GameStop Pulls Back The Curtain: Weekender Preview
Jared and Nick discuss in detail what exactly happened with the short squeeze of GameStop, Nokia, Blackberry, and other stocks, but also break down how the gross manipulation of all financial markets have been obscured by the wealthy for hundreds of years.
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I'm Nick Hauselmann and this is an announcement to let you know that we are going to be doing a new series called The Weekender over on Patreon that will appear every Friday.
And this is a little sneak preview so you can get a handle on what it's like and why you'd want to go over there.
And join the Patreon and be part of that community, which has been incredible and amazing.
A lot of people there and a lot of great conversations.
So, here it is.
Check it out.
And feel free to check out the actual Patreon as well at patreon.com slash muckrakepodcast.
Hey, everybody.
Welcome to the Patreon-exclusive Weekender Edition of the Muckrake Podcast.
I'm Jared Yates Sexton here with Nick Halseman.
We're going to do something that we don't normally do on this podcast.
We don't usually talk about the world of finance and stocks and markets and such, besides the fact to point out that they are, let me check my notes here, rigged fraudulent bullshit.
But we have to.
We have to have a conversation about the madness that is currently taking place with the stock market.
Nick, do you do you want to take a stab at bringing maybe people who haven't been paying attention to this thing up to speed?
Sure.
And, you know, full disclosure, I worked on the floor of the mercantile exchange in 1988 and 89.
So I was a runner.
I literally... Wait, time out, time out, time out, time out.
What subject are we ever going to get involved talking about?
We're not like, uh, true story actually.
I, uh, I betched Alfred Hitchcock his espresso every afternoon.
Oh no, there's more.
There's more, don't worry.
Take us into the world of high-stakes finance.
I can't wait.
Well, by the way, in the summer of 88 or 89, there was an FBI sting.
They had people undercover on the floor trying to catch front-running traders, which connects to this somehow, tangentially.
I actually had written a screenplay about this, which kind of sort of recreated that whole, you know, on the floor, you gotta get caught, you gotta become a traitor, you gotta learn.
It was kind of a cool thing.
Nonetheless, so here's what kind of happens.
There are these funds that will short a stock.
They will basically predict that a stock will go down.
So that they basically buy an option on that stock.
So that means that if it goes down, they're screwed, but they don't think it's ever going to go down because the more they buy that, the more it just drives it down almost artificially.
And this is what's been happening for decades and decades.
So they can do this in a short amount of time because with options, there is a moment where there's an expiration day that you actually have to get even on your position or you're literally going to have to buy the stock that you were buying the options on.
It's a little confusing, but The bottom line is, is these guys on the Reddit decided to say, okay, here is a hedge fund that spent a lot of money to artificially sort of depress the GameStop stock.
It was already a shitty company, right?
Like, no one's going in there during COVID.
Okay, we need to point this out before we go in.
Okay.
You'll notice that all of the companies involved in this situation, GameStop, Bed Bath & Beyond, BlackBerry, Nokia, BlackBerry, All of these companies are more or less obsolete, and it's not because they've done anything necessarily wrong.
It's because the market has somehow or another moved around them, or they're mall locations, right?
These are old businesses that made a ton of money that, like, the new market has completely discarded, right?
These people, it needs pointed out before we go any further, These people, these hedge funds, make ungodly amounts of money.
Off of bankrupting companies, and destroying companies, and buying a company, and then destroying it, and then selling it off for used parts.
That's the entire game for hedge funds, and it always has been.
It's what they engage in.
Yeah, so basically what happened was, is they knew when the expiration date was going to happen, and so they normally would say, okay, we are now going to buy back the stocks that we had borrowed on the options at a much lower price, because when they bought them originally, it drives the price down, because It means everyone thinks it's worthless, the company's worthless.
And that's been working fine, no problems, right?
And when you're talking about millions and millions and billions of dollars, this is where it becomes very risky and a troubling thing.
So some people on Reddit were like, hey, let's find one of these hedge funds that really has a really leveraged position, who's just like assuming, oh, no one's going to bother with GameStop, because again, No one's going into brick-and-mortar stores right now and buying games when you can buy them online by downloading them now.
He goes, well, you know, and there's, by the way, the relationship between BlackBerry and GameStop is all, like, sort of millennial... What's the word when they're... Nostalgia, right?
Like, BlackBerry.
So it's almost like, hey, let's go find these fun places we used to like, these BlackBerrys, and, like, you know, let's make them cool again in some weird way.
So this is important, too.
You and I, like, we're just a couple of layman dudes.
Right?
Like, we understand what's going on.
The stock market people, they all know this game.
This game is well understood.
Like, if you are involved in the stock market, you know that a stock like GameStop is being shortened.
You know that!
Like, it's an open secret.
But they have a quote-unquote gentleman's handshake.
Which is, we'll make our money over here, you make your money over here, we're just not going to fight, and we'll all get rich.
With SEC filings, you can find out which of these hedge funds are which positions they have.
So that's what they did, right?
But we as laymen, who are not involved in trading, we could get that information, but we don't have the expertise, we don't necessarily have the information readily available.
But this is just stuff that's been allowed to happen because the wealthy and the powerful, they all know that they're all involved in the same game.
They all have their little partners.
And it's important to point out, Apple, I don't know if you saw this, Apple, one of the biggest corporations in the world, Just had an incredible quarter.
Like blew past everything that was expected out of them.
And their stock really didn't rise at all.
Because everybody is involved in the same thing.
They all know what's going on.
They know which stocks are going to go up.
They know which stocks are going to stay pat.
They know which stocks are going to go down.
They're all involved in the same rigged game.
Exactly.
So what happened here was the people on Reddit decided, you know what, let's fuck these guys and surprise them with buying a lot of the actual stock, the actual stock, which when you buy a lot of it at one time, the price will go up, usually.
And they knew this knowing that it was coming close to the time where this hedge fund needed to get out of their positions as expiration day for the options were coming up.
So they screwed them to the point where they had to buy back the stocks that they had borrowed at a lower price than they had bought them.
And did you just send it up?
I'm sorry, at a higher price than they had done the borrowing in the first place.
And that ends up bankrupting this huge billion-dollar hedge fund that they needed.
Now, two-thirds of their company was bought by another hedge fund because they didn't have the capital and they were leveraged too much.
It all echoes what we saw in 2008 with whatever the Gosh, who are those companies?
The Lehman Brothers, all the gold parachutes.
Yeah, the insurance company, I'll tell you in a second.
Anyway, so if you don't understand this, the only thing you take away from it would be that it's completely manipulated, which is what you're saying.
Absolutely, all of it.
And so that's what's frustrating because now they're out there saying, okay, well what other companies can we do this for?
And there's nothing illegal about it.
There's nothing illegal about having a group online saying, hey, let's just buy GameStop.
You know, people are freaking out.
They're trying to say this is illegal.
We got to call it in.
But no, what was illegal was what they were doing the whole time, which was, hey, guys, let's all do options on this company.
It'll drive the stock down.
We don't give a shit about the company itself, if it goes bankrupt or not.
And we'll all make a lot of money in the short term.
Let's do it again and again and again.
That is much more illegal in my mind than, yeah, a bunch of people saying, fuck it, we'll buy the stock.
And then, by the way, what they'll do is, as it started shooting up to ungodly amounts, a thousand times or a thousand percent higher, well, guess what they did?
Then you get to sell it and you get to make a shitload of money.
This is what you couldn't have done in the past when you didn't have Robinhood out there.
If you couldn't day trade like this back in the day, it either was all Greek and no one understood it, which is why they were getting away with murder, or you didn't have enough money or enough ability to Listen, I know that all of this, there's a tendency when you talk about finance and stock markets, sometimes your eyes can glaze over.
I get it.
It's a whole new world which has not been regulated really anyway.
And guess what?
It's going to be. - Well, and by the way, so, and I, listen, I know that all of this, there's a tendency when you talk about finance and stock markets, sometimes your eyes can glaze over.
I get it.
What we are talking about here, we're not talking about finance.
We're talking about the way that the world works.
We're talking about the man behind the curtain.
We're talking about how the rich and the powerful become more rich and more powerful.
And the fact that we have to explain this, the fact that, like, I had to learn this over the past couple of days, right?
Like, I'm very interested in power and how it gets used and where it gets moved around.
I don't know this stuff.
I was raised in a poor family.
I barely know how to read a contract.
I barely know, like, even the understanding of how to invest in something.
It is a stratosphere that we're not invited to.
And it's this thing that takes place, and it makes sure that there is a group of people who is above us, and they will stay perpetually above us, and they don't fuck each other.
They bear, like occasionally they will go to war to each other.
It's almost like watching a movie or a TV show with organized crime families where there's an uneasy truce, right?
And we'll take this part of the city, you take that part of the city, and of course occasionally they'll have like a gangland war and there will be like a takeover or something.
But this whole situation, what we have seen over the past couple of days, is we have seen a bunch of people who normally wouldn't be involved in the stock market Figure out what's going on in the stock market and understand that there was an advantage to be had by screwing these people over.
And these are people, just for reference purposes, these are the people who have destroyed one company after another.
These are the people that go in to where your parents work, buy the company, lay a bunch of people off, drive it directly into bankruptcy, and then sell off the parts to other people.
That's how they get the money to make these trades and to continue going it.
Then, after they did that, and I don't know if you watched the coverage of this, but it was the most telling media coverage I've ever seen.
I watched CNBC, which usually basically makes my eyes go bloodshot and me screaming outside.
The coverage was consistently, it was like, well, you know, we want people involved in the stock market, but just not These people.
And, you know, we're for free markets.
Which, by the way, they're not.
They're not actually for free markets.
They're for dammed up markets that they can basically, it's like if you've ever, like people who like to fish.
You can go out to a pond or a lake and fish, or you can go find a pond or a lake that has been artificially stocked with fish.
They threw fish in there for you to go and catch.
This is shooting fish in a barrel.
Is what this is.
Right.
And the worst thing about all of this is that to cover their ass, Robinhood, for instance, stopped trading, stopped allowing trading on GameStop.
Can we explain who Robinhood is real fast?
Yeah, you know, it's basically, you know, you can be a day trader with an app that allows you to buy stocks.
Which, by the way, their slogan is, we're democratizing investment.
That's their entire thing, which is we're going to bring investment to the people.
And they don't charge because what are they there for?
They are a tool of the powerful and the wealthy to gain data on people who would think about trading.
That way they can be manipulated and used and studied and all that.
And what does Robinhood do when all this is going on?
Yeah, they do not allow trading anymore on GameStop.
- Shut it down. - They shut it down to protect the hedge funds from losing any more money while they're trying to get everything sorted out, which is ridiculous, right?
Because like you mentioned, the hedge funds pay Robinhood for the data so they can figure out more about what the patterns are gonna be for the stock market.
But all they had to do was go to Reddit.
Had they been on Reddit looking around, they would have realized this a lot earlier.
I wish I was on Reddit.
I have a Robinhood account.
I would have done that, you know, a week ago and bought GameStop up the wazoo.
Which also goes to another point of this.
So you oftentimes will see these marketing gurus who are trying to tell you how easy it is to make money doing this, right?
And they probably are right in the sense that they understood this and they want to give you guys, like you see those commercials, I'm gonna give you the secrets.
And a lot of it is this, but a lot of times it's like, yeah, so take $5,000 and go into Robinhood and you buy da da da.
Now nobody or so many people on the response would be like, I don't have $5,000, I don't have, I don't have $250.
I can't make this grow to what you're talking about into thousands and tens of thousands of dollars because I don't even have a couple hundred dollars to spare right now.
And that is really where you get that dichotomy between.
And you have been listening to a free preview of our Patreon-exclusive Weekender Show.
If you want to get in on all the fun and get that bonus episode every week, not to mention exclusive content, live hangouts, question and answer sessions.
We're even going to do some of these live so you can come and watch how the sausage is made.
All you have to do is go over to patreon.com slash muckrakepodcast On top of that, you get to hang out with the Muckrake community, which are a really good group of people.
