEC and asking for a bailout immediately. Oh, yeah, yeah, yeah, yeah. And if you're the right kind of entity Your chances of getting a bailout are much higher that if that, you know, if you were like Matt's mutual funds, Matt's hedge fund, you probably have a better chance candidly of getting some help from Uncle Sam than you would if you were just Matt the person. So this all brings us to GameSop. This is the environment in which Game Stop's story is occurring. Yes, that GameSop used to be babbages, brick and mortar store, they sell video games, new and useds video game consoles. toys and movies. Turns out someone was attempting to short sell Game stop, and that makes sense GamSop is in a mall. GameSop is a physical store.ose are two very difficult things to navigate nowadays And as they see in Scooby Doo The people attempting to short sell Game stop would have gotten away with it too if it wasn't for some sharp eyed nerds and I say this with great affection, with their eyes on the market. There's a guy who is known as Roaring Kitty or Dep Value who actually got doxed recently. So we're just gonna to keep with his internet handles. He's the one who realized there was a hedge fund shorting Game stop stock In July of twenty twenty, he made a video that's about an hour long where he explained his logic and why he was bullish on the stock. It was about I think about four dollars per share when he recorded it. Which means you should buy Right. And and we were talking earlier with with Paul and Paul, what was the stock at Today, did you check Paul has just told us the stock is as we record, at three hundred and forty eight dollars a little north of that per share. So from four dollars to three hundred and forty eight dollars. This video came out in twenty twenty, but he's been buying this stuff earlier Yeah, since twenty nineteen. And as we record today, this kind of packet of stocks including you know again, the whole idea behind this practice is to target stocks that will likely fail, to target companies that will likely fail. It's not like doing this is going to make them more likely to fail because that would be extra crappy But it's just a practice of kind of making bets that these stocks and these companies are not going to do well. So a lot of companies that were affected by the pandemic, like GamSop, like the movie Theater Chain AMC, are on the table for this type of practice. So a lot of these stocks have been bundled up in what have been widely reported as something called A short squeeze which is a combination of it's basically a a way to screw over these investors that make their money shorting stocks. I want to step back real quick though, because there's an important point. and I think a lot of our listeners are thinking this too, which is what you said is absolutely correct in theory, it's absolutely correct. However, we have to remember we're talking about influence on a macro scale. If you have the juice for it and if you have the connections, let's say your Math's mutual fund and your short selling books you can have Matt or one of Matt's employees or someone who knows Matt from college or something, go on CNN Go on Fox, go on MSNBC and say something like, you know what sucks? This book And then that can that can influence the price of that book. and that does happen There's not really Yeah, I mean, it's kind of you can see how it's tough to regulate that. that's what Yeah Yeah. there aren't a lot of regular folks showing up on CNBC to tell you a viewer about their special stocks that they like to to trade in. Elon Musk got in trouble quite a few times for saying things on Twitter that affected his own stock price and then he got in trouble with his board and they basically said, yeah, you can't do that Stop, stop doing that Whether he was knowingly doing it to game the system And it's, you know,s he's kind of an interesting mavericky type fellow. It's hard to say. I would lean towards he knew exactly what he was doing. But you know, a Donald Trump, for example, and I can't think of any direct examples of him using his presidential platform to directly call out an individual stock, but he certainly did for sectors and certainly indicated that you certain investments were going to be going into certain sectors, and that would absolutely affect stock prices. But it would be harder to pin because again, the language that he used was more broad and vague Yeah, it gets it gets sticky real quick. and does. by the way, have you guys Have you guys looked at what's been going on with Tesla stock? Dear God It's out of control, right? Like it's It's nuts I don't like I don't like being a person that thinks about stocks a lot I don't like this feeling that I've had over the past couple of days. I've thinking about money all the time. Yeah, I don' even I don't particularly care for casinos myself. you know, if you have fun with them, have fun with them and just do so responsibly, a short squeeze is another thing that's a little bit difficult to regulate against This is when a stock or other asset has a huge jump in price. and this forces all our book buyers in this example to buy up the stock to try to stem the flow of financial blood. And that scramble only drives the stock higher and higher. And this is why at one point recently, the cost of game stop stock which is our tongue twister for the day, soared by like as much as seventeen hundred percent, not one hundred and seventy percent, one thousand seven zero zero percent This can lead to insane losses for those short sellers These losses, by the way, a little bit of foreshadowing could in theory be much, much higher than say an SEC fine for illegal market manipulation Dude, dude, you know what, we're gonna do this, Ben Throughout this episode, I'm just going to tell you what Game stop stock is. Okay? because we said three hundred forty eight before, it's now three hundred sixty eight Uh so it's our it's like you know, obviously stocks fluctuate a ton throughout the day, up and down like that. But We're just going to see where we where we land Okay, let's keep going And what a good time to pause We'll be back after a word from our sponsor. M Matt, maybe you can kick us off by telling us if the price is the same. Oh it's back it's backed out now it's three fifty seven Three hundred fifty five This is George Sais and Sam Taggart from Stradio Lab. Okay, picture it. Your apartment after a Saturday workout, the gym bag, the couch, maybe even the car. Miam, it's a full novella of odors and not the glamorous kind. That's where Fabriz comes in. Boost, spray, spritz, plug, or clip. It doesn't just mask odors, it fights them, honey. Want long lasting scent you can control? Try Fabrie pllug scent booster Tod. with the adjustable intensity dial, you can control the scent to match your mood Plus, thanks to its fade defefy technology, your home stays first day fresh for up to fifty days. Need a quick car rescue? Clip a fabriz car vent clip and map your ride to freshness. And don't forget the fabric refresher. whileile you can't cram that cushion in the washer, you can top off every pill of fluff with a spritz of fabric refresher, because home should smell like you Fabulous, fresh, unforgettable. 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Join this landmark celebration and get your America's Block Party tickets now for seventeen dollars seventy six cents at America two fifty dot org slash L It's ninety five degrees and your air conditioner suddenly starts making a very weird noise. That's when you post your task on Air Tasker. Find local help for repairs, yard workor, errands, and more without losing your cool. Go to airtasker dot com or download the app. Air Tasker. Get anything done? Hey everybody. I'm Bobby Bones. Today we're talking about Thomas Rhett and the Soundtrack to Life Tour For over a decade, Thomas Rhett has delivered more than twenty number one hits and sold out tours. Inspired by his family and his Nashville roots, he's created songs that have become the soundtrack to our lives. From Dia Happy Man to Life Changes. You've heard his songs playing at life' special moments. Now it's time to hear them live. Round up your friends to catch Thomas Rhett on the soundtrack to Life Tour Get your tickets now at live Nation. com. And we're back. How did this happen? Someone got caught with their hand in the cookie jar As we said, GameSop was ailing. A lot of people thought its demise was on the horizon, very near sales were sluggish because for all the reasons that we just named You don't really have to go to a physical store to buy a new game nowadays. You can download it Malls are the native environment of Gameestop stores and they were already in dire straits way before a pandemic And so traditional investors are being rational about this and they're saying, hey is a chance to do our short selling thing over didid it. In a worst case scenario, a lot of folks will tell you that somewhere around five to ten percent of a stock could be shorted This was not the case with Game stop to know Those investors shorted one hundred percent of Game stop stock. More than one hundred percent, right? then And then it went to more So impossible. You hit one hundred percent and then you just kept going. What I don't understand. How is there not a ceiling? How can there not be? Nope, sorry, the market's closed on GameSop, you can't do anymore 's like it's like overselling a concert. I've never understood how you can oversell a concert. orr see it's on an airline Right It just seems like the very basic level of greed kind of, I don't know, what it is So they're borrowing these shares, right? So they're borrowing more shares than actually exist And people initially didnn't really didn't really heed what Raring Kitty or DFV was saying. he invested fifty three thousand dollars in the beginning and people were kind of mocking them. they were like, oh wow, you're crazy. I mean, Yolo, do you, bro, but don't expect much And then online forumms, specifically Reddit, eventually had his back and an online community of stonk watchers That's ST ON K saw an opportunity to do a couple of things with Gamestop. Picture, you can see the memes, picture The famous Heath Ledger A take on the Joker in the Nolan Dark Knights series saying it's not about the money. about sending a message Yeah, or the other Joker from the Joker There's a fantastic video that you can find online or's I guess it's more of a gif that's animated. But it goes throughout the whole scene there at the end where the Joker Do some The thing that he does on that show You know what I'm talking about. It's it's just fantastic and it does speak to Millennials and people who are younger U than us and it really hits home And it makes sense. why a group of folks who are investing on their own and don't have a lot of assets to their name and don't feel like they don't have a lot of opportunities because the situations have changed since their previous generation. Why that group of people would want to this Yeah, yeah, they had a couple of reasons. Of course there's there's a there's a profit motive, right? We could make some money off of this. There's also this ideological push that has some kind of like cognitive DNA in common with occupy Wall Street, if anybody remembers that from a thousand years ago now They wanted to damage these hedge funds that make billions of dollars by betting on the failures of these companies. They also wanted to troll this industry and frankly, if you talk to a lot of people involved, they'll say they like GameSop. They have nostalgia for it. Just like many of us listening today, we like the stock And they also wanted to show the collective power peopleople without billions of dollars of capital could could exert if they worked together That's where that's where a subreddit called Wall Street Bets comes in. and you know, we've all been having various conversations about this off air Wall Street Bets is getting portrayed in a weird way in the mainstream media in some ways that are either intentionally or accidentally misleading. But it's a lot of people who are identifying themselves as day traders or retail investors, and they were keeping an eye on these companies that had a lot of stock shorted and They coordinated their efforts having DFVs back to buy tons and tons of game stop stock as much as they could and they wanted to drive up the price for this hedge fund and make it very expensive for them to buy back these stocks and make good on their short positions. That's the short squeeze. And it kind of Well, the story's not over yet, but it kind of worked. Financial data companies estimate short sellers lost upwards of seventy billion dollars so far just because u And this short squeeze on game stop and on other stocks This is not the crazy part Let's look at what happens at what Wall Street did, how they reacted when peasants invaded the casino Here's where it gets crazy Yes Enter Robinhood an app that many of you may have heard of from this very show because we in fact have done some advertising with Robinhood in the past Robinhood is a investment tool that folks are able to use to kind of get dip their toe into the stock market. It's sort of presented as like for the people. They very much align themselves with kind of the aftermath and the fallout and public sentiment towards Wall Street after the occupy Wall Street movement and very much capitalized on that. know, the idea of Robinhood, robbing from the rich and giving to the poor or the people It's anyone's market out there, right? But unfortunately, this particular story puts some cracks in that facade that they've tried so desperately to cultivate. Many of the retail investors that drove up the price of GameSop and others in these bundles of short squeeze positions, we're using Robin Hood to do so U The retail investors noticed something odd though when this all started to hit the fan. Robin Hood and other brokers like them We're restricting these stocks in kind of weird ways. And when we say restricting We literally mean they were not allowing users to buy them Some youTes Some users, right to buy existing Gameestop stock. It would only allow them to sell the positions that they already had. Why would they do this? you might ask. Was it out of like some sort of you know sense of justice for the financial market that no, this will not stand? Or is there something deeper at play? Or you know why wouldn't they see this as a positive? Be it really is an example of the poor rising up and robbing from the rich is exactly what Robinhood as an icon stands for. Well byy only allowing you some users to sell the stock they already had, it allowed this hedge fund, Melvin, is already in dire straits at this point to buy up the stock that they had shorted in the hopes of kind of reducing some of this damage, you know, both Robin Hood and another company called Interactive Brokers also raised margin requirements, which means that the trader needed to have more collateral in order to maintain that position. If they didn't have what these outfits saw as the necessary collateral, they would automatically have their positions closed out. That doesn't seem very roobin hoody does it Well, yeah, it seems like you're You're pushing out people who were jumping on a bandwagon, or at least that's it seems like what they were attempting to do.? a thumb on the scale essentially. So Right, The outcry begins. A lot of people who are, you know, falling victim to this are crime foul. and it's a valid thing to have a problem with. For the past few years Robin Hood has spent a lot of time and energy Marketing itself is something born out of occupy Wall Street We're democratizing finance for all It turns out a lot of people are saying they feel this may not be as impartial an institution as it appeared to be There's a very old cliche on the internet N a story the Jedi would tell you, if a service appears to be free to a user. Facebook's a great example, then it means that you're not the real customer. You're the product. Robinhood is popular because it's commission free, meaning you can make trades and you' toay you don't have to pay a little bit of a vig to make those trades So how did that make money? How are they doing this for free Well taking these trades that these users are making And they're selling the information about those trades to other firms, to large firms before these orders are actually executed. And that means that if you are positioned correctly as one of these firms you can see the trends. you can see the wind moving through the financial forest and then you as this large firm time takeake that information and use it to inform your own financial actions. It's pretty neat when you think about the system, you get a window into what's happening It kind of reminds me of the AI things that we've discussed in the past on this show. of attempting to find a way to tell the future by looking at the past Closely enough and like right up to the moment and being able to simulate. something, right? Be it's almost like you can you can see it that way That's strange, strange that that's what it actually was and that's all confirmed. L that's That's that's what they were doing. That's the yeah, that's the business model Geez Robin Hood's largest customer is allegedly a firm known as Citadel securities Are they apppparently tried to bail out Melvinne Capital. That's the hedge fund. they got, you know the one that was popping up in the headlines for this shorting of Game stop So the big fish are buying info from Robinhood and they're inserting themselves into this process, into this kind of chain of events between when you as a customer Make a deal on Robinhood and when it actually gets executed on Wall Street, this is something called order flow. and Vice has a pretty good explanation of this Vice says Citadel securities pay tens of millions of dollars for this order flow but makes money by automatically taking the other side of the order thenen returning to the market to flip the trade. And then it gets to pocket the difference between the price to buy and the price to sell, and that's known as the spread Isn't that interesting that the term spread is another term that you often hear in sports betting Horse racing, know, all of that kind of stuff. I mean, they really are relying on a lot of the same concepts and terms. And there's a good case to be made that some of this retail investment action may be happening because of the decline in sports betting during the COVID pandemic, you know There we there we are Outfits like Citadel are supposed to be honest dealers. They're supposed to look for the best price for any particular order and whher and that's whether they internalize the order themselves or whether they send it to the market. Fortunately, this has not always been the case. Back in twenty seventeen, they were fined twenty two million dollars by the SEC because their algorithms were taking advantage of retail investors when it was purchasing those order flows We're going to pause for a word from our sponsor and then we'll be back to explore more because the tale continues to unfold This is George Severres and Sam Tagart from Stradio Lab. Okay, picture it. your apartment after a Saturday workout, the gym bag, the couch, maybe even the car. 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Go to airtasker. com or download the app. Air Tasker Get anything done Hey everybody, I'm Bobby Bones. Today we're talking about Thomas Red and the soundtrack to Life Tour For over a decade, Thomas Rhett has delivered more than twenty number one hits and sold outdours. Inspired by his family and his Nashville roots, he's created songs that have become the soundtrack to our lives. From Dia Happy Man to Life Changes. You've heard his songs playing at life special moments. Now it's time to hear them live. Round up your friends to catch Thomas Rhett on the soundtrack to Life Tour Get your tickets now at live Nation. com And we're back, which means it's time for I don't know about you guys, but my new favorite game, Matt Frederick, what is the stock price of Game stop Gameestock at this moment is three forty seven. Oh Es going up and down, baby You never know justust to jump back really quickly to the Citadel thing It makes so much sense. They. It's exactly what we' talking about. Citadel is getting all that information from Robinhood, right? that order flow of what's coming through. And they are they're literally going opposite to whatever all of the retail peasants want And so that way, it's almost as if it's canceling out what retail stock buyers and sellers are doing. It's interesting because now Since we're talking about Game stop, let's introduce the next part this way. A new player has entjered the game was a sound cue. Has this cause been co opted? Vice has again, done some excellent reporting on this and There's a narrative here that's presented online. It's the idea of like the little guy, right? the person who is not a Wall Street tycoon banding together with like minded people to get back, to get revenge of some sort on the big fish the The truth of the matter is probably more complicated. It's probably not just like a kind of a Star Wars narrative of the rebels versus the Empire. Yes. And that's because the financial system has a ton of moving parts. and these day traders using Robinhood, who see themselves as you know, literal kind of Robinhoods freedom fighters are really just just kind of blips on the radar. They're just tiny cogs in a massive, massive, very, very expensive machine. So it's worth, you know, mentioning that whatever profits some of these day traders end up with On Game stop, it's really ultimately a drop in the bucket. The huge firms that own the majority of game stock stock will likely in the end still come out on top, not to, you know reign on this whole freedom fighting, kind of stick it to Wall Street parade, but these entities, these massive, too big to fail type firms are folks like Fidelity and Black Rock. And they all own millions of Gameestop shares each. For example, I think Black Rock owned around nine point two million shares worth about one hundred seventy four million dollars. That was at its original price Back in December of twenty twenty And that's according to SEC filings that were published this week U That stake now is worth about three point one billion God, I hope they sold Yeah, this is leads me to ask something that I asked off Mike. and I think it's something that maybe there isn't really a good answer to, but Obviously we can see how this false inflation of the stock price can benefit these big fish. But how does it actually benefit the company You know, because it's obviously like a, um an incorrect you know assessment of how the company is actually doing Because you'd think a stock price would be reflective of how a company's doing, what their futures are, their perspective of growth, et cetera, during their quarterly earnings reports, and all of that it should be tied to some physical asset, whether it be a brick and mortar store, inventory or what have you. So how does this vastly overinflated stock price actually benefit the folks that run the Game stop company. Yeah, it's an interesting question, right? How closely associated are the stocks and the actual thing, right? It's important to note that, you know An economy alone is not the health of a nation or a country and a stock price alone is not always indicative of the actual value of the thing, right? Because What we're talking about at this point is kind of an article of faith. We're circulating ideas and beliefs and values, right? We're betting. We're believing in a thing, or we're attempting to convince other people. believe in a thing, right? And You know, like the dollar is a coupon You know, we all just sort of believe that it'll work. It represents energy and labor over time. That is the value of the dollar. You are really trading time when you pay someone a dollar or when someone gives you a dollar. And this I would argue this is kind of similar And you know, it is it is amazing. We're seeing story after story of you know, a kid just out of college that invested a little bit of money in Game stop then was able to pay off, you know, his or her student loans almost immediately over the course of a year or, you know, someone who was able to buy their first home, and it didn't look like they were going to be able to because they couldn't find steady income Um, but, you know, it's just It's incredible that that is true and exists and came out of this whole deal It is also weird. to think that Black Rck or whatever, you know went from Crouge McDuck level to buying a palace on the Black Sea. Right, Mansso Mus or Putin level. Yeah, this I think that's a really good point that we shouldn't miss here even if some of these individual investors are at scale accurately described as a drop in the bucket, that's a life changing drop. That's amazing for so many people. And right now, as we record, there are many people on online forums who are urging one another to hold as in to not sell Game stop and these other stocks because that would enable some of these short sellers get some stocks back, right? to get those borrowed stocks back and close their position And then there are other things that are happening. They're really weird things. I don't know about you guys, but I didn't I didn't expect Neo Nazis to show up But people are recognizing opportunities and things are getting even crazier. You're going to see some circulation of anti Semitic conspiracy theories. The old stuff, you know, that keeps coming back around throughout history. and Some people are just trolling, I guess,, in like a four chan level way. Other people are spreading what I assume to be their sincere, incredibly misguided ideologies And then This is the thing. we have to remember, we're talking about the internet anybody can make. a Reddit account. Anybody can log into any number of forums and they can say they're whomever they want to say they are That doesn't mean that's their real identity 's it's quite possible I would say even likely that there are professional traders involved. We were talking about this before we went on air But if you go into these forums, you will see a lot of a lot of bots, you'll also see a lot of people who are trying to push a certain stock, like saying, hey, you know what the the real big thing is Silver. Right? Noel, I think, um You and I maybe you Matt, I don't know if we talked about this probably had some folks talking about silver to us. Is that correct? Yeah. ye, I wanted to mention just a buddy of mine. We were talking off air before we went on about this concept of cryptocurrency and how it's reacting to all of this hoopplw. And a buddy of mine yesterday was talking about how he just invested a little bit of money in something called Dogecoin, which is just another of these many different varieties of cryptocurrency, like what is it Ethereum? thatid I make that one up? Something like that.ious. Obviously the big one, Bitcoin, but Bitcoin is so expensive that it's really hard to buy into now unless you've been you know in it from the ground up. And this is my buddy's rationale and I think it really holds true and it kicks into the silver thing is a great place to go. He says platforms like Robin Hood have restricted trades of stock like GameSop and AMC. And the real short sell extravaganza, silver, the metal, hasn't kicked off yet and may never. So lots of fired up retail or day traders investors are ready to trade something. Bitcoin is too intimidating because the price in is now around thirty K. None of the other coins have any sway with the general public except Dogecoin, which opened. Yesterday, as we record this, at less than one cent per share. When I got locked out of Game Stop, I looked at the cryptos that had the most activity. Doge was ahead by a country mile and already up pasto point zero two, which is when I bought in The creeps on Reddit are targeting a dollar, which would leave me more than debt free before student debt U So it's an interesting the way the cryptocurrency market is reacting to this because it's just another market that can then be thrown into the mix to kind of offlay some of these burdens, you know, for these traders. But it causes a lot of action, right? Yeah, that's one of the big That's one of the big possibilities in the future. Is this going to lead to even more mainstreaming of cryptocurrency? And there are tons of cryptocurrencies out there. Let us know which one is your favorite and why short sellers According to the retail investors, short sellers were attempting to save themselves by engaging in something called a short ladder attack A short ladder attack is just putting in lower and lower bid prices between yourselves. So there's not really a lot of volume on this trade, but it's a camouflage thing. It's an illusory move because now it looks like the stock is plummeting. because a bunch of people appear to be trading at lower and lower prices. Quite clever, quite clever And so this means that Not everybody might be the retail investor they purport to be. It's possible that other factions of Wall Street are involved. Wallreet mayaybe eating its own. Oh. Okay okay Just full disclosure here I Ben gave me a gift at some point in our past. and When I remembered it, I was thinking about it when I was watching all of this going down in the news. And I just want to share it with everybody in case you may be interested. If you like graphic novels, we are not sponsored by this these writers or the artists or image comics. But if you're interested in graphic novels, there's a sc thing called The Black Monday Murders highly, highly recommend this is volume two, by the way. but It's about the stock market and the truth behind U Like Black Monday U in nineteen twenty nine and what happened, you know, in two thousand eight. Anyway, it's really interesting stuff I highly recommend. No, don't feel left out, man, because spoiler alert, that's the gift I got you too. So don't not surprised. Oh what Oh my God. That's awesome. Thank you was I was watching your expression. why did you feel left up? Oh, no, I wasn't an expression. Thank you very much. Is it to the office U I think so. It's either it's either at the office of my You know what? you know what? I feel like I'm almost a short seller. It will be there by Monday, my friend. All fair. Yeah, Black Monday Murders, it's a wild read. I love it. I do have to warn everybody that like this story, Black Monday Murders is not yet complete So creators of that, if you are listening Jonathan Hickman, let's go. Yes, please While we're waiting For that story to conclude, let's look at some of the updates for this current saga There is a cl thirty eight by the way Three thirty eight, o There wow, jeez, it's ping pongon. There is a class action lawsuit afoot Yes. and it would seem there's a pretty good case to be made because as we mentioned earlier, Robin Hood has this business model where like you said, Ben, if you're getting something for free, look no further than yourself to see where where the product is coming from. And the way that Robinhood is situated where they're essentially giving like a first look these trades to a third party that I'm sure somewhere in the terms is acknowledged, but it does seem like a little bit sketchy. And then this third party is was directly affected by this run on you short selling or this short squeeze. So the case to be made is that They misled investors. They misled their user base their customer base Yeah And there's also a question of whether or not Citadel actually like pulled the trigger on those actions, right That's right. There's even a rumor that there was a call from the White House and said, hey stop letting people Mess with Game stop stop letting people mess with the money. you know, That's another unwritten American law. So Citadel comes out. very recently and denies any involvement with this. They say, quote, Citadel is not involved in responsible for any retail broker's decision to stop trading in any way That's pretty explicit, right? There's not There's not much weasel language in there. This lawsuit is directly in response to the restrictions that were placed on GameSop. It was filed in the southern District of New York. claiming that Robin Hood was rigging the market against its customers You can see the language of the lawsuit.