Grubstakers - Episode 216: The Short Squeeze on GameStop

Episode Date: February 1, 2021

We tackle the short squeeze at GameStop that has caused their stock price to explode and offer a handy explainer for essential investing terms such as “shorting”, “naked shorts”, “tendies”, “diamond hands”, “gamma squeeze”, and “wife’s boyfriend”. We further offer a few lessons to take away from what has happened so far as well as some predictions for the future and a stern insistence that nothing we say in this podcast is investment advice.

We find people that basically can't make enough to eat before they go into the fields. I don't believe that. I think that you're looking at other places that are not Central Romana. People actually who focus on and who like getting an orgasm never get one. Pull up your socks and figure out what you're going to do. Any chance I'm going to get to be a completely red state? Oh, yeah. For the future is always uncertain. But more uncertain now.

And listen, Blue Ivy is six years old. Beyonce's busy. She tried to outbid me on a painting. Everybody in Atlanta right now at the Louis Vuitton store, if you black, don't go to Louis Vuitton today. In five, four, three, two, one. That's why you need to take a meeting with Kanye West, Bernard Arnault. Hello and welcome to Grubstakers, the podcast about people-powered financial markets manipulation.

I'm Sean P. McCarthy and I'm joined today by my fellow bag holders. Andy Palmer. Steve Jeffers. Yogi Poliwal. And we want to talk today about what has been going on with GameStop and the stock market more generally. We're recording on Saturday, January 31st, 2021. The S&P 500 ended the week down 3.3%, the worst week since October 2020.

Well, stock in the video game retailer GameStop ended the week up 400%, closing at $325 per share. And before we talk about why that is, what happened, and what we think might happen in the future, we should begin with some mandatory financial disclosures. Well, first, I wanted to turn to a brief explainer from the Turning Point USA popular show Poplitics, which kind of gives a good overview before our own explanation. So here's the GameStop controversy broken down

for conservatives who don't get gaming and don't get stonks. And yes I said stonks. She gotta stonk. She gotta stonk. She gotta, she gotta, she gotta stonk. Now stonk with it. Go stonk with it. Get stonky with it. Gross. I like that it's Talking Points USA,

so that's what Sheldon Adelson's estate is being spent on. Oh, Turning Points USA. Oh, Turning Points. Those dancing hot dogs in the video are not cheap. No. It's just going to confuse boomers and they'll be like there's these new things called stonks. They're different from stonks. I'm trying to buy them.

Conservative comedy has got to be the best grift in the world because everybody you're pitching to is half blind in a community home so they don't even know which kind of particular message you're sending.

That's right. But to get back to our mandatory financial disclosure, we should mention at the top of this episode, if you could not figure it out by listening to any episode of this podcast, none of us are licensed financial professionals. Nothing we say on this podcast should be taken as financial advice. It is strictly for entertainment purposes. You should not invest any money in anything that you are not willing to see go to zero dollars. And lastly, we should go around the horn and just acknowledge if any of us might own any shares in any stocks we may or may not talk about today. Andy, perhaps you'd like to start us off? Sure. Yeah, I've got five shares in AMC and two shares in Nokia.

I guess I spent $90 on it all. No GameStop because I can't buy fractional shares right now. I don't know. I've also got a couple of guitars, which I guess you could call investments because those tend to appreciate value, though I modded them a bit and I'm not sure what that does to the value since once you're sure

i'm shorting the guitars that's only going to work out for me man i'm going to uh anyway i think that covers my bases um and i've got i don't know what counts as an asset and what doesn't, but I've got a bunch of bullshit all over the floor of my room. And that's also assets of mine. Have you looked at the failed to deliver numbers on Mustang guitars, though? I think the hedge funds are seriously, they've been shorting Mustang guitars without having the physical assets. Just like GameStop, you can't buy fractional shares of Mustang guitars, so I don't have any of those. I got an old Ibanez that did the show intro,

and then I got an Epiphany SG. Nice. Stephen, what you got? Nothing. None of the securities we'll be discussing today. I mean, in my head, I bought 100 shares of GameStop on Wednesday, but I didn't actually do that so nothing in real

life the listeners can't see it but when steve said nothing he was actually sweating profusely no i do not own any gamestop at all uh yeah i currently like most indians have all my money wrapped up in gold i have gold buried in various locations all over the country um and other than that i bought a whole bunch of game stock game stop stock in best brokers the uh app that we use on grub stakers feel free to join us and add us as friends if you want to play along and uh yeah i doubled my investment and i'm killing all y'all motherfuckers in the fake investment game that we play and i bought uh the same stuff a day after yogi and have lost a bunch of money like any good financial advice you give it a

little bit too late like yeah yogi has andy holding his fictional bags that's right uh i bought so i think tuesday no monday i bought 30 shares of amc literally because i saw somebody on twitter post a picture of an astronaut standing at the moon on the moon and seeing an amc theater there and going what are you doing here and the thing about that was i then like an idiot i I was just day trading on Robin Hood at my day job. And I like I had what I am told are called paper hands or weak hands. And I sold my AMC shares all but one. Oh, buddy. And then literally in after hours, if I had just shut off my phone and done my day job instead of trying to be a day trader, I would have made five hundred dollars in after hours, if I had just shut off my phone and done my day job, and instead of trying to be a

day trader, I would have made $500 in after hours. But because I couldn't just do my job, I had to fiddle around with, you know, my green line stock market app, I cost myself about $500. That's what happened to me with like GameStop, because Wednesday was the last day you could buy fractional shares of GameStop. And by the end of the day, I had like $20 in GameStop. I made like $3 from the day's like, uh, trading. And then I was like, wait, this might be a scam. I might be getting screwed over by, uh, some bad faith actors. And I sold my GameStop, uh, stock. And then I, uh, I guess it didn't let me sell the AMC stock, uh, until the next day. But then, of course, I couldn't get... After that, I changed my mind and wanted to go back and it wouldn't let me because, you

know, Thursday they shut off GameStop trading and then Friday they wouldn't let you buy fractional shares. Yeah. So let's see. I own one share of AMC. I do own three shares of GameStop purchased at an average price of $266 per share, $267 per share, actually. And this is another brilliant investment of mine where I heard about this a month ago, and I thought GameStop is overvalued at $25 a share. And then I went out and I bought it at

$266 per share. And now I'm sitting on three shares of it. We'll return to that later. I also own like five shares of silver, one share of AMC. And I did buy 40 shares of Naked. Again, because I saw somebody post this on Twitter. And I assumed that this was the Naked Fruit Smoothie Company. It's actually a clothing company, which i had no idea when i bought it so i hope this will discourage anybody from following my particular investment advice

you see sean you got the magic card hands but unlike some of us g's over here we got them kenny rogers hands all right you gotta know when to fold them and know when to hold them. But so we'll give a little bit more of a detailed explanation of the GameStop situation in a bit. But just to kind of give you the cliff notes summary version, the Reddit board WallStreetBets has or some users there have had months ago identified GameStop as a heavily shorted stock. It's of course this retail video gamer, a video game company. A lot of hedge funds and other companies think that all this brick and mortar shit is going out of business. So they all shorted it. They all predicted the company would go bankrupt. These users and some others had the idea that if they buy it and they hold it,

they can do what's called a short squeeze, which we'll explain later. And this has kind of led to this massive increase in the price, 400% the last week, I believe 1,600% this month price increase. But so kind of before we go through it, I thought we could all spend maybe five or 10 minutes just giving our overall opinions on the situation, which is that acknowledging the fact that I own three shares of GameStop, I am, as a U.S. citizen, formally urging President Xi Jinping of the People's Republic of China

to sell his country's entire share of U.S. treasuries and dump it all into GameStop stock Monday morning. Because, you know what, like, first of all, China would make money doing that, but more importantly, you would get the first of all china would make money doing that but more importantly you would get the mother of all propaganda coups if president xi destroyed the hedge funds and gave the american people their stimulus checks i mean come on it writes itself i'm just shocked that a company that used to rob all of its customers over the used price of their own games and goods is now what's saving the people that are now broke.

It is true, Yogi. And I was thinking about this earlier that 20 years ago as like a video gamer, GameStop was the most evil Goliath on the face of the planet. And this just shows like how progressively more evil everything gets that like now these are the Davids. We're like we didn't know SAC Capital would exist when we were hating GameStop. We just thought this was as evil as it gets. But no, these are these are the good guys now. I was I'm just recall throughout this event. I'm recalling walking into GameStop 20 years ago

as a 12-year-old and they looked me in the eyes and told me my GameCube that I was trading in was only worth $20. And you know what? Okay, I'm willing to just overlook that

if you guys allow us to buy your stock and ruin a couple hedge funds what if what if their massive price increase has nothing to do with all this this stock manipulation and it's entirely like oh shit we forgot to uh add console arbitrage to our balance sheets and they just discovered that they have a trillion dollars from underbuying and overselling used consoles. I was going to say, you know, the price target of $7,000 seems unrealistic

until you realize that the PS5 and Xbox Series X are sold out everywhere. So this is actually a value investment, not a momentum investment. You know, I got one over on gamestop years ago similar to steven i once sold my original xbox and all the games i had for it i had i don't know maybe 20 or 30 games at that point um but the xbox it wasn't the red ring of death because it was the first console but none of the games would work on it and so except for fusion frenzy and so i took the xbox to game stop trying to sell it and the lady behind the counter was like i'll try a game out and she grabbed fusion frenzy and she put the disc in and

i'm like sweating because i'm like oh man if this game doesn't work she's gonna be like zero dollars and it works for like two minutes she's like yeah, yeah, okay, we'll give you $60 for it or whatever. And I was just like, it felt like Ocean's Eleven. It felt like I was screwing over the man. Power to the player. I have been very accustomed to making money from GameStop that wasn't necessarily legitimate in the long run. Yeah, my brother and I, so for a while they had this program where you could like if you didn't like a game return it and get a new game and then my brother and i kept

doing that so the guy at the store had to tell our dad like so this is not a rental store you do actually eventually have to keep one of these games i remember remember that. I think that was the GameStop insurance. Yeah, something like that. You spent like 20 bucks a month and GameStop was like, yeah, if you fuck a game up, you can come and get a different one. And then you and your brother did it to it. I will say, honestly,

even though I think GameStop is fucked from their business model standpoint, I would like, I mean, we need used discount game stores still and so maybe they can't do it but somebody ought to be doing that it's like i'm i have my psp you know i still need to go somewhere to get games for that yeah i mean as a business model they unfortunately can't be bigger or even as profitable as like amazon or ebay in terms of a used market but in the grand scheme of things

a physical location that functionally repairs and sells games and consoles of eras that are no longer being produced is something that should exist everywhere like i hate that that seems so far-fetched like what a repair store for shit that you already own and parts for things that they don't make anymore but it's like no this is how the world should work i mean it shouldn't be that if i have a dreamcast and i want to buy fucking ready to rumble that i have to dig through the internet instead of go to a guy who smells weird and will get me the game for pennies on the dollar. I felt when Radio Shack went under,

it's like, well, what if you want to buy weird electrical components? You have to go online now. I miss just walking down the street to a store that had whatever weird capacitor you wanted. Is there truly no place in the market for in-person pickup of weird random electronic components or of old video game systems or their games right like manhattan has both of those but then you have to that they're not like yeah it's it's not something that's like franchised anymore. Well, that's why GameStop was the villain 20 years ago,

because there used to be all these, you know, used places or just kind of hole in the wall shops. You could get video games. And the GameStop business model was, what if we replace these all with one store? And now why they're the hero is because hedge funds are like, what if we replace this with zero stores? What if you just can't go anywhere physical to buy things?

You have to buy everything on the internet. And so, you know, we didn't even know how good we had it with just GameStop. I've been wondering if maybe GameStop could turn the situation today to its advantage somehow and maybe do like an overall rework of their business model to be like okay we'll we'll vamp up the online business but we'll still have like the repairing shit

and trading stuff inside business or something yeah maybe like after the pandemic make it a tabletop game thing like something that justifies the brick and mortar property where like i don't know if that's profitable at all um but yeah make it kind of community oriented has gamestop released a like statement about any of this have they been like hey by the way thanks bros i don't think so they did uh their twitter account quote tweeted robin hood uh when robin hood tweeted out uh when robin hood shut down trading in the stock uh robin hood in 2016 had tweeted out, when Robinhood shut down trading in the stock, Robinhood in 2016 had tweeted out, let the people trade. And so GameStop's official Twitter account quote tweeted that with the,

I forget the name of the JPEG, but it's the little monkey looking like kind of confused. Fuck, what is it? Real quick while Sean looks that up, you know, Andy mentioned Radio Shack a moment ago, and I remember when Radio Shack was like shutting down their locations, there was one that was next to my parents' house, and me and my brother and a friend went, because we were like, let me get some cheap wires or something like, you know, some random bullshit, right? And I went up to the door, and I pulled it it and it was like a glass door and the door fell on me like it like broke from the hinges like as if there's no screw on there like they were using

that for a different as if it were a shack door right and it fell on me and then the employees inside came to the door to be like why did you break our fucking door and i had to look at them like why'd your door fell on me you pieces of shit and they're like we're closed and i'm like if your door is falling on me maybe you're open it was a very odd situation but i was like yeah i can understand why that place is going out of business a place that doesn't have functioning doors is a place that i'm pretty sure won't be able to sell me an RCA core at a profit. I have one more GameStop story is I remember being traumatized as a child because I wanted to buy Tekken 3 and I called the store like three different times because I called them and I was like, do you have Tekken 3? And then they were like, yeah. And then I hung up and I called back

and I go, do I need to reserve it? Can I come in and get it? And he's like, yeah, we got plenty of copies you can come in. And then I called back and I go, how much is it? Gives me the price. And then I hang out and I come in. And then when I was in the store, I hear the employee making fun of me to his co-worker. Oh, wow. And I was like seven or eight years old or something. I was very young at the time. Maybe I was like seven or eight years old or something I was very young at the time maybe I

was 10 uh but yeah so he's like and then he calls back and he's like how much is it I just go through it and I was and I just like didn't say anything and I bought the game and then I told this to my friend later and pretended that I got up in his face. And my friend, very correctly, didn't believe me. And he was like, no, you didn't. You didn't say anything at all to this guy. But yeah, that one stuck with me. Yeah, my cousin who's in the mob beat him up. The GameStop saga is extremely interesting to me and I think important for a lot of reasons

but like overarching I felt like it was a repudiation of just like the value investing theory of stock prices I guess where so like there's the orthodoxy of like securities pricing for stocks is is it should generally be based on underlying fundamentals of a company like say a couple like within a corridor of multiples of the company's earnings like the price should be some multiple of the earnings and like if it gets too high it snaps back to the where it was before eventually because that's like reflects some underlying natural reality about the stock price and this is like evidence that that's not true and that it's just the price is set directly by people and institutions in the market, much the same way that prices are set for industrial and commercial goods.

So like the price of a consumer good or an input into a business is its costs plus a markup of whatever the company needs in order to make a profit. And you're like like okay why that works it's called administered prices there's a whole theory of in economics and so i've just been wondering like oh yeah that works for those prices what about stock prices though why are those

somehow different and like this is like an a real world experiment showing that like the it's it's more like uh what's referred to as a keynesian beauty contest which is uh what keynes said is what's really going on in the stock market is it's what people say a stock is worth and how powerful that person is within the financial market that just becomes what it is and like there are people who lead on prices by who are very important and may use things such as value investing to dress up their opinion of what a stock price ought to be in order to be fair and like they say like well this is what it is because it's um it's only 10 times uh multiple of the company's earnings and historically that's where it's been but that's very that's like circular logic if you think about it because

they're saying like this is the natural price but that's only because you read a book called securities analysis back in 1950 which is like a bible for stock pricing and it says that that's only because you read a book called securities analysis back in 1950 which is like a bible for stock pricing and it says that that's how you ought to price things and there's a lot of people who think that that's what the price of a stock ought to be in order to be fair so it's like a circular logic of that and there are other but the the gamest thing is saying like, no, it's a bunch of people who are like, no, the price is whatever it needs to be in order for us to fuck over these couple hedge funds. Like that's a fair price.

The price is how me and my friends make money at your expense. And it shows like this underlying rally of like, maybe there isn't a fair price and the price is just whatever it needs to be for various groups to profit off of it so we should probably start at the beginning with the um how this is affecting hedge funds and and what exactly happened um uh that led us to this place yeah i think we'll get into i have a small timeline here and then we have a lot of definitions the last comment i wanted to make before we start though is uh i believe this is the modern equivalent of the spartacus rebellion i think this is like kind of you know a roman era slave rebellion this is what

it looks like when you have i'm holding no i'm holding i'm holding i'm holding I'm holding. No, I'm holding. I'm holding. I'm holding. I've got five on it. No, no, no. I'm holding. But, you know, it very possibly will end the same way, and we'll talk about how things have been kind of rigged in the market this week. Wait, we're all going to get crucified? Is that what you mean, Sean?

Yeah, Redditor's crucified along I-90. And across the land, the people that held would be crucified until they found the original WSB holder. But there's some level of nobility in that. Are you going to sell your shares and surrender to the Romans? Or will you fight to the last man and be crucified in 6,000 across the roadways leading to Rome as a lesson to the other slaves to never again buy GameStop stock? As long as one child can hold, every life lost is worth the sacrifice. Exactly. Look, GameStop, it's yours. He's free. He can hold or sell whatever he wants. He's no longer controlled by the hedge funds.

Go, GameStop, go. Do you like pizza? Do you like tendies or pizza can we start there between tendies and diamond hands i don't know what these words mean but i do know that i'm up on best brokers and that's all i care about maybe we should define some terms yeah but i but I mean, you know, kind of in summary, this is, you can argue about the extent to which this is retail investors leading this as to whereas certainly in the last week, big money institutions have got into this trade. But it is certainly a, at least initially, an instance of people powered hive mind getting into tactics usually done by institutional investors, such as hedge funds, in this case, a short squeeze. But, you know, with that, we should go into defining 10 Ds and diamond hands

and these other essential terms to understand what's going on here. And don't get stonks. And yes, I said stonks. She got a stonk. She got a stonk. She got a, she got a, she got a stonk. Now stonk with it. Go stonk with it. Get stonking. She gotta stonk. She gotta stonk. She gotta, she gotta, she gotta stonk. Now stonk with it. Go stonk with it. Get stonking with it.

This is the most evil thing the Koch brothers have ever done. This video was produced by David from Hell. David has to watch it every day in Hell. So yeah, Stephen, what are tendies? The tendies? What are tendies? Yeah, I don't, yeah, David has to watch it every day in hell. So, yeah, Stephen, what are tendies?

The tendies? What are tendies? Yeah, what are tendies? That's, wait, okay, literally, I don't know if I know or not. Is that tendies? Sean? Tendies are when or if you can sell, right? I thought it was just the chicken tenders that you can eat when you make a bunch of money.

Yes. It's referring to like, well, once we can finally sell, then you get the tendies. Well, I might have some explanation here because, you know, WallStreetBets, the Reddit board, its description is like 4chan found a Bloomberg terminal.

And so a lot of that Chan culture kind of migrated into Wall Street bets, you know, with a bunch of people day trading, but using this 4chan lingo. So tendies does mean chicken tenders. And it's kind of the idea of like a lot of needs, not in education, employment or training people on 4chan would post about you know their mom bringing them chicken tenders or like there was like a copy paste a while ago about some guy said like my mom gave me good boy coupons and i can turn in the good boy coupons for chicken tenders. Chicken tendies or something like that. I see. At some point this became a meme.

So on Wall Street Bets they talk about it but it has also come to mean like gains because when you make money you can buy chicken tenders or chicken tendies. So if you sell your stock for a profit, then you have tendies. I like how I opened this by being like, Stephen, what is this financial term? And Stephen was like, I'm not exactly sure. And Sean was like, oh, it connects to Fortune.

I know everything about this. Yeah, that was more of a Sean question. All right, so what about diamond hands? What do we got there? Is it the same concept? Oh, I know that one, I think anyway. I'll try to answer it and then Sean can answer it for real.

So if you have paper hands, that's like you're you... Oh yeah, I see. You bought into GameStop or whatever but you sell out too quickly. Right, right. And it progresses up to diamond hands, which is the apex people who never sell. They quickly. Right, right. And it progresses up to diamond hands, which is the apex people who never sell.

They just hold on to it. Yeah, they hold on to it. They don't let go. Right. Is that fair? Yeah, that's pretty accurate. Like, so the other thing is there is a finance board on 4chan,

but it has kind of been eclipsed by WallStreetBets. It's called Biz or B-I-Z. And Biz is mostly just been, you know, literal cryptocurrency coin scams, where people just like shill cryptocurrency that is totally worthless and try to get other people to buy in to their pump and dump scam but um but yeah so like biz has started this whole meme of having weak hands which if you sell your cryptocurrency you have you have weak hands and so they'll they would post like memes of like wok's pointing guns at you and saying, show me your hands, put your hands up, do not, you know, do not have weak hands. And then weak hands became paper hands.

And of course, diamond is the hardest metal known to man. So this is the hardest- Not a metal. Yes. The hardest substance known to man is a diamond uh and this is the the hardest kind of the least weak hands you could have the least paper hands would be diamond hands right right and applied to this situation which we'll get into of like okay you know someone else suffers when the price goes down and if you just buy and then hold the whole time,

it's easier to make them suffer because the price goes up. Right. It stays up as well, right? Yeah. You have more control in maintaining the high price to make the other side of the trade suffer. And so diamond hands would be preferable for this strategy. So I think that just about explains everything.

People need to understand what was happening with GameStop stock price this week. So going back to the timeline of events, though, everything that's happening to the hedge funds is something that was self-inflicted, right? They borrowed way more than they were like physically could, which led to this entire short situation. Yeah. Maybe we should run through the mechanics of this. Okay. If you guys are ready.

Are there any more terms we wanted to find? I was, you need to for part of this. She got a, she got a, she got a stonk. Now stonk with it. Go stonk with it. Get stonk with it. Is there a difference between stonk and stalks? Is that, might you presume stonks are more exciting stalks?

Stonks are, like, stonks are when, like, millennials and zoomers do it. Yeah. They're stocks. They are stocks, but only if Zoomers and millennials do it. Yeah, millennials and Zoomers who don't have a cocaine habit. Yeah, it's just like regular younger people doing it. You can get a cocaine habit after you have the attendees. Stonks are like need the diamonds are like stocks

except if you're using the term you know you're a bag holder right so to start explaining like the mechanism of what happens uh need to do some terms so when you short shares which is at the center of this whole thing you borrow shares at one price sell them at that price wait for the price to hopefully go down and then you buy them back and then give them back to the person you borrowed them from and you pocket the difference of selling high and buying low and that's your profit and in a short squeeze you that's using you notice when someone else has done this shorting and you intentionally buy the shorted stock, causing the price to hopefully go up, squeezing the people who were short. Or in other words, the price goes beyond what they bought it for and they increasingly are

at a loss because the price is going up. And you know this because they're starting to cover their position and that pushes the price even further. And what does covering their position mean? That's buying back the share that they borrowed. Oh, at a loss. At a loss. To make sure their losses don't go up.

Yeah, so their losses don't even get worse don't get even worse great and so when there are a lot of shorts on a stock and you attempt this strategy it's often easier to push the price up because they'll be scrambling to cover their position but there's another level of the short squeeze squeeze in this case with GameStop because not only did people borrow the shares themselves and then sell those short, there are also people who were in the options market for GameStop. And so they were selling call options

that they thought no one would ever be able to collect money on because they figured the price would only go able to collect money on because they figured the price would only go down and they were selling these call options to who they believed were suckers basically who thought the price would go up when they knew it would go down but what they didn't expect was a subreddit wall street bets subreddit of a couple million people all decided all just voted to buy game stop stock and push and they entered successively higher limit in market orders into their brokerage apps mostly on robin hood to push the price up which initiated what's called a gamma squeeze

and so gamma is one of the terms in a complicated formula for options pricing called the black-scholes equation. And it is... Why it's got to be black? Yeah, why? Why it's got to be scholes? And gamma is just a word for the acceleration in how readily the price of the option increases given a unitary price increase in the underlying stock, in this case GameStop.

So not only were people losing on borrowed short shares, but they're also losing on these call options that were increasingly becoming worthless that they didn't cover for. So they didn't buy any other... Not only did they not buy gamestop stock to as a hedge against you know just in case someone did this they didn't buy any options to cover themselves either on the other side of the trade so it just accelerated out of control even more because of this what's called a gamma squeeze now a call

option that's the um you're selling the right to buy a stock at a certain price and so they assumed that if they sold it the right for someone to buy a stock at like uh thirty dollars then uh the price would go down and the person who bought that call option and then redeemed it would basically operate at a loss whereas the person who sold the call option would operate at a gain that's that's as i understand call options is that correct that's pretty close so they were assuming that the price would never get to the exercise price of the call option, thereby expiring worthless. And then they just collect the credit that the person gave them to buy it in the first place. Okay.

That's what they wanted to happen. But since it rose without limit and they didn't buy any call options of their own to offset it they potentially have infinite losses rather than like if you buy a stock and it goes to zero that sucks but you're limited to the loss of the the value of that position you don't go further they could end up losing more than they put in because there's no ceiling to a price there's only a floor right yeah there was a there was a post going around i think reddit um where a guy said if you only learned what a gamma squeeze was two days ago you're gonna be the bag holder and i thought that was bad because i still haven't learned what a gamma squeeze is so i think i'm gonna be the bag holder for the people who only learned what a gamma squeeze is two days ago.

People are regular like proletarians are discussing gamma squeezes and I'm here for it. Steven, how do you feel about a larger portion of the population now being at least slightly more knowledgeable about the stock market? I think it's mostly a good thing. Even if you don't do any trading, it's important to know precisely how people are fucking with you, like these hedge funds. It's good to know more about their business and how they screw us over.

Yeah, makes sense. I guess it's kind of obvious, but just to clarify, bag holder is the person who basically pours their money into a stock to kind of pump it up. And then when the stock kind of goes down and other people pull their money out,

the bag holder is the one who operates at a loss at the benefit of everyone else who made money. Yeah, the best time on the 4chan biz board is anytime there's a significant decline in the price of Bitcoin because you'll go on the front page and it'll be nothing but posts of pink Wojaks screaming. That's great. I guess I would also add to this.

It's like the hedge funds have largely stopped hedging even though their name is what it is. And this was an example of them being caught unhedged that went very badly because it was like a coordinated hit against them rather than just it happened to uh the price happened to move against them for more ordinary reasons and to just kind of elaborate on what steve just said with gamStop specifically, what makes this so unique. And then from there, we'll kind of move into the timeline of all this is the percentage of short that it was. So to just kind of run through a couple terms here, you can look up on finviz.com. You can

look up any particular stock. They have some other places you can look this up, but there's the shares outstanding, which is just total shares. GameStop was at about 65 million. There's the shares float, which is of the total shares, what is actually available to trade. So there's the ones held by the institution. They're not for sale. But then for GameStop, there's about 50 million shares float. And then the short float is out of that shares available to trade, how much of a short percentage is it? How much of those have been borrowed to short? You know, you borrow it, you sell it on the expectation that you can buy it back at a lower price later, because you think it's going to go down. And GameStop, this short percentage for GameStop went up to 140%.

And that's not supposed to be physically possible, obviously. You shouldn't be able to short more than shales that actually exist. And the only way that could happen is if there was what is called naked short selling going on. And naked short selling is illegal. But the idea is, again, if you're shorting, you borrow a share from somebody, you immediately sell it, and then you buy it back later because it'll be cheaper and you'll make money. But if you naked short, you just share that doesn't exist you immediately sell it and now you have uh created a situation where you can have a stock 140 short yeah and it's not um i would say it's not technically illegal to do naked shorts but

they're usually very strict parameters because it's so risky. And brokers will limit your ability to do this for regular people. But hedge funds who have more of a direct line to exchanges and people just don't really prosecute them for this stuff are able to do it more freely. And usually back when hedge funds actually did hedge themselves, they would try to remain what's called delta neutral, which going back to the equation, the Black-Scholes equation, what that means is if they take a position, if they go short in something, they want to remain long in the other direction overall. It's where you could cover with the necessary stock if you needed to, or if you don't have that stock, at least have other stocks along to where you could sell them to buy the correct stock and then cover.

But they weren't delta neutral in this case, as evidenced by there being more of a short interest than there were outstanding stocks. Now, there's also a way I think that you can have 140% of the GameStop shares shorted without naked shorting, as I understand it, where you could have one group that, say, shorts 100% of GameStop shares. And so someone else is buying those. And then that other party lends to someone else who shorts, say, 40% of those shares.

And so you have like 140% of the total shares in a shorting position, but many of those shares have been shorted twice. Right. Yeah, there could be different parties or the same party. It's true there's a couple different ways you can arrive at more than 100 of the float being shorted

that's one of them another is through um taking out options positions which are agreements to deliver a stock if it reaches a certain price and so you could have notionally higher than 100 through that mechanism like if the price will move against you, as it has been, and you suddenly need to make good on contracts where you're like, oh, I'm going to sell you the stock at $30. But now it's at like $300. And I take that entire loss and it's like, yeah, that's another way you can get to over 100%.

And of course, all three of these methods are extremely dangerous as they're all finding out now. Yeah. Right. And that's what's so unique about this GameStop situation is because when you have 140% or I think S3 Partners says as of January 28th, about 113%, 113.31% of GameStop shares are short. That's their estimate. But when you have more than 100% short, so as we mentioned, if you short it, you borrow it, you sell it, and then you have to buy it back later. But if 113% of the shares are short, and essentially to buy it back, if the people who are holding it just do not sell, theoretically the price could hit infinite. people sell eventually you could unwind this but in the theoretical if nobody sells then there are not enough shares to refund or for the people who short it to buy it and the price would be bid up theoretically infinitely until the people are willing to sell their shares is that

about correct steve yeah basically it's uh it's different than if you like i was saying if you own a stock and it goes to zero that um you lose all of your principal if you sell a stock that you didn't own in the first place and then it goes the other way there's no ceiling to that and you could theoretically just be wiped out and i think what makes this um situation particularly uh unique is that um a lot of the people who are buying game stock stock are not expecting to make money they just saw that hedge funds were losing money and wanted to jump in with money that they could afford to lose and aren't so they aren't planning to sell. They're just putting money in there to hopefully destroy this hedge fund, Melvin Capital. Like when I was going through WallStreetBets subreddit

to just kind of get a sense of where people are at and also just like TikTok videos that people were posting about it, it seemed like it was about half people looking to make a buck and half people who really just were doing a spite trade where they just wanted particular hedge funds to suffer and there's a lot of overlap actually so like there's some people who are just purely in there to make a buck including perhaps some

hedge funds but the fact that they could make some hedge funds not necessarily the whole hedge fund industry, but some suffer, was enough for people to become diamond hands, I guess. Well, and that's where I'm at, you know, because Melvin Capital, which we'll talk about a bit more in a minute, is this hedge fund. They're apparently down $7 billion on the month, which is more than 53% of their capital. This is according to the Wall Street Journal. So the thing is, like I said, I stand to lose $800 if GameStop goes to zero. But if I bankrupt at least one hedge fund, that's fine investment for me.

Like that is more entertainment and more sense of accomplishment than buying a PS5. It's just getting a bunch of hedge fund fuckheads to do the Lehman Brothers, put your shit in boxes, and walk out into the street dance. So, you know, like, it sucks if some Redditor just pumped his bags on me,

but if it bankrupts a hedge fund, I'll think it's money well spent. I view it as buying a ticket to a public execution. Back in the olden days where people would just take their kids to like watch some guy get killed. But this is like a company, a hedge fund. That was one of the questions I had was, Stephen, has something like this happened before in the U.S. history economy? Yeah, there's a few instances of it. There's this really good book called Reminiscences of a Stock Operator, which was written in the u.s history economy yeah uh there's a few instances of it there's this really good book

called reminiscences of a stock operator which was written in the 20s and it's like this one notorious uh not a hedge fund guy but a individual investor who would go around doing things sort of like hedge funds do now and he was just talking about stories of groups of more average investors would just conspire to bid up and down prices more often, sort of like this. And they would essentially do the same play against people who were shorting and do at the very least a delta hedge,

but sometimes gamma hedges. Interesting. Sorry, delta squeeze and gamma squeeze not a hedge oh i see oh i was about to call you on that have you guys heard of the sigma squeeze it's like an alpha squeeze but the sigma stands alone he's like keanu reeves in the movie john wick because like an alpha squeeze they lead a pack but the sigma squeeze is the rarest type of male squeeze that is like equal to the alpha but stands alone see i'm more of a lambda lambda lambda squeeze man myself it's a lot of nerds and a group of

strong black guys uh i did want to just run through very quickly a timeline of what exactly happened here this is just based on uh uh the podcast done by shamath uh pali haptia um he he ran so he ran through a timeline thanks yogi helped me with the name before we started recording uh he ran through a brief timeline of what kind of happened here with gamest stock. So in June 2019, on WallStreetBets, the user DeepFuckingValue posted that he bought calls for GameStop for January 2021. He spent $50,000 at this time, and he advertised it on WallStreetBets. Those calls are now worth $25 million. And DeepFuckingValue is kind of famous on Wall Street Bets for every month he posts his YOLO GameStop updates, which shows his position and kind of encourages other

people to get in and hold and such. And he has brought upon himself the wrath of the finance community because the financial press has doxed him. And I have seen that there are people on Twitter suggesting that he might face criminal charges for pumping a stock. So it is something where there are a lot of indications that hedge funds and the financial press are extremely mad at people on this forum, which does not indicate to me a position of strength. Uh, but so that's June, 2019, then August, 2019, Michael Burry, who's, um, the guy who Christian Bale played at the big short. Um, and I am also proud to report that he has blocked me on Twitter just recently after I quote tweeted him and said, he is the villain in the movie, the big short, uh, which like we've run through before but the story of the big short is a bunch of people

recognized the housing crash and then dumped their worthless assets onto german pensioners who who had the mistaken idea that these were triple-a assets and then got a movie made about what heroes they are but anyways michael burry the big short guy, in August 2019 disclosed a 3% position in GameStop. He said 90% of the stores are cash positives. He said it's undervalued. So he took a significant stake. August 2020, Ryan Cohen, the founder of Chewy.com, takes a 10% stake. September 2020, a user on WallStreetBets notes a 120% short interest in GameStop and also that the new

consoles are coming out Christmas. It has a strong balance sheet. Ryan Cohen, the Chewy.com founder is there. He says there's a lot of play for a short squeeze here. November 2020, WallStreetBets user highlights Melvin Capital going long GameStop puts. January 2021, GameStop strikes agreement with Ryan Cohen, the Chewy.com founder, adds him to the board and gives him and two of his allies board seats. This immediately causes a 13% stock rise. This is January 12 and 13. It's up to 20 to share. January 14, it's up to 40 to share. And then since January 14, there's been this really intense ongoing battle of people buying calls and the stock. The short interest goes all the way up to 140%.

And then over the past seven days, there have been over $100 billion in GameStop trades, which kind of indicates that in the last week, institutional investors have gotten into this as well on the long side. So it's not just retail doing this at this point. January 25th, $2.7 billion is injected into Melvin Capital by Citadel and Steve Cohen's 0.72 asset management. So these two other hedge funds have to kind of bail out Melvin Capital because they've lost so much money on this gamestop short january 27th discord bans the wall street bets discord channel for quote-unquote hate speech and this was like the funniest thing because they did this in the middle of the trading day after gamestop had had a huge rally and they suddenly just found all this hate speech that they had never noticed

but discord insists that they are uh they did not ban this for any reason associated with the stock whatsoever. It just so happens to be they found a bunch of hate speech. Bird Respecter on Twitter pointed out that there are still several openly Nazi Discord channels. Right. openly nazi discord channels right like uh 75 of discord's revenue comes from uh people grooming underage children on their channels but they really sprang into action with wall street bets to be fair there's like since there's so much uh overlap or like a fair amount anyway from like 4chan or whatever to the wall street bets there i mean there is some age speech on there and like like the more sort of like

principled sort of occupy ish people in my opinion ought to like stand up against that but it's not obviously what discord did was motivated by the star purses i mean come on right yeah i mean they were running scare tactics at that point they were you know terrified of this thing snowballing and i think that you know i'm really intrigued to see what's going to happen this upcoming week because i do feel like the scare tactics that were employed from shutting down the wsb board for a little bit to the discord blocking and stuff didn't really work and i think that you know from what i understand even people that haven't invested in gamestop saw or read the reddit posts that a lot of them got deleted about people that were like i've lived through occupy and several financial crashes i don't give

a fuck if i'm gonna lose this money i want to fuck over these people that have never had to deal with the consequences of their actions i think that economics is rarely empathetic and this is a moment where you're seeing people investing purely with empathy instead of or not empathy but purely with like fuck that company instead of like i'm trying to get rich from this and so that certainly is the change that is a form of empathy though yeah yeah i mean empathy seems like the wrong word but i think that the point i'm making is clear is like i'd rather lose my money now to fuck over a giant hedge fund because it means more to me that they're dead than I have an extra you know a couple hundred dollars or ps5 or whatever there's there's definitely this connection to occupy times like literally through people's

life stories that they post about and it gets deleted mysteriously um but like i've yeah i mean i found that a lot just sort of sorting through the the forum there's definitely yes there's connection to occupy that i think a lot of there's like this cohort of like leftists who are sort of saying like the gamestop thing that's not important i I mean, that's just a few rich people buying the dust and other rich people using WallStreetBets as pawns in their game to profit from it. I'm like, yes, there are some hedge funds

on the other side of the trade making money, but I think it would be foolish to overlook the amount of collective organizing that it took to execute, hopefully, a few of these hedge funds while also making a buck for average people. And to just dismiss that would be a mistake, I think. That's an opportunity to talk to people

who are being radicalized and connected back to Occupy like some of them are already doing. They're also discounting how funny it is to see a hedge fund manager cry on national television over people who say stonks. It's ridiculously funny and easy to relate to and to dismiss it is just the wrong call to me i think though that one thing that we may be underestimating is that this to me at least

seems to be a direct response to how fruitless and hopelessly bullshit this time in the pandemic has been where we can't, you know, physically organize into groups, but something like this can organically build online and quickly build momentum because even if it's stimulus checks or people's bank accounts or whatever it is, people currently have time and anger. And even if, you know, this hedge fund isn't a common enemy for all the people involved, like it's just an enemy in the same vein that in the Occupy Wall Street photos of people drinking champagne and laughing at the Occupy Wall Street movement, like those people aren't like directly the enemy but it's like fuck that person i'm gonna do everything i can right now and i would really hope that this time could lead to more movements where people are utilizing their time and money to take down

larger opponents like this but so that kind of brings us to the last thing on the timeline, which is, so Wednesday, January 27, Discord shuts down. The Wall Street bets, Discord. And then January 28, shit really hits the fan because GameStop stock rallies above $400 in pre-market trading. And Robinhood shuts off the ability, Robinhood, the trading app, shuts off the ability to buy GameStop stock. And they're the primary person that this has been reported about, but it should be noted that TD Ameritrade also restricted trading in it. Charles Schwab restricted trading in it. WeBull, another trading app, restricted trading in it. But all of them restricted trading just on the buy side. And that's what's so rigged about this entire thing is Robinhood allows you to

sell the stock, but they don't allow you to buy the stock. And that is clearly going to put downward pressure on the price. So they do that on Thursday. It peaks at about $480 a share, but then this does cause some downward pressure on the price. It closes Friday around $3.25. But it's just so... What I want people to understand about this is regardless of how it goes, if it does go belly up, a lot of people are going to blame Reddit and say, oh, they've got a lot of suckers in to pump their bags on them and these people lost money because of Reddit. But what happened here with Robinhood and these other apps shutting

down the buy side of this trade was blatant market manipulation. Because there is no doubt in my mind that this thing on that Thursday peaked at $4.80. If they did not shut down the buy side of that trade, it would have absolutely run up, I think, at least $5.60 is estimates I've heard in terms of what the calls and puts were. So just the fact that they shut down the buy side of the trade is a lot of people who were in this who understood the fundamentals of it lost a ton of money because of that decision that they made. And, you know, with the time we have left, we can talk about this, what has been offered as the reasons why Robinhood and these other brokers shut down the buy side of that trade.

But I just want to underline that they are claiming that this is for liquidity reasons, and maybe that's true. But if that is the case, then why not shut down the buy and the sell side until you can recapitalize? When you just shut down the buy side, you are clearly engaged in market manipulation. You are pushing the price of a stock down. And with Robinhood, they clearly have conflict of interest to want to do that because of just who gives them their revenue. It's worth mentioning that the Robinhood business model is more or less built on insider trading. The idea is that they allow you to make trades for free. And the way that they then make money from that is they sell your trading information to companies with high-speed trading algorithms that will front run your own trading decisions. And so they'll buy a stock

right before you buy it so that when you buy it, it'll increase the value of the stock. And it's just fractional at that level. But when you have Robinhood's entire trading base going into these algorithms, it's quite the cash cow. It's like Superman 3. And retail traders are becoming a more important segment of total trading. So people who buy 100 stocks or less or only a few options contracts, those are just referred to as odd lots. And they're paid companies.

Brokerages will send that information over to Citadel or someone. Citadel is one of their biggest customers, Robinhood's customers. And they get the order flow. They can front run it. They can slice and dice it and see who's asking for what price and do a whole bunch of data science on it that the average person can't do and fundamentally control the price to pump things up

and dump things down for their benefit rather than the average investors. So it's really like a struggle over who gets to price stocks, I think, fundamentally. Should hedge funds be able to control prices for stocks, or should random subreddits be able to do it? Right. And we should just give a brief explanation here of 0.72 Asset Management is the hedge fund founded by Stephen A. Cohen. We did an episode on Stephen A. Cohen, if you want to learn more. He was banned from the security industry for multiple years for

failure to supervise. But it was really a case of, in my opinion, just insider trading, where one of his traders is doing a nine-year prison sentence, and he refused to drop a dime on his boss. So they couldn't get him on insider trading. But check out the episode if you want to learn more about that. But so 0.72 Asset Management and Citadel are kind of like the bigger fish, whereas Melvin is the smaller fish in terms of hedge funds. Melvin was founded by one of Stephen A. Cohen's former traders. So Melvin had to go to 0.72 Asset Management and Citadel for this $2.7 billion bailout on their GameStop losses. And Citadel is so significant to this story because, as we mentioned, their relationship

with Robinhood, who made this decision to shut off trading. So if Citadel is investing billions in a company, in a hedge fund that is short this stock. And they're also one of the primary revenue drivers for Robinhood. You can just see the conflict of interest there. It's very blatant. I was going to mention, I don't know if we have any time for this, but there's like sort of a supply chain to the stock market, right? And the main thing they want is collateral. So everyone needs to collateralize at least part of the bets they're making on stocks and options.

And what happened with the GameStop thing was there's like a lack of people were facing what are called margin calls. So they're using margin to buy and sell things. And suddenly there wasn't enough of that to go around because the hedge funds were being short squeezed. And eventually that worked its way up the supply chain to apparently the settlement companies. There's one that there's huge settlement clearing houses that people just never hear about, but they're insanely important to the financial system. So there's one called DTCC, which I think stands for Depository Trust Clearing Company, I want to say. And we touched on them in the Bernie Madoff episode. Yeah, yeah, we did. They're obviously extremely important to the entire system and they are involved in negotiations about like, okay, you guys need to, even though it wouldn't normally be a margin call for say Robinhood, I feel like you need to because it might bring us down and we might have an actual liquidity event.

Right. So they're like Robinhood as it stated margin requirements. But a lot of people who weren't technically hitting up against those limits nonetheless had maybe we'll get to this later but some of their GameStop stock was sold for them by Robinhood

and it's okay for brokerages to do that if they need to if you're facing a margin call they're allowed to sell securities such that you once again are in the limits of collateral and that happens and that's legal but some people are saying wait a minute i wasn't anywhere near that but they still did it so there's like some confusion about that yeah and just kind of a brief overview of citadel. So I've seen people online try to debunk this Robinhood connection because there's Citadel, the hedge fund, and then there's Citadel Securities. Citadel Securities is an electronic market Griffin. And the evidence of them being separate companies is that they are supposedly separated by a Chinese firewall.

And if we have learned one thing about hedge fund billionaires, it is that they will never cross a Chinese firewall. Just any sort of law, any sort of regulation, these guys are 100%. They are, you know, Cato the Younger, very noble Romans, all about the law. But so Citadel Securities is the electronic market maker, and they're the ones who pay Robinhood for order flow, not the hedge fund. But again, both founded by billionaire Ken Griffin. Securities, Bloomberg reported in 2018 that 40% of Robinhood's revenue in 2018 were derived from selling customers orders to firms like Citadel Securities. Citadel Securities, according to Financial Times, accounts for 40 out of every 100 shares traded by individual investors in the U.S., making it the number one retail market maker. According to Zero Hedge, I believe quoting

Wall Street Journal, Citadel handled 29% of Game Stop trading volume Monday through Thursday, while at the same time they are losing billions on their investment in Melvin. So you can see where this conflict of interest comes in, because Citadel is probably the number one player in terms of actually fulfilling these trades for retail investors. Robinhood's money, significant chunk of it, comes from Citadel. And so they are losing money on this short position. And like Steve said there, they don't have to explicitly say, hey, shut down XYZ. They can just raise margin requirements or do whatever else to Robinhood or to these other brokers to put pressure on them to shut down the buy side of the trade. Right. And so the CEO of Robinhood was asked like, okay, was there a liquidity event that was threatening you guys? And he's like, no, there wasn't. it was just to to help to help keep our traders safe

so he was sort of like uh i think he was being interviewed by cnbc and so he gave that as the explanation so i'm like so either like there there could very well have been a legitimate liquidity crisis going on that we won't ever know about or like maybe the SEC will but they like hide it because it was so threatening. If DTCC really was involved maybe there was one. But if there wasn't that's also pretty bad because it means that he was stopping people from

buying for no prudent reason. Right. Right. Just kind of committing a crime in plain sight. Yeah. So either way whether there was a liquidity crisis going on or not, it looks pretty bad for Robinhood. Right. So Vladimir Tenev is the Robinhood CEO. He was on CNBC being interviewed by Andrew Ross Sorkin. He says, quote, we're really in unprecedented times. And in order to protect the firm and protect our customers, we had to limit buying in these stocks. And then Andrew Ross Sorkin asks him, quote, it sounds to me like

you're suggesting there was a liquidity problem at the firm. And he just goes, no, there was no liquidity problem. And so that's the thing about their explanation is because, you know, obviously they can't say that we colluded with any hedge fund or anything because that's highly illegal. And then they have to say we were doing it to protect whatever, but they don't want to say there's a liquidity problem because then obviously people who have their money in there, investors are going to be like, what the fuck? Get my money out. I don't want to be stuck holding this bag if you go under. But then on Friday, Robinhood raised an additional 1.5 billion US dollars. So it's like there's no liquidity problem, but we had to raise 1.5 billion US dollars. So it's like there's no liquidity problem,

but we had to raise 1.5 billion dollars immediately after all this went down. Yeah, it's like either way, it looks pretty bad for them. I don't know which would be worse. Yeah, and so Google has deleted over 100,000 negative one-star reviews from the Google Play App Store

that people left for Robinhood. Just so happens Google has an investment in Robinhood. Robinhood gave their 1,000 employees a $40 DoorDash credit to quell discontent with the decision to block buying in the GameStop stock. And, you know, so, like, it is something where, like, the liquidity problem would not surprise me. But it is so interesting that you add up.

Robinhood got most of the focus, but it was also, as we mentioned, Webull, TD Ameritrade, Charles Schwab. Are they all having liquidity problems? It's possible. But the fact that they just shut down the buy side as opposed to just freezing the buy and the sell side and being honest and saying, hey, we need to raise some money and then we will resume this trade does really heavily indicate to me that there was a thumb put on the scale. And because we don't really know for sure what these hedge funds did on that Thursday that Robinhood shut down the buy side of the trade, because they run it all out of dark pools, which maybe we should just kind of explain. A dark pool is a privately organized financial forum, according

to Investopedia, for trading securities. It allows institutional investors to trade without exposure until after their trade has been executed or reported. And hedge funds almost all have dark pools. So we don't really know exactly what trades they entered into there. But it does make sense, and I've seen the theory going around, that when Robinhood shut down the buy side on Thursday, hedge funds were able to, to an extent, cover their short and then make new shorts at like a higher level. So shorted at 200 or whatever else. And I mean, I've also seen the argument that it would take these hedge funds like more than a week to unwind all their trades. They wouldn't be able to do it in just one day. But I think it is important to note that Robinhood froze the playing field. They froze it just for, and these others, brokers, they froze it just for retail investors, and they allowed all the institutional investors an entire

trading day to set up their positions as well as possible. So there's no way to undo what was done on that Thursday, and we'll see how it goes this trading week. But I again just want to underline, don't let anybody fucking blame Reddit for what happened here. This was a completely rigged game that everybody was playing. And they may or may not actually beat these people at a rigged game. They've certainly inflicted a lot of damage against them so far. Now, Secretary of the Treasury, Janet Yellen, has been tasked with looking into this. And Sean, she's coming at this with an objective perspective. Is that correct? Yes. Yeah. She's, you know, Citadel Securities just thinks that she is such an intelligent speaker that a one hour speech from her is worth $800,000.

You know, it's like seeing Chris Rock live. You'll pay anything. Or if Tupac Shakur came back from the grave and put on one concert, I think $800,000 a ticket would be a fair price. But that's about what Citadel paid Janet Yellen for a speech after she left her role as Federal Reserve Chair. Maybe they paid her that much to do Gallagher's Act. In fairness, I think it was two speeches. Oh, okay.

So $400,000 a speech. That's my rate. Maybe she had to put in some work. Gallagher's Brothers Act. There's been a class action lawsuit filed against Robin Hood. Should be noted, a lot of people point out that all these things have these mandatory arbitrage clauses and stuff that say you can't sue them. Mandatory arbitration. Arbitration, excuse me. However, Deepak Gupta Law on Twitter pointed out that despite this arbitration clause,

the clause is subject to FINRA's rules, which protect investors' right to bring class actions in court. So despite this arbitration, because of FINRA rules, they may actually be able to bring a class action lawsuit forward. We see i don't know guys i just think that gamestop is a really reputable company and i think that the stock going up is just them proving to the economy that they're really good yeah i don't know what people are talking about stonks i'm not sure how reddit's involved but i'm pretty sure that gamestop is just a company that's really good. You know, I was thinking there's probably some people who are in on the Wall Street Bets thing.

They're like, yeah, no, I mean, I just, I really do think it is worth $350. Like, no, this company is going places. A company that makes fun of a baby Sean McCarthy for not knowing how to ask three questions in one phone call. That's a company I want to invest in. It's it's incredible to imagine that right now as we speak, there are probably meetings going on in the White House as to how to close out this this issue and in a way that benefits the hedge funds without it being visible. Right. Listen here, Jack, I don't know what a stonk is. Joe Biden.

Yeah, I'm just imagining somebody being tasked with explaining 10 D's to Joe Biden. My mental picture of Joe Biden in the White House is just like a mid 2000s video game NPC just walking into the walls and then backing up and walking into the wall again. It's like that that hitman level in the White House where they did a glitch so that you just drop a grenade somewhere and all the guards run into the wall repeatedly. But, you know, look, we'll see what's going to happen here i did want to just mention this cnbc article that quotes uh s3 partners is a stock analysis firm um they point out that the borrow fee on gamestop stock or the cost to borrow shares for the purpose of selling them short has jumped to 29.32 percent on existing shorts and 50% on new short positions,

again, according to S3 partners. And then they quote the managing director of predictive analytics at S3, and he says, quote, if most of the shorts had covered, we would not be seeing stock borrow rates at these high levels. By now, you would be able to borrow GME, GameStop stock, at single-digit levels due to an increase in the lendable stock loan supply due to borrowed shares being returned after all the supposed buy-to-covers.

And so GameStop remains the most shorted name in the market as of January 28th. We mentioned that the short interest peaked at about 140% S3 Partners, puts it right now as of January 28th, we mentioned that the short interest peaked at about 140%. SCS3 Partners puts it right now, as of January 28th, at about 113.31%. Hard to know how accurate this data is, but it does seem like there's still a huge short interest. We just don't quite know what price everybody's been shorting it at. Right. So they're still out there, which means diamond hands, guys.

Diamond hands. Hold the line. Right. Diamond cocks. And according to this same article, total short seller year, total short seller losses this year since the start of January 2021 exceed 50 billion US dollars.

S3 Partners estimates that 19.75 billion of that is in gamestop alone uh apparently they lost eight billion dollars just on friday so you know i mean we'll see what happens uh i think i'm gonna hold b Diamond Hands just because I don't know how I would be able to face the listeners if I wasn't willing to lose $800 over completely retarded reasons. But any other predictions for what might happen or any other closing thoughts going forward, guys? All right. I think a second coup is going to happen. And they're going to be like, we've got to shut down Wall Street.

Got a whole bunch of WSB people up on the steps. We've got to shut shit down. I really do think, though, that this won't stand. I put all of my fake Best Brokers money into GameStop again, and I don't plan on keeping it all or whatever, but I do think that Wall Street will do some sort of like, what? There was a bomb threat called on the building oh looks like

all the stocks have to something something i'm not sure what will happen but i i predict chaos uh next week they're trying i just look they wall street bets is now just holding like a public vote on who to kill next basically it's like like one for next week is AMC we'll see how it goes there's like less of a short short interest as a percentage of the float for it so it might not pop as much but GameStop

is still going on at the same time also that's not a recommendation to do either of those things. Yeah. And one last thing on that naked shorting. There was a Wall Street Bets user, Johnny Dagger, who pointed out the failure to deliver numbers from GameStop. And so this is when we talk about naked shorting. Shorts create what's called an anti-share, which is a paper product that trades like a share but cannot actually be delivered. So, you know, if the short works, that's no problem. But if it doesn't work, this creates a lot of problems because it creates these situations where the short is unable to deliver the share. So Michael Burry, again, the big short guy, has said that in May 2020, way before this all popped off, he said it took his broker weeks to find him shares of GameStop.

And this is, again, before this all popped off, this user, Johnny Daggers, took a look through the SEC data for December 2020, the last that it's available, he noted that GameStop had 1.787 million failed to deliver shares in that time period, whereas the company Lowe's, for another example, had 13,960 failed to deliver shares. Boston Beer Company had about 295 shares failed to deliver. So there is some evidence, and we don't know how true it is there is some evidence that there might have been to me there's compelling evidence there might have been naked short selling there might have been this creation of these fake shares and if that does

pan out I mean these people I think the thesis at Wall Street Bets is right and I'm rooting for them all the way not just because I own three shares valued at $800 Andy you got a prediction oh I'm rooting for them all the way, not just because I own three shares valued at $800. Andy, you got a prediction?

Oh, I don't have a prediction. I'm just here for the ride. Nice. Yeah, we'll see how high the price target gets. But, you know, I think once you're getting near $1,000, the SEC is probably going to step in. Like, you know, it is... Theoretically, it can go to infinite, but at some point, the big players are going to get involved and shut your shit down.

So we'll see how it goes. Okay, I want GameStop to be worth a trillion dollars as a company. I really... I don't know what price its stock needs to get to in order for that to be true. I haven't done the math on that but just keep this thing going so that it rivals like it's

worth more than Google right or something did you know that if you bring in your $10,000 GameStop shares to GameStop they'll offer you $5 for it best I can do is a used

copy of Sudeikis 2 for Xbox 1 and with that this has been Grubstickers I want to give a special shout out to people that have left some reviews on our podcast to those that have sent us dirt and suggestions for billionaires thank you for your support really appreciate it and thanks listening. I'm Yogi Poliwool.

I'm Steve Jeffries. I'm Andy Palmer. I'm Sean P. McCarthy. Thanks for listening. Careful trading out there. Don't bet any money you can't lose. And let's hope we all see at least one hedge fund bankruptcy in the near future. She gotta, she gotta, she gotta a, she got a stonk. Now stonk with it. Go stonk with it. Get stonky with it.

Shout out to Lydia Burrell. All right. The house always wins.