"There appears to be a need of some bold man who will say outright what is best... opposing the mightiest lusts and following reason only."-Plato - Laws, VIII, 835-
Following the recent events concerning Wall Street and the GAMESTOP company I wanted to share my thoughts about the current events happening and why I believe it is a historic event.
In order to keep this short and to the point I have condensed my current understanding into a series of posts which you can read here and here.
Melvin Capital - Hedge funds are in big trouble.
Melvin Capital Management LP is an american investment management firm which currently hit the spotlight due to it's involvement in the most beautiful short squeeze going on in the stock market. Melvin Capital has been placing short orders against GAMESTOP for quite some time and has just recently revealed publicly it is facing problems with its short positions in GAMESTOP. Having faced a Margin Call recently due to the sudden increase in value of GAMESTOP share values it has had to borrow nearly 3000 million $ from Citadel Investment Group, a multinational hedge fund. The news about Melvin borrowing money from Citadel hit the news on monday and since then prices have continued to increase towards 460$ per share.
Robinhood app and the fall of Wall Street.
Robinhood has also reached the spotlight as many individual investors purchased shares of GAMESTOP, partly due to /r/wallstreetbets promoting a move towards pushing GME's price so as to destroy many hedge funds which have believed themselves to be all mighty and have been so overexposed with short positions they are now crying in despair. Robinhood offers a complete broker suit for anyone willing to invest in the stock market and does not take any fee from trading. So, then, how does Robinhood remain solvent and gain money? At a superficial level Robinhood only has to match buyers with sellers in order to offer a useful tool for individual investors to more easily access financial assets and stocks without the need to actually find buyers/sellers in the marketplace, something which brings a lot of problems and increases expenses due to the difficulty of finding willing participants to exchange shares for dollars or vice versa.
Robinhood provides many of the trades towards Market Makers such as Citadel who then match these orders with the oppsite side, joining buyers with sellers and vice versa. Citadel then makes money from the small difference in price between the actual value of a share and the price at which it sells it to a buyer. In this way, Citadel benefits form the increase in volume Robinhood brings to it's company and in return Citadel provides with payments for its services, which last year managed to reach 35% of the total gains reported by Robinhood.
The Depository Trust & Clearing Corporation (DTCC), which is a monopoly which ensures companies can repay their clients and partners in case of liquidations or financial problems, issued an order on Thursday for Robinhood to provide a higher collateral in case they where not able to repay the parties at risk with the current situation going on with market value exploding for many stocks such as $GME $AMC $BBRY. Some individuals say the DTCC was asking for Robinhood to provide for 100% of their net Clearing House orders, which means over 33.5$ billion. This move by the monopolistic DTCC can give us a deeper look at what is happening, for this exagerated collateral requirement means they where actually looking to actively prevent Robinhood and other brokers to allow users to buy more shares from these companies. This means the big guys are scared about what might come if public awareness keeps growing and shares begin to explode again, possibly taking GME towards 4-digit numbers.
People are waking up.
Over at /r/wallstreetbets people are still posting their new buy orders which will be placed on the market on monday opening, so we are expecting a new bloodbath to occur on Monday, something which can affect many MULTINATIONAL HEDGE FUNDS which can cause a break of current Financial markets and teach wall street a lesson about not to repeat the errors of the 2008 Market housing crisis.
The current situation with Robinhood and GAMESTOP is serving as a wake up call for everyone to really see how corrupt and monopolistic wall street has become. It is my believe this is something very healthy for the Free Market and in the long run it will help with clearing the oppressive powers we have given to many multinational investment corporations which have single handedly brought many corporations to bankruptcy by pushing prices lower.
I hope you are not missing on the action. Make sure to investigate as much as you can and get ready, the next months are a time of GREAT AWAKENING towards the serious evil which has been living behind the curtains.
Chad trader from ClearThoughtCrypto