The financial system is filled with interesting stories and questionable endeavors. Since the dawn of money, money has been a focal point for dubiousness. Here we explore the GameStop Saga and have the financial system versus the people. Satoshi Nakamoto would say it is the central control against the retail investors, we say it’s all fool’s gold and the house always wins.
If you want to explore every angle of the financial system there really is no better example than the GameStop Saga. It started with transparency into many hedge funds short positions betting against GameStop. It was the middle of the pandemic and an in-person retail chain that was losing money seemed an easy target. Yet, the people wanted revenge. It started with DeepFuckingValue a.k.a Roaring Kitty. People blamed him for hyping the stock, but if you can’t say anything what can you do? You must cater to your audience and swear it’s all true, and that is exactly what he did. With flair, and beer and a head band he advised on buying GameStop. How? Through Robinhood a free online app.
He did not make money for signing up investors to this program so he can cover his rear. He also can’t shut up and let this chance go by, so he passes it off as “my own opinion” and not gratified financial advice. So, he is off the hook as he is not a professional nor is he due to a fiduciary duty; he is more flexible and technically not technical. His posts were shame full boasts but never boring. He was better than financial advice because it was no holds barred for the cause. He dropped jaws with his antics and taught many young investors to practice trading on Robinhood to get better and richer. However, he was also under fire for his unorthodox wild methods. Being a pump and dump scheme schemer. As it turned out he was one of the best. He did have a license in securities from Massachusetts and was responsible for signing people up to the app, so that is a fiduciary duty to provide a good selection in the app.
Next came the app itself: Robinhood. Its claim to fame was to do what no one had done; it was free trading. The big guys wanted to shut it down too, but it fought back, by catering to the consumers’ needs with 24/7 trading. Plus, it provided raw adrenalin through dopamine increasing congratulations graphics after every trade. To some this was a point on rigging the system that had to be undone. On the other hand, they could have provided a huge disclaimer with danger and warning signs. Either way, this works to release dopamine in conservative investors not YOLOers looking to bring down the financial system. But we must look within the system, introducing the next player in our saga, Citadel Securities.
Citadel Securities probably started the whole thing. They are the bank providing liquidity to Robinhood and trading on margin. It is called payment for order flow. Where the liquidity provider buys each share for slightly more and sells for slightly less than the parties are asking, thus making a spread between the two buy and sell prices, even if it is just a few cents, over a long bull rise this adds up. And it is better if you can properly negate the crash, by having it happen faster than the upside rise. So, everyone trades on the way up and you owe nothing on the downfall. Thus, the motive for the hype is there. It is probably the smoking gun and where everything began and likely ended; as Citadel Securities stopped providing liquidity to Robinhood and that led to the domino effect of Robinhood taking out the Buy button. It was completely out of any kind of fairness proposition for the traders. The big guys kept winning. Thus, the only way to go was down. However, the market did rally on hype.
When it comes to pure math, the shorts (betting against GameStop) probably did not suffer nor cause too much of the rise in price as people thought! People thought the shorts would have to rebuy in at higher and higher prices, making the huge trading institutions look like fools. This did not happen, they were hedged, and not exactly greedy, they were smart. It was the hedging for the calls that caused further buying of the stock; when a call is made on the Robinhood platform the platform buys more stock to cover their exposure. It’s a nice little blip to make the stock continue to rise after you are all locked in. As time went on the pumping gained momentum. So, it wasn’t killing the puts it was investing in the calls that made all the difference for a new day. Still people wanted to have the David killing Goliath story, and it happened.
Ultimately we think it was a ploy by the liquidity provided Citadel Securities to create a huge bull run and owe no one on the quick and painless ride down. No one hurt right? Wrong. Roaring Kitty had a class action lawsuit brought against him because he could not shut up and invested in hype and not responsibility. It was dismissed as he had lived by the YOLO attitude, meaning it is always hype and he later said to his legions of followers “buyer beware.” Then Robinhood was slammed for taking advantage of poor uninformed investors with pumped up tactics and no disclaimers! They also took out the Buy now button and made no friends. They ultimately had a huge IPO and an exodus of users, because they could not treat them right, they were just money. As for the investors, if the ride down is sharper and nonlinear compared to the rise, it means a lot of people could not sell or get the opportunity to sell, thus promoting the house and damaging investors. Then many lost out on the Tulip Mania following the typical YOLO internet ride based on memes and Elon Musk tweets.
If one could prove a connection between Roaring Kitty, his legions of followers, Robinhood and Citadel Securities we could justify the David vs Goliath story and rightly try to dethrone the large hedge funds and liquidity providers; the people were aiming for to being with. I do feel for the rebellion, the hype, the YOLO and the opportunity. It is pure capitalism, and we are connecting the dots stopping collusion and proving, logically, it could all be a conspiracy you don’t know about. It started with the UFO flagship Citadel Securities, embarrassing Robinhood and claiming it doesn’t have proper liquidity or ability to stop the rise of powerful internet memes (think Elon Musk). They in turn would blame Roaring Kitty for undue hype, who blames the people for following blindly. Just kidding, he is still supporting GameStop’s rise. So, we prefer to leave the system and laugh. We invest in forex, cryptocurrencies, NFTs, ETFs, and DeepFrickingValue stocks.
So, at the end of the day we learn and earn about collusion, greed, manipulation, and YOLO memes. We also learn in fact, there are unicorn stocks out there, so we support and “believe in the beautiful shockers” around the globe from right here in Canada. We are the cautious and curious investors that see all the angles, and the angels and investors too. After the dust settles we wonder what Robinhood will do, for its future; apparently a large IPO and legal troubles. Citadel Securities walks away, Robinhood loses uses and reputation, Roaring Kitty had a $50 million short position, and the last people are left holding the empty bag. We have learned to be cautious and careful and free thinking. We connect with that typical capitalist meme “what goes around comes around” and YOLO, so be a true entrepreneur.
Allegedly there was in fact contact from Citadel Securities to Robinhood about limiting liquidity and therefore trading in GameStop. What on earth. Robinhood claimed it was protecting investors but really the banks made that choice for them, unfortunately. If you can get any dirt on Roaring Kitty knowing Robinhood or Citadel securities, you have a lawsuit going on for you. Why? It is insider trading, false advertising, and a breach of fiduciary duty selling you shit, silence and no responsibility. So please rewind and find all you can, we will find you in the future, when capitalism is back to normal, with another ingenious story. Still people don’t learn from greed and pride, until next time; from the YOLO to the UFO we know the house always wins 😊.
