True Anon Truth Feed - Episode 134: Freakanomics
Aired: 2021-02-04
Duration: 01:49:00


=== GameStop Frenzy Stops (07:53) ===

[00:00:00]  You know, I saw this clip that a lot of people were getting mad at about this, like, I don't know, some freak on TV, like CNBC or whatever.
[00:00:10]  One of the, one of the, whatever the money is.
[00:00:12]  Money TV shows.
[00:00:13]  Money TV show.
[00:00:14]  And he's like, you shouldn't be on the trading app.
[00:00:17]  Like, you should go out there.
[00:00:18]  You should go out there and like investing in yourself and like talking to girls.
[00:00:23]  And like people were getting really mad at it.
[00:00:25]  And the guy's totally correct.
[00:00:30]  The thing that was so funny about it was the way he was saying it, I think.
[00:00:34]  He was passionate about it.
[00:00:36]  I would say he was more than passionate.
[00:00:38]  You know that it came out that he's actually now advising on the film that has the, you know, the someone sold the options for the film rights to the anti-social network.
[00:00:51]  And I think that guy is actually advising on the movie.
[00:00:57]  So you told me this earlier, but I couldn't tell if you were kidding.
[00:01:01]  And then I didn't want to seem stupid to you.
[00:01:03]  But then I didn't look it up afterwards.
[00:01:04]  The movie about the Reddit thing is called The Anti-Social Network.
[00:01:07]  So there's been a couple that have sold.
[00:01:09]  I can't remember.
[00:01:10]  There was like one that sold to MGM and there's one that sold to Netflix.
[00:01:15]  And I've heard rumors.
[00:01:17]  I've talked to some people who have said that there's even more houses working on scripts.
[00:01:23]  Who did you talk to about who you call Harvey Weinstein?
[00:01:27]  You're talking to people.
[00:01:29]  What do you do when I'm not talking to you?
[00:01:32]  I'll tell you once we stop recording.
[00:01:34]  I know nobody I could call and be like, is there a Reddit movie getting made?
[00:01:39]  Baby, you know, I got little gum shoes everywhere.
[00:01:42]  Yeah, but they're talking to me.
[00:01:44]  They're always talking to me.
[00:01:45]  Are you telling me right now that why why?
[00:01:48]  Because I listen, so listeners can't see us.
[00:02:14]  But i'm currently uh in a barrel with suspenders.
[00:02:18]  Um, Liz is uh.
[00:02:22]  Liz is calling in from a oubliette.
[00:02:25]  She's looking up.
[00:02:26]  There's a camera sort of pointed down at the ground.
[00:02:28]  She's clutching onto the bar, sort of doing one long pull-up as I have sold her to white slavers to cover my debt.
[00:02:35]  And Young Chomsky has been replaced by AI.
[00:02:39]  I've also sold the rights to the name Truanon, unfortunately, to Ron Watkins of QAnon.
[00:02:46]  So the podcast is now called, well, we don't have a name yet.
[00:02:52]  I can't afford the copyright on one.
[00:02:54]  It's Chapo Trap House.
[00:02:55]  All right.
[00:02:56]  Well, so it sounds like you didn't do very well in the last week's trading frenzy.
[00:03:01]  No.
[00:03:02]  No, Liz, I didn't.
[00:03:04]  Well, I'm sorry to hear that, Brace.
[00:03:06]  We're going to get into that.
[00:03:07]  We should say hello, everyone.
[00:03:09]  Welcome.
[00:03:10]  The podcast is still, I promise, called Truanod.
[00:03:14]  My name is Liz.
[00:03:17]  My name is Brace.
[00:03:18]  We're joined by producer Young Chomsky.
[00:03:23]  Turn it around.
[00:03:23]  Turn it around.
[00:03:27]  Oh, good.
[00:03:29]  What the fuck was that?
[00:03:30]  Just a little Coke and K.
[00:03:32]  Oh, my God.
[00:03:32]  You're getting.
[00:03:33]  Yeah, I relapsed.
[00:03:34]  I relapsed last week.
[00:03:36]  You're getting into character.
[00:03:39]  We are, of course, here to talk about the wild ride in the stock market last week.
[00:03:47]  It's all anyone's been talking about, I think.
[00:03:49]  Actually, I think people are talking about some other stuff.
[00:03:50]  But you know what?
[00:03:51]  I haven't been paying attention.
[00:03:52]  I don't know anything anyone else is talking about because the only thing I can look at is, you know, whether the market's going up or down, left or right, backwards or forwards.
[00:04:02]  Flapping around like a pair of elongated nipples on a long-distance runner.
[00:04:11]  Well, that's a beautiful image.
[00:04:13]  The guy who put them down with weights or something.
[00:04:15]  I was trying to, like the other night, I was trying to think of like titles for the episode, which I still haven't figured out yet.
[00:04:22]  And I was like, oh, it was like something that's like, when the game stops.
[00:04:27]  Doesn't that sound like...
[00:04:28]  That's the title you thought of?
[00:04:30]  No, then I was laughing because the only thing that I could not get Journey out of my head, when the lights go down in the city, that's like so crazy.
[00:04:41]  All I can think of is when the game stops and then like, when the lights go down in the city, which, by the way, is San Francisco.
[00:04:51]  And the sun shines on the bay.
[00:04:57]  I've never heard you do that deep of a singing voice before.
[00:05:00]  You know, I really like Journey, I gotta say.
[00:05:02]  Can you do reggae?
[00:05:04]  That'll get us in trouble.
[00:05:06]  That'll get us in.
[00:05:07]  Anyway, which is to say, by the way, the game has stopped.
[00:05:10]  GameStop, the hottest stock of last week, is not so hot anymore.
[00:05:17]  It is lost a lot of value.
[00:05:20]  But yeah, it lost a lot of value.
[00:05:22]  No, it lost a lot.
[00:05:23]  I think it was, you know, at its highest high last week, it was trading at like 436, and I think it closed today under 90.
[00:05:30]  So that's a pretty big drop.
[00:05:33]  So for our GameStop customers out there, for those who are listening, because they saw that in the algorithm, like, ooh, a podcast about the game side of GameStop.
[00:05:44]  This is if you were trying to sell PlayStation 1 after the PlayStation 2 came out to GameStop.
[00:05:50]  They'd be like, I'll give you not that much money for this.
[00:05:54]  Exactly.
[00:05:55]  Yeah.
[00:05:55]  So everyone, I feel like I've, I don't know if you've gotten DMs or seen tweets on the internet, at the podcast account or anything, but people have been asking for us to talk about GameStop and our thoughts and explanation of everything that was going on last week.
[00:06:12]  I think it's pretty confusing.
[00:06:15]  And it took me a while to think it's confusing to figure out kind of the like what was going on.
[00:06:23]  And as everything was happening too, it's like the stocks are going up and down.
[00:06:28]  The options coming in left and right.
[00:06:30]  And let me tell you, baby, the takes hotter than hot.
[00:06:34]  Can't stop.
[00:06:35]  They're coming in.
[00:06:36]  Crazy volume, crazy velocity.
[00:06:39]  Too many takes.
[00:06:40]  Everyone's takes are bad.
[00:06:41]  No one knows what they're talking about.
[00:06:43]  I'm real sick, real, real sick.
[00:06:46]  In fact, I've been sick of this basically for five years, of the word populist.
[00:06:53]  I know.
[00:06:54]  Everyone's like, you know, like running to their copies of whatever Negri book on, you know, is this the moment?
[00:07:03]  No.
[00:07:04]  I will say, I will say, if you're like honest to God's sincere take is like, you know, like this is really good politically or whatever, just and you didn't make any money, you're wasting your time.
[00:07:18]  Just like, just chill out, man.
[00:07:21]  Can everyone just chill for a second?
[00:07:23]  Just let's all take a step back.
[00:07:25]  Do a little K.
[00:07:26]  It's C and K.
[00:07:27]  No.
[00:07:28]  Well, cocaine ketamine mix.
[00:07:32]  But yeah, it seems in the, you know, in the past couple of days, more sober heads have prevailed and the frenzy, the mania has calmed down, which, you know, is good and bad.
[00:07:47]  There's going to be, there's a lot of losers that are coming out of this, which is going to be rough and we should get into.

=== Jimmy Kimmel's Market Manipulation Revelations (07:08) ===

[00:07:53]  But before we get into the kind of like, I don't know, nitty-gritty plumbing of what occurred last week, we should just talk, you know, for people that weren't following the biggest news story of last week, maybe we should just give a little overview of what happened.
[00:08:09]  Yeah, I will say I was surprised to learn a bunch of things sort of at the beginning.
[00:08:14]  What day is it today?
[00:08:15]  Today's February 2nd.
[00:08:17]  Yes.
[00:08:18]  And so this is, I'm going to start a little before last week.
[00:08:22]  I need to get my fucking phone out because I need to know when I started actually paying attention to this.
[00:08:27]  Oh, do you have your notes?
[00:08:28]  Did you make a little journal?
[00:08:30]  No, I just can see in the Robinhood history when I invested in it, which is five minutes after finding out about it.
[00:08:38]  Nice.
[00:08:39]  But, So, GameStrice, GameStop stock price starts going up around the 10th of the month last month.
[00:08:50]  Really, on the 21st, though, it starts going up to like $43 a share.
[00:08:54]  Mind you, this has been traded like, I think last year at like sub $20 a share.
[00:08:59]  22nd, it rises 65.
[00:09:01]  I'm not paying attention at this point.
[00:09:03]  And then, as you probably remember, 26th, it hits 147.
[00:09:08]  A lot of these fucking guys on the internet.
[00:09:10]  I don't know if listeners of this podcast are familiar with Elon Musk.
[00:09:15]  But he is one of the greatest queer performance artists of the 21st century and one of the most valuable members of the international business community.
[00:09:27]  A guy named Chamith, who I only knew Chamoff.
[00:09:32]  Listen, I believe it was you who told me on this show is that you could pronounce names however you'd like.
[00:09:37]  No, you said that.
[00:09:39]  You said that on the show.
[00:09:40]  I didn't say that.
[00:09:41]  Doesn't seem to be like something.
[00:09:43]  No, we can, Young Chomsky, you can cut her saying that.
[00:09:49]  But Chamith and a guy named Barstool Dave Portnoy, who appears to be the man who won't let the two girls who do Call Her Daddy get reunited.
[00:10:02]  They start talking about, they're like, oh, you got to invest in this stock and do, you know, it's like 50-year-old guy, like meme tweets or whatever about it.
[00:10:11]  Bam, keeps going up.
[00:10:12]  That same day, Wall Street Bets subreddits made private for a little while.
[00:10:16]  The Discord gets shut down for hate speech.
[00:10:18]  Should be shut down for pedophilia, like all discords.
[00:10:21]  And, you know, rounding out the week, I'm sure basically anybody who's listening to this podcast remembers the stock keeps going up and up and up.
[00:10:31]  Melvin Capital, Citroen, which we'll get to later, all that shit.
[00:10:34]  They fucking close out most of their GameStop positions at a loss, you know, get this giant infusion of capital.
[00:10:41]  Robin Hood, the, I don't know what to call it, the FinTech, which is not apparently technology to help sharks, but in fact, technology to confuse me about money, restricts trading of Robinhood, excuse me, of GameStop and a bunch of other stocks that were popular on Reddit, like CP, which is a child porn website, CP2, which is another child porn website, Upskirts, which is an upskirt website,
[00:11:10]  and various other pervert websites.
[00:11:14]  And people flip the fuck out.
[00:11:15]  You know, people are talking, AOC is saying some bullshit.
[00:11:18]  Ted Cruz is also saying some bullshit.
[00:11:21]  A bunch of other people I think should be in prison or say, basically, anybody who's commented on this prior to this episode of this specific podcast should be in prison.
[00:11:31]  And then it gets to a high of, I think it briefly touches like 450 at one point, but it like, you know, it cruises at like 360 for a while.
[00:11:40]  And then today, February 2nd, 2021, it hits like $88, $90.
[00:11:48]  Yeah.
[00:11:49]  Show's over.
[00:11:50]  Yeah, show's over.
[00:11:51]  The game has stopped.
[00:11:53]  It probably hasn't stopped, but I just wanted to say that again.
[00:11:55]  Yeah.
[00:11:56]  Yeah.
[00:11:57]  So, I mean, I think at one point, you know, you mentioned Melvin Capital Citron.
[00:12:02]  We're going to get into all that.
[00:12:03]  How is how are you naming your Melvin Capital?
[00:12:08]  I know.
[00:12:08]  It's awful, isn't it?
[00:12:09]  That's what they would name like the guy in Mad Magazine.
[00:12:12]  It was like, not Alfred E. Newman, but like the guys in the stories they had in old Mad Magazines would always be named Melvin.
[00:12:18]  This is terrible.
[00:12:18]  All the hedge fucking terrible dork ass names.
[00:12:23]  They're all dorks.
[00:12:24]  Anyway, yeah, I think there was something Morgan Stanley said in a note to its clients last week: the performance pain has been record-breaking.
[00:12:36]  So, like, people are getting fucked, you know, left and right.
[00:12:40]  Although, the way that's gonna, that ends up shaking out, you know, remains to be seen.
[00:12:45]  But yeah, as you mentioned, people were freaking out last week.
[00:12:49]  All of the CNBC, all the money shows had no idea what was going on.
[00:12:54]  At one point, Jimmy Kimmel, that dude, who I feel like is somehow barstool-affiliated, he's like an Ur Barstool.
[00:13:02]  No, he used to do the man show with what's his name, Adam Carolla.
[00:13:07]  But Jimmy Kimmel was always like, you know, he's like, oh, this porcine fucking freak.
[00:13:12]  He got blue-pilled.
[00:13:14]  Carolla gets red-pilled.
[00:13:16]  Right, right, right.
[00:13:17]  The thing is, is that Kimmel and Bill Simmons have a relationship.
[00:13:22]  Simmons was like a writer for Kimmel, I think.
[00:13:25]  And Simmons is the ER Boston sports guy, obviously, which is, of course, the kind of precursor to what has now become Barstool.
[00:13:34]  So in that way, there's an interesting, you know, little family tree there.
[00:13:41]  Anyway, I'll be honest with you, not interested in that, but I understand what you're going for here.
[00:13:45]  Okay, well, you're probably going to be saying that a lot this episode.
[00:13:50]  Apparently, what I was about to say, no, Jimmy Kimmel says the Russians were involved.
[00:13:54]  So Putin's out here.
[00:13:56]  He's manipulating the markets.
[00:13:58]  There's people saying that the alt-right are, you know, that there's alt-right Nazis on Reddit that are trying to take down Wall Street, which is okay.
[00:14:09]  And, you know, basically what emerges is this kind of, you know, aside from those insane takes, this David and Goliath narrative, right?
[00:14:18]  But that's not really, and that's, it's not as simple as that to kind of distill this all down to a morality play between a bunch of Reddit guys and a bunch of Wall Street guys really like is not telling the story or doing anyone any service.
[00:14:34]  It's actually like really, really, it's doing a lot of work to obfuscate like a lot of really nefarious actors in this entire saga.
[00:14:41]  So I think we really got to kind of like including Robin Hood itself, by the way.
[00:14:46]  And so we really got to like peel all this back and get into it.
[00:14:50]  I think actually we sort of have a perfect framing for this episode.
[00:14:53]  By the way, if you're like a stock guy, in which case you, I don't know, go play with your dog.

=== Instant Deposit Explained (14:55) ===

[00:15:01]  I don't know.
[00:15:02]  Why are you listening to this?
[00:15:03]  But if you're a stock guy and you know a bunch about stocks, you can't get mad at us for talking about stock stuff on the show today.
[00:15:11]  All right.
[00:15:11]  I need you to, I'm putting, here's your options.
[00:15:15]  Here's your, I'm putting two options in front of you.
[00:15:18]  One, just turn it on in the background while you scrub your tub and do whatever.
[00:15:23]  I don't know what people do when they listen to podcasts.
[00:15:26]  While you fuck your wife or your husband, ride him a reverse cow girl, et cetera.
[00:15:32]  Or two, you just don't listen to it.
[00:15:36]  Those are your two options.
[00:15:38]  And I'm not taking a third one.
[00:15:40]  the bell has rung
[00:16:10]  So, Brace, you got in on this, you said.
[00:16:14]  Yeah, big time.
[00:16:16]  800K.
[00:16:18]  No, you didn't do that, did you?
[00:16:19]  No, no, no, no.
[00:16:21]  Yeah, no, I actually, no, so hold on.
[00:16:23]  Let me get my phone, but keep talking into the microphone, which I have to keep my mouth closed to, or else you can't hear me very good while I look for my phone.
[00:16:34]  Got my phone.
[00:16:35]  Okay, because it makes noises if I put it near the mic.
[00:16:37]  All right.
[00:16:37]  So I, here, here's logging into my Robinhood account, which I opened on January 25th, actually.
[00:16:47]  Wow, I got a little ahead of the curve.
[00:16:49]  So I, well, okay, first of all, I got a bonus stock.
[00:16:53]  Well, we'll get to that later.
[00:16:55]  I made a $500 GameStop, which is GME, short for game, market buy on January 25th at, it doesn't say what.
[00:17:08]  Oh, $86 a share.
[00:17:10]  Okay.
[00:17:12]  So, and that you had just signed up for a Robinhood account, right?
[00:17:16]  Like three minutes before then.
[00:17:18]  All I knew about Robinhood before that was that I believe a couple of people have killed themselves after using it.
[00:17:24]  Yeah, they, well, yeah, we should talk about that.
[00:17:28]  But so, okay, so you signed up for Robinhood and immediately you deposit the $500 into the account and you immediately start, you immediately buy GameStop, right?
[00:17:39]  At 86 a share.
[00:17:40]  Correct.
[00:17:41]  To preface this, I have never bought a stock.
[00:17:45]  Yeah.
[00:17:46]  I don't understand how they work and I feel like I would lose money if I did it.
[00:17:51]  Well, and that way you're the perfect GameStop customer.
[00:17:54]  Exactly.
[00:17:56]  So, okay, they let you start playing with that money immediately because the thing about Robinhood that people, you know, that we need to kind of outline is that they default into what's called a margin account.
[00:18:09]  Right.
[00:18:10]  And this is what they call instant deposit.
[00:18:12]  So when you deposit that $500, they say, hey, it's instant deposit.
[00:18:16]  You can play with it immediately.
[00:18:17]  Right.
[00:18:18]  Okay.
[00:18:19]  So a little anecdote from my own life.
[00:18:22]  I used to steal checks from people and open up bank accounts and deposit checks in those bank accounts and then take the money out immediately because they would just give you access to it and then close the accounts.
[00:18:39]  Right.
[00:18:40]  So you were, yeah, so that's bad.
[00:18:43]  Don't people at home don't do that.
[00:18:44]  But you were doing that because you were operating on borrowed money technically, right?
[00:18:50]  Yes.
[00:18:50]  Yeah.
[00:18:50]  Yeah.
[00:18:51]  A lot of borrowed money.
[00:18:52]  Yeah.
[00:18:52]  So that's what a margin account is.
[00:18:55]  It's borrowed money.
[00:18:56]  Robinhood is extending you credit, the $500, so that you don't have to wait the two days for that deposit to clear and actually operate within a cash account.
[00:19:04]  And so it does this automatically with everyone who signs up with Robinhood.
[00:19:08]  So I didn't have that, even though I, even though I said to deposit $500, I didn't actually have that $500 in my account.
[00:19:15]  In your Robinhood account, no.
[00:19:17]  In my Robinhood account.
[00:19:18]  You had basically, you know, you had, you know, we promise you that you're, that it's $500 of your money, but it's not technically actually your money because it hasn't cleared deposit yet.
[00:19:29]  Gotcha.
[00:19:30]  So a margin account basically lets you trade way above the cash that you've deposited.
[00:19:34]  So they offer ratios of deposit to margin and that ratio expresses what we would call leverage.
[00:19:41]  So if you got 500 in your account, but you're trading with 5K margin, that means your account is leveraged 10 to 1, right?
[00:19:52]  Yeah, okay.
[00:19:53]  Yeah.
[00:19:53]  I didn't, I didn't know I could do that.
[00:19:55]  Wait, so I'm not sure.
[00:19:57]  I don't think you could do that with that tier of Robinhood account that you signed up for, but you could if you wanted to.
[00:20:02]  You'd probably have to pay a fee or so, you know, at other brokerage firms, it would be like an interest rate, right?
[00:20:08]  Gotcha.
[00:20:08]  Understood.
[00:20:09]  So that's pretty leveraged, 10 to 1.
[00:20:12]  And that's, you know, pretty minor in the grand scheme of things.
[00:20:15]  So, but that leverage comes with a lot of risk, right?
[00:20:18]  Because you can potentially win a lot if you're, you know, if you're playing with that much.
[00:20:22]  But then remember that your losses are magnified as much of your, as your gains.
[00:20:27]  So there's a lot of risk here when you're trading a margin.
[00:20:31]  And, but if you didn't do that, you would have to wait two days for the cash deposit to hit your Robinhood account to trade in cash.
[00:20:39]  And while maybe in normal times, that's not a big deal.
[00:20:42]  When you're facing something, when you're looking at something like GameStop and you're like, man, got to get in, got to get in, watch it go down, watch it go down, got to buy the dip, buy the dip, that can seem like a really bad deal, right?
[00:20:52]  So everyone says, cool.
[00:20:54]  And you say, great.
[00:20:55]  If I'd had to wait two days, it would have been like, I mean, Christ, that would have been the 27th.
[00:20:59]  Exactly.
[00:21:00]  And we know that's when it hit 400.
[00:21:01]  So you got to get.
[00:21:03]  So instead, Robinhood lends you cash to purchase the stock or the options, which we'll get into.
[00:21:08]  And, you know, just because it's fun to make your head spin, that loan, that $500 in your case, or $5,000 or $10,000 in whatever case, that margin account balance is actually collateralized by the various securities that you purchase it with.
[00:21:25]  So securities are stocks?
[00:21:28]  Yes.
[00:21:29]  Okay.
[00:21:30]  So your loan to buy GameStop is guaranteed by the GameStop security itself.
[00:21:35]  And this is going to be really important later on.
[00:21:38]  So remember that.
[00:21:40]  What?
[00:21:42]  Okay.
[00:21:43]  So we're just going to keep going through it.
[00:21:44]  Okay.
[00:21:45]  So because you're trading a margin, which is, again, remember that's credit, not cash, you don't actually own the stock you're playing with.
[00:21:53]  Instead, what you own is basically an IOU from Robinhood that that security is yours.
[00:22:01]  So I think one thing we have to do, and again, like Brace said, I'm sorry if you guys all understand this, but to really explain what happened last week, we really do have to kind of get into the like plumbing of the stock market.
[00:22:13]  So we just have to like explain how this all works.
[00:22:16]  So we need to kind of, I want to walk through what happens when you actually buy a stock through a broker like Robinhood, right?
[00:22:23]  Yeah, yeah.
[00:22:25]  So Robinhood is really, you know, a broker, they're just the broker of the sale.
[00:22:28]  You're not buying the stock from Robinhood.
[00:22:32]  You're actually buying it from someone else who is someone you don't know who owns the stock somewhere and is it selling it through their own broker, right?
[00:22:41]  So Brace is on Robinhood app.
[00:22:45]  I'm in a bubble bath surrounded by cherubs 18 plus and I am trading on my app and I buy $500 worth of Robinhood or excuse me worth of GameStop.
[00:22:59]  And I'm buying that through from like Brace 2, who's uglier and not as cool and is not in a bath.
[00:23:11]  And he's got his broker, I've got my broker and they're meeting the middle.
[00:23:15]  Yes.
[00:23:16]  Yeah.
[00:23:16]  It's basically a mirror of you buying it, right?
[00:23:18]  So it's these two, think of these two mirror transactions happening.
[00:23:21]  That's why I use Evil Brace.
[00:23:23]  Yeah, It's Bizarro Brace.
[00:23:25]  Exactly.
[00:23:26]  In the classic formulation, it's a Pizarro Brace.
[00:23:29]  Yeah.
[00:23:30]  Okay.
[00:23:30]  Anyway, yeah.
[00:23:33]  And so maybe they're using Robinhood.
[00:23:34]  Maybe they're not.
[00:23:35]  Maybe they've got TD, a TD account, maybe they got an E-Trade account, whatever.
[00:23:39]  So because you're buying it from someone you don't know, brokers, those two brokers from Brace and Bizarro Brace, they use a third party to certify that transaction to make sure that it's legit and to clear it and say, okay, this is good.
[00:23:54]  We certify.
[00:23:55]  This is real.
[00:23:55]  Everything good to go.
[00:23:56]  Thumbs up.
[00:23:58]  Party start in right now.
[00:24:00]  So that body is called a clearinghouse.
[00:24:04]  And in the case of Robinhood, they go with these guys called Depository Trust and Clearing Corporation or DTCC.
[00:24:11]  So I'm just going to keep referring to them as DTCC through this.
[00:24:15]  And they're kind of owned by, it's like a consortium of banks and broker dealers, other financial firms, whatever.
[00:24:21]  They're very well respected, et cetera.
[00:24:23]  Yeah.
[00:24:23]  Not by me.
[00:24:25]  Well, you know, yeah, me neither.
[00:24:26]  I don't respect any of these fuckers.
[00:24:29]  So they're the intermediary, intermediaries between the seller's broker, between Brace's broker and Bizarro Brace's broker, right?
[00:24:39]  And what they do is they match and clear the stock transaction within a designated period of time.
[00:24:46]  That period of time is known as T plus two or two days from the initial trade, right?
[00:24:52]  Okay, so just like a just like a deposit, it takes a little while to clear.
[00:24:57]  Exactly.
[00:24:58]  They clear all transactions within two days.
[00:25:02]  So I could spend this stock on heroin and close the account before anyone even notices.
[00:25:07]  Well, not so much, but you know.
[00:25:09]  Okay, I understood.
[00:25:11]  But, you know, as you said, as you noticed, it didn't take two days for the GameStop stock to show up in your account, right?
[00:25:19]  Yeah, no, no, no, it was there.
[00:25:20]  It was there fairly soon after.
[00:25:22]  It wasn't there automatically, but it was there pretty soon after.
[00:25:25]  Right, right, right.
[00:25:26]  So it's kind of like with banking.
[00:25:27]  The transaction appears in your account immediately, even though it technically hasn't cleared yet.
[00:25:31]  So you buy the stock, you see it credited to your account that you own the stock, even though technically that hasn't happened yet.
[00:25:39]  And that means that in order for your account to reflect a transaction that hasn't technically cleared, we've got some lending going on, right?
[00:25:48]  So the DTCC, they provide their own balance sheets as a guarantee that these stock transactions are good and that all parties are going to fulfill the contracts and the assets will be delivered.
[00:26:03]  So they're like the referee in this case.
[00:26:05]  Exactly.
[00:26:07]  They don't have like really big balance sheets.
[00:26:11]  So they manage all of these lending transactions pretty tight and they keep real, you know, they've got their eyes all over these things.
[00:26:19]  And a lot of times they actually own the title, or they don't own it, but they, I mean, they have the title of the stock like in their reserves themselves.
[00:26:28]  And they're able to just assign, you know, one from one client to another.
[00:26:33]  And so it keeps these transactions moving and this whole process moving like really quickly and seamlessly.
[00:26:39]  So you can kind of think of the DTCC, you know, as the central location of the stock and as the guarantor of the stock.
[00:26:48]  And, you know, okay, sorry if you're snoozing, literally no one cares about this because these like these transactions happen without a hitch, like every second of the day, like millions, sometimes billions of these.
[00:27:00]  And they usually carry very, very little risk, usually.
[00:27:04]  Okay, so let's wrap up this transaction.
[00:27:07]  What happened when you bought GameStop?
[00:27:08]  So you bought it last Monday.
[00:27:10]  And at the end of trading day, what happened is Robinhood looks at all the transactions for the day: the buys, the sell, the options, the shorts, whatever.
[00:27:17]  It adds it all up.
[00:27:18]  It nets it together.
[00:27:20]  And it pulls that money that it needs to send to the clearinghouses to cover that day's transactions.
[00:27:26]  So another thing to note is that Robinhood doesn't have this cash on hand, right?
[00:27:32]  They have to borrow cash pretty cheaply.
[00:27:35]  And they do that through interbank lending, which, you know, people might remember.
[00:27:40]  We've done those episodes with Alex Gaggs on the repo markets and that whole process of interbank lending.
[00:27:47]  And so that's what happens there.
[00:27:49]  A lot of stuff is getting lent and put on credit just in this one tiny transaction.
[00:27:55]  Yes, that's exactly what I'm trying to drive home through this very, very detailed description of this usually pretty seamless transaction.
[00:28:05]  There's a lot of credit going around.
[00:28:06]  There's a lot of lending going around, right?
[00:28:09]  Robinhood looks at your order and all the rest.
[00:28:13]  It borrows the money it needs to send to the DTCC.
[00:28:16]  The DTCC then takes that money and sends it to the brokers of Bizarro Brace, who's selling you the GameStop stock.
[00:28:25]  They have already credited their clients, Bizarro Brace, their clients' account.
[00:28:31]  So they've already lent it out the sellers of the stock to account for your purchase.
[00:28:37]  So this and this entire transaction settles formally in two days.
[00:28:42]  Jesus Christ.
[00:28:44]  That would take me months to do.
[00:28:46]  No, but okay, you rightly pointed out there's a lot of lending and borrowing going on.
[00:28:50]  That's what I'm saying.
[00:28:51]  There's a lot of different parties exposing themselves to various levels of risk at just this basic level of a single stock transaction.
[00:28:59]  Yeah.
[00:29:00]  Yeah.
[00:29:01]  And we're not even talking about the risk that Robinhood takes by taking on you, Brace, as its client.
[00:29:08]  I'm good for it.
[00:29:09]  I've changed.
[00:29:11]  Well, that's the thing.
[00:29:12]  Okay, so when you sign up for instant deposit, which again, that's the Robinhood default.
[00:29:16]  Remember, that's now a margin account.
[00:29:18]  So you're trading on borrowed money.
[00:29:20]  You are able to immediately start buying stocks for zero commission.
[00:29:26]  You don't have to pay.
[00:29:27]  Yeah.
[00:29:28]  And since you aren't paying anything, Robinhood, then what?
[00:29:31]  They're not making any money.
[00:29:34]  Well, you'd think so, but it turns out they're making a little bit of money.
[00:29:38]  Exactly.
[00:29:39]  Yes.
[00:29:40]  That's because their customer is not you.
[00:29:44]  You're actually the product.
[00:29:46]  That's the thing.
[00:29:47]  Their real customer are the buyers of what's called Order Flow.
[00:29:51]  And the largest of those customers is a firm called Citadel, which we'll get into in a second.

=== Order Flow Buyers Win (11:04) ===

[00:29:56]  So what is Order Flow?
[00:29:58]  I know.
[00:29:59]  There's so many fucking stupid ass names in this whole entire story, including GameStop, by the way.
[00:30:05]  So Order Flow.
[00:30:06]  What else would you call it, Liz?
[00:30:09]  It's where you stop to buy games.
[00:30:11]  No, games start because it's where you start playing games.
[00:30:16]  No, because it's where you don't want to, you want to, you want to be like, this is the end of the line.
[00:30:20]  This is where you're buying game.
[00:30:21]  You could never, you could never own a video game franchise store.
[00:30:25]  Yeah, I don't really understand it anyway.
[00:30:27]  Why don't you just download the games?
[00:30:29]  I think that wasn't possible until recently.
[00:30:32]  But good question.
[00:30:34]  I think, honestly, GameStop's board was probably asking themselves that until very recently.
[00:30:40]  And actually still probably asking themselves that.
[00:30:45]  Okay, so back to order flow.
[00:30:46]  So order flow is what it sounds like, which is that it's a flow of orders.
[00:30:50]  So it's like literally a flow, like a list of all the trades, buying, selling, options trading, shorts, whatever anyone is doing on Robinhood.
[00:31:00]  It's basically just like a huge ledger of every single transaction that's happening in real time.
[00:31:06]  Or not in real time, but like literally like second, like milliseconds before it happens.
[00:31:11]  If that makes sense.
[00:31:12]  Yeah, that's one thing I really don't like about the stock market is there's all this like talk about milliseconds and stuff like that.
[00:31:19]  Yeah.
[00:31:19]  I really dislike that we're putting, what are we trying to get to the big bang here?
[00:31:23]  I'm not, it's, it's too hurried for me.
[00:31:27]  Well, it's usually not real people executing.
[00:31:29]  That's the thing.
[00:31:30]  It's all a bunch of robots that do it.
[00:31:32]  Okay, so robot slaves doesn't make it any better.
[00:31:35]  I think they should just slow it down a little bit.
[00:31:36]  It will get rid of a lot of these jokers and fucking smokers in here.
[00:31:41]  So Citadel, they buy Robinhood's order flows and they get a sneak peek at all the pending trade activity, which is what it uses to inform some of its own trading decisions, which it, you know, pulls basically from robots.
[00:31:53]  It has key indicators and it executes trades based on the kind of volume that it sees on sites like Robinhood.
[00:32:00]  And so they pay a tiny bit of money on each transaction, which is what allows you to do it for free.
[00:32:06]  Because if they get to do it for you based on what you do.
[00:32:09]  So they're basically doing, they're buying data.
[00:32:13]  Yeah, they're front-running your trades, basically.
[00:32:15]  Yeah.
[00:32:16]  So, okay, that makes sense.
[00:32:17]  And it's done in the milliseconds because they have, again, like I said, robot slaves that do this gambling for them.
[00:32:24]  Exactly.
[00:32:25]  So now, now you can say you own GameStop.
[00:32:30]  Yeah.
[00:32:31]  Except, actually, no, you don't.
[00:32:33]  This is come on, man.
[00:32:34]  Yeah, since you're trading on margin, Robinhood actually owns it, and they basically transfer you nearly all the rights of ownership, except for technically you don't actually own it.
[00:32:47]  This is like the Apple Music thing.
[00:32:50]  Yeah, yeah, yeah, yeah.
[00:32:51]  It's important to understand, though, because if something catastrophic were to happen, like say Robinhood facing, I don't know, a liquidity crisis and it freezes, or facing a solvency crisis and they go under, you actually wouldn't be able to walk away owning that stock.
[00:33:08]  You would just walk away with a claim as a creditor against a failed company.
[00:33:14]  And that's exactly what happened with, you know, Lehman Brothers.
[00:33:20]  People were stuck with just having claims as creditors that, you know, takes forever.
[00:33:24]  Maybe they get it.
[00:33:25]  Maybe they don't.
[00:33:26]  Right.
[00:33:27]  I think that's called getting caught with your dick in your hand.
[00:33:30]  Yeah, exactly.
[00:33:32]  The other thing about margin accounts is that because you don't own the stock, Robinhood reserves the right to take the stock you buy and lend it to others to short.
[00:33:42]  So there's more lending going on at this point.
[00:33:45]  Everyone's lending, baby.
[00:33:47]  I have been lent essentially the money to basically fake buy, at least temporarily, a stock from an evil version of myself that is lent to me for a couple of days, but I don't even still own it after a couple of days.
[00:34:08]  And then Robin Hood is lending that stock that I, you know, quote unquote own to some other Jewish person.
[00:34:18]  Wow.
[00:34:19]  And they're okay.
[00:34:21]  Okay, you didn't say.
[00:34:22]  Okay, so that was just okay.
[00:34:23]  I'm editorializing that.
[00:34:25]  So to someone else, and what are they doing with it?
[00:34:30]  Well, okay, so they lend.
[00:34:33]  So when people borrow stock, they're doing so because they want to short it.
[00:34:37]  And Robinhood, before we kind of get into that, Robinhood, they do that to make money.
[00:34:43]  So most brokers that lend out client stock, they actually share the proceeds of the borrow fee.
[00:34:49]  They're like, you know, hey, you know, you get some, I get some, and then it's a good deal as we lend it out, whatever, blah, blah, blah.
[00:34:56]  But Robinhood, because they're these like fintech assholes and they don't, they're disrupting, they don't play by the rules, they just keep all of it.
[00:35:04]  And so if I'm at Schwab and I have 800 shares of Truanon and, you know, Bugsy Siegel wants to short Truanon, which I don't recommend doing.
[00:35:19]  It'll end very badly for you.
[00:35:23]  And, you know, Schwab lends my shares out to him.
[00:35:25]  I get some money.
[00:35:27]  But at Robinhood, I don't get any money.
[00:35:29]  Yeah, no, they keep all of it.
[00:35:30]  And they end up making actually a lot of money because the borrow rates for stocks actually fluctuate based on how rare, which I know this sounds crazy, but how rare the stock is to borrow.
[00:35:43]  So, like, you're not gonna, Robinhood's not gonna make a lot of money, you know, lending out Apple stock because that's fucking everywhere.
[00:35:50]  No, who gives a shit, right?
[00:35:52]  But something that's a real hot commodity that's pretty rare that everyone wants that you can't really get, like, say, GameStop, Robinhood makes a lot of money lending that stock out, right?
[00:36:04]  Especially when there's a lot of short interest in the security.
[00:36:09]  Okay, so now we got to get to this part, which is what is short selling?
[00:36:13]  So for this, we have you know how in the big short, they're like, here's Mila Kunis fucking, you know, on a bidet telling you about money or whatever.
[00:36:29]  I never liked that.
[00:36:30]  That was very weird.
[00:36:32]  Very difficult to jerk off to those scenes.
[00:36:34]  Oh my gosh.
[00:36:34]  In the first one, because I don't know who that lady is.
[00:36:36]  And the second one, because I don't know who that other lady is.
[00:36:39]  Didn't they get the blonde girl who's in Wolf of Wall Street?
[00:36:42]  I think, yes, I think so.
[00:36:44]  I ended up just jerking off to the whole movie.
[00:36:45]  I think she's older than she says.
[00:36:48]  How old is she?
[00:36:49]  Who is she?
[00:36:49]  Margot Robin.
[00:36:51]  Yeah, I feel like she said she was like 27 or something.
[00:36:54]  And I'm like, I don't know, baby.
[00:36:56]  She looks like Nicole Kidman.
[00:36:58]  That's right.
[00:36:59]  Okay.
[00:37:00]  Yeah, I don't know who I don't know who these women are.
[00:37:02]  You do.
[00:37:03]  You do.
[00:37:04]  I watched.
[00:37:04]  All right.
[00:37:05]  I just named two women.
[00:37:06]  That's like two more than you usually can.
[00:37:09]  Yeah, well, that's true.
[00:37:10]  Yeah.
[00:37:11]  But I don't, I pay, I think they're the same person, I think, kind of.
[00:37:15]  Okay, anyway.
[00:37:16]  So short selling.
[00:37:17]  So the basic mechanics, it goes like this.
[00:37:20]  When you bought GameStop, you bought it, right?
[00:37:23]  Because you thought, hey, I'm going to buy this.
[00:37:25]  And at some point in the future, the price is going to go up.
[00:37:27]  And then I can sell it and I'm going to make money.
[00:37:31]  The same thing, by the way, if you're ever in a disaster type situation, you should do that with like water and food.
[00:37:37]  It's a really good way of making money.
[00:37:39]  So that's called going long.
[00:37:42]  So what happens if you look at a stock and you think the price is going to go down in the future?
[00:37:49]  I'm going short.
[00:37:50]  Exactly.
[00:37:51]  You want to short it.
[00:37:52]  So think of it as buying the stock, but in reverse.
[00:37:56]  So when you buy a stock long, you buy it for one price, hoping it will go up so you can sell it for a higher price to fuck at the difference.
[00:38:03]  But short selling is the opposite.
[00:38:06]  You sell a stock short, you sell the stock for one price, hoping it will go down in the future so you can buy it back at a lower price and pocket the difference.
[00:38:16]  So, all right, more, all right.
[00:38:18]  I really don't like the whole like, you know, shadow realm, light realm, sort of binary there are with stocks.
[00:38:27]  Which one's good and which one's evil?
[00:38:31]  Neither.
[00:38:31]  It depends.
[00:38:32]  Well, it depends on your perspective, I guess.
[00:38:35]  Elon, for example, hates shorts, which we can talk about.
[00:38:40]  But we also, if it weren't for short sellers, we wouldn't know that Wirecard was a fraud.
[00:38:46]  And we wouldn't.
[00:38:46]  I could have told you that.
[00:38:47]  We don't know some things about Tesla, if you ask me, allegedly.
[00:38:51]  Yeah.
[00:38:52]  Yeah.
[00:38:53]  Short sellers were right.
[00:38:55]  I'm going to say in Tesla's case, they were correct.
[00:38:59]  Okay.
[00:39:00]  So how do you sell?
[00:39:01]  But this is the big question, right?
[00:39:02]  How do you sell a stock you don't own?
[00:39:04]  You steal it.
[00:39:05]  No.
[00:39:06]  You bet.
[00:39:09]  Oh, you borrow it.
[00:39:10]  Exactly.
[00:39:11]  You borrow it.
[00:39:12]  Okay, hold on.
[00:39:13]  Okay.
[00:39:14]  I get what you're saying.
[00:39:15]  You borrow it and you maybe forget to tell the person that owns it and then you sell it and then you move to Oakland.
[00:39:25]  No.
[00:39:26]  No, no, you actually do borrow it.
[00:39:28]  You borrow stock, you sell it immediately with the hopes of buying it back later at a lower price.
[00:39:34]  And in order to borrow that stock, you have to pay a fee.
[00:39:37]  And that's the fee that Robin Hood collects, the premium on the short position.
[00:39:42]  Okay.
[00:39:43]  So for a lot of hedge funds, this is like their whole game.
[00:39:48]  With GameStop, you know, this is famous.
[00:39:50]  There's a bit, all these shorts happening, these big shorts happening.
[00:39:53]  You know, like we said, Melvin Capital, Citroën, they had a huge short position in GameStop.
[00:39:58]  So just to drive this home, we have to break down this transaction one more time.
[00:40:04]  Melvin, I don't know why it's so funny saying that.
[00:40:10]  Melvin.
[00:40:12]  Should I say Citroen?
[00:40:13]  No, let's say Melvin.
[00:40:14]  No, Melvin.
[00:40:15]  Melvin.
[00:40:17]  Melvin, they call up their broker and he's like, hey, I want a short GameStop.
[00:40:23]  And their broker is like, nice.
[00:40:25]  Let me let you borrow this GameStop.
[00:40:27]  You just got to pay me a fee daily until you return it.
[00:40:30]  And Melvin is like, sick, cool, thanks.
[00:40:33]  Hey, here's that fee.
[00:40:35]  Now I'm going to go sell it, sells GameStop stock immediately and gets some cash.
[00:40:40]  So at this point in the transaction, Melvin's balance sheet is they owe the broker the stock they borrowed.
[00:40:48]  They owe the borrowing fee to Robinhood or the broker daily, right?
[00:40:54]  And they have cash credited to their margin account from the sale of that borrowed stock.

=== Shorting GameStop Shares (02:44) ===

[00:41:00]  Yeah.
[00:41:01]  So this is all funny money.
[00:41:03]  Well, it's all a fee they pay.
[00:41:05]  Yeah, yeah, yeah.
[00:41:06]  Understood.
[00:41:07]  So that balance sheet that they're holding, their position, is going to do better.
[00:41:11]  It's going to look a lot better the worse the stock does, right?
[00:41:14]  Because they're betting it will go down.
[00:41:16]  They're betting against it.
[00:41:17]  So the better the stock does, the worse Melvin does.
[00:41:20]  The worse the stock does, the better Melvin does, right?
[00:41:22]  They're the inverse.
[00:41:23]  It's the inverse of the stock position.
[00:41:25]  Melvin wants GameStop to do badly because then they'll make money because they bet on GameStop doing badly.
[00:41:32]  Yes.
[00:41:33]  And so you brought up the big short.
[00:41:35]  You guys might remember this is exactly what these guys did.
[00:41:38]  They said, okay, we're going to bet against the housing market.
[00:41:41]  We're going to bet that all these mortgage-backed securities are going to be completely worthless in the future.
[00:41:46]  And, you know, there's that whole scene in it where Michael Burry, who we've got to talk about in the context of this story, where Michael Burry is like, you know, fuck, I'm bleeding money.
[00:41:57]  I'm bleeding money out on my short positions, even though I know, I know someday that the whole world economy will collapse, I promise.
[00:42:04]  And then everyone's like, man, you're such a hero.
[00:42:06]  You brought down the economy.
[00:42:07]  Master of puppets are making me cry.
[00:42:10]  Yeah.
[00:42:13]  That's not how it goes, but there's some crying in the movie.
[00:42:15]  So I figured out.
[00:42:16]  There's a lot of crying.
[00:42:17]  There's a lot of crying.
[00:42:18]  When I was younger, I knew a guy named Manface who stole a six-pack of beer from Lars Ulrich's garage.
[00:42:24]  The guy had a face that was like an adult man's face.
[00:42:28]  I swear to God.
[00:42:29]  As a kid?
[00:42:30]  Like craggy and weathered and several times too.
[00:42:34]  I've seen him since he's become a man.
[00:42:36]  The face looks normal now.
[00:42:37]  I mean, it's have you ever seen that on a baby?
[00:42:40]  Because that's what's really disturbing.
[00:42:43]  I know, I haven't.
[00:42:45]  Like, it's like a Benjamin Button situation where you got an old man baby.
[00:42:49]  You know, that disease is real.
[00:42:51]  We can talk about this in another episode.
[00:42:55]  I don't know why this makes me laugh so hard.
[00:42:58]  I'll tell you another thing.
[00:42:59]  I'll tell you another thing.
[00:43:00]  One time Wild Thing was supposed to play with Crime, the seminal San Francisco punk band of Belazo.
[00:43:06]  And they try to get us kicked off the bill so their kids' fucking band can play.
[00:43:12]  And they're all dressed up in like suits.
[00:43:14]  You know, they're like 70 years old.
[00:43:15]  They're like dressed up in like suits and like, you know, they're kind of sitting in the back, back of the, you know, where bands gather or whatever.
[00:43:21]  And I go up to the guy and I start one of the guys, I start yelling at him.
[00:43:24]  And he's like, well, I want my kids' band to play.
[00:43:26]  And I'm like, you look like Benjamin fucking Button.
[00:43:29]  And I thought it was so funny.
[00:43:30]  And he hadn't heard of Benjamin Button.
[00:43:32]  And I looked like a real trendoid.
[00:43:36]  Yeah.
[00:43:36]  We played anyways.
[00:43:38]  I think I was at that show.
[00:43:40]  It was a good show.
[00:43:41]  They were not great, although Crime, fantastic band.

=== Trading GameStop Risks (05:28) ===

[00:43:44]  Okay, so where are we at in this?
[00:43:46]  So Melvin, they are shorting the stock.
[00:43:50]  They told their broker they want to short the stock now, blah, blah, blah.
[00:43:53]  Their broker actually, you know, they have to actually go and find the stock, right?
[00:43:57]  Because they do have to actually borrow against something real.
[00:44:00]  That's the thing.
[00:44:01]  So they have to go and find someone who owns GameStop shares with a clean title.
[00:44:05]  And crucially, they have to find one that hasn't been borrowed against already.
[00:44:10]  So they have to look for a stock that isn't what you might call in the business a stolen stock.
[00:44:17]  Yeah, the one that hasn't fallen off the bus.
[00:44:19]  Exactly.
[00:44:20]  A yeah, a tenderloin stock.
[00:44:23]  So usually they can find the stock in their own brokerage firm, but sometimes they can't, especially if the stock is in super high demand.
[00:44:32]  So they go to third parties.
[00:44:33]  Third parties like Robinhood.
[00:44:38]  So then that broker pays Robinhood for the daily borrow of the stock, which is the fee they pass on to their client, Melvin, who is the one who is actually borrowing the stock daily.
[00:44:48]  Okay?
[00:44:49]  So.
[00:44:49]  So many middlemen here.
[00:44:51]  Everyone's the middleman, baby.
[00:44:52]  That's how you make your money.
[00:44:53]  A little off the top, keep them moving.
[00:44:56]  Can I do this?
[00:44:58]  No.
[00:44:59]  So to back it up, Frays.
[00:45:02]  Yeah.
[00:45:03]  You're the Robinhood client.
[00:45:05]  You bought GameStop.
[00:45:05]  You're the consumer.
[00:45:06]  Yes.
[00:45:07]  Yeah.
[00:45:07]  Excuse me.
[00:45:07]  That's a better term.
[00:45:08]  You're the Robinhood consumer.
[00:45:10]  You bought GameStop on Monday and you think you own the stock, but actually you never did because you are trading in a margin account.
[00:45:18]  Robinhood, your broker owns it, and they actually lent it out to another broker for a daily fee.
[00:45:24]  And that broker took those GameStop shares and lent them to Melvin.
[00:45:28]  So Robinhood and Melvin actually simultaneously are quote unquote owning the same shares at the same time.
[00:45:37]  So it's like a polyamorous thing.
[00:45:40]  Yeah.
[00:45:40]  And let's not forget to add to the polycule that while all of this is happening, the DTCC is recording the entire ownership chain and ensuring it's all accounted for with all the appropriate cash backing.
[00:45:54]  So a robot slave at the DTCC is like, this is fine.
[00:45:58]  Yes.
[00:45:59]  But, you know, this all, I know this all sounds really complicated and it really, you know, it is sort of, but usually it is like really pretty seamless.
[00:46:07]  Like millions, billions, these are happening daily.
[00:46:10]  And the only worry the DTCC has is that at some point along this long chain of transactions, there's a little snag.
[00:46:17]  And if that happens, things can get tricky.
[00:46:20]  And they can get tricky for all these, you know, different parties in a lot of different ways because they're all at different points in the kind of transaction chain.
[00:46:30]  Yeah.
[00:46:30]  So because of all of this, everyone involved, well, everyone involved except for you, crucially, everyone involved has their own internal teams evaluating their risk exposure, which is called counterparty risk.
[00:46:45]  Because a margin account is simply a huge loan that uses leverage to magnify profits and losses, like we said.
[00:46:51]  Those accounts are going to carry way more risk than a cash account, like way, way, way, way more risk.
[00:46:58]  And the DTCC is going to continually monitor Robinhood and their ability to cover that risk with collateral.
[00:47:05]  The more risk they see that the brokers have, the more collateral they are going to demand.
[00:47:10]  They want to make sure that everyone who's in all these fucking transactions, everyone they're dealing with, are liquid enough that they have enough cash on hand to cover everything that's going on.
[00:47:20]  And if the brokers aren't, if they can't put up the cash to secure all these different trades that are happening all at once, then they're going to need to halt trading or they're going to have to start clearing accounts to start mitigating their risk exposure and the demands of the clearinghouses or they're going to risk facing a liquidity crisis.
[00:47:42]  See, I don't understand.
[00:47:43]  You know, people talk about liquidity crises like this big fucking thing.
[00:47:48]  I have had, I have, until most, I will say, for most of my adult life, I have been careening from one liquidity crisis to the next.
[00:47:59]  What's a couple days of liquidity crisis for Robinhood?
[00:48:03]  Well, this is what they, this is what they fucking faced last week when GameStop became the most volatile security in the entire fucking world.
[00:48:25]  So Robinhood is really at the center of all of this because, you know, everyone's trading GameStop all over the place in all different, you know, retail, all different retail brokers and institutional brokers.
[00:48:39]  But Robinhood has somehow become the, I don't know, like the symbol of all of this, no?
[00:48:46]  Like, well, I think they have, they have a lot more traders, I think, just using their app than most of these other people.
[00:48:53]  And novices traders, probably.
[00:48:55]  Exactly.
[00:48:56]  Amateurs, as we call them in the retail trading business, which now I'm a professional at because I technically made some money.
[00:49:03]  Yeah, Robinhood is, again, I mentioned that I'd heard of them basically.
[00:49:08]  You know, it's one of those things where I know what it is, but I'm never really going to come into contact with.

=== Amateur Traders' Haven (15:42) ===

[00:49:13]  You know, it's like I can't, like, Hinge or something.
[00:49:17]  I'm trying to think of other apps I've heard of.
[00:49:19]  What's an app?
[00:49:22]  Uber?
[00:49:23]  No, you use Uber.
[00:49:23]  Uber?
[00:49:24]  No, I don't have Uber.
[00:49:25]  No, I just, I use the Lyft.
[00:49:28]  I don't know why I download two.
[00:49:30]  I don't understand what people do.
[00:49:31]  I just did Lyft because some, like one person online was like, hey, fuck Uber.
[00:49:35]  And then everyone was like, yeah, fuck Uber.
[00:49:37]  And then they're like, hey, you want to fuck Uber?
[00:49:39]  Buy Lyft.
[00:49:40]  And it's like, wait, but Lyft is the same as Uber.
[00:49:42]  It's the exact same thing.
[00:49:43]  I remember it used to be worse because you had to touch the guy.
[00:49:46]  It's the whole, oh, and they had the mustache.
[00:49:48]  Remember the mustache?
[00:49:48]  They had the mustache.
[00:49:49]  Really didn't like that.
[00:49:50]  I remember, yeah.
[00:49:51]  My friend's Spanish husband always refused to take Lyft because he said, I will not get in the mustache.
[00:49:56]  Yeah, yeah.
[00:49:57]  I understand that.
[00:49:59]  Well, so these two guys, I got into Robinhood in a big way.
[00:50:04]  As I mentioned, I spent thousands and thousands and thousands of dollars of the podcasts on this.
[00:50:11]  But it was started in 2013, 2013 by these guys, Baiju Bat and Vlad Tenev.
[00:50:20]  And now these guys seem like real fucking jokers.
[00:50:23]  By the way, I've heard on the street, in fact, I got a little message in my Bloomberg terminal about this, that Vlad Tenev literally isn't caught in it and shits his pants all the time.
[00:50:35]  Like, I'm not, I get that.
[00:50:37]  I make a lot of jokes on this podcast, and I understand it might be hard to tell that I'm being serious, but I am being serious.
[00:50:44]  This man shits himself out of his ass into his pants, presumably which he gets laundered using your money at, I'm sure he has a lot of joggers or whatever.
[00:50:58]  These guys wear joggers, probably.
[00:51:00]  I didn't really, I've never really looked at pictures of the bottom half.
[00:51:02]  I've seen the top apps.
[00:51:04]  Anyways, it is an app that they started basically in the shadow of Occupy Wall Street.
[00:51:11]  All these people love saying that.
[00:51:12]  It's like, oh, everyone's talking about Occupy.
[00:51:15]  Hey, stop talking about Occupy.
[00:51:18]  Here's the thing.
[00:51:19]  Everything that happened in the shadow of Occupy Wall Street, I wish had happened on the floors of another part of Manhattan on a different part of the 2000s.
[00:51:32]  Perhaps at the beginning of the 2000s and perhaps on a very high floor.
[00:51:37]  Oh my God.
[00:51:38]  You get what I'm saying?
[00:51:39]  Anyways, so, you know, these guys are like, well, we need to democratize America's financial system.
[00:51:45]  Now, listen, every time one of these tech bozos opens their fucking mouth, they're always talking about democratize this.
[00:51:54]  We need to disrupt that.
[00:51:56]  What they're saying is they're going to figure out a new way to rip you, the sucker, off.
[00:52:01]  And they've been pretty good at it, right?
[00:52:03]  You get a free stock when you sign up.
[00:52:05]  You know, they got millions of you.
[00:52:06]  Well, I'll get into that in a second.
[00:52:08]  But they got millions of users.
[00:52:10]  In fact, their rise has also sort of mirrored Wall Street Bets rise, although far outstripped them at one point a couple of years ago.
[00:52:18]  The thing is with Robinhood is like Liz mentioned, I think Liz mentioned, maybe I just thought this, maybe I'm the first guy to ever think this, is that Robinhood's accounts usually have way, less money in them compared to basically any other broker.
[00:52:35]  I think the average asset sort of range in a Robinhood account is from $1,000 to $5,000 compared to basically tens or hundreds of thousands of dollars in basically every other brokerage firm.
[00:52:48]  Now, they're not the only app that lets you trade stocks like that.
[00:52:54]  In fact, not at all.
[00:52:55]  And they might have also sort of popularized the zero fee trading, but basically all of these other things like TD and fucking Schwab and stuff have followed suit.
[00:53:07]  The thing is with Robinhood is it's really easy to use.
[00:53:11]  Now, when I was on birthright, my third birthright last year, we all downloaded Schwab onto our phones and I was trying to buy stocks in Raytheon.
[00:53:19]  And it was super confusing because there was all these things and I had to have a certain amount of money in my account and blah, blah, blah.
[00:53:24]  Very difficult.
[00:53:25]  You're like, what?
[00:53:26]  Why doesn't it look like a dating app?
[00:53:28]  Hey, why doesn't it look like an iPod?
[00:53:30]  I want to be, you know, inside Silicon Valley, you know, circus having fun.
[00:53:36]  Big old party.
[00:53:38]  Precisely.
[00:53:39]  So those are all those stodgy old fucking, you know, brokerage firms and whatever.
[00:53:45]  I don't really know what the word for them.
[00:53:47]  The fucking nerd houses are for bitches and losers.
[00:53:51]  But Robinhood is literally gives you a scratcher when you download it.
[00:53:57]  You know what it reminds me of?
[00:53:58]  It's like, you know how casinos, they have like designed the carpet in order to keep you on the casino floor.
[00:54:06]  And they don't have any windows and they don't have any clocks.
[00:54:09]  And they pump the air in.
[00:54:10]  Yeah, yeah, yeah.
[00:54:11]  And the whole thing is like laid out in order to keep you in.
[00:54:14]  That's exactly like, I mean, I think there's studies, you know, Robinhood is basically designed like how Twitter and Facebook are.
[00:54:21]  So they keep you inside the app.
[00:54:24]  And the whole thing, I mean, that's what they call it gamified, right?
[00:54:28]  That it's a total gamification.
[00:54:30]  Yeah, and it really is.
[00:54:32]  I mean, I encourage you to download this app and put all of your money into it and purchase shares in silver, I think is the new thing that people purchase.
[00:54:41]  I don't know.
[00:54:42]  I think we moved on from that.
[00:54:43]  I'm not sure.
[00:54:44]  Well, not exactly a comm stock load.
[00:54:46]  Did not last very long.
[00:54:48]  That was like a day.
[00:54:49]  Anyways, but it's really, I mean, I cannot stress enough.
[00:54:52]  This is like using Candy Crush.
[00:54:55]  I don't know, man.
[00:54:56]  I keep trying to say apps, but I really have not used that many apps.
[00:54:59]  And so I'm not sure what I can compare to.
[00:55:00]  Because the only app you use now is Robinhood.
[00:55:03]  Exactly.
[00:55:04]  I haven't used, I use Robinhood for everything.
[00:55:06]  Robinhood is a private browsing feature.
[00:55:08]  Robinhood is a public browsing feature where you can airdrop your Robinhood stocks to people.
[00:55:12]  I mean, I'll tell you, Robinhood is the single greatest invention known to man.
[00:55:16]  But again, I'm a journalist.
[00:55:18]  This is neutral.
[00:55:20]  What Robinhood does differently is it really is like a game or something.
[00:55:24]  Like, you know, you swipe this way, swipe that way.
[00:55:26]  It's like, it's not you're clicking buttons or any bullshit like that.
[00:55:29]  It's like you're swiping.
[00:55:30]  It gives you this sort of congratulatory noise.
[00:55:34]  It is really, really, really easy to use.
[00:55:37]  And this is after they took out some of the gamification features due to certain incidents of suicide, et cetera, and everyone losing all their money and stuff like that.
[00:55:49]  There have been some problems with Robinhood in the past.
[00:55:53]  One of the funniest, in fact, they're all really funny.
[00:55:56]  Well, except for the suicides and people losing all their money.
[00:55:59]  But the funny thing that they did is in 2018, they accidentally reversed the direction of everyone's option trades, Which is really cool.
[00:56:11]  April Fool's.
[00:56:12]  Yeah.
[00:56:12]  Pizarro Day.
[00:56:14]  Yeah, exactly.
[00:56:15]  So that's when people's evil versions of themselves, the person that you buy stocks from, because people don't know that when you buy a stock, it creates another universe where you also inhabit it, but you're evil.
[00:56:26]  And that person sells you the stock.
[00:56:28]  That they switched, they did this.
[00:56:30]  I mean, it was basically magic.
[00:56:32]  Another thing that they did was they accidentally also basically like I looked up, I watched videos on this.
[00:56:42]  I read about it.
[00:56:42]  I still don't really understand.
[00:56:44]  I think really, because I don't really care, but they, it's these people on Wall Street Bets, which I'll get to in a second, figured out like a cheat code where you could gain essentially infinite leverage from Robin Hood.
[00:56:55]  Oh, shit.
[00:56:56]  Yeah.
[00:56:56]  Which actually is very dangerous.
[00:56:58]  Yeah.
[00:56:59]  Yeah.
[00:56:59]  Some guy I think got up to about a million dollars in leverage just by doing some like small transaction back and forth.
[00:57:07]  Yeah, they found some Easter egg that some fucking developer put in there and they unlocked level eight or whatever.
[00:57:13]  Exact shit nerd shit.
[00:57:15]  Well, speaking of unlocking things, you can also get Robinhood gold, which lets you see like Reddit gold, by the way.
[00:57:24]  Oh, I mean, I doubt that is a coincidence.
[00:57:29]  Although I do get confused because the green and gold stuff, I do associate that heavily with leprechauns, which are really frightening creatures and wish I didn't have that association.
[00:57:40]  But yeah, you essentially can trade, you get more data.
[00:57:47]  I didn't really look into it that much, but it's one of those fucking things.
[00:57:50]  Never sign up for anything.
[00:57:52]  That is except for you get a bigger level.
[00:57:54]  You get a bigger margin account, I think.
[00:57:55]  Yeah, but you're just going to lose more money.
[00:57:58]  Well, but people don't, or you make more money.
[00:58:00]  I mean, don't look at those.
[00:58:01]  But that's the whole point, right?
[00:58:02]  So I think that Robinhood Gold, it's like it brings you up to five or 10K, depending on how much you pay.
[00:58:08]  And the fees are, I mean, it's like, it's pretty high, I think.
[00:58:15]  So yeah, you can, you know, you know, people are basically getting sucked into this fucking gamified app that is pushing them into signing up for betting a ton of fucking money that isn't theirs.
[00:58:32]  Well, the funny thing is about Robinhood Gold is actually earlier, well, I guess it's last year, but last year in March, you remember when coronavirus, you know, came to town, you know, took the fucking, took the steamer over the Pacific from old Wuhan and everybody got it and the stock market or whatever, you know, went up crazy.
[00:58:52]  Yeah, yeah, yeah.
[00:58:52]  March last year in the market was fucking nuts.
[00:58:56]  Well, Robinhood went down, I think, for like all together, I think like two and a half days combined.
[00:59:03]  It went down a few times in a week.
[00:59:05]  In those days, markets caned $1.1 trillion in value.
[00:59:10]  And of course, like that doesn't mean that the people who would have traded their stocks that are in Robinhood would have gained a bunch of money or anything like that.
[00:59:19]  But certainly they all lost the opportunity too.
[00:59:21]  And in fact, I read an article about this one guy who essentially like this, this dude in the Midwest, who basically lost $850,000 that day.
[00:59:31]  And he was just some like, you know, a guy who worked a minimum wage job who had built that money up and lost it because the markets were fluctuating.
[00:59:41]  Yeah, so I mean, that's the problem.
[00:59:43]  I will say, Robin Hood did sort of make it up to people by giving them three months free of Robinhood gold at $45 value.
[00:59:51]  I mean, it's like drug dealers.
[00:59:52]  They're fucking drug dealers.
[00:59:54]  Yeah.
[00:59:54]  Oh, absolutely.
[00:59:55]  I mean, this is the thing too.
[00:59:57]  It's like you mentioned the fintech angle.
[00:59:58]  And like, I think, especially in the craze of last week, you know, it's like people were really upset at Robinhood and they expected, it's like they expect them to be of like a fucking institution.
[01:00:09]  And it's like, dude, they're a startup.
[01:00:12]  Like, these are like app disrupt Stanford fucking jerk off assholes who don't know shit about anything.
[01:00:19]  But like, you know, by definition, startups are undercapitalized, right?
[01:00:25]  They go down because they don't have the fucking capabilities to handle this kind of shit that they're inviting.
[01:00:30]  And they're playing fast and loose.
[01:00:33]  And it's, it's ruining people's lives.
[01:00:36]  Oh, yeah.
[01:00:37]  I mean, that's the thing about Robinhood is that there was a rash of stories last year.
[01:00:41]  And I think earlier this year, too.
[01:00:43]  I mean, a lot, a lot, a lot of people have been using Robinhood during the pandemic because A, a lot of people are unemployed.
[01:00:50]  B, you're fucking sitting around all the time.
[01:00:52]  You know, you try to do the OnlyFans 2.
[01:00:55]  You can't do it.
[01:00:56]  You know, only the old lady can do it.
[01:00:59]  And, you know, she's only got three subscribers and it's, you know, eking out a meager existence.
[01:01:04]  I am in the top 0.3% of Robinhood performers.
[01:01:08]  Dude, you joke, but the app on Friday, last Friday, the 29th, it was downloaded more than 600,000 times just from.
[01:01:19]  Yeah.
[01:01:20]  That's how many people.
[01:01:21]  I mean, so many fucking people are on this.
[01:01:23]  And it's, it's, you know, whatever.
[01:01:26]  We'll get into, you know, some of the reactions to all of this.
[01:01:30]  But seeing people basically argue that there needs, you know, that Robinhood fucked up by not by being, you know, too regulated.
[01:01:42]  These people are out of their fucking minds.
[01:01:43]  This is like some serious, serious, dangerous shit.
[01:01:46]  Yeah, like Robinhood shouldn't exist.
[01:01:48]  Yeah, exactly.
[01:01:50]  It's bad.
[01:01:50]  I mean, and here's the thing.
[01:01:52]  I am extraordinarily good at gambling.
[01:01:55]  I have literally never lost a monetary gamble.
[01:01:59]  I have lost.
[01:02:02]  No, you know what?
[01:02:03]  I'm not going to admit to that, even if it's true.
[01:02:05]  But I have never lost a monetary gamble.
[01:02:07]  I've made a lot of money in Reno.
[01:02:09]  I've never gambled in Las Vegas, but let me tell you, Reno, there's a lot of money to be made there, and you literally can't lose if you just do it enough.
[01:02:16]  None of this is true.
[01:02:18]  Well, no, that is true.
[01:02:19]  And I can show you, I'll tell you, I have won hundreds of dollars there, which is, I feel like, a lot of money.
[01:02:28]  But users of every app need a place to gather.
[01:02:33]  For instance, I'm on Furry Meet.
[01:02:35]  People on Furry Meet meet at furry conventions.
[01:02:38]  I'm also on J Date.
[01:02:39]  People on J Date, well, we meet, you know, smuggling weapons to dissidents inside Iran.
[01:02:46]  I'm also on Christian Mingle.
[01:02:48]  We meet, funnily enough, also in Israel.
[01:02:51]  But if you're using Robin Hood, the place where you meet is on Wall Street Bets, a subreddit.
[01:03:00]  Now, I have a lot of reservations about looking at any kind of subreddit.
[01:03:09]  I think that's fair.
[01:03:10]  Regular Reddit.
[01:03:11]  Yeah, it's, I don't get that.
[01:03:12]  You got those parental controls on your browser.
[01:03:15]  I do live within 500,000 feet of a school.
[01:03:20]  And so it technically is blocked by the city Wi-Fi.
[01:03:23]  But, but, but I was, I was really fascinated to look at Wall Street Bets.
[01:03:27]  And I'm doing like a Vox Splaner voice.
[01:03:29]  Like, so I was looking at this subreddit.
[01:03:32]  And these people call themselves retards and autistic.
[01:03:40]  And they act like children on the internet.
[01:03:46]  And so what Wall Street's bets is, it's a place for retards and autistic people and children on the internet to lose a bunch of money, usually.
[01:03:54]  And I'm not being a pejorative guy here.
[01:03:58]  This is what they call themselves.
[01:03:59]  You know, it's, it's, you know, it's, I get it, it's their word, but I can still say it.
[01:04:03]  And, you know, if you go on it and you've, you know, you've had all looked at like places on the internet that are like, I don't know, basically anywhere on the internet.
[01:04:12]  It's like how everyone talks and basically like memes and jargon and like in this sort of affected, ironic style and like very excited.
[01:04:21]  But also it's Reddit, so they're very sentimental.
[01:04:24]  Yeah.
[01:04:25]  But, you know, again, though, it's Reddit.
[01:04:27]  So they're like more saccharin.
[01:04:29]  Yes.
[01:04:29]  I think than a lot of places.
[01:04:30]  Although people, I will say, every time you see shit like on like 4chan, it's like people falling for like fake posts about like a good grandfather or whatever.
[01:04:40]  Like it's like, these people are all fucking more on, anyways.
[01:04:45]  No, I'm an objective journalist.
[01:04:48]  I was looking at this subreddit and it's just like memes and you know, people being like, we're taking this to the moon and stuff.

=== Short Squeeze Frenzy (15:04) ===

[01:04:55]  This thing, I guess it started in 2012.
[01:04:58]  Again, I don't know.
[01:04:59]  You know, what do I look like?
[01:05:01]  One of those guys who looked at the Wikipedia for Wall Street bets cursorily before he did this episode.
[01:05:07]  That is technically true.
[01:05:08]  Yes.
[01:05:09]  But, you know, it started in 2012, you know, again, in the shadow of Occupy Wall Street, although nothing really to do with it.
[01:05:15]  And it was basically what it looks like, a place for guys to lose a bunch of money, like amateur traders to lose a bunch of money and then post funny pictures of how much money they lost.
[01:05:24]  Fine with me.
[01:05:25]  Harmless.
[01:05:26]  Who gives a fuck?
[01:05:27]  I mean, the whole thing is basically, well, I don't know about technically harmless, but you know, that's a big thing on there.
[01:05:33]  It was like posting lost porn.
[01:05:34]  And that's like, you know, again, that's like, you know, something people fucking do on the internet.
[01:05:38]  It's, you know, if you lose big, it's kind of funny.
[01:05:40]  At least you can get solace in being like, well, people think it's funny, right?
[01:05:44]  Right, right.
[01:05:45]  You know, they got all these meme stocks and they're always hyping stuff up in this really a sort of affected way.
[01:05:50]  Martin Shkrelli was a mod there.
[01:05:52]  They're just so incredibly based.
[01:05:57]  I didn't know mods could get put in prison.
[01:06:00]  Yeah, I thought the mods were in charge of the jail.
[01:06:02]  Exactly.
[01:06:03]  Like, I thought he would have some.
[01:06:05]  They were on planet of the mods.
[01:06:06]  Well, I thought it was going to be some like, you know, like they're like, he's at the tombs in New York, and they're like looking at his rap sheet.
[01:06:14]  And they're like, oh, no, he was a mod.
[01:06:15]  We can't, you know, he can't.
[01:06:17]  He doesn't have to go in here.
[01:06:20]  Anyways, there's this one guy on it named DeepFucking Value, who is a YouTuber.
[01:06:28]  I know.
[01:06:29]  I know.
[01:06:31]  This is all so modern, isn't it?
[01:06:33]  It's a YouTuber who goes by, and again, I know I don't come up with these names.
[01:06:37]  I just have to read them.
[01:06:39]  Roaring Kitty, which means I guess it's for Screaming Pussy, which is, I would describe a lot of the people who didn't cash out last week because they wanted to impress their friends on Reddit.
[01:06:55]  This guy, he's like, he's a YouTuber.
[01:06:57]  He talks about money and all that kind of shit.
[01:06:59]  Stocks.
[01:07:01]  He looks at in June 2019.
[01:07:03]  He's looking at GameStop stocks.
[01:07:04]  It's $5 a share.
[01:07:06]  He's like, he's got some fucking reason why it's going to go up.
[01:07:09]  Again, people say insane shit all the time.
[01:07:12]  So I'm not about to watch a YouTube video or even really read an article about it.
[01:07:16]  I just am telling you the bare facts of what happens.
[01:07:19]  He buys $50,000 worth of $5 shares.
[01:07:23]  He records all these videos from his basement.
[01:07:25]  There's a fucking interview with him if you want to read it.
[01:07:27]  I read it.
[01:07:28]  I still can't really tell you what happened.
[01:07:31]  He starts posting screenshots once a month titled GME, which is GameStop.
[01:07:38]  YOLO, which is You Only Live Once, which is something you used to yell before you drank too many sparks and then had heart palpitations.
[01:07:46]  Then you had to go to the hospital, all that stuff.
[01:07:48]  You got kicked out of UC Santa Barbara, etc.
[01:07:51]  Update.
[01:07:52]  So GME YOLO update.
[01:07:55]  And he posts these.
[01:07:56]  Now I think he's posting them every day, but he's posting these once a month.
[01:08:00]  And, you know, all these people, I read the thread that were people originally talking about it.
[01:08:04]  And they're talking about, you know, basically like betting on all this kind of stuff.
[01:08:09]  Again, this is Liz's territory.
[01:08:11]  I'll tell you what.
[01:08:12]  I was just thankful I didn't find any childborn.
[01:08:15]  Eventually, Michael Burry, who is a guy I'd like to bury in a graveyard in Coma after he dies when I am working as a caretaker at the graveyard and I'm very old and haunted.
[01:08:30]  That's mean.
[01:08:30]  I don't know who this guy is, really.
[01:08:32]  I mean, maybe he's a good man deep in his heart.
[01:08:34]  Liz, is this guy nice?
[01:08:35]  He's a bad guy.
[01:08:36]  I mean, I don't know him, but I don't like any of these guys.
[01:08:38]  No.
[01:08:39]  Okay.
[01:08:39]  I don't like him.
[01:08:40]  You know what?
[01:08:40]  Baby, I don't like any of these guys.
[01:08:42]  You don't like him.
[01:08:42]  I don't like him.
[01:08:43]  You know, whatever.
[01:08:44]  I don't need to say my thing about the big short.
[01:08:46]  But it's like, you know, Michael Burry is kind of like a weird hero to these guys, like a kind of folk hero, where because he, you know, he was able to see what people couldn't see and they doubted him, but he knew and he held because he knew in his belief that, you know, the mortgages were bullshit or the securities were bullshit, whatever.
[01:09:10]  So yeah, he gets into GameStop and, you know, a lot of people take that as a sign.
[01:09:15]  If Scion Capital is in, then there's something to see here, right?
[01:09:19]  Yeah, yeah, yeah.
[01:09:20]  He buys, I think, quite a bit of it.
[01:09:22]  So Liz, I don't know if I mentioned this to you before, but GameStop is a brick and mortar video game store.
[01:09:31]  So brick and mortar are stores, you know, Zara?
[01:09:34]  Yeah.
[01:09:35]  Trying to think of things you know.
[01:09:36]  Like Zara or Men's Warehouse.
[01:09:40]  Sure.
[01:09:42]  Or The Gap.
[01:09:44]  So it's like that.
[01:09:45]  Or Lush Cosmetics is another one you might know.
[01:09:50]  So GameStop.
[01:09:52]  GameStop is like that.
[01:09:55]  But for video games.
[01:09:56]  And I don't really know what these guys' reasoning was because there's really no, I mean, it's a brick and mortar store.
[01:10:02]  None of those are doing too fucking great.
[01:10:04]  GameStop.
[01:10:05]  Again, video games, you asked why people didn't buy them online and just download them.
[01:10:09]  That is what people do now.
[01:10:13]  People just download.
[01:10:14]  I think you even have to do that on PlayStations and stuff like that.
[01:10:17]  Well, the thing is, is that what this guy, Deep Fucking Value, and then later Michael Burry, you know, find is that GameStop's stock price is way lower than it should be given their kind of financial position.
[01:10:32]  And so they start looking into it and they see that the hedge funds, the short position, is like 140% of total shares.
[01:10:43]  And I think it's like closer to like, I mean, 280 or 300% of float, which float is basically like how many shares are actively traded because so many shares are just held and not traded, right?
[01:10:55]  So float is how many shares are actively traded.
[01:10:58]  And so what they saw is they're like, hey, wait a second, there's actually something here.
[01:11:03]  These short positions are pushing down the share price artificially.
[01:11:06]  And actually, GameStop, I don't know, I think they're okay.
[01:11:10]  I think they, you know, I think they're going to bounce back.
[01:11:14]  Okay, so they're doing, well, they get a little bit of wind in their sales because a little PlayStation called the PlayStation 5 comes out.
[01:11:23]  Now, this was preceded by the PlayStation 4, and before that, the third one and the second one.
[01:11:27]  And of course, the titular PlayStation.
[01:11:31]  But PlayStation 5 comes out, I think, over Christmas, if I'm not mistaken.
[01:11:35]  People can't get them or something like that.
[01:11:37]  But anyways, if you want to get the PlayStation, you got to go to the fucking GameStop.
[01:11:41]  You can order online all you want, but gamers, they're very, they're excited.
[01:11:46]  They need to be able to scream certain slurs that I've said on this podcast earlier on the podcast to people in different parts of the world.
[01:11:53]  So they want to go to GameStop.
[01:11:55]  So I think the stock rised a little bit then.
[01:11:57]  And then this guy named Ryan Cohen from Chewy.com.
[01:12:04]  He comes on board.
[01:12:05]  Chewy.com, I guess, is where you buy pet foods for the dog that you have or want.
[01:12:12]  I don't know, but it's a fucking online retailer for pet stuff.
[01:12:15]  And I guess they do pretty good.
[01:12:16]  He comes on, he buys 13% of the company, gets a few board seats.
[01:12:20]  I guess, you know, people are hyping this up like he's got a lot of experience in the business of online retailing, which is, I guess, what they want fucking GameStop to transition to.
[01:12:31]  And a little before that, a Reddit user had figured out that Mike, excuse me, Melvin Capital was going long on the GameStop puts.
[01:12:40]  That, in fact, they're shorting the stock and that they've been long on that position since 2016.
[01:12:45]  So all through those crazy Trump years, they didn't sell their GameStop.
[01:12:48]  I'll tell you, I bought GameStock the day that Hillary Clinton died in 2016.
[01:12:53]  And I sold it immediately out of sorrow.
[01:12:55]  And so for Melvin to hold on to that, it's like, oh, that's a big deal.
[01:12:59]  So in January 2021, GameStop gets an agreement with Cohen.
[01:13:04]  They add him to the board.
[01:13:06]  The stock goes up like 13%.
[01:13:09]  We're at like $20 a share.
[01:13:12]  January 12th and 13th, you've got Wall Street vets going wild and wild, right?
[01:13:17]  They're like, Cohen's going to turn the company around.
[01:13:20]  There's all this stuff happening.
[01:13:21]  A few days later, $40 a share.
[01:13:25]  And that's when things like kind of get a little wild because then more and more retail investors start pouring in and they're buying both the stock and they're buying call options.
[01:13:36]  And all this is going against the shorts.
[01:13:39]  So yeah, everyone's going to apes shit because they're all pouring in and the short guys are freaking out, right?
[01:13:47]  That was probably not the best way to put that.
[01:13:49]  But you know what?
[01:13:49]  I'll tell you what.
[01:13:50]  I know what you're saying.
[01:13:51]  I know what you're saying.
[01:13:52]  roll up guy like me 6'3 145 pounds comes into the club every guy under 5'4 which is by the way 99 of my friends they're all like what the he looks like godzilla and i'm like let me through and they're like we can't we're too packed in tight because we're so small and i'm like that's crazy and i leave the club and i go home and i invest well that is called a short squeeze No,
[01:14:21]  that's not called a short squeeze, but we do have to talk about a short squeeze because that's actually what did happen last week.
[01:14:26]  So these Wall Street bets guys, what they're trying to do is create what they've deemed the infinite short squeeze.
[01:14:37]  So we kind of have to explain what that is.
[01:14:39]  So remember.
[01:14:39]  Infinite?
[01:14:40]  Yeah.
[01:14:41]  Everything is infinite.
[01:14:42]  These guys are so dorky.
[01:14:45]  So we were talking about Melvin, the short positions.
[01:14:48]  Yeah, We were.
[01:14:51]  Okay, so Melvin Capital, one of the biggest funds on Wall Street, they get totally fucked by their short position in GameStop, right?
[01:14:59]  So they get fucked because of this short squeeze that happens.
[01:15:03]  So what's a short squeeze?
[01:15:04]  A short squeeze happens when a stock jumps super, super high really, really quick, forcing the guys who bet that it would fall, in this case, Melvin and others, to buy a bunch of the stock in order to try and forestall their greater losses.
[01:15:22]  So remember about short selling, it's the opposite of long and what you typically think of with stock.
[01:15:29]  And so in this way, these guys, you actually have like infinite potential losses because when you you lose when the stock rises and the stock, you know, technically, although, you know, theoretically, although it, you know, it usually doesn't, it can rise to like the highest of the highest of the highest highs.
[01:15:47]  Wait, you're telling me that GameStop could go to $1 million to the fucking moon, baby.
[01:15:52]  Diamond emoji hands or whatever.
[01:15:55]  Diamond hands?
[01:15:56]  I'm sorry.
[01:15:57]  I don't know.
[01:15:57]  You know what?
[01:15:59]  I don't speak the language.
[01:16:00]  I sold the shares.
[01:16:02]  Yeah, we're out.
[01:16:03]  So that's the thing.
[01:16:04]  But this is the thing.
[01:16:05]  You know, your losses, when you're in, you know, when you're in a short position, your losses are not capped, right?
[01:16:13]  Because technically, because a stock can only go down to zero, but it can go up to whatever price.
[01:16:20]  And you lose the higher it gets in a short position, right?
[01:16:23]  Remember.
[01:16:24]  So when a short squeeze, guys who are short the stock, they're scrambling to basically buy the stock to offset what they're losing on their short position.
[01:16:34]  Okay.
[01:16:35]  What?
[01:16:36]  So they're playing both sides.
[01:16:37]  Yeah, that's called hedging.
[01:16:38]  They got offset, right?
[01:16:40]  So, But as you could see, that could be really fucking dumb if you've got a ton of volume in the stock because you're only if you're buying up the stock to offset your short position.
[01:16:53]  Makes the stock go up.
[01:16:55]  Exactly.
[01:16:55]  You're only adding upward pressure to the stock price, which is pushing it even higher.
[01:17:01]  So the stocks, they keep going up and up.
[01:17:04]  You're screwing the short sellers even more and more.
[01:17:07]  Now, this is what a hedge fund like usually does when it wants to go to war with another hedge fund.
[01:17:13]  It says like, hey, you, Brace Fund.
[01:17:17]  Yeah.
[01:17:18]  You've got a huge short position and I want to bankrupt you.
[01:17:23]  So I'm going to buy a ton of shit of the stock that you're, you know, that you're short of.
[01:17:29]  I'm going to buy so much that I'm going to push the price up so high, I'm going to squeeze you and you're going to have to buy back so much, it's going to bankrupt you.
[01:17:37]  That's awful.
[01:17:38]  Why would you do that to me?
[01:17:40]  I'm just simply, I'm just simply a man trying to get by.
[01:17:44]  We're fucking sharks, baby.
[01:17:46]  Oh my God, dude.
[01:17:48]  Okay.
[01:17:49]  I thought it was Farrar, Strauss, and whatever I was doing.
[01:17:52]  I didn't think I was investing in female genital mutilation.
[01:17:56]  I'm sorry.
[01:17:57]  Okay, okay, okay.
[01:17:58]  That was books.
[01:17:59]  But the guys, so think of the Wall Street Fets guys.
[01:18:02]  They're kind of doing this, right?
[01:18:03]  But they don't actually have billions and billions of dollars to just buy up GameStop immediately to squeeze it.
[01:18:09]  So what they do is they say, okay, well, I'm going to buy ridiculously out-of-the-money call options, which are going to force the sellers of those options, the market makers like Citadel, to buy the stock to hedge their short position, which in turn will push it up even more to the moon.
[01:18:30]  So the higher they can push the stock, the more money the stock is going for, the more money that Melvin Capital is losing.
[01:18:39]  Exactly.
[01:18:40]  So the thing too is that market makers, you know, Citadel is one of them, they write options.
[01:18:48]  They have to remain neutral by law when they write the options.
[01:18:52]  Now, you know, you've heard this term short squeeze being thrown around.
[01:18:55]  You might have heard a term also called gamma squeeze being thrown around.
[01:18:58]  Yeah, what is a gamma squeeze?
[01:19:01]  So, okay, gamma refers to the price of options contracts, puts and call options, is determined by something called the Greeks.
[01:19:11]  Okay, so gay men.
[01:19:14]  No.
[01:19:15]  No, it's Delta, Vega, Theta, Gamma, and they're kind of- Okay, so drunk women.
[01:19:22]  No.
[01:19:24]  It's only, I don't, we don't really have to get it.
[01:19:26]  That's like really getting into the weeds.
[01:19:28]  But for our purposes, we're going to say gamma is, you know, it's a number between one and zero that changes on a call as the price of a stock gets closer to the call price, right?
[01:19:43]  So the options contract always refers to an underlying asset.
[01:19:48]  And gamma measures how close that asset price is to the strike price on. one of the options contracts.
[01:19:59]  Okay.

=== Gamma Squeeze Dynamics (14:25) ===

[01:20:00]  So if you bought a $300 call and the stock is $290, then gamma would be somewhere around like 0.98.
[01:20:10]  Okay.
[01:20:11]  Okay.
[01:20:11]  I said understood before, but only sort of understood.
[01:20:14]  But understood.
[01:20:16]  So the thing to remember with calls and options is that every call purchased and every, you know, every contract represents 100 shares.
[01:20:28]  So market makers then would have to, in this situation, if gamma is, you know, 98, market makers who are writing the call options would have to buy 98 shares of the asset in order to remain neutral while issuing the option.
[01:20:44]  Yeah.
[01:20:45]  Right?
[01:20:46]  Totally.
[01:20:46]  Yeah, of course.
[01:20:49]  So as gamma moves, they have to buy more or sell more shares in order to remain that neutral arbiter.
[01:20:58]  Yeah, okay.
[01:20:59]  I go, I get what you're saying.
[01:21:00]  So.
[01:21:01]  You got to pay a little money to be neutral.
[01:21:03]  Yeah.
[01:21:04]  If GameStop runs up insanely fast, the market makers, much like the short sellers, have to hustle in order to cover for the calls that they've issued, the options they've issued, you know, to settle them or buying up millions of shares, which is pushing the share price even further.
[01:21:25]  That's called the gamma squeeze.
[01:21:27]  Gotcha.
[01:21:28]  Okay.
[01:21:29]  And this is what they were trying to do.
[01:21:31]  Well, they're trying to force it.
[01:21:32]  And so you put that together with a short squeeze, bam, to the moon.
[01:21:37]  Okay.
[01:21:38]  Yeah, because it's a lot of down low pressure sending it straight up.
[01:21:44]  Exactly.
[01:21:45]  A geyser of money.
[01:22:08]  So the thing about buying options, particularly with the GameStop stuff, is that sometimes you can get a really good deal, right?
[01:22:14]  Like people who bought options for GameStop for January 29th at $400 a share, which that probably looked totally fucking insane in December.
[01:22:25]  So they were able to buy them at like 30 cents a contract.
[01:22:29]  That now probably went up to like, I don't know, $250 a contract.
[01:22:33]  That's like insane gains multiplying crazy.
[01:22:38]  Big money.
[01:22:40]  Yeah.
[01:22:41]  Because so buying options is a way of kind of like borrowing money, but capping your risk of loss.
[01:22:46]  You can't lose more than what you put in, but you receive nearly uncapped upside because, you know, it can go up to whatever.
[01:22:55]  So because of this, options have fairly high odds of expiring, like totally worthless, you know?
[01:23:03]  So like there will be for, you know, this, the thing that happened with GameStop doesn't usually happen.
[01:23:09]  If people are buying these ridiculous calls, those contracts are usually going to expire totally worthless because the stocks are never going to hit those prices, right?
[01:23:18]  So like what you're doing is you're putting a little bit of money on hoping it'll pay off in a big way.
[01:23:23]  But you also, yeah, but you, you know, if it does it, you're not going to lose that much.
[01:23:28]  Yeah, yeah, yeah, yeah.
[01:23:31]  So if buying basically has uncapped upside, then conversely, selling options has nearly uncapped downside.
[01:23:39]  And this is important for understanding with what happened last week with GameStop because let's say, okay, in December, GameStop, $12 a share.
[01:23:49]  Let's say I sold $40 strike calls on GameStop with February expiration for $2 a contract.
[01:23:58]  So each contract, remember, that represents 100 shares.
[01:24:03]  So I get $200 for every contract I sell.
[01:24:07]  That's pretty good.
[01:24:08]  That's a pretty good deal.
[01:24:12]  Yeah, unless GameStop were to go to $42, which is the strike price plus the cost of the contract.
[01:24:20]  That's when I'm going to start losing money, right?
[01:24:23]  So if GameStop's at $300 a share, that same contract that would now sell for $250 or $25,000 a contract, which means that I would have lost $24,800 per contract.
[01:24:44]  Sounds pretty bad, Liz.
[01:24:45]  Sounds like, I got to be honest with you, not great investment acumen here.
[01:24:49]  Dude, that's so fucking, that's really, really bad.
[01:24:52]  Like, and if you want to get nutty, all those people in the options market doing that kind of selling are financing all those transactions on margin, aka all borrowed money, all of it.
[01:25:06]  Okay.
[01:25:08]  So if I was there.
[01:25:09]  So you can just borrow money and bet with it.
[01:25:13]  Yeah, that's what's, that's welcome to the fucking game, man.
[01:25:16]  Fuck.
[01:25:17]  So if you sold that call, you probably wouldn't wait until GameStop hit $300 to start managing your losses, right?
[01:25:25]  You're not going to wait that long.
[01:25:26]  No, you're going to start scrambling a lot earlier.
[01:25:29]  And if you aren't able to get long, right?
[01:25:33]  Which is, you know, get in positive position, your broker is going to step in and they're going to start mitigating the risk for you because they're going to be like, what the fuck is this?
[01:25:42]  We can't, we don't want to handle this on our books either.
[01:25:44]  You're in margin, you know?
[01:25:47]  They're going to start asking for additional funds.
[01:25:49]  It's called a margin call.
[01:25:50]  They're going to start closing out positions.
[01:25:52]  They're going to start buying them back at a loss.
[01:25:54]  They're going to start buying call at a higher strike price.
[01:25:57]  So it has an effect of capping your loss.
[01:26:00]  But if you want to do that, if you want to buy that higher call, someone has to sell that call.
[01:26:05]  And we're in the middle, remember, of a short squeeze when most option sellers are not actually looking to sell something that they just watched go up 20 times in like two weeks.
[01:26:14]  Yeah, they're holding.
[01:26:16]  Yeah.
[01:26:16]  And on the flip side, everyone at this moment is going to want to buy, is going to want to buy options.
[01:26:21]  They're looking for cheap puts on overvalued squeezed stock because theirs are going to win when the stock eventually falls.
[01:26:28]  So with demand high, the put pricing is going to go through the roof.
[01:26:33]  So no one wants uncapped exposure to these losses.
[01:26:36]  So people are going to be selling options one strike price and probably buying options at another as a way to hedge their positions.
[01:26:43]  So in this moment, in this total moment that's happening, and this is what happened last week, the amount of options outstanding is just like fucking multiplying.
[01:26:54]  What do you do?
[01:26:55]  What do you do in this moment?
[01:26:56]  Option sellers are trying to mitigate their losses.
[01:26:58]  They're given two options.
[01:26:59]  You either unwind your position or you start getting rid of the rest of your exposure elsewhere on your books.
[01:27:05]  You start selling, you start selling your other positions.
[01:27:08]  You're liquidating Alibaba.
[01:27:09]  You're liquidating Tesla.
[01:27:11]  You're getting rid of Palantir.
[01:27:12]  You're getting rid of Apple.
[01:27:14]  You're liquidating Jack Ma.
[01:27:17]  Exactly.
[01:27:18]  So in total, what I'm trying to get at, what I'm trying to get at is that in total, the amount of capital at play in the GameStop situation with all of these options and all the equity trading, but specifically with the options and the related transactions that are coming off of it is fucking jaw-dropping.
[01:27:38]  Yeah, it's huge.
[01:27:39]  It's massive.
[01:27:40]  And this is a quote, and just to drive this home, this is a quote from the founder of one of the retail houses, Interactive Brokers.
[01:27:47]  And they halted GameStop much like Robinhood did.
[01:27:51]  And this is what they said.
[01:27:53]  We are concerned about the ability of the market and the clearing systems through the onslaught of orders to continue to provide liquidity.
[01:28:00]  And we are concerned about the financial viability of intermediaries and the clearinghouses.
[01:28:05]  The broker stands between these customers and the clearinghouse.
[01:28:08]  So when options holders make the money, the clearinghouse has to give us the money to give it to our customers while other options holders, sellers, or buyers on their own side lose money, we have to collect money from them and give it to the clearinghouse.
[01:28:24]  That's the whole thing we outlined at the beginning of the show.
[01:28:28]  If our customers are unable to pay for their losses, we have to put it up from our own money.
[01:28:34]  Interactive Brokers has 10 billion in equity to cover these payments if need be, but we can't say the same about other brokers with full confidence.
[01:28:44]  Jesus.
[01:28:45]  So basically they're saying like everyone kind of might be secretly broke.
[01:28:50]  Yeah.
[01:28:50]  So basically they're saying, I don't know if Robin Hood, I mean, are you liquid?
[01:28:58]  And at this point, is it even, is it liquid or are you, I mean, are you solvent?
[01:29:04]  Yeah.
[01:29:05]  And so like basically, well, what's the, what's the difference for our listeners who might not know precisely what the difference between those things are?
[01:29:15]  Because in my life, when I haven't been liquid, I also haven't been solvent and vice versa.
[01:29:20]  So I'm not really understanding the distinction between these two things.
[01:29:24]  So liquid means, you know, you have the ability right now to like, you know, pay your debts, not your debts, but like what you owe in the moment, the second.
[01:29:35]  Yeah, yeah.
[01:29:35]  You have enough cash to kind of keep things moving, right?
[01:29:39]  Solvency is actually like you, no matter how much you continue to borrow, you'll still be bankrupt.
[01:29:46]  So like you have a problem.
[01:29:50]  I know that's a limiting.
[01:29:53]  It means you have a revenue problem, right?
[01:29:55]  Not a cash, not a cash flow problem.
[01:29:58]  Familiar with both those problems, but yes.
[01:30:01]  So wait, okay.
[01:30:02]  So I want to pull back though, you know, and this is going to sum up all the, you know, this is taking a long time, but, you know, I'm sorry, this stuff is like complicated, but once you get it, it's, it's, you know, it's impressive.
[01:30:13]  I will say, I have read all of this information and have had Liz explain to me all this information several times, and I still don't get it, but I keep thinking that there's like a catch, but it looks like people are just betting.
[01:30:25]  That's the thing.
[01:30:26]  Okay.
[01:30:27]  Imagine, okay, betting, perfect.
[01:30:28]  Imagine you're a sports betting desk, right?
[01:30:32]  Yeah.
[01:30:32]  Bet DBI.
[01:30:34]  And every customer keeps coming to you and they're betting on the same team.
[01:30:38]  And the line, even as the line, the betting line is getting worse and worse, which should theoretically incentivize people to bet the other team.
[01:30:49]  Everyone is still just betting that same fucking team.
[01:30:52]  Stillers, still worse.
[01:30:54]  Still worse.
[01:30:54]  But so you, the casino, your risk is now actually growing because none of the bets are getting evened out, right?
[01:31:03]  Well, here's the thing.
[01:31:04]  I did watch Oceans 11 recently, and apparently casinos, according to the lore of Oceans 11, not sure if this is real, have to have money to cover every chip on the floor.
[01:31:15]  Oh, wait, but that would still actually apply.
[01:31:17]  Because if there's too many chips on the floor, if everybody goes and bets at the same time and it's way more than people would usually be doing it, you wouldn't have enough money, even if you were the Bellagio and whatever other ones were in that movie.
[01:31:31]  Exactly.
[01:31:32]  Now, let's take it one step further.
[01:31:34]  Imagine then what would happen to Robinhood if GameStop were to then drop in price really sharply.
[01:31:43]  If you've got users, if you've got, you know, customers, I guess, totally skewed heavy on the long side, you're staring down cascading margin calls as the security price is dropping.
[01:31:57]  That means, you know, and you've got all these losses.
[01:32:00]  It means the DTCC is going to demand more collateral.
[01:32:03]  You know, this cuts both ways.
[01:32:03]  That's the clearinghouse.
[01:32:04]  Yeah, yeah, yeah.
[01:32:05]  This cuts both ways.
[01:32:07]  So this is all to say that like most people risk manage their portfolios and really care about counterparty risk and all of their levels of exposure.
[01:32:17]  And it's like extremely, extremely unclear that Robinhood has ever even thought once about it.
[01:32:24]  Classic.
[01:32:26]  But why should you?
[01:32:27]  You're making a bunch of money.
[01:32:28]  Here's the thing with from what I understand about these fintech companies.
[01:32:32]  They're much more tech companies than Finn companies.
[01:32:36]  Yeah, absolutely.
[01:32:38]  You know, just like how Uber, you know, sort of builds itself as a transportation company, but it's really a tech company.
[01:32:45]  Yeah, absolutely.
[01:32:46]  I mean, and that's the thing.
[01:32:47]  You know, that's the other thing that got me really pissed off about the way all this shit got framed afterwards.
[01:32:52]  Like we said, there's this David and Goliath story.
[01:32:55]  You've got all these like activist CEOs, Elon, Shamath, fucking Mark Cuban is doing like Reddit AMAs.
[01:33:03]  Like they're all the Vinkel Vi.
[01:33:06]  They're all up in there talking about how this is like a revolution and a protest and whatever.
[01:33:12]  And it's just, it's completely and totally absurd.
[01:33:15]  Like the idea that any of these people are operating outside the logic of the system is a fucking joke.
[01:33:24]  Like that the market hasn't taken into account any of the things that they're doing.
[01:33:30]  Like, look, not to get too math heavy or whatever, but if you look at what's happening with the massive price moves, it's not just a function of the fucking Reddit crowdfunding like YOLO calls on TikTok or whatever.
[01:33:44]  We got BlackRock in there, right?
[01:33:46]  Absolutely.
[01:33:47]  That's the thing.
[01:33:48]  It's like if 15 to 20% of calls are day traded, like it's not actually affecting like market, like market makers like chasing their hedges.
[01:34:01]  They're like chasing Delta hedges or whatever.
[01:34:03]  Like, that's not what's happening.
[01:34:04]  It means that what's happening is that Wall Street's bets is concentrating call buying on, like, a couple names.
[01:34:10]  And there's observers in whatever hedge funds and elsewhere that are fucking using that as signals for further price moves.
[01:34:19]  Like, there's, there's Reddit-based hedge fund strategies that are doing the work for Reddit.
[01:34:24]  You know what I'm saying?

=== Affecting Market Hysteria (08:32) ===

[01:34:25]  Jesus Christ.
[01:34:26]  Yeah, I see what you're saying.
[01:34:27]  And that's what's like so crazy.
[01:34:28]  It's like.
[01:34:30]  You know, it's like all these people want to believe so badly that this is some kind of fucking like populist, like, you know, oh, we're taking down Wall Street.
[01:34:39]  We're affecting the system or whatever.
[01:34:41]  And like, okay, you know what?
[01:34:43]  I'm sure that Robin, this whole GameStop Robinhood craze, like it probably minted a few new millionaires.
[01:34:49]  Okay.
[01:34:50]  But like, what about the fucking losses?
[01:34:53]  There's a story in the Washington Post today about some kid who's staring down like, I don't know what it was, like 60K in debt and is still fucking holding because of Wall Street vets.
[01:35:03]  There's a picture of him with a, that's what strikes me most about it is that like, it really is, it's a mania.
[01:35:12]  It's you know, it's a craze.
[01:35:13]  And it's like, you know, which again, like, I'm not immune to this.
[01:35:18]  And like, just like, you know, I was talking about the sort of the subreddit earlier and like this ironic sort of affected way of speaking.
[01:35:25]  It's like, I'm not immune from that either.
[01:35:27]  You know, this is sort of like one of the, I mean, all of these things, I guess, are just like sort of sick symptoms of the very depraved time that we live in and country that we live, most of us live in.
[01:35:38]  Although, I guess the guy in that Washington Post article was from Europe.
[01:35:41]  But he's one of these Americanized Euros.
[01:35:44]  You know, he's got a picture of Elon Musk in the article taped to his wallet, very pathetic display.
[01:35:52]  And like, I think that's, that's, that's like, I mean, look at, look at all these other sort of, you know, crazes of the past year.
[01:35:59]  You know, you had the, I mean, even the January 6th thing was this hysteria, this craze of everything about it from the people doing it to the reactions to it.
[01:36:08]  You know, the Black Lives Matter thing, you know, you had this sort of hysteria and this, this great momentum, and not momentum, excuse me.
[01:36:15]  Well, there was momentum to the hysteria, but like there was this like, this energy and this sort of like wild-eyed abandon from a lot of people.
[01:36:21]  And then that sort of just went away.
[01:36:24]  And then, you know, again, like this, this happens all the time.
[01:36:27]  It's this sort of like cyclical nature.
[01:36:29]  And like, it's, you know, I don't know what, I don't know what to call it, but it's like, I think in a way, sort of the, the, this, like, nihilism of the Wall Street bets people makes perfect sense here, right?
[01:36:42]  Like they, a lot of them know that they're going to lose.
[01:36:45]  I mean, deep down, you can't think that you're going to make a bunch of money as the stock is tanking today, you know, going from, you know, hundreds of dollars to, you know, just above $85, you know, at the end of the day.
[01:36:59]  You can't actually imagine you're coming out of this with any real amount of money.
[01:37:04]  In fact, you might be losing money.
[01:37:05]  You know, there's people posting these sort of screenshots of them buying at the very peak of the price.
[01:37:10]  You know, it was like $450 for like, you know, two seconds or something.
[01:37:14]  And there's people bragging about having bought it at that price.
[01:37:17]  And I think to me, it's like, I don't know, you know, it's just mind virus of the internet.
[01:37:23]  It's just this fucked up hysteria you have.
[01:37:25]  And it's, it's, it's, it's a wicked fucking world, man.
[01:37:31]  Like, I don't know.
[01:37:32]  I think a lot of people are going to be pretty fucking broke.
[01:37:34]  I'll tell you this.
[01:37:35]  I cashed out last week.
[01:37:38]  I think, yeah, I guess today is Tuesday.
[01:37:40]  Yeah.
[01:37:40]  Last week, I think like 250 something.
[01:37:43]  You know, because I, here's the thing about this Wall Street stuff.
[01:37:48]  It opens at 9 a.m. on the East Coast.
[01:37:51]  That's 6 a.m.
[01:37:52]  I'm not getting up at 6 a.m. for this.
[01:37:54]  What are you talking about?
[01:37:55]  I got up at 6 a.m. for most of my adult life for work and stuff.
[01:37:59]  I'm trying to, you know.
[01:38:00]  And so, yeah, I missed when it was like at 300 something.
[01:38:03]  So I'm like, well, I might as well sell it now.
[01:38:05]  And part of me felt bad.
[01:38:06]  And then another part of me was like, what are you talking about, brother?
[01:38:09]  You just made a little bit of money for basically doing nothing.
[01:38:12]  You know, this got you to pay attention to something you really don't give a fuck about because I'm sorry, no disrespect to any stocks, you know, any of the market makers out there in the audience, but I really difficult for me to understand this stuff and thus care.
[01:38:25]  And so it's like, for me, it's just like, it's this sort of rabid psychosis that the whole country is in.
[01:38:33]  And it's not that like we go through phases of that.
[01:38:37]  It's that we go through phases of like the barest of lucidity in between these sort of spikes, I guess to use, you know, a little stock term there.
[01:38:47]  In terms of these spikes of the blood pressure of the country, of the nation.
[01:38:51]  You know, it's, it's, it's the baseline is actually psychotic, but the dips are where things get quiet for a little.
[01:39:00]  And I'll tell you what, in two weeks, no one will fucking remember any of this.
[01:39:04]  Well, I think the people who lost a bunch of fucking money remember.
[01:39:08]  And I just like, I think that what, you know, what you said about it being increasingly nihilistic, I think is important.
[01:39:17]  And it's a real shame.
[01:39:20]  I think it's real slimy because I think it feels very opportunistic the way some political actors and social media people and activist CEOs and whatever, like all the people who've been throwing their fucking takes out on this entire fiasco of the last week are saying.
[01:39:38]  But like, yeah, I think it's real opportunistic the way they try to say, oh, this is David and Goliath.
[01:39:44]  This is the little guy against the big guy.
[01:39:46]  Like, this is you taking on the hedge funds.
[01:39:48]  You're taking on the hedge.
[01:39:50]  And it's like, no, that's not at all what's happening.
[01:39:53]  Like, the hedge funds are fucking fine.
[01:39:56]  Like day traders, like I'm sorry to say, but like even with hundreds of thousands or even millions of guys with, I don't know, fucking 5K in their Robinhood account, this is such small fucking potatoes to the money that moves on Wall Street and that makes actual fucking dents and shit.
[01:40:15]  Like this is not, I'm sure it feels real good to feel like you're part of, you're, you're affecting a thing and you guys are being players or whatever, but like you're not.
[01:40:28]  Yeah.
[01:40:29]  Like, I don't know how to, I really, I mean, I don't want to be harsh, but like, I think it was even Martin Shkreli that like, I mean, he compared it to being a jihadist, like blowing yourself up.
[01:40:41]  You're not actually doing anything.
[01:40:43]  You know what I mean?
[01:40:44]  Like, and so I think it's like, I think it's real scummy how people like the Winklevoss guys or fucking Shamath, who is, by the way, like, that guy runs a fucking platform that is basically Robinhood.
[01:40:58]  SoFi.
[01:40:59]  Yeah.
[01:40:59]  Yeah.
[01:41:00]  There's the ads for it all over the city.
[01:41:02]  He's a fucking scumbag.
[01:41:03]  Like he's a fucking, I listened to his podcast about this and the one thing that they all agreed on, because there's some Robinhood investors he does a podcast with, was that we need to repeal capital gains tax.
[01:41:16]  Oh my God.
[01:41:17]  I mean, I just can't even that guy.
[01:41:19]  He's like, I mean, whatever.
[01:41:21]  That he's a fucking, yeah, fuck that guy.
[01:41:25]  But it's true.
[01:41:26]  It's like, you know, these guys are, you know, pushing this and pumping this and fucking Dave Portna and all the rest, you know, like pumping this thing, you know, and then suddenly people are coming out of this demanding the right to speculate and demanding the right to have like, you know, oh, I should have unfettered access to the market.
[01:41:45]  What we need, I mean, you see this fit on the left, the fucking responses is like, actually what we need is a freer market.
[01:41:51]  And it's like, wait, what?
[01:41:53]  Like, we are so through the fucking looking glass.
[01:41:56]  And I don't know if people are just fed up and crazed and are so fucking detached from reality, but like you're not getting even with the fucking capitalists by going all individually on Robinhood and fucking pumping up a mall stock.
[01:42:12]  Like, what are you fucking talking?
[01:42:13]  This is, this is like Don Quixote.
[01:42:15]  Like, what are you doing?
[01:42:18]  Like, I just, I don't even know what to say.
[01:42:21]  And I'm not mad at the people who get, who get, you know, caught up in it because they're just, that's the whole thing.
[01:42:28]  They're innocent actors.
[01:42:29]  You know what I mean?
[01:42:30]  They're just people getting swept up in a fucking cultural moment.
[01:42:34]  What I'm mad at are the fucking people going on the talk shows and going on Twitter and, you know, are fucking should know better or fucking politicians and are on the wrong side of this.
[01:42:47]  You know?
[01:42:48]  BlackRock, like you said, BlackRock is fucking fine.
[01:42:50]  The hedge funds are fine.
[01:42:52]  Wall Street is fine.
[01:42:53]  Actually, all made a lot of fucking money, and now the stock is going down.

=== Folks Swept Up In Culture (04:15) ===

[01:42:57]  So, guess what?
[01:42:58]  Those shorts are looking mighty fine right now.
[01:43:01]  You know, like the house always fucking wins.
[01:43:05]  Yeah, yeah, yeah.
[01:43:06]  You can't beat them in this game.
[01:43:08]  It's not even, it's their game.
[01:43:10]  They're literally, it's they're literally capitalists.
[01:43:14]  Yes, you know, I mean it's like that, it's like the astronaut shooting meme, you know yeah, when the lights go down in the state,
[01:43:44]  oh oh, I can't fucking remember this song.
[01:43:53]  I just remember little bits of it.
[01:43:55]  That's not the good journey song, right?
[01:43:57]  What's the good one?
[01:44:00]  You know, the boots and braces, shaving headed halts.
[01:44:06]  What?
[01:44:07]  Oh, nothing, that's just a different journey song.
[01:44:09]  No, don't stop, believe, you know, yeah, Off all screwed up.
[01:44:17]  It's a really good rhythm.
[01:44:19]  The game has stopped.
[01:44:22]  Oh, it's stopped.
[01:44:23]  It stopped, baby.
[01:44:24]  It's done.
[01:44:24]  This is, we've recorded for so long.
[01:44:26]  I gotta say, I Liz has like 12 pages of very well-researched notes.
[01:44:33]  I assume well-researched notes.
[01:44:34]  I, I, I made up this.
[01:44:35]  Liz could have just been making all of this up, and I would this is like the end of, have you seen um F is for Fake?
[01:44:43]  And at the end, he's like, and the last hour and a half is I totally made up.
[01:44:48]  That's exactly what I'm gonna do right now.
[01:44:50]  The last hour and a half is totally made up.
[01:44:54]  My old roommate Vinnie Martini used to watch that movie like damn near.
[01:44:57]  It's a fucking great movie, though.
[01:44:59]  Yeah, yeah, it's real.
[01:45:01]  I'm sure it is.
[01:45:02]  Who made that?
[01:45:03]  Orson Welles.
[01:45:04]  Come on.
[01:45:04]  Oh, Fat Man.
[01:45:05]  Yeah.
[01:45:06]  Yeah, yeah.
[01:45:06]  He was big old fat man when he was making this.
[01:45:09]  Yeah, he was.
[01:45:11]  I guess he's not little.
[01:45:12]  I'm thinking of Edward G. Robinson.
[01:45:14]  It's a great movie.
[01:45:14]  It's kind of like an Adam Curtis movie, but without the like montage.
[01:45:20]  One thing I want to mention is that, yes, the Lincoln Project co-founder John Weaver did get in trouble for sexting a 14-year-old boy and many other teenage males.
[01:45:35]  Unfortunately, that does mean QAnon is real.
[01:45:39]  So, me a couple of there.
[01:45:40]  I have a question.
[01:45:41]  Yeah.
[01:45:42]  Lincoln Project.
[01:45:44]  This is just, these are just the Peanut guys, right?
[01:45:47]  Yeah, yeah, yeah.
[01:45:48]  They're like the Iraq war guys.
[01:45:49]  Yeah.
[01:45:51]  It's like fucking.
[01:45:52]  This real tragedy farce.
[01:45:55]  Yeah, oh, yeah.
[01:45:55]  Well, in this case, he's like the Afghanistan war dancing/slash t-boy guy.
[01:46:02]  But yeah, same sort of genre.
[01:46:05]  Yeah, yeah.
[01:46:06]  It's a.
[01:46:07]  Here's the thing.
[01:46:08]  This was long, but it's really hard to explain what happened and why all of this and everyone is wrong talking about it without going into the nitty-gritty of how fucking insane and risky all this shit is and why it should not be like this should not be a thing.
[01:46:26]  This is not, this should not be a thing.
[01:46:29]  I'm sorry.
[01:46:30]  Here's my policy prescription.
[01:46:31]  Shut down all apps.
[01:46:33]  Yeah, just shut them down.
[01:46:35]  We should shut down all the apps until we can figure out what the fuck is going on.
[01:46:39]  Absolutely.
[01:46:40]  Absolutely.
[01:46:40]  And you know what?
[01:46:41]  I'll say this too.
[01:46:42]  Deport everyone who makes apps.
[01:46:45]  You know what's crazy?
[01:46:46]  Donald Trump was the president.
[01:46:49]  I don't know what you're talking about.
[01:46:52]  Do you ever think about this?
[01:46:53]  Of America?
[01:46:54]  Yeah.
[01:46:54]  It's pretty crazy.
[01:46:55]  Yeah.
[01:46:56]  Oh, I think he's on Hannity tonight, which I'm very excited about.
[01:46:58]  Really?
[01:46:59]  Actually, it might have already happened while we were recording this five-hour episode.
[01:47:02]  Yeah.
[01:47:02]  Damn.
[01:47:03]  Wonder how he looks.
[01:47:04]  I know.
[01:47:06]  Probably fantastic.
[01:47:08]  One of the best-looking men in American history.
[01:47:10]  Maybe you got a little Florida sun.

=== Jinxed Podcasters (01:47) ===

[01:47:12]  I would give, I'll say this, and I know this has sort of played out, but I would pay basically any amount to see his dick.
[01:47:21]  I don't think anyone is listening at this point.
[01:47:23]  We've been going for like two hours, so you should keep it going.
[01:47:26]  What else do you, what else would you say?
[01:47:29]  We should be allowed to say it too, like if we're singing along in songs and stuff like that.
[01:47:34]  All right, cut it.
[01:47:35]  Shut it down.
[01:47:35]  Shut it down.
[01:47:36]  My name is Liz.
[01:47:38]  My name is Beres.
[01:47:42]  We're joined by producer.
[01:47:43]  Okay, so sorry.
[01:47:44]  So, okay, hold on.
[01:47:46]  You've been doing this.
[01:47:47]  Yeah, we just, we feel it out, baby.
[01:47:49]  It's got to feel it in the moment.
[01:47:51]  Did you hear that like, you know, three-quarters of a second pause?
[01:47:54]  That wasn't.
[01:47:55]  I thought that if I jumped in, then you would jump in at the same time and then we would have been on each other's, you know, we would have stepped over each other.
[01:48:00]  So I was just waiting for you.
[01:48:01]  Jinxed each other and then we couldn't do podcasts anymore.
[01:48:03]  Exactly, because of, you know, that rule.
[01:48:07]  They should make jinxes legally binding.
[01:48:10]  Yes.
[01:48:11]  Anyways, we're joined by producer Young Chomsky, who I have jinxed.
[01:48:17]  I jinxed him several years ago, actually.
[01:48:20]  He owes me $50,000 interest on that because he's broken it every time he's spoken.
[01:48:24]  And this is Funny Money Edition of Truanon.
[01:48:29]  And we are, of course, joined by producer Young Chomsky, and I am on cocaine and ketamine.
[01:48:35]  Liz, sing us out.
[01:48:38]  We'll see you next time.
[01:48:40]  Bye-bye.
[01:48:59]  Come out.