Reaction To GameStop Short, Robinhood & Reddit Drama

so let's just say there's a company that's worth 155 million dollars as of last april of 2020 regular company not a company you think about a lot their stock is worth roughly 2.57 think about if that 155 million dollar company nine months later is worth not a billion not 5 billion not 10 million 29 billion dollars 188 times more than what it was worth nine months later simply because a reddit group users called wall street bets decided to take on the big wall street hedge fund managers go to war because these guys decided to short sell gamestop they said it's not going to happen we want to expose you and these guys ended up costing them billions and billions of dollars just in the last few weeks so we're talking about the company called gamestop now this last week has been a very very rough week for wall street wall street got wall streeted the bully got bullied and game stopped that today's worth 325 if you come over here mario you will see in the last 12 months the lowest the stock was was 2.57 cents the highest it went was 483 that's 188 times we're talking about look gamestop has been the highest short selling company of the year last year one of the biggest short selling companies of the year was a guy named elon musk and tesla tesla last year believe it or not short sellers elon musk hates short sellers matter of fact i think he tweeted something about short sellers he says here come the shorty apologist give them no respect get shorty he has no sympathy for shorty but what is he alluding to if you go a little bit closer here's what he says you can't sell houses you don't own you can't sell cars you don't own but you can sell stocks you don't own what do you mean by that this is bs shorting is a scam legal only for vestigial vestigial reasons now watch this here stay right here with me mario okay actually turn around because i want to show this because i don't think people are going to believe this how much you think short sellers from wall street lost betting against elon musk last year again short sellers how much do you think they lost bidding against elon musk last year a billion dollars out of five billion dollars 10 billion dollars 20 billion dollars you think that much money pat watch this according to cnn tesla short seller this is an article from this year january 6 2021 tesla short sellers lost 40 billion in 2021. elon musk made more than triple that think about hum 2020 think about how much the short sellers lost so there's a whole business of companies that short sale so what we're going to do in today's episode is the following number one nothing about what's going on today will make sense to you if you don't know what's short selling and what's margin those two are important for you to know about so we're going to cover that here in a minute i'll go into that first then we need to know who's involved what topics are involved and then a timeline of what happened with robinhood and reddit those two data you need to know about and a certain capital like melbourne capital steve cohen a bunch of these other companies you know who bailed out who what mentor bill that his mentee if there's a whole story line too that we got to get into and how is michael jordan involved in this because some of his investors anyways but let's get right into it the first thing i want to do to you for for understanding the basics of what is margin there's a movie called margin call it's a great movie to watch but let me explain to how margin works here's what margin means when you hear the word margin just think about margin equals debt so for example you go to e-trade you go one of these brokerage accounts and you put up a hundred thousand dollars and you want to buy a share of xyz uh that's worth ten thousand dollars and you take your hundred thousand dollars you say you know if i buy a hundred thousand dollars of this 10 10 share i get 10 000 shares but i want more hey mr brokerage e-trade can i get some debt some margin well since you put up a hundred thousand dollars the current federal reserve requirement is fifty percent and the most we can do is fifty percent which means we can match you a hundred thousand dollars for a total of what two hundred thousand dollars no way yes which means instead of buying ten thousand shares now i can buy twenty thousand shares at ten dollars for a total of two hundred thousand dollars right so you're like oh this is so cool this is awesome i am leveraging my money not a big deal so what does this look like well let's just say the stock goes from 10 bucks to 20 bucks what happens here's what happens your two hundred thousand dollars goes to four hundred thousand dollars the brokerage house comes and says hey you gotta pay that hundred thousand dollars back to us plus fees commission interest whatever they have depending on the timeline you end up netting around 300 000 now why is this such a big deal well if the stock went from 10 to 20 that's a hundred percent growth right yes but only if you would only put a hundred thousand dollars now gone on margin but you put the stock went from ten dollars to twenty dollars but you also borrowed another hundred thousand dollars you came out with three hundred thousand dollars so you didn't make a hundred percent you made two hundred percent that is why people do margin which means somebody can make twice the money sometimes by leveraging hence margin equals debt and using the brokerage company's money and then you pay the fees and commission right now what happens is the following that's pretty scary and i've gone through this before in my 20s it is scary is the an understatement so now let's just say this 20 stock goes to 15 bucks this i'm sorry this 10 stock goes down to let's just pick a number seven dollars and 50 cents which means it goes down 25 when this happens typically the brokerage company when it gets to around 850 will call you and say hey we just want to prepare you your your stock's gone down and you got to be ready for it but at around 25 some brokerages are 35 but i'm just using 25 at around 25 if they don't hear back from you you get a margin call and sometimes they just go out there and they sell the stock without even asking you because they're protecting their money here's what happens the stock went down 25 right from 10 to 750 it's down 25 so that means that 200 000 now went down to what 25 50k it went down to 150. you started off with 100 you borrowed 100. the brokerage says hey give our hundred thousand dollars back you're like oh okay so i give the hundred thousand dollars back to them what's left to you 50k the stock only lost 25 percent but you lost 50 why because 25 percent here 25 here because you went and borrowed money so you ended up losing 50 okay that's what margin call and that is very scary when that happens now the the thing about margin call is there's limited loss right there's only so much you can lose now when it comes down to shorting shorting shorting can get people to take their lives which is something that happened in the story that we'll talk about here in a minute shorting is very scary let me show you what shorting is so here's how here's what happens when you buy stock so when you say oh i'm long on xyz stock meaning i'm banking on this thing's going to go up or i'm short on xyz stock meaning you are banking on this thing going down so what is long long is you say i got a hundred thousand dollars i buy xyz stock i buy that ten bucks i get ten thousand shares i'm hoping this thing's going to go up great that's what i'm doing short as you say i don't think the stock is going to go up i think this stock's gonna go down no problem so you borrow okay money from the brokerage house and you say look i want to do a hundred thousand dollars of xyz stock go find me somewhere out there that's willing to sell it to me lend it to me uh borrow it and you get it at ten bucks you know and you know you you wait for what's going on with the market because you're shorting you're banking on this ten dollars going to seven dollars right like these all these short sellers were banking on tesla going down the start going down right well let's just see kind of what happens here if in this situation the stock goes down to five bucks this guy who was long loses fifty thousand dollars because when he bought it was only ten bucks but this guy that bought it at ten bucks goes down to five bucks here's what happens he tells us broker go buy those same stocks at five dollars now not ten dollars now i have a hundred thousand dollars that i put in but i only spent fifty thousand dollars but i'm getting a hundred thousand dollars which means what i made additional fifty thousand dollars you're kidding me no that's when the market goes down so short sale we have short seller billionaires in america that all they do is shorting companies i'll read you here in a minute an article about uh uh herbalife that's pretty scary written by this variety articles brilliant article but let's go to the scarier side on what could happen here the long guy he's buying and holding hoping i hope the stock goes up this guy's banking on the market going down this is the scary part about what just happened this last week with these last couple weeks with gamestop so let's just say this 10 stock doesn't remember this thing went up 188 times say this ten dollar stock goes to a hundred dollars okay if it goes to a hundred dollars this guy who bought a hundred thousand dollars worth his hundred thousand dollars goes to what a million dollars okay so he's happy he made what nine hundred thousand dollars good guy he's happy good for him what happens to this guy well this guy was banking on the stock from ten dollars to go down the commitment he made on the hundred thousand dollars was at ten dollars the stock goes up he's only put up a hundred thousand dollars the stock goes up to a hundred thousand dollars which he has to now buy those same shares at a million dollars which means he lost 900 000 dollars you see here the scary part about these two is the following remember how i said margin call it's a limit where how much money you can lose the most this guy can lose is what a hundred thousand dollars the most he can gain is what unlimited right depending on how big the company gets the most this guy can make is how much a hundred thousand dollars but the most this guy can lose is how much ready unlimited that is the scary part about short selling so you may want to come back here to me so you got margin call and you got short selling this short selling game is not a fun game if you don't know what you're doing well these reddit guys didn't like it and they went up against them they found out that these short sellers announced we are shorting gamestop they went on this group called wall street bets there was only a hundred thousand subscribers a few years ago now it's 5.2 million subscribers they started talking smack about his hedge fund people they said let's go buy and they forced this stock to go from 257 to what 483 and in the last three weeks from 19 bucks to 483 and it's been craziness right lots of money's been made but who's been hurt and what is the timeline so let's go through this because i think this is the most important thing for us to look at on what's going on so here's the timeline of both the reddit wall street bets and robinhood and a couple other events so january 2012 wall street read wall street bets subreddit is created by jamie rogozinski an entrepreneur live in washington dc and his motto is playful with a little hint of what is to come inspired by earning seasons let's play later on the model will change to something more sinister sounding like it's like 4chan found a bloomberg terminal and the discussion board will become known by shorthand wsb okay so just remember every time you hear wsb it's that ready to count wall street bets okay later on 2012 the culture wall street best takes the shape even though it's unorganized and smaller tracks people who weren't interested in relatively boring investment like index fonts or in the traditional as i mentioned value anyways it starts attracting different kinds of people right even one popular video early in the post is a great video in which investor mark cuban says diversification is for who idiots okay april 2013 robin hood is founded in san francisco bay area you know initially was just a way to track stocks but the company is building towards the idea of being an online brokerage with no commissions key no commissions for the little guy the problem here is their investors are now the big boys so their clients are the little people the small investors but their investors are the big dogs of wall street new york so targets younger potential investors with a mobile only trading platform to go on to become a favorite at where wsb let's continue october 2013 robin owens approval from the financial industry regulator allowing it to expand beyond just tracking stocks okay this is big for them february 2014 wsb surpasses 5 000 subscribers on reddit only two years old but they get 5 000 subscribers good for them they're growing and they're doing what they're doing discussion of earnings advice about how to trade off the news and tales about a kid who lost a hundred thousand dollars about betting wrong on twitter december 2014 after years of development robin hood will launch his first trading gap on apple ios store reviews are positive i think even ashton kutcher a bunch of different people in hollywood business sports by the way i think this is a great app i i myself think this is a great app i just think they got themselves in trouble so this takes off december 2014 april 2015 by now popular new features beginner to appear on wsb frequently the label of yolo short for you only live once it starts to capture cultural basement okay let's continue next robin hood wins the apple design award la la la june of 2015 august 2015 they they go on droid next thing you know their users within weeks nearly doubles triples from 67 to 176 000 and wsb meanwhile now has what 18 000 subscribers 2015 bigger names start taking notice martin shakarelli which is one of the most hated pharmaceutical executives best known for the time raising drug prices gets an invitation to join wsb while he's doing a reddit q a i'm looking at it shkreli said responds his personality ends up as clear as wsb subscribers and eventually someone with his name becomes a wsb moderator robin hood wins a design from google then 26 anyways things are developing and growing they get to a hundred thousand robin hood is 200 000 this is january 2017 and they're still growing they start raising some money here 110 million dollars in 2017. they're not worth the 1.3 billion dollar company they're now unicorn wsb is still growing doing their parts so let's kind of speed up the process on what happens they raise more money these guys get 363 million dollars of money now they're worth 5.6 billion dollars in 2018. wsb now in 2018 has 300 000 users and robin hood now has 664 000 active users they're growing they're both growing all of a sudden some issues start happening retail is slumping nationwide and now gamestop comes in game stop shares drop sharply after the company announces poor earnings and it cancels this my kiki and analyst for the research and investment bank management benchmark company says he cut his expectations for the company as the business burns to the ground wsb is ranked number two now on reddit as of april of 2019 they're getting bigger and bigger and bigger but also increasingly heated debates that is becoming its hallmark later on it will become number one here soon robin hood receives another investment 323 billion dollars now there's 323 million dollars now there were 7.6 michael bury an investor made famous for the movie or the book the big short announces that he has acquired a stake in gamestop before long wsb user takes notice september 2019 tactics of robinhood and often other languages on wsb get more scrutiny from nbc news anchor outlets and they start getting a little bit of challenges here including screenshots boasting about major losses and frequent jokes about what suicide that's when they get a little bit of trouble on their side in the same month a wsb user publishes a screenshot with a list of game style trades and references to bury's position on the same stock how they found that obviously we don't know but they found it you can do research and find out december 2019 robinhood launches a new feature allows users to buy fractions of shares making it easier for people with a limited budget to events in the company you've seen this video on facebook it's got a ton of views it's an ad march 2020. now we're talking wsb's not got more than a million subscribers during that time with the pandemic dave portnoy the founder of arsenal sports website a frequent target of criticism for his company's handling of gender and racial issues he turns to the stock market as a replacement for sports betting and has a large audience on social media which by the way he commented on everything that happened with robin hood and got four or five million views on his instagram account portnoy was not holding him back so these guys need to go to jail it's not pretty same month robin hood experiences a spike surpassing two million users according to apotopia etc etc now gamestop price hits a low of 257 remember how we talked about it earlier it hits 257. robinhood raises 280 million dollars now it's worth 8.3 billion dollars then over here a problem takes place in june of 2020 robin hood user alex kearns 20 years old dies by suicide illinois illinois after he believed he had lost hundreds of thousands of dollars which was a mistake in a note he blamed robin hood for suicide this is obviously not good pr for robin hood november 16 2020 ryan cohen an investor and entrepreneur launches a campaign to gain stop to reinvent himself i think he ends up buying 76 million dollars worth of the uh company uh nine million shares 76 million dollars and he was a guy that sold this company uh what is that one company called with the pet food company chewy he sold it to i think a pet company for 3.35 billion dollars and he decides to get into this saying we have to go from being a you know brick and mortar to what more like amazon okay great december 2020 robin hood hires investment bank goldman sachs etc etc but it is also fined 65 million by scc for misleading investors about how it makes its money and that's not good for robinhood so they keep getting a black eye now we are here to today this is where everything happens january 14th 2021 the battle between game stock short sellers and wsb user begins in earnest as purchased by both sides since game stock surging by 27 and one day cnbc jim kramer plot you know credits of reddit users it's odd it's incredible to watch i think they're succeeding beyond their wildest dreams january 19 not a smart comment to make citron research a short-selling firm sends a tweet that gamestop buyers are suckers at this poker game you're poking is what you're doing you're pissing them off a comment that only seemed to encourage wsb users even more citron later calls reddit and angry mob and vows to quit commenting publicly about gamestop january 22nd gamestop trading becomes so volatile that it is halted at least four times its stock search 51 in a day and closes at a den record then wsb users celebrate and vow more with one user writing you ready guys please hold i got to pay off my student loans just crazy stuff going on with gamestop share surge again and then there's the short squeeze that we talked about earlier and then january 27 to 28 everything seems to reach a boiling point at once wsb goes off flying for several hours and it's moderators catch up to the volume of margin calls 5.2 and they're they're now at 5.2 million subscribers anyways it's not looking pretty while all this stuff is going on it's important to realize that janet yellen all of a sudden comes out and says wait a minute this is what is going on over here you know and she's been assigned by uh uh uh by uh biden you know this is not good now we need to investigate bitcoin she traps bitcoin because some of these wsb people are also bitcoin people so they're like free-minded leave us alone you can't tell us what to do type of a mindset and then there gets a link between janet yellen who did speaking for these guys and got paid seven million dollars and one of the companies that lost a lot of money is the one that she got paid 810 000 so now there's speculation that she is really getting involved to stop the whole thing because this is now hurting the same people that paid her the seven million dollars which is the big that's that's what the speculation is right then aoc gets involved and aoc says this is unacceptable we need to know more about robinhood app apps decision to block retail investors from purchasing stocks while hedge funds are freely able to trade the stocks and they see fit as a member of the financial services committee at support of hearing if necessary elon musk down here says what absolutely you know who else agrees with her a person that would never agree with her ted cruz and she says listen ted you can sit this one out i don't like you but any other republican that wants to come and join me on this to go against robin hood let's go ahead and do it by the way today robin was a 20 to 30 billion dollar company it's not a small company so all of this stuff has happened in the last few weeks right so when you when you go in you know you look at the fun you know some people are taking shots reddit tweets out saying can't wait to explain this week to my therapist it gets 857 000 likes they're not playing along and realizing hey we got to kind of take advantage of this and play along because this thing can really you know they're they're obviously getting a lot of eyeballs which is good for them elon musk plays even more just puts the hashtag bitcoin in his profile and within one hour bitcoin stock goes up twenty percent to thirty seven thousand two twenty nine you're kinda seeing what's going on so so as we're looking at all this stuff how do these short sellers do what they do because melvin capital was one of the ones that shorted gamestop they are saying they lost somewhere between a half a billion dollars to a few billion dollars melvin capital got bailed out by ken griffin from citadel and steve cohen from 0.72 they injected 3 billion dollars into melvin to prevent it from collapsing this is not small-time stuff right now by the way melbourne capital is a 13 billion dollar company 12 and a half billion dollar asset under management they were bailed out by steve cohen who was the founder of melvin capital's former mentor anyways long story short they came out and said we got to build these guys out and the next thing you know a bunch of these guys pulled out 100 their money oh my gosh we can't even do anything with this anymore so melvin capital pulled their money out you have another company that pulled their money out just a bunch of people like dude we're giving up you know andrew left from citron 100 by the way the stock of gamestop was short at 130 percent let me say this one more time imagine there's only 10 shares of a stock but 13 shares were shorted how do you short 13 you understand what i'm like it's ludicrous what happened during this last three weeks so what does all this stuff mean to you and i and what's going to happen to robinhood because they're getting sued and a bunch of other stuff is taking place here's what i have these are my thoughts about what i'm thinking about on on what's going on over here number one is we just had an election and we learned what happens if you say stuff that the government doesn't like they silence you how do they silence you they silence a lot of people on twitter you can't put this you can't put that you can't put that okay but social media and the voices had so much power that the government came in and said hey twitter what are you going to do about it you got to silence these people what does it mean if this happens today the last three weeks we learned social media users day-to-day people have a lot of power because they have a lot of voice but the wall street guys may not have 5.2 million subscribers but what do the wall street guys have and hedge fund people have is they buy politicians so they have power and influence the reddit guys have a voice that war here's what takes place on one end if we saw election news while silencing everybody this could lead to the government silencing a lot of people on reddit i don't know what they're going to be doing but they're sitting there saying well this is not acceptable we just lost a few billion we can't be losing that kind of money and the people they're complaining to are the same people that they supported their campaigns and they need their campaign they need their money to be supported on the next election so that's number one let's set that part aside next one here okay so one side is coming out saying over-regulate we need new regulation we need new regulation we need no regulation that's what we need to be doing the other side is saying let the market decide for itself one side is saying no you can't do this because people are losing money they're committing suicide yeah anytime you buy a stock someone makes money somebody loses money it's a zero-sum game it's not like everybody who buys they make money no guess what the hedge fund guys lost some money that's fine they lost some money no but it's not fair because these other guys that are doing what they're doing they're not professionals they don't know what they're doing let the market decide for itself it tells you the government wants control and they're hinting at controlling bitcoin bitcoin folks don't think that'll ever happen but the government's saying if we want to take control we can and they're just putting a lot of threats don't regulate let the market be left alone do regulate by the way remember the margin call earlier i gave you that i said it's 50 like if you have a hundred thousand dollars the brokerage will give you another hundred thousand dollars which is 50 of the total remember that number that number was came out in 1974 by federal reserve right you know how many times that number's been changed 23 plus times which means what they can change it again if they want to and there's nothing anybody can do about it next point the bully got bullied right we all know the bully got bullied what took place right now is this going to stop the only way the bully is going to be able to continue bullying is if he gets the government to protect them if they do because the bully doesn't like it when the rules are against them they love it when the rules favor them they don't like you when the rules are against them so i don't really know what's going to be taking place right now with that what i can tell you is the following there's really a handful of people right now on what took place with this there are those who know what they're doing okay and they may have lost some money they'll come back up because they know how to play the game there are those who have no clue what they're doing they got lucky there are those who are scared and they're sitting on the sideline there are those who are not going to go in and then there are those that are researching and learning right now to see how they can capitalize off of this all i can tell you about this is the following when you play a game that you know nothing about you can't get lucky but if you keep playing the game that you know nothing about you can eventually burn now for me when i got into investing into the stocks years ago i was 20 years old or 21 years old i bought nike stock and i got margin from e-trade and the stock went up 20 percent i didn't make 20 i made 40 i sat there and i said wow this is awesome uh six months later i played the same game with margin i didn't pay attention i didn't put a stop loss i lost all my money in the market at a point where i couldn't afford to lose all my money so there's going to be a lot of people today that get lucky a lot of people today that lose money my biggest recommendation to you is to go research and learn because sometimes when you lose the biggest lesson about losing is the fact that you're forced to learn i was forced to learn i hope this entire mess of the last week forces more of us to get educated about how money works because if we don't get educated about how money works this is not going to go away very good thing for some people very scary thing for a few people robin hood's black guy is not going to go away these reddit folks are not going to go away because they're very loud and the hedge fund fund guys are not going to go away we don't this may be just a little battle that the redditors won the war is yet to be determined and the war is not you know one month or one week or three months the war is a year five years ten years the next 12 24 36 months is going to tell us who's going to end up winning this war having said that if you watch this video i got a video i did four or five years ago called 20 rules of money if you've never seen it click over you to go watch it and if you have any thoughts on this i'd love to hear from you send me a text at 310-340-1132 once again 310-340-1132 i want to hear from you on what's your biggest takeaway of what happened the last three weeks take care everybody

Channel: Valuetainment

Views: 673,064

Keywords: Entrepreneur, Entrepreneurs, Entrepreneurship, Entrepreneur Motivation, Entrepreneur Advice, Startup Entrepreneurs, valuetainment, patrick bet david, Every University’s Worst Nightmare, colleges, universities, college scam, Gamestop, Reddit, Wallstreetbets, Elon Musk, Reaction To GameStop Going to the Moon, Robinhood & Reddit Drama, Understanding the GameStop trades

Id: m4Im5vWMglQ

Length: 29min 17sec (1757 seconds)

Published: Sun Jan 31 2021