A long time ago in a financial crisis far, far away. . . .

Episode VI

RETURN OF THE RETAIL TRADERS

The Retail Traders have remained locked down in their homes during the pandemic while staging a rebellion in the markets from their basements with their stimulus checks in an attempt to rescue their beloved businesses of their childhood’s and lives that they cherished pre-pandemic from the vile short-selling gangsters on Wall Street.

Little do the Retail Traders know that the EMPIRE OF BLUE CHECKMARKS & PIN-STRIPPED SUITS have secretly been conspiring to squeeze the life out of the small businesses and publicly traded companies that stand in their way of concentrating their own control, influence, power, and wealth.

If they are successful, it will mean a certain doom for the small band of rebels struggling to restore freedom to the financial markets . . .

Global Financial Crisis

Unchartered Waters
The world entered uncharted waters in 2008 and 2009 as the banks and insurance companies saw themselves lose big only to have the central banks with their government’s backing bail them out by simply creating and printing money from nothing under the leadership of the Federal Reserve chairman at the time, Ben Bernanke. They fractured the fractional banking system in a way that corrupted its integrity fundamentally to the point of no return. Bitcoin was born as direct result of this bankrupt behavior from the top down as the younger generations would start to become disillusioned with their systems of trust as well as centralization.

In the wake of the Global Financial Crisis, many hardworking Americans as well as people around the globe were forced into making due with what they had left if there was even anything to be salvaged. While those at the bottom of economic ladder struggled to get by and picked themselves up by the bootstraps, there was a party being thrown by fat cat investment bankers, insurance companies, and investment firms on Wall Street who received their bailouts from the governments as they secured the funds necessary to keep their lucrative bonus checks. This left a bitter taste in the mouths of all Americans who did not see any of that stimulus money and watched their ideals about democracy, economics, and free market capitalism fly out the window.

The actions taken by bureaucrats, elected officials, and politicians back then set the tone for what was coming down the pike. It was telling that the foundation had been corrupted, and those who were willing to pay close enough attention could see that money spilling out of every crack at the Federal Reserve meant it was starting to lose its meaning as the purchasing power was being printed away without any regard for its consequences. “Gradually then suddenly” as described by Ernest Hemingway in The Sun Also Rises, it looks like people are waking up to the reality that they are not powerless against those highly connected insiders who seem to be changing the rules as they go as they continually bankrupt the economy.

The culmination of events brewed a perfect storm for an alternative system, such as Bitcoin.

“The idea that growth will remedy our debts is so addictive for politicians, but the citizens end up paying the price.”

— Michael Burry

The Corona Crash

Inflating the “Everything Bubble”
Fast forward twelve or so years, and you will see pretty much any asset’s price chart go up and to the right. Luxury items whose demand is relatively inelastic to common goods have seen their values rise exponentially as the markets for art, bourbon, cigars, designer handbags, wine are subject to doing so because of the limited scarcity of their supply. This phenomenon is also largely fueled by inflation, not to mention, the low interest rate environment of the past decade in addition to society’s everchanging tastes and preferences that has only been exacerbated with the growth of social media.

In the face of a global pandemic spurring national emergencies and lockdowns, we saw grocery stores have their shelves emptied as they had been picked over by nervous consumers hoarding everything they can get their hands on, even the toilet paper. Investors acted similarly, although it seemed instead of buying everything they can get their hands on they were selling it for cold, hard cash. Financial markets had not seen selling and volumes like they did since the Global Financial Crisis, and alike the last crash it was another great opportunity to “buy the dip” if you had any free capital to deploy.

The black swan-like selling went across the board and even knocked safe haven assets like gold and silver that are risk-off relative to the emerging risk-on safe haven in bitcoin. They bounced back stronger than ever though, especially bitcoin as more “smart money” and institutional investors came out the woodwork announcing their interest or proudly declaring a freshly laid position in bitcoin like Michael Saylor did. Gradually and then suddenly it seemed that these sorts of headlines and news were being made on a more frequent basis, and the legacy banks and financial institutions seeing the demand as well as interest caved on their bashing bitcoin to reverse their stance completely that purported that it was dead, failing, never going to happen, or manipulated as they actually issued price targets well into the hundred thousands after witnessing bitcoin’s price reach all-time highs above $20,000 as it began skyrocketing up past $40,000 in recent months.

Bitcoin is on a trip to the Moon and does not show any signs of stopping there, so onwards to Mars!

“I believe Bitcoin is one hell of an invention… Bitcoin looks like a long-duration option on a highly unknown future.”

— Ray Dalio, What I Think of Bitcoin

Rigged Games

GameStop & Wall Street Bets
This past week saw one of the greatest underdog trading stories of all-time that revealed the absurdity of the Federal Reserve’s policies and how influential and interconnected the big-money insiders really are when the push comes to shove. The low-brow reddit forum of self-described “degenerate” day traders that are essentially glorified gamblers known as r/WallStreetBets coordinated themselves for a “gamma-squeeze” on some of the most infamous and notorious players on Wall Street. In the Global Financial Crisis of 2008, the “big short” was made by a group of insiders who identified a market dislocation and exploited it but this time around a it was a bunch of ragtag retail traders banding together after pointing out another dislocation in the market and exploiting it to see magnificent profits in return for their risk.

The Rise of the Daytrader led us to this moment, and the little guys saw their opportunity to stick it to the same people that stuck it to them in the last financial crisis, so they took their shot. In spectacular fashion they stood strong holding their calls and buying shares pushing up the price of their favorite video game store GameStop, and it paid off as the founder and CEO of Social Capital, Chamath Palihapitiya, and the world’s richest man, Elon Musk, cheered them on as well as joined in on the action over CNBC and on Twitter. The recipients of the retail smackdown in the markets and on social media were the firms Citadel, Citron Research, Melvin Capital, Point72, and Robinhood.

Interventions came down swiftly as the retail traders saw that they were no longer able to buy or trade their shares in the companies of GameStop as well as AMC, American Airlines, Bed Bath & Beyond, BlackBerry, Castor Maritime, Express, Koss, Naked Brand Group, Nokia, Sundial, Tootsie Roll Industries, and Trivago. These restrictions took place mostly on Robinhood, but also were seen on other major brokerage applications and platforms used by other retail traders. As these small investors were locked out from buying shares in companies they believe in by their own service providers, they were only allowed to close or sell their positions to push the price down during a period of time when it was critical that the hedge funds on the losing side of the bet suppress the price of the shares to limit the losses being accrued on their short bets.

This was sparked the awakening of the retail traders, and they saw just how badly the market is rigged with greater than 100% of GameStop’s public float being shorted (62M shares short and only 50M shares available) by some of the most sophisticated hedge funds in the game that literally made it impossible for them cover.

“HEDGE FUNDS LOOK FOR RESCUE FINANCING IN GAMESTOP TRADE”

CNBC Headline, January 27th, 2021

Trojan Horse

Big Bets Backfire on Hedge Funds
The corporate raiders and cut-throat hedge fund managers from the golden age of Wall Street in the 1980’s lived by a fairly crass credo that best summed up how they would do business by putting it plainly that they would, “Pick on a cripple.” They loved seeing companies that were in dire straits or desperate for a good turnaround because it meant they also could profit from them sucking the wind out the sail’s of the share price to gain control of the company buying it cheap as well as make healthy gains on the way back up after they worked their magic. Many of the names of companies that were being mentioned on r/WallStreetBets were ones that had been particularly effected adversely by the pandemic and its restrictions that were stemming from the rise of COVID-19.

Melvin Capital and Citron Capital suffered an epic short-squeeze by retail investors piling into the most unloved names on the street. Dave Portnoy along with some of the biggest names in finance, pop culture, and technology with millions of followers began fanning the flames from across the Internet as well as mainstream financial media outlets that propelled the shares even higher. According to Andrew Left of Citron Capital in a YouTube video, the firm closed its position at “a loss of 100%” after needing to repositioning other parts of their portfolios to cover the losses on GameStop as the gaming retail surged even higher in the after and pre-market trading.

Hedge fund titans Ken Griffin and Steve Cohen together injected $2.75 billion into Gabe Plotkin’s Melvin Capital as the firm lost about 30% this year after starting it with about $12.5 billion in assets under management. The hedge funders came under intense scrutiny in the court of public opinion as it seemed that Cohen was bailing out his old employee with a friend in return for a “non-controlling revenue share in the six-year-old hedge fund.” It also does not look good that some of these names mentioned who were being squeezed and bailed out their buddies are either investors in Robinhood or customers of the app’s order flow.

This will forever be an interesting study throughout history of how the “smartest guys in the room” with tens of billions of dollars got fooled by a bunch of unsophisticated retail traders with $600 stimulus checks who presented them a Trojan Horse from the depths of social media, giving a new meaning to F-You Money.

“We can stay retarded for longer than they can stay solvent.”

— u/blunt_person on r/WallStreetBets (mocking a famous quote by the economist John Maynard Keynes)

Time for a New System

Centralization is Losing, Decentralization is Winning
This last week was proof that the system is vulnerable from being controlled by a few insiders with the resources and connections to get themselves bailed out, even from the White House if need be. After all 80% of the stock market volume is automated trading between machines, not humans, by high-frequency-trading firms like Citadel, Ken Griffin’s firm. That firm alone spent over $200,000 in government lobbyists while also paying over $800,000 to Janet Yellen (the former Federal Reserve chairman appointed by Barack Obama and the sitting Secretary of the Treasury under Joe Biden), so it seems that the return on their investment may already be looking to pay off.

Currently, the best analogy that can be used to explain the GameStop debacle is that it’s been an intense back-and-forth video game between a little brother and big brother. After of taking loss after loss for years, even when the big brother would bully and cheat to win, the little brother kept grinding and mastering his game. Then, out of absolutely nowhere, the little brother entered the game with a wealth of knowledge and an edge that he gleaned from information over the internet, which he then used to wipe the floor with big brother.

Now, it looks like the big brother is crying foul and trying to change the rules and even turn the game off as they are playing without admitting any defeat or wrongdoing. This is a shining example of why it is so important to have a censorship-resistant and decentralized networks as well as money like bitcoin that cannot be altered or adulterated. It has become increasingly urgent that the word spreads about the benefits of bitcoin because if you use it properly nobody can prevent you from buying it or transacting with it to “protect you from yourself,” only you can do that now.

In 2008 they said they were “Too Big to Fail,” and now they are telling us that we are “Too Small to Win.”

“In light of current market volatility, we are restricting transactions for certain securities to position closing only, including $AMC and $GME.”

— @RobinhoodApp, Official Twitter Account of Robinhood (January 28th, 2021)

“Dapitalism” – Decentralized Capitalism

Younger Generations Picking Up and Leaving for New Systems
Revelations over the past decade have shown us the dirty tricks of the business in Silicon Valley with the likes of Facebook as well as Robinhood that recently highlighted the fact that if the application is free or brokerage has no fees that you are the real product, therefore your data is their asset that they sell. These assets are sold in the open market to their real clients who pay them in exchange for your information so they can profit at your expense. Younger generations are seeing bitcoin and crypto assets and their networks as viable alternatives that enables them to engage privately or at the very least get some remuneration for their data.

The markets are clearly not acting efficiently, and the powerful stock market operators are censoring investors from acting efficiently as well as making decisions out of their own free will. It is so purely un-American that it is making millions of people sick to think that they can be shutdown and shutout in broad daylight from exercising their own transactions while behind the scenes there is another VIP fast lane allowing those who can afford to pay the tolls to do what the otherwise normal person cannot as an ordinary user. Selling the order flow of millions of retail traders to further enrich the billionaires and their own investment companies as well as their other hedge fund buddies is the antithesis to the namesake Robinhood, and bitcoin is truly the only way to seize back your freedom and sovereignty.

Free enterprise is an economic system in which private business operates in competition that is largely free of state control, but our current form of capitalism that we are seeing again and again is cronyism at its finest. Levels of disgust in the current system are so high that it has become a bipartisan issue to prevent these Wall Street insiders and institutions from manipulating the market as well as ensure they are not bailed out after gambling at the casino. It is crazy to think hedge fund billionaires are complaining about the fiasco after getting caught with their pants down by a group of small investors who would never get bailed out if the trade went as those insiders had planned and they all lost their shirts.

We need decentralized capitalism that allows private citizens as well as companies say and transact as they please, letting us all decide for ourselves whether it is worth facing the consequences for better or worse.

“I love how @RobinhoodApp is like we’ll go back to normal tomorrow. What changed? Oh right? They crashed the market and let the hedge funds get out. Now suddenly there are no issues with it.”

— @stoolpresidente, Dave Portnoy via Twitter on January 28th, 2021 in response to Robinhood blocking customer’s buy orders

Changing of the Guards

The “Big Short-Squeeze”
As the news of the retail traders victory spread like wildfire across the variety media outlets, the entire stock market suffered slipping about 3% over the span of the week because the so-called “masters of the universe” did not surrender their reckless short positions. It wasn’t just Robinhood either that forced the retail traders into only selling and barring them from buying more calls or shares as clearing house firms caused brokerages to restrict trading after deposit requirements grew on those Wall Street Bets company shares, which threw a wrench in the works for Robinhood who was “democratizing finance” and now possibly impaired the entire system for a younger generation learning what it all means that the market is rigged for insiders and not outsiders. Censorship has been a major theme this year as the sitting president of the United States of America, Donald Trump, lost bank accounts in addition to his social media accounts that put on display just how the Big Banks as well as Big Tech are untouchable.

Steve Cohen tried to downplay his role over social media after tweeting, “Rough crowd on Twitter tonight. Hey stock jockeys keep bringing it,” which caught a lot of criticism to say the least. Dave Portnoy of Barstool Sports and DDTG who has been one of the most prominent leaders in the day trading and degenerate gambling movements this past year with his live streams discussing news and market moves sparred with Cohen online replying to the fund manager’s request to take their public beef offline only to call him “shady” before firmly stating, “I think you had a strong hand in todays criminal events to save hedge funds at the cost of ordinary people.” At the time of this writing, Steve Cohen has since deleted his account after denying any involvement in the events.

It should be noted that hedge funds currently have greater than a billion dollars of short interest in bitcoin futures on the Chicago Mercantile Exchange (CME) relative to other asset managers and other financial institutions. Ray Dalio, who runs the largest hedge fund in the world, was not the only one changing their stance on bitcoin since Elon Musk and Jack Dorsey both changed their biography sections on their Twitter profiles to simply say one word, “#bitcoin.” Now that we are seeing memes on social media starting to move financial markets and recognizing that those two people in particular are deeply entrenched in the Internet’s culture, not to mention have about 50 million followers between them, it might be an indicator that they know something that the people following them do not all see or understand, yet.

This could mark the beginning of a beautiful relationship if the Wall Street Bets community embraces BTC.

“They can only control us because we use their currency.”

— @WSBChairman via Twitter on January 28th, 2021

Beating Them at Their Own Game

GameStop Shows Us the Flaws in Hedge Funds, Bitcoin Reveals the Same for Central Banks
Manipulation is a dirty trick that Wall Street professionals like to play on amateur investors, and they thought they had it mastered until recently getting schooled by people they used to bully and shakedown regularly. Price distortions happen for myriad reasons, but the main culprit is the Federal Reserve who steals value from the low and middle-classes by printing money that debases and devalues the purchasing power of their savings and wages through inflation. It is not that hard to see that the policies that our central bank and government employs does not really serve those who need it most, but rather are just more methods for the wealthy upper-class to become richer without actually doing anything productive other than simply owning assets whose value benefit them from Cantillon Effects.

The fractional banking system under our central banks is failing, and it appears to be losing its luster in these modern times. Issuing free money and limiting free markets is not a sustainable or wise path to be taking for any functioning democracy that aspires to call itself “free.” Yet, here we are in the 21st century with a Federal Reserve that many founding fathers objected to for the reason being that too much power was going to be held in the hands of too few people.

The levels of opacity in Bitcoin compared to the Fed is night and day. You can determine exactly how many bitcoins will be created on any given basis but when it comes to our infinity dollar, who really knows? Seeing the close ties that the Federal Reserve along with the Treasury Department have with the business moguls and hedge funds makes you wonder just how much they are looking out for the common man rather than being two-faced politicians who only protect all of their friends in high places that they hope to work for once they finish their work in “public service.”

We must decide to opt into a new economic system that is designed to benefit its participants and not be detrimental to their livelihoods or future generations that are going to be footing the bill.

“The bold effort the present bank has made to control the government, the distress it had wantonly produced…are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution or the establishment of another like it.”

— President Andrew Jackson, The Federal Reserve System, The New American, p. 31.
(His warning to the American people after abolishing the privately controlled central bank, the Bank of the United States. We now have another privately controlled central bank known as the Federal Reserve.)

A Better Way Forward

They May Take Your Dollars Away, But They May Never Take Your Bitcoin
It is time for the world to embrace a new Bretton Woods system having seen the amount of counterparty risk in our interconnected global economy that is being run into the ground by central bankers around the world. The collapse of the Bretton Woods system put into place after World War II caused a major shift in the value of major currencies after abandoning the gold standard and instead opting for floating exchange rates tied to the American dollar, the Euro, the Chinese renminbi, the Japanese yen, and British sterling pound. Bitcoin has the best shot at becoming the new replacement for a global reserve asset that becomes the standard for all of these currencies to be tied to at a fixed rate, so they may create a basket of them whose value can be used as Special Drawing Right (SDR) by the International Monetary Fund and their member countries while maintaining the relative importance of their fiat currencies trading in the world’s financial system.

Bitcoin is not a private currency. It is an open, decentralized currency that cannot be shut down. It might be worth getting some or learning more about it before the entire world starts coming around on their opinions against bitcoin. According to a survey by Finder, 14.4% of Americans own bitcoin or some form of crypto asset in 2019 doubling from 7.95% in 2018, so keep in mind that it is still early and the hedge funds are shorting it to a considerable degree.

Having some bitcoin might be good too in case the retail crowd keeps deciding on flattening the hedge funds that are betting against innovation like Citron and Melvin Capital who also tried to kill Tesla once upon a time only to see those shares skyrocket higher too. Do not let them try to destroy our best entrepreneurs, innovations, and technology that are trying to bring a higher quality to humanity as well as restore liberty and sovereignty inherent to all individuals. Buying bitcoin today is simply investing in a brighter future and should be your right to exercise as a peaceful protest against the tyranny of central banks and governments.

If we all HODL and everyone wants it (even all of the millionaires and billionaires), there will be a buy-side liquidity crisis due to the limited supply that can shoot the price of bitcoin to the moon, maybe even mars.

“If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry.”

— Satoshi Nakamoto on the Bitcoin Talk forum on July 29th, 2010

DISCLAIMER
An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written above may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed above are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

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CHAMATH for California Governor

“r/wallstreetbets is now the largest hedge fund in the world.

Excepts [sic] it’s completely decentralized and entirely democratic.”

— @chamath via Twitter on January 30th, 2021