The Great Stock Market Short Squeeze: It’s Far From Over (GME)

since the rise of hedge funds to the day hedge funds are like the apex predators of wall street instead of making money by predicting outcomes they engineer the outcomes these are the apex predators of wall street they are in the business of shorting companies to destroy them i mean that is their business model and they are not academic traders okay who are just speculating on outcome they engineer the outcome right look at their tactics just watch the show billions right they hire pr people they hire private investigators they're participating on these message boards spreading disinformation they try to destroy companies to engineer that outcome they create nothing they're in the business of destruction so we have short seller billionaires in america that all they do is shorting companies yeah a big group can come in and crush a company simply because well we're gonna make a lot of money i haven't made my haven't made my quota this month or what have you so i i really don't care for it these guys are regularly known for collaborating with each other in very legal ways like online forums but in person yeah and by the way those forums exist uh in the professional organized world too amongst hedge funds you know i've been invited to idea dinners where we all get together and we talk about the ideas that we have and in very less legal ways and being that they have 3.4 trillion dollars under management altogether when they move together they can move entire markets crush companies skyrocket companies hedge funds are the scavengers of the financial sector and that a select few have undue influence on the markets any public statement you make or position you take can send a stock soaring or falling they make billions in profits and when a giant crisis comes they socialize the losses onto the public while arguably not adding much value to society pretty clever business model if you ask me what exactly is the societal value of these hedge funds now i know that they provide some price discovery and they provide greater liquidity to markets but is that really worth them really being the richest players in the game it doesn't make any sense and then when they lose like in 2008 they get bailed out and since the inception of the stock market big players like hedge funds and institutional investors have always had an advantage over the little guy in money power and influence and by the way guys before we continue i'm on stereo now i partnered with them for this video and i just had my first live talk on stereo with my close business friend wally went on how to evade texas legally wally just moved to puerto rico to take advantage of their amazing flat 4 percent tax rate a few weeks ago and i have been dying to figure out how he's been liking it so i thought i might as well make our more casual conversation live so you guys can learn from it too and what's cool about stereo is that you guys can ask me questions and interact with me live on the show i'm kind of curious as to like the living status in puerto rico like is it comfortable i don't know is that a third world country that's funny yeah we talked about that earlier a little bit actually we had a super great time it's right up your guys's alley evading taxes legally so if you missed it you can check out the replay of our chat with the link below and i'll be hosting a few more lives one on friday at 12 p.m u.s pacific time with my youtuber friend captain sinbad you might have seen his hilarious watches once videos what gives you so much energy gratitude super funny guy in real life and another one on monday at 12 p.m with arvid ali where he's going to be responding to all the hate comments he's received on our last video on kathy wood this one is going to be pretty spicy you're not going to want to miss it so come hang out come chat with us at stereo.com jake tran and be sure to hit the notification bell on there too so you get notified when we go live that's again friday at 12 p.m with captain sinbad and money at 12 p.m with orphan ali at stereo dot com jake tran link below january 2012 a guy named jamie rogozinski got bored of the idea of safe investing he found existing online forums to be too risk averse and couldn't stand hearing another word about the fundamentals of a company from talking heads on tv so he launched a new subreddit one called wall street bets with the slogan being it's like 4chan found a bloomberg terminal one might imagine that jaime is probably some basement dweller with greasy fingers and potato chips on his shirt but he's actually a respectable looking entrepreneur with his own family april 2013 within 15 months of the founding of wall street bets a new startup was founded in silicon valley a baby named robin hood at first it was just an app that allowed you to track stocks no buying or selling one and a half years later on december 2014 robin hood launched a zero commission trading platform on the app store forever changing the landscape of stock brokerages by doing the same thing that companies like facebook did they took something that was inaccessible stock trading where you had to pay a few dollars per trade on outdated intimidating looking apps and made it accessible by finding a new way to make money elsewhere in this case by selling your trading data to bigger players october 24th 2015 as robin hood opened the door for more and more average everyday people to get into the stock market a community like wall street bets was in the perfect position to grow and by now they were already developing their own subculture a subculture of artists or degenerates yellowing their life savings on risky stock place they call themselves autists or degenerates which are basically people that are horrible at making stock trades without even attracting the membership of martin shreli everyone's favorite big pharma ceo who was very well loved in the community fast forward a little over a year later in january 2017 and wall street bets crosses the milestone of a hundred thousand degenerates at the same time robinhood was also growing with over 200 000 daily active users april 2017 robin hood raises 110 million dollars at evaluation of 1.3 billion dollars bringing the company into unicorn territory december 2017 robin hood introduces options trading one of the riskiest forms of trading where you can make even more profit and losses with less money opening the app up to an even wider more risky audience a feature that will play a key role later in the story options also allow you to short a stock may 2018 the growth continues robin hood has nearly 700 000 daily active users and they raised another 363 million at a valuation of 5.6 billion october 2018 wall street bets rise the wave of millennial trading with over 300 000 degenerates nearly the same number of bloomberg terminals the software that professionals use for research and trading that cost twenty four thousand dollars per year fun fact at 325 000 terminal subscriptions bloomberg is bringing in 7.8 billion per year june 2019 the black swan takes shape gamestop releases a poor earnings report cancels dividend payments to people who own the stock analysts downgrade the stock and the overall consensus was that gamestop much like the blockbusters and toys r us before them was as good as dead so their stock tumbled which on the surface is like duh of course they're doomed that was my first reaction which sounds oddly familiar to the consensus that back in the early 2000s that duh the housing market is never gonna crash at the same time a user on wall street best name deep in value or dfv for short yolo's 50 thousand dollars in call options for the stock betting that is going to go up based on some legitimate reasons in june of 2019 a wall street bets user named deep value began buying long dated january 21 calls what that means is in june of 19 this person was betting that the stock would go up by january of 2021. dfv also comes off as a pretty respectable guy i'm thinking seeing a legitimate investment process like mine in action day to day could help set you on the right path to building out your own investment process over time the gamestop thesis is super simple but it's often misunderstood everyone classifies it as a cigar and then just moves on but it's more than that july 2019 one month later robin hood raises another 329 million raising its valuation to a staggering 7.6 billion august 2019 one month after that michael bury the investor that shorted the housing bubble and was portrayed by christian bale in the big short announces that he owns three percent of gamestop and he also gives some legitimate reasons why he thinks the company is worth more than it is with the main reason that being 90 of gamestop's 5 700 stores are free cash flow positive they're not losing money or in other words michael brewery and the reddit user started this whole trend based on some real fundamental reasons fundamental analysis as they call it wall street best soon takes notice of burry's position and dfv starts posting monthly updates on his gamestop yellow at this time he's already up 50 thousand dollars on his original 50k december 2019 robin hood launches a new feature that lets you buy fractional shares keeping their promise of further democratizing investing by making it even easier for more people to get into stock trading march 2020 the pandemic has shut down the economy and would you look at that i just got a 1200 welfare i mean stimulus check and maybe i got even more free money in the form of unemployment aid well i'm stuck at home where should i put my money why not the stock market [Music] so interest in stock trading surges and practically at the exact same moment the stock market starts its greatest climb ever which is a big reason why we haven't seen a lot of inflation yet watch this video to learn more wall street bets crosses 1 million degenerates and robin hood crosses 2 million users april 3rd 2020 gamestop hits a low of 2.57 august 31st 2020 the billionaire founder of the successful pet e-commerce company called chewie.com buys a nine percent stake in gamestop making him yet another big name to show support for the brick and mortar chain everyone thinks is gonna die september 19 2020 [Applause] a member of wall street bets writes basically a stock analysis like the pros do on why gamestop could be a winner the next generation of consoles will still be using this they're not going all digital just yet like michael burry said the company's fundamentals are not bad but most importantly gamestop was the most shortest stock on the stock market at the time with around 120 of their stock shorted see when you buy a stock the most money you can lose is the money you put in but the most you can gain is however high the stock goes there's no limit to how much you can make but when you shorter stock this gets reversed the most you can gain is a stock going to zero but the most you can lose is however high the stock goes there's no limit to how much you can lose think 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 graham stefan has a great video explaining short selling and if you check it out just let him know that i sent you since so many people were shorting gamestop this reddit user theorized that once the market realizes that gamestop is not all that bad and more good news comes out the price will rise forcing the short sellers to exit their positions which will drive the price higher which will force more shorts to exit which will create a positive feedback loop of the stock skyrocketing an extreme short squeeze and if everyone bought at around the same time they could accelerate the short squeeze even more skyrocketing their profits in the process the only thing left that they needed was for some good news to come out january 12 2021 [Music] ryan cohen and gamestop reach an agreement earning him and his ceo and cfo a seat on the board of directors because they have so much experience in e-commerce ryan cohen is viewed as a saver of gamestop the stock closes at around 20 on january 12 2021. chatter about gamestop explodes in online forums like wall street bets and the degeneres got to thinking that maybe this short squeeze idea wasn't so crazy after all the battle lines are drawn and the game is set gamestop closed at 1995 on january 12th on one side you had institutional investors and hedge funds that thought gamestop was for sure going to perish shorting the stock pushing it downward and on the other side you had the degenerates on wall street bets buying the stock and buying call options for the stock pushing it upward the institutional guys are like hey wait a minute you know ryan cohen's an idiot this company is these guys they have too many you know cyclical and secular tailwinds and they become so massively short that the infrastructure that's supposed to even count all the shares can't keep up and now they are short more than the actual number of shares that actually exist so now they're 140 short january 13th gamestop is up to 31.40 or up 57 january 14th 39.91 up 100 from the start january 19th degenerates hold the line at 39.36 short sellers start to sweat but doubling down in their position now it becomes a game of protecting their ego citron research a big short seller calls the degenerate suckers at this poker game later calling them an angry mob and what started out as a genuine strategy for the retail investors to make money has turned into an all-out proxy war representing the little guy versus the establishment of wall street as news starts to spread on social media more and more average people get in on the action then over the next two days gamestop calls hit an all-time high and it runs a two-day rally of almost 70 percent and this is what really starts what's called the gamma squeeze friday january 22nd gamestop becomes so volatile that trading is halted at least four times the stock closes at 65.01 up to 126 percent since the start of the battle the stock market closes for the weekend and the number of degenerate on wall street bets starts to explode at some point in this process the degenerates recruited some unlikely allies quant funds and other hedge funds that saw an opportunity to get on the right side of the battle then a bunch of quant funds and momentum hedge funds notice all this activity and they also participate on the long side and then over the past seven trading days we have traded over 100 billion dollars of stock in gamestock which is well in excess of what retail can support so quant funds are funds that use mathematical models and computer algorithms to trade after all why wouldn't you use an opportunity like this to wipe out some pesky competitors then comes monday january 25th one of the major hedge funds that was short in gamestop melvin capital is on the brink of collapse so they got a near 3 billion bailout by two other hedge funds gamestop closes at 76.79 up 285 percent since the start tuesday january 26th elon musk tweets gamestock and support linking to wall street bets continuing the subreddit's explosion and growth now elon may genuinely support the fight for the little guy but remember elon hasn't asked the ground with short sellers which elon refers to as a scam releasing tesla short shorts after defeating them the way short selling is used today is it's it's kind of like a it's frankly used against the public tesla is under a massive attack by the shortened distort where they take a short position and then they do everything possible to trash the company in every six weeks of sunday and they were successful um and and this has now happened to tesla twice it happened in 2013 and it happened in in basically 2017 through through 2019 i mean the intensity of the attack was was was crazy it would like cause you to lose faith in humanity the degree of this which this went on what you may not know is that melbourne capital the fund that was just bailed out has been shorting tesla for years that infinite short squeeze loop kicks into high gear and gamestop explodes to 147.98 that day up an insane 642 percents wednesday january 27 to thursday january 28th everything has been leading up to this point and the little guy puts what seems to be the final nail in the coffin for the shorts gamestop closes at 347.51 up 135 from just yesterday and up 1642 from the start our guy deep in value's original 50 000 is now at 48 million dollars but then everything falls apart discord bans the wall street bet server citing hate speech because of course they would and this is exactly what i've been talking about with censorship it starts with something you like and then becomes something you don't how many of the people who support these you know reddit kids were in favor of de-platforming trump and parlor and now they can see where it goes this is a slippery slope and we've only had to wait three weeks to see where it goes it goes to the same place which is when the people in power get threatened they use these rules they weaponize these rules to shut down the outsiders and the upstarts that is a problem with censorship that is why you cannot let the beast get started and the next day just ask the shorts were right where they should be robin hood and other broker brokerages restrict the buying of meme stocks like gamestop one could still sell their shares helping wall street but one couldn't buy gamestop falls to 193.60 at the close down 44 from the day before the beautiful thing is you had these reddit kids these pirates who published this manifesto right on reddit basically being the heirs to occupy wall street they recognize look occupying physical space does nothing to these guys we are going to hurt them where accounts in their pocketbook we are going to get together and we're going to basically create a trade mob that's even bigger than their cartel and they did they got 2.7 million people taking the other side of this trade and then when the hedge funds doubled down they said you we're gonna double we're gonna triple down and the guy on reddit said listen uh paraphrasing john maynard kane said we can be longer than you can be solvent and they were winning that was what they said right and they were winning the trade they had these guys on the ropes they had them felted okay and then what happens just at the moment where they're gonna like basically bust them out of the game for good robin hood shuts down the buy side of the trade and so what does that do it gives these hedge funds time to regroup to unspool the trade to reposition and save themselves and to get out of the trade if they want to get out of the trade you can never take that 24 hour time period back no matter what robin hood does now even though multiple apps were strictly trading the public pointed the finger at robin hood claiming that they were pressured by wall street to shut it down on the same day robinhood ceo vladteniv went on a few of the mainstream media channels to explain the decision and it was absolutely awful to save you the pain he basically regurgitated a bunch of alliance's pr department and legal team wrote avoided questions by talking about their values and the founding of robin hood denies being pressured by hedge funds to limit trading this decision was not made on the direction of any market maker or uh other market participants didn't take full ownership and blame it on social media and unprecedented volume said the decision was to protect their customers in order to protect the firm and protect our customers and that no we didn't do this because we didn't have enough money to cover the fees that there was a liquidity problem uh inside the firm no no there was no liquidity problem the next day january 29 robinhood raises 1 billion dollars in emergency cash from investors because it definitely wasn't a liquidity problem no no there was no liquidity problem literally they got on television yesterday and they lied to americans right to their face this is a company that was insolvent it cost individuals hundreds of millions probably billions maybe even tens of billions and these should go to jail robin hood also lists most restrictions on stocks like gamestop game stock soars back up before it gradually falls back down january 31st elon has robin hood ceo on clubhouse to grill him about what happened at first vlad tries to pull the same pr double speak that he pulled on tv but elon wasn't having it well it's full of beans man what happened last week why do you uh stop people why can people buy the gamestop shares the people demand an answer and they want to know the details and the truth okay so let me let me start by giving a little bit of background um so i'm the chief executive of robin hood right now actually i'll go through this quickly don't worry this is this is uh this is important then he finally came to his senses and acted like a normal human being in a nutshell his rationale was that when you buy a stock on robinhood they don't actually fulfill your order they send your order to what's called a clearing house which then takes two days to actually transfer the stock over to you without getting into the details too much companies like robinhood then have to deposit your money from the stock to the clearing house plus an additional fee depending on how volatile the stock is the day robin hood restricted trading their fees apparently shot up to nearly 3 billion dollars that they had to pay right at the moment so they gave us a file with the deposit and the request was around three billion dollars which is you know about an order of magnitude more than what it typically is up until now robin hood has only raised a little over two billion dollars so that three billion dollar fee would have put them out of business right then and there why they didn't just come out and be honest about this from the start is beyond me but that's probably the truth until more information comes out since other apps like weeble have told a similar story we only had to stop the ability to buy on the word from our clearing firm that was unsure if they were going to be able to clear them now whether or not those were legitimate fees or arbitrary fees made up to force them to shut down trading that is still up for discussion february 1st robin hood raises another 2.4 billion in emergency funds which is a decent sign that robinhood didn't do anything illegal because if they did investors probably wouldn't be injecting billions of emergency dollars into them all the while lawyers politicians former central bankers that have received money from hedge funds all start coming out the woodwork because of course they would [Music] but whether it's robin hood's fault or the hedge fund's fault or the clearinghouse's faults it doesn't matter these are just the symptoms of the disease of fragile centralized power centralized power that can restrict you limit you censor you at any moment it pleases if you go against his aim and the masses have just realized that maybe they have a lot more power than they thought and now they have the technology to back it up and the people in power know it now too if we had to summarize all of this in a nutshell that's what we know we know that it started out as people debating the true fundamental value of gamestop and it morphed into a momentum trade where a bunch of folks got dogmatic about a short a bunch of folks got dogmatic about being long and belongs one and in the middle what happened was a bunch of firms basically decided at some point to gate the ability for people to transact in all of this which i think caused a lot of economic disruption and that was because they didn't have the margin requirements and i think it's because they were insolvent i.e robin it's capitalism it's business you know people love free markets and limited regulation until it affects them and i mean everyone's talking about regulating robin hood or regulating this unless we're looking at going the track of china and russia and actually regulating our entire internet you can't stop humans communicating to each other you know everyone's baffled all the time they're baffled that a president can go direct to consumer and not do briefings they're baffled that you know that taxis have been disrupted everyone's always baffled when is everybody who's watching this show gonna understand that this thing called the internet came along and changed society this is printing press 100x we are in the early stages and people are struggling with calibrating the massive impact of this [Music] 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 but what's super interesting about what happened this week and i think is the most impactful societally over time is that we're seeing this phenomena where individuals in aggregate can believe something to be true and make it true and we saw this with tesla elon was not hitting numbers that people thought he was gonna hit margins production volume etc people were shorting the stock but enough people believed in the story that elon told about what he wanted the future to look like that they bought the stock and that gave him the ability to do shelf offerings raise additional capital and ultimately build the business and make it manifest in reality that he said would happen and the same is true of bitcoin in all of these cases there was a belief in something and there was an aggregation of individuals using social media as a mechanism for sharing and talking and engaging and creating a collective outcome that wouldn't have happened through a centralized system or centralized process and wouldn't have happened in the traditional way where history defines the future so maybe just maybe this was the spark the modern day boston tea party to a more decentralized financial system you know now maybe we found the first obvious use case for a blockchain right but when you take the broader point of view of the implications that's where this becomes really shaky and really scary and i think really enables a decentralized movement that is going to be a lot broader than folks are really realizing at this point you know folks don't want to be trading um on a system that tells them how to trade and folks don't want to be communicating on a system that tells them how to communicate i definitely think this is part of this ongoing populism versus the elites war and social media is now the tool that the people use to organize themselves against these powerful elites it's why we cannot allow censorship because it always comes down uh it to benefit the powerful the elites against the people who are trying to organize against them i think this year is going to be a huge year for cryptocurrencies and it's going to be a major theme as we move closer to figuring out exactly what happened this week but one thing's for sure this war between the masses and the people in power has just begun 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 gonna go away very good guys quick reminder that i will be going live on stereo on friday at 12 p.m u.s pacific time with none other than captain sinbad carl jung is my deep deep lover and another one on monday at 12 with arvid ali where he's going to be responding to all the hate comments he's received on the kathy wood video it's going to be very fun i can't wait for them and you shouldn't either so you should go to stereo.com jaytran and click the notification bell on the show so you get notified when we go live if you're watching this after those lives already happen you can catch the full replays of them plus the first one we did on evading taxes legally with the link below at stereo dot com jake tran i feel like i'm saying this every single month now but this is by far the most research i put into a single video it was very tedious and i really wanted to get it right for you guys so if you guys think i did a good job and that more people should learn about this stuff be sure to leave a comment below and just write out iwatch to the end that way it gives the youtube algorithm a nice little boost and click that share button down below there too and share it with your closest friend just one friend that's all i'm asking if you are new to this channel we make video essays just like this one every single week on the most provocative things in the world of business for your viewing pleasure for free so you might as well subscribe because you can always dislike and unsubscribe and leave me your best hate comments anytime you want so you have nothing to lose and everything's game that is going to wrap it up for this video thank you so much for watching you've been awesome i've been jake stay dangerous out there and i will see you guys in the next one [Music] you

Channel: Jake Tran

Views: 483,421

Rating: 4.8952746 out of 5

Keywords: wallstreetbets, gme, amc stock, gevo stock, gme stock, melvin capital, amc stock prediction, amc, elon musk gamestop, stock market today, gme prediction, gme short squeeze, gamestop stock, robinhood lawsuit, robinhood gamestop, robinhood, wsb, gamestop, wall street bets, hedge fund, reddit wallstreetbets, wsb gamestop, bitcoin trading, vlad tenev, robinhood ceo, gamestop stock explained, michael burry tesla, michael burry gamestop, michael burry, short squeeze, tesla stock

Id: GkvRWzz1Rkk

Length: 28min 25sec (1705 seconds)

Published: Wed Feb 10 2021

Reddit Comments

[u/yellowkayaker]

Pretty awesome video

[u/vivwash]

Still here and holding GME and AMC 🚀😭🙏🚀

[u/ThereeA]

Damn

[u/HiveMind1000percent]

Ok that was longer then the rocket ship line but totally worth it! 💎🤲 unite!

[u/crispynuggets01]

Great video