The Stock Market Is Broken, Now for All to See

The historic short squeeze, engineered by a bunch of deeply cynical small traders, exposed just how rigged the market has been.

By Wolf Richter. This is the transcript of my podcast last Sunday, THE WOLF STREET REPORT.

It has finally blown into the open for all to see. The stock market has been broken for a while, for a long time, actually. The idea that the stock market is where price discovery takes place on a rational transparent basis, with ups and downs, and some amount of chaos, but free of rampant manipulations – that idea has now totally imploded.

What has been visible for a long time but now blew into the open is just how manipulated the market is, by all sides, how overleveraged the big players are because the Fed encouraged them to, and how enormous the risks are, and how crazy the trading strategies are.

And the stock market soared to record out-of-whack valuations, in a terrible economy where at least 10 million people have lost their jobs and are still out of work, and where entire industries have gotten crushed. The whole thing is propped up by stimulus and bailout payments to consumers and companies alike.

And then came a new force – or rather the force wasn’t new, but the magnitude was: regular folks ganging together in the social media, particularly on Reddit’s WallStreetBets, and they were deeply cynical about the fake markets and they saw an opportunity, and they conspired to make a ton of money and push some hedge funds over the cliff, by buying long the most shorted stocks, in other words, they conspired to engineer a historic short-squeeze.

This coordinated buying by the crowd on WallStreetBets, of a handful of small most-shorted stocks, drove up their prices sometimes by 100% or more in a day, which pushed the hedge funds that were short these stocks to the brink. And it pushed online broker Robinhood to the brink. And it revealed for all to see just how broken the stock market has been.

You know it’s serious when the New York Times puts a stock chart at the top of its front page which it did in its Saturday morning edition – and not any stock chart but a chart of GameStop, one of the stocks targeted by what likely became the biggest and most widely organized and most effectively manipulated short squeeze in history.

GameStop started surging in April last year. GameStop is a brick-and-mortar retailer of video games whose annual revenue has plunged by over 50% since 2016. This is a company that has gotten caught up in the brick-and-mortar meltdown before the Pandemic. And the Pandemic made everything a lot worse.

In early April it was still trading at around $3 a share. By the end of August, it had more than doubled to $7 a share. By Thanksgiving, it had doubled again to $14 a share. By mid-January, it had more than doubled again, trading at $31 a share. Which means the share price had multiplied by 10 since April.

And then all heck broke loose and it spiked ultimately to $483 a share last week, with vertigo-inducing volatility, surging and plunging by huge amounts in a matter of hours. On Friday it closed at $323 – up by over 100 times from $3 in April.

Other stocks went on different gyrations. For example, on Friday, a heavily shorted stock, Siebert Financial, which hadn’t gotten the full treatment, suddenly jumped by 400% in early trading, on no news whatsoever, soaring from $3.75 at the close the day before to $18.50 before plunging partway back to earth throughout the day and in afterhours trading ended up at $7.33, amid enormous trading volume.

People are chasing lottery-type returns.

The folks on WallStreetBets that openly conspired to create this short squeeze – their number is heading toward 10 million people – well, they didn’t create the situation. They just took advantage of an opportunity to manipulate those share prices their way.

They saw that these most shorted stocks were incredibly vulnerable to a short squeeze, and if enough buyers got together, they could push those overleveraged hedge funds that had shorted the stock at $10 or at $20 or at even $50 over the cliff.

It was highly effective stock manipulation. And it outdid by a huge margin the stock manipulation schemes that those hedge funds had undertaken to push down the share price. Those hedge funds look practically amateurish with their reports that they spread across the media in order to crush those shares they were short.

Thanks to the people on WallStreetBets, now everyone gets to see the manipulations, even on the front page of the New York Times which has for years purposely ignored just how badly the market is broken.

The trading strategies that blew up and that blew the whole schmear into the open is that overleveraged hedge funds have been shorting the already “most shorted stocks,” which are stocks with a relatively small float that can be easily manipulated. And they’re doing this on one side, while being long other stocks. This didn’t start with GameStop. It started a long time ago. Tesla’s stock is a primary example in recent history.

The hedge funds that were short were taking massive losses in the shortest amounts of time as the most shorted stocks jumped. To get out of the trades, the hedge funds had to buy these shares back, and so a mad scramble ensued to find those shares and buy those shares at whatever price, and shares soared further.

Because these hedge funds were losing so much money on their short trades, they attempted to lower their risk profile, as determined by a formula called Value at Risk, which is what they use to make their own clients feel better about the hedge fund not just blowing up one day and taking their money down with it.

As the hedge funds sold their long positions, those prices began to slide, and so hedge funds were losing money on their shorts, and they were losing money on their longs, and they’re leveraged out the wazoo and they were blowing up.

A lot of wealthy people gave their money to those hedge funds to beat the market with and make a killing, and now their money was going down to heck in days or hours.

And some of the hedge funds, at the brink of collapse, got bailed out by other hedge funds.

For the crowd on WallStreetBets, this was a huge victory. Not only were they sitting on lottery gains, but they’d blown up a trading strategy and nearly some hedge funds.

They’re now something like the world’s largest and most chaotic and decentralized hedge fund, and since their schemes are public, other investors, including other hedge funds, trade along with them. It’s a power trip they’re getting a huge kick out of. They had a plan, which was to make a ton of money and in the process push the hedge funds over the cliff, and they executed that plan.

Hedge funds have long done everything they could to manipulate stocks their way. Short sellers came out with devastating reports about a company. Some of the facts were true and some were false, but it didn’t matter. This is the game of “short and distort.”

The report would be released before the start of trading. All the financial media would jump on it. The short seller would appear on CNBC and explain why this stock would collapse, etc. It was all a big manipulation scheme and it worked most of the time, and at least for a brief period the stock plunged, and the short seller could take a profit. A reverse of the classic pump and dump.

On the long side, the same has been happening for eons at the highest level of Wall Street, with bullish reports about crappy companies and strong-buy recommendations, and all kinds of fabricated stuff…

I mean, just look at Tesla’s shares. The hype machine behind that stock is huge. It’s Musk himself with his promises that may materialize years behind schedule or that don’t materialize at all and were just empty promises, all of them designed from get-go to manipulate up the share price.

And there are the Wall Street banks that make a huge amount in fees every time Tesla raises money. Tesla raised over $12 billion in 2020 alone. So these banks have huge financial incentives to manipulate up the shares.

Then there is the army of Tesla fans the crawl all over the social media, and they take no prisoners. They work tirelessly to pump up Tesla shares.

The thing is as long as the shares are manipulated higher, everyone is good with it, and regulators support it. It’s the oldest game in town.

The Fed is a big proponent of it through its monetary policies. It has a word for it, the “Wealth Effect.” President Trump jumped on the bandwagon as soon as he was elected. Everyone’s doing it.

But now that millions of individual investors are conspiring on WallStreetBets to drive up share prices of the most shorted stocks to push a bunch of hedge funds over the cliff, it rattled some nerves.

But these traders are collectively also taking huge risks, and in the process, they were just about to push their own trading platform Robinhood over the cliff.

So the blame for the enormous risk appetite out there, the reckless leverage, the crazy trading strategies by hedge funds, and the huge incentives to manipulate goes to the Fed.

It printed $3 trillion in a few months – and $6 trillion in 12 years – to create exactly those kinds of financial markets where no one cares about anything anymore, where everyone is just chasing after the wildest returns, and where investors that follow prudent strategies are ridiculed and earn near-zero returns. And that’s what the Fed got. That’s where the blame is. The Fed is the biggest market manipulator out there.

Its primary target are the credit markets. But it has a strong effect on the stock market, and the Fed knows that, and counts on it as part of its monetary policy. It made clear, it wants asset bubbles, it wants blind exuberance, it wants reckless risk-taking and huge leverage, and it has shown that when those bets blow everything up, it will step in and bail out the biggest bettors.

In the current short-squeeze, huge profits are being realized by institutional investors – from private equity firms to pension funds – that had been holding the shares of GameStop and other most shorted stocks whose prices have spiked to high heaven. Some of these institutional investors have now dumped their positions and cashed out at these ginormous prices, earning billions of dollars in lottery-style gains.

They effectively sold their shares to hedge funds that were short and were scrambling to buy shares to cover their short positions; and to traders that were trying to ride up those shares. This happened across the most shorted names.

For example, GameStop disclosed on Thursday that Korea-based MUST Asset Management, one of its largest shareholders, sold its entire stake, 3.3 million shares, that it had bought sometime before March 19, 2020. And if it sold those shares at Wednesday’s closing price, it made about $1.1 billion in gains.

AMC Entertainment, the movie theater chain trying to stave off bankruptcy, is near the very top of the most shorted stocks, and its price exploded from around $2 a share in mid-January to $20 on January 27, multiplying by 10 in two weeks. Well, its second-largest holder, private equity firm Silver Lake, disclosed that it sold its entire stake of 44 million shares for $713 million at an average price of $16 and 5 cents each.

The Ontario Teachers’ Pension Plan, in Canada, sold its entire 16% stake in US mall landlord Macerich, another one of the heavily shorted stocks, whose shares had doubled in January.

They all made their lottery-style returns and they took the sales proceeds and put them in Treasury securities or whatever and they’re outa there.

Amid this chaos, Robinhood imposed draconian limits on trading of 50 stocks, including the most shorted stocks. As justification, it said on Friday that its clearing house had demanded a massive increase in the deposit that Robinhood has to keep at the clearing house. Robinhood had to raise $1 billion from its existing investors and get another $500 million from a bank credit facility.

The clearing house – National Securities Clearing Corp. which is owned by Depository Trust & Clearing Corp. – demanded the additional capital in order to guarantee those trades amid the huge volume and the enormous volatility of the shares. It wants to protect itself in case Robinhood blows up.

Whether or not the Robinhood fallout can be contained remains to be seen.

Other brokers too imposed some trading limits, including Schwab, which raised its margin requirements for those stocks and imposed some limits on options trading, but none were as draconian as Robinhood.

Robinhood is free for its users. It makes its money from selling its users’ order-flow data to investment firms. This is real-time data about which stocks its users are buying and selling. According to Robinhood’s regulatory filings with the SEC, it generated $271 million in revenues in the first half of 2020 from selling its clients’ order-flow data. Much of it from Citadel.

The SEC nailed Robinhood for misleading its users about the sales of their order-flow data and about not trying to find the most competitive rates for executing orders. In December, Robinhood agreed to pay $65 million to the SEC to settle the charges. But it still sells its users’ order-flow data – because that’s the way it makes its money.

Robinhood isn’t alone in selling order-flow data. For example, TD Ameritrade, which is now owned by Schwab, earned $560 million from selling its users’ order-flow data to investment firms. Lots of brokers are doing it.

Those relationships between Robinhood and the firms that execute its orders, and its clearing house, and the firms that pay for the order-flow data are now coming under further scrutiny, after the trading halts in those stocks, amid allegations that those halts were imposed to prevent the hedge funds from blowing up and making serious dents into the billionaires that are behind these hedge funds, investment firms, and clearing houses, many of them affiliated in various ways.

Congress is now seeing a dual opportunity. On one side, the millions of infuriated retail traders that got locked out from trading the most shorted stocks. And on the other side, the teetering hedge funds that are now giving their rich clients and owners the willies.

So Congress promised to look into it. It’s doing what it knows how to do best: On one side, it’s trying to coddle up to the millions of infuriated traders that got locked out from trading. Those are the voters. And on the other side, it’s creating pressure on those hedge funds and their wealthy owners and clients to unleash a tsunami of campaign contributions to get this situation under control.

As first step, Congress woke up the SEC, which then issued a statement on Friday that said that it’s working with other regulators “to ensure that regulated entities” – and here the SEC is likely talking about brokerage firms, clearing houses, etc. – “uphold their obligations to protect investors.” And it said that it would “pursue potential wrongdoing.” It said, “We will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws.”

Also on Friday, Texas Attorney General Ken Paxton issued 13 civil investigative demands, which are the civil equivalent of subpoenas, to various entities of Robinhood, TD Ameritrade, TD Bank, E-Trade, WeBull Financial, Interactive Brokers, Citadel Financial, Apex Clearing Corporation, and others.

Paxton said, “This apparent coordination between hedge funds, trading platforms, and web servers to shut down threats to their market dominance is shocking, unprecedented, and wrong.”

Meanwhile, Fed officials from Powell on down have been busy deflecting criticism that their reckless monetary policies have caused this kind of crazy exuberance and risk-taking and leverage across the board, from smaller traders to overleveraged hedge funds.

What all this shows, for all to see, is just how massively the stock market has been manipulated, from the Fed on down. Most of these manipulations attempt to manipulate prices up. But some manipulations are aimed at pushing prices down. What the millions of people conspiring on WallStreetBets to the exact their pound of flesh accomplish was nevertheless enormous: They showed for all to see just how completely broken the stock market is.

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  176 comments for “The Stock Market Is Broken, Now for All to See

  1. raxadian says:

    My great grandparents called it “Gambling” they were right.

  2. 2banana says:

    So guess who the SEC is going after?

    Not the folks doing naked shorting – which is illegal.

    Not the High Frequency Traders – who front run trades which is illegal

    Nope.

    They are going after some basement bloggers.

    • Dave says:

      Of course they are. The elected officials count on us for voting to get them in power and our elected officials count on Wall St money to fund their campaigns to get us to vote for them.

      So lets say I am an elected official. Who am I more worried about?

      1) The firms/lobbyists and Wall streeters who fund my campaign?
      2) The voters who have the attention span of a mosquito strung out on meth?

      • Page88 says:

        ……someone said this…….your average citizen does not have a lobbyist walking the halls of congress addressing the average citizen needs.

        ……..This is not high school civics class teaching …”theory of how government works”…anymore (if it ever was – now the “disconnects” are blatantly apparent).

        • Dave says:

          If I were POTUS I would threaten to eliminate lobbying altogether in order to pave the way for serious and heavy handed regulation on lobbying.

          Crazy idea? I say to thee crazy world!

        • Dave says:

          And Senator Warren did propose a bill calling for reform on lobbying. As usual I completely agreed with the bill she proposed.

        • GirlInOC says:

          The same Warren that ran for president and delt with headlines like this?

          “Wall Street Democratic donors warn the party: We’ll sit out, or back Trump, if you nominate Elizabeth Warren”

          Yeah, Warren literally ran on fixing Wall Street corruption. But *whispers* she’s a giirrrllllll

        • Happy1 says:

          @Dave,

          Bill of Rights allows people to petition the government. Lobbying is constitutionally protected and there is zero chance a court would allow a blanket lobbying van.

    • Island Teal says:

      The SEC….GARY GENSLER…LOLLOLLOL 🤣🤣🤣

    • Maximus Minimus says:

      The jokes just keep writing themselves.
      In addition, there will be some hearings by some Congress persons and personas. And what a pickle they are in.
      Either they drill some RH traders, and will be in for some truths, or leave them out, and make the whales look like sole criminals.
      Luckily it won’t get out-of-control as Janet Yellen managed to insert herself into the process. /s

    • K says:

      The evidence of corruption by securities brokers and hedge funds has become publicly admitted and blatant. E.g., watch “How Hedge Fund Billionaires Are Crushing GameStop Stock” at casgains academy in yte before it is removed or censored. See Jim Cramer Admits To Stock Manipulation When At Hedge Fund at seekingalpha d t c m, which is a website for wealthier persons, so it is less likely to be censored by the crooks. Do you doubt really that they are using “naked shorts” now to manipulate the stock markets?

      After seeing this, I wonder if Americans will finally demand that their congresspersons take action at least as to the SEC (called the “Society to Enable Corruption”), which is probably again sitting on its hands as it sat on its hands FOR YEARS when it was repeatedly warned about the connected, Bernie Maddoff’s corruption until his own family member reported it. (Did they report it to get police protection from their defrauded clients who had accepted remarkably high returns for years without questioning how they were being “procured” and might have left them floating in some pools somewhere? I suspect the latter.)

      The sign on the front of the SEC sigil should be drawings of the see no evil, hear no evil, and speak no evil monkeys, except perhaps a last, fourth monkey should be added which always keeps his head stuck in a hole in the sand, because he does not notice any corruption among the connected. Why do you think that entity’s leaders and TV personalities have been hired for years? Because they stand up to corruption, or because they go along with it and do not report on it?

      As Forbes reported, 15 billionaires now own US media, so the media has utterly abandoned its investigatory role. Watch other countries’ media to see how real journalists investigate stories and do not just public word bites repeating whatever the powerful want said, even false stories to manipulate stock prices! We will see if the new administration has a reformer head the SEC or just another enabler.

  3. TBP says:

    Wolf, you’re just moping because you didn’t make a bonanza from the craziness (I didn’t either). This is, in my opinion, a function of too many people with too much time with too much “free” money. It will all end, most likely badly. No need for idiots in congress to investigate anything other than their own lies and lives.

    • Wisoot says:

      Cleansing is easy too. Owners of 1yr old cars with a value in excess of $100k. Right there.

    • Old School says:

      Let’s say you are a holder of the broad stock market. The price to sales has just passed 3. It never passed 2 in 2000 and 2008 bubbles. You made 5X from the bottom. Why would you not sell? The only reason not to sell in my opinion is if we are going total destruction of the currency mode, but if that’s true precious metals would probably be better.

      • Old School, precious metals have been manipulated by Morgan and Goldman for decades, so the CFTC has looked the other way since these firms generated handsome fees to the Commission and Comex with their trading activities. Look at the $100’s of Millions in penalties that JP Morgan has paid do date in manipulating bullion prices. Just the tip of the iceberg actually with these monied “insiders”. Oh, they are very heavy political contributors also.

        Why does Morgan have a physical silver position in excess of what the Hunt brothers had held via futures in 1980/81?? And at the same time maintains a NAKED SHORT POSITION well in excess of physical silver held in vaults?? That would be a hedge to their physical long positions, but the position is lopsided on the short side and has been for years. Central Bank afraid of citizens exiting Dollars & Treasuries and finding safe haven in precious metals??

        HAVE MORGAN OR GOLDMAN EVER RECEIVED FREE OVERNIGHT MONEY FROM THE FED, IN PARTICULAR THE NEW YORK FED, TO MANIPULATE THE PRECIOUS METALS MARKETS?!

        REDDIT and the millions of bullion investors that have been harmed by this illegal activity, GO SIC THEM!!! As bad or worse than what the hedge funds have been doing with equities, esp. with Government involvement and approval!

        Eventually SUPPLY vs. DEMAND have their day, and just look at the $4 premium over spot to buy Silver American Eagle coins. Normal premium would be about a $1.25. Bullion retailers in U.S. have virtually sold out their current inventories and many are backlogged over 30 days if they will take a backlogged order at all.

        • Frederick says:

          Normal premium hasn’t been 1.25 for silver eagles for decades I paid 1.50 over spot for Pan American rounds in 2006 which are less expensive I’ve seen the premium at 6 to 8 dollars for silver eagles Money well spent in my opinion Better still 100 Oz bars at 2 dollars over spot

        • Mora Aurora says:

          David: Exactly!

          Also, further to their precious manipulations, it is interesting to note the correlation between Clinton’s last day ‘corporate pardoning’ of Barrick and the reclassification to ‘deep storage’ of US gold reserves.

        • Oops, since I can still buy at wholesale prices, I should have said $1.65 AT WHOLESALE, because my company bought at that premium for 2x decades, usually. The $4 premium is at the wholesale ask from one of my suppliers. Sorry.

        • VintageVNvet says:

          paid 1 dollar over spot a year or so ago to buy eagles for the grandchildren,,,
          and they had all I wanted at that price
          been following AG since the TXbros did their thing in 80/81,,, completely failing because they did not know the Russians were sitting on approximately 12 BB oz at that time
          While many folks want to make each and every event exactly the same as the last one,,, the fact is that it IS different this time and every time, and that is exactly the challenge:
          How to figure how the inevitable differences this time will make the outcomes different,,, or not
          just have fun with it–PLAY the market,,, etc.,,, we are none of us getting out of here alive, yet

        • RagnarD says:

          Great summary / explanation of the JPM silver situation. So many commentators talk about it w/o actually giving (understanding?) the soup to nuts aspect of it. And you have show in succinct fashion, that it can be fleshed out in just a few paragraphs. Thanks

      • gorbachev says:

        Precious metals have been overtaken by Bitcoin .

        • Frederick says:

          Not true They are apples and oranges Gorby

        • Anthony A. says:

          Can I make a Krugerrand out of bitcoin?

        • RagnarD says:

          Just bitcoin? What about BTCxyz 2.91? I heard it has a super cool revolutionary technology…. er no wait, this just in… its the exact same technology as BTC1.0! And get this, you can buy it for $0.01!! Here’s the deal, because BTC is just like gold, any clone BTC product should be valued just like BTC!! So I’m going to back up the truck and buy all I can of BTCxyz 2.91 at $0.01 and just wait till it hits $30,000. Who’s with me?!

      • SocalJim says:

        Old School, tbe price to sales multiple is very high since the yield curve is so low and since people are expecting above trend growth. To do a quick smell test, there are valuation spreadsheets on the internet that you can use to model valuations at different yield curve levels.

        In 2000 and 2008, the yield curve was much higher.

        • Old school says:

          Empirical data says long term stock prices are much better correlated to price to sales than interest rates because low interest rates at the long end are telling you expectations of growth are low. For example nominal growth is crawling along last decade at 4%. How much are stocks worth if future growth is 4% vs old 6%? It’s the delta between growth and interest rates in theory that determine the value.

    • intosh says:

      This will only encourage pumping up the bubble even more. There is already an inherent positive bias to the stock market in general (when was the last time you hear anyone tell you they loss money with a stock?).

      So fewer contrarian positions (shorts) will only inflate the bubble more and faster.

  4. Apple says:

    In other news, Texas Attorney General Ken Paxton‘s trial for securities fraud has been delayed yet again and his hopes for a pardon were unfulfilled.

    The original date for his trial was July 2015.

    • elkern says:

      Still, we may be seeing Republicans attack Wall Street more. They’re already pretending that the Democratic Party is the Party Of Big Money, which is pretty funny, but becoming less false recently. For good reasons, Wall Street trusts Democrats more than Republicans now, so GOP has a lock on that source of life-blood. I suspect that GOP gets most of it’s big money from Extractive Industries – Oil/Gas/Coal, Mining, Big Ag (“efficiencies” of concentration now qualify Ag as extractive), and other (non-coastal) Western interests. The highest priorities for those Industries – reducing/eliminating high-end Taxes, Labor Costs, & Regulatory hurdles – translate directly into the highest priorities of the GOP.

      • RightNYer says:

        Of course Wall Street trusts Democrats more. The public companies can only maintain their current earnings if the people are continually given “stimulus.” Earned income in this country doesn’t come close to supporting our collective lifestyle, so we need to borrow to keep up the illusion. The Democrats are all on board with MMT at this point, although the Republicans surely haven’t been fiscally conservatives in decades.

      • Shiloh1 says:

        The sooner the red / blue fake wrestling game collapses, the better.

  5. Memento mori says:

    Do we really need a stock market nowadays?
    At this point why not have everyone who needs money go directly to the Fed instead, if they bail them out when times are tough, might as well make some money when times are good.
    We can get rid of the banks, and all financial intermediaries and industry by the same token, let Powell allocate capital as he sees fit and make everyone “whole” in his own words.

    • DeerInHeadlights says:

      Spot on.

    • Wisoot says:

      Is that you schwabby from WEF putting in a promotional for the great reset in a bid to protect you and your Blackrock Vanguard buddies (in their bid to own the world) from doing prison time or god forbid having your 10 houses taken away from you!

    • YuShan says:

      Exactly.

      The whole point of having a stockmarket was that companies can raise capital themselves when they need it. It’s ridiculous that they get bailed out with taxpayers money or Fed money (which is basically the same thing).

      At the same time, trillions of what were supposed to be “safe assets” are now guaranteed losers because their yield to maturity is negative.

      This has massively increased moral hazard. The central banks are playing a very dangerous game. In order to avoid small recessions or even just small dips in the stock market, they are shifting risks to the tails of the distribution. In other words, instead of having small slowdowns every few years, as used to be normal, they are creating the appearance of stability which will eventually end in a crisis of epic proportions when it inevitably normalises, because they have allowed excesses and imbalances to keep building up in the system.

      • RightNYer says:

        Right. The whole point of a stock market is for companies to raise capital. I keep hearing people repeating the myth that stock price appreciation benefits the companies in deploying capital where it’s most valuable. No. It doesn’t. Unless the company uses the high price to issue new shares (as Tesla did, for example), then the trading of already existing shares benefits no one other than the shareholders who sell and the employees’ whose compensation is tied to stock price.

        The stock market wasn’t intended to be a store of value or a trading game like baseball cards.

      • Ralph Hiesey says:

        The easy way to fix your electrical system is to just keep putting in a bigger fuse.

        That works until the house catches on fire.

        • RightNYer says:

          That’s a good analogy. Another good one: “Trying to fix a debt problem by printing is like trying to cure smallpox by putting makeup on the spots.”

      • Lisa_Hooker says:

        YuShan, I have trouble with that word “inevitably.” Under the current scenario I will be dead before there is any “normalization.”

    • intosh says:

      Well, then you won’t have a huge mass of people willing to spend their whole lives working for some other, much smaller, mass of people and “we” don’t want that, do we?

  6. WES says:

    All of this craziness is a result of being on the increasingly steepened slope of the ever rising exponential money creation curve.

    The central bankers have no choice now but create ever larger amounts of money with each new crisis. And the money needs to be created faster and faster too! Overnight is too slow now!

    They have also passed the point where they just created money indirectly via Wall Street banks (now considered too slow) to the point where they are spending money directly (faster)!

    Most people haven’t noticed this important shift at the Fed.

    Now the Fed wants to be able to send money directly to the people, because they realize soon they may need to get money to people instantly!

    Yes, congress is sending money to some people but in a sudden crisis, congress acts too slow!

    • Rcohn says:

      The gig is up for the FED. Rising inflation along with rising rates from very low levels are a death kneel for stocks

  7. Paulo says:

    What an excellent article. Great job.

    Now I know why I don’t trade stocks, rather…relearned why. Years ago I was going to buy into a silver miner. I talked to a drilling contractor about the stock. I knew he had about 30 hard rock drill contracts in Yukon, including this property. He knew his stuff. He shook his head, “No”, and explained the facts of life to me. “It isn’t the property” he said. “It is who is the promoter, and this property has the wrong promoter”. He was the millionaire and I was not so I listened and followed his advice. Never regretted it.

    Unless you have inside information, or have a line on who is doing the scam…er promotion cough cough, best to stay away from it all. I did and never regretted it. There are no shortcuts or easy scores, and there ARE people with inside information and people who control the trade. Unless you’re the butcher, you are the lamb for sale.

    • Wisoot says:

      As Wolf points out trade data for sale is the model. Insider is defunct. Funneled into algos at Blackrock, one system control or at least that is what they believed. Until traders anon surfaced. The last thing to install is to create pools of small trades that freeze out large hedge fund activity and we slide towards a grass roots up model. Pensions should be paid for by the free money for everyone as a ty for putting up with the lies for so very many years.

    • WES says:

      Paulo:

      My Father was a geological mining engineer (Queens).

      I remember him telling me that to find a new mineable ore body, he would need to work for over 600 years!

      Everyone has an ore body! It is just that it is unmineable!

      My Father flew all over North America looking at ore bodies! He never found one that could be mined profitably!

      My Father observed that the only reason mining promoters could raise money for exploration, year after year, was because high tax (marginal tax rates well above 50%) individuals, like doctors, dentist, and lawyers, were thinking why should I send this money to Ottawa where they will just pissed it away, when I can choose to piss this same money away somewhere up in Canada’s frozen north so the government can’t have it! (If I can’t have the money, then you can’t have it either!)

      Excessively high taxes was the key to promoter success!

    • DanR says:

      Hi Paulo,

      A bit of aside but I’m am American who has been to Canada several times and do notice from my visits and the way you describe where you live that things in Canada seem more well-kept and orderly than in the US. To me, Canada actually seems a bit more European, posh and bourgeois than the average place in America.

      Anyway are there any books you know of that describe Canadian culture and history that would help Americans understand the country better?

      Dan

      • RightNYer says:

        Not trying to speak for Paulo, but my feeling is that it’s because Canada was mostly developed by the same type of people who developed New England, where “not making a fuss” was part of the culture, while the frontier of America was disproportionately settled by people from Scotland and the more rugged parts of the UK, where individualism and going out on one’s own to get ahead was more cultural.

        • eg says:

          Canada is a very large place with a relatively small population, mostly strung along the US border and congregated in 3 major conurban areas, with smaller regional centers. Culturally it is very diverse, not only due to recent immigration to urban centers from all around the world (after the old system which favoured white, Commonwealth countries and Europe was abandoned) but also because of the “French fact” of Quebec. First Nations people represent a far larger % of the population in Canada than they do in the US, and that population skews younger. RightNYer is partly right, in the sense that the “Laurentian Elites” of Upper and Lower Canada were primarily of conservative, Anglican stock — and this element was further bolstered by the United Empire Loyalists who abandoned the northeastern US during and after the American Revolution/War of Independence. But there is also a strong Scots-Irish element, particularly in Quebec and the Maritimes, that do not share much in common with the old Anglican “Family Compact” and their ilk.
          Politically Canadians generally tend to be far more “communitarian” in mindset than their more independence/liberty minded American cousins. There are theories about why this might be, including the need for compromise between the “founding” (this is not a premise upon which First Nations scholars are very keen, for obvious reasons) European settlers who were separated by language and religion (French and Catholic in Upper Canada; English and Anglican in Lower Canada), along with the need for people to band together to survive what are by European standards very harsh environmental conditions. There is a story, perhaps apocryphal, that when the British Empire was deciding where to establish its penal colony (which ended up in Australia) Canada was considered, but dismissed with the observation that it would represent “cruel and unusual punishment.”
          Unfortunately I can’t think of specific books to recommend, but if you can find it, the CBC documentary, “Canada: A People’s History” is a good place to start, and it references many texts.
          Hope this helps …

        • td says:

          Some minor points for eg et al:

          – Lower Canada is now Quebec and their elite was mostly French Catholic from the beginning. For example, the two Trudeaus.
          – Ontario was Upper Canada and the founding elite were the Loyalists that fled form the US.

          The protestant Irish (Orangemen) took over Upper Canada in the mid-1800’s and until about 1950, you had to be a member of the Orange Lodge to become mayor of Toronto. The large numbers of Scots and Irish Catholics emigrated to Canada as well and the Catholics were a majority in the country until church attendance in general fell off in the later 20th Century.

          If I had to guess as to why Canada is what it is, I would say that the local corrupt politicians were content with a percentage rather than trying for the whole ball of wax, and devoted the bulk of their efforts to the best management they were capable of. Not always wonderful, but usually adequate.

        • Crush the Peasants! says:

          Most folks do a double-take when informed that Quebec is a member of Latin America. And yet there is no recognition of the Frankic minority, as there is Hispanic.

          Regarding European immigration, by numbers of immigrants, the USA is Germanic-Celtic.

        • Lynn says:

          Crush the Peasants, French Canadian culture and history is sort of an embarrassment to other New World European cultures and is rarely mentioned except in passing. I feel because their history was far less violent. Intermarrages and alliances with Algonquin tribes were common from the start. In the mid 1800’s people started to deny those marriages publically and in records as anyone with certain Native blood was prone to having their land taken from them or killed. Whether they had title or not. Many Metis (analogous to Mestiso) families were Catholic farmers. Those families should influence Canadian culture to this day.

          There may be more influence from Native cultures in Canada. IDK, I don’t live there. But if half the population was sympathetic and many were communicating regularly on a day to day basis with Native peoples, then I think it likely.

          Native cultures are not necessarily less violent, but in my experience tend to be more polite within themselves and more communally orientated.

      • Anon1970 says:

        Look up the late Canadian author, Pierre Burton, here: https://www.thecanadianencyclopedia.ca/en/article/pierre-berton

        and read one or more of his books.

      • Lisa_Hooker says:

        1) Canada did not import a large number of slaves and got out of the slave business in the late 1700’s.
        2) Canada is not within walking distance of Mexico and the rest of Latin America.
        3) The composition of your population matters. Sorry.

    • gorbachev says:

      All true Paulo.But sometimes we just wanna play.

    • Happy1 says:

      This is garbage. People who have broadly invested in the entire stock market and who have the stomach to hold on when things are low and sell when things are high have done better than with any other kind of investment including property.

      The casino aspect is in trying to pick individual stocks. I agree with you that that is a losers game for the most part. But broader stock market investment is ownership in businesses, and over the long haul, it is more profitable to own businesses than any other asset.

      • Lisa_Hooker says:

        JM Keynes –
        1) “The market can remain irrational longer than you can remain solvent.”
        2) “The long run is a misleading guide to current affairs. In the long run we are all dead.”

        • Old School says:

          I just read he lost 75% of his money during depression. Economists seem to be too theoretical to do well in the real world. I am sure it’s not true for all, but maybe most. I think Larry Summers did a poor job overseeing Harvard’s endowment, but I could be wrong.

      • RightNYer says:

        Yes, if the economy is growing, as it did for most of American history. If it’s not growing, as the projects show, then the only way you are getting returns is through multiple expansion.

      • Old School says:

        Most people under appreciate the volatility of stocks and if you are holding period is 20 years or less you really have to be careful. Been several 20 year periods stocks were lousy investments, worse than CD’s. After great depression you had about 10 – 20% of your capital left if you were diversified stock holder. If you were all QQQ in 2000 you had around 20% of your money left. Buying at the top ensures lousy 12 – 15 year returns.

  8. Anthony A. says:

    And here I am buying preferred shares trying to collect 4% dividends. I missed out on the “Big Hits”.

    Great article Wolf. Playing in that league is nuts!

  9. Riding Hood says:

    Great summary of a wild week, Wolf. For me the gut punch was when Interactive Brokers joined the other platforms on Jan 28 and prevented new long positions for the infamous tickers. IBKR has always charged commissions and warned traders that you-get-what-you-pay-for when you go free. Given their history of raising margin requirements during periods of “elevated option implied volatilities” I have trouble believing they were themselves at risk that day.

    The lockout worked. Prices fell without the retail bids and the short sellers escaped or reset their positions at safer levels. (So they say–I haven’t seen the data firsthand.)

    There have been many emperor-has-no-clothes occasions for anyone paying attention to this big beautiful market. Last week was more of a Lance Armstrong Day for me. Even the best of the best cheat, pay referees, or simply change the rules when they’re losing.

    I want to believe the small investor school of fish can achieve something, but they will have to tame their emotions and their worship of renegade billionaires to take this to the next level.

  10. Jan says:

    Wolf, thanks for all the facts, data and stuff about Robinhood and how the stock market is rigged but I would like to assure you and all your merry men and women readers that we now have an ethical treasurer who will stand guard over our system because she has no conflict of interest and she can honestly judge these hedge funds that she recently spoke to on her post fed head speaking tour and deliver Solomon like wisdom as she yields her sword of DamoEccles to swiftly deliver justice for all!

    • IdahoPotato says:

      “DamoEccles”

      Well done.

    • Cas127 says:

      Boy, those conflict of interest waivers really pack a punch in terms of fixing everything.

      So, please no more Yellen and Scheming.

      “All is well.” (ending of Animal House).

  11. joeh says:

    Can someone use the internet mob to get this article published in the NY Times op ed? I dont read that paper anymore but I can’t think of a better outlet to run with it. Great work Wolf!

    • Anthony A. says:

      We have censored news media here in the banana republic. No paper or other MSM publication will publish this ( the truth).

    • kitten lopez says:

      joeh-
      Wolf is his own THING. he doesn’t NEED NYTimes as the big papers routinely crib from HIM. anyone/anything “legacy” and status quo would kill him. Wolf has been one of the most radical sites on money and thus philosophy.
      x

      • VintageVNvet says:

        kl,
        Please please please be clear Wolf is NOT ”radical” in any way, shape, or form!
        Wolf is the very voice of reason and calm and truth and common sense in a world gone waaaayyy to the ends of reason,,, WolfStreet is the very opposite of radical…
        Otherwise LOVE your comments on here, although a bit too few lately!!
        Thank you

        • kitten lopez says:

          (i’m going to respond below anew because this got long and i think at this generation of the stack it’ll be an inch wide)

          x

  12. Lou Mannheim says:

    I traded at a fund and I do not understand how a broker selling their order flow is legal. I completely understand why someone would want that data, but it’s material non-public information., the definition of insider trading. What am I missing?

    • I have been with Schwab for decades and am wondering what document I signed to allow the free use of my trade data on Schwab online to be sold to third-parties??? SHOULDN’T WE ALL GET A CUT OF THE PIE SINCE IT IS OUR DATA, WHICH IS PRIVATE UNTIL THE TREASURY GETS A HOLD OF IT AT TAX TIME. Something stinks here.

      • Sierra7 says:

        David Y.:
        “SHOULDN’T WE ALL GET A CUT OF THE PIE SINCE IT IS OUR DATA, WHICH IS PRIVATE….”
        That has been my contention for decades. “Any ‘private’ data sold by any entity to a third party of private individuals” should share the profit with the individual. But, of course that is not the system. The system is to “exploit”, not, “conjoin” (in the profits)….It’s all whacko!!

  13. Beardawg says:

    In my life I have witnessed the greatest players who will ever play the big 4 sports: Gretzky, Brady, Ruth and Chamberlain (no need to argue LeBron or MJ – 100 pts in one game and all those rebounds – end of story).

    I experienced the invention of the internet, hiked the Grand Canyon rim 2 rim 2 rim, power my entire home with the sun – and the list goes on.

    Never in my wildest dreams did I think a paper dollar would be replaced or become worthless. It’s like when you are a child and you cannot imagine your parents ever NOT being there.

    It will be an event in my life to challenge all others. I am scared and excited.

  14. Tang says:

    What matters? Heads I win. Tails you loose. So happens those retail folks at that point in time the coin rested upright…..then later it fell.

  15. Anthony says:

    Wolf..”They showed for all to see just how completely broken the stock market is..”

    Sadly the word broken, in good old fashioned Anglo-Saxon, means corrupt……

  16. Cashboy says:

    “The Stock Market Is Broken, Now for All to See”

    Not everyone seems to see it otherwise they surely would sell and get out of the stock market.
    I thought that and have been buying gold for the last few days and today (4 Feb 2021) it is falling to its lowest for the last 6 months.
    Is it because everyone is buying Bitcoin or Euthereum crypto currency that appears to be up 20% in a week?
    Bitcoin is called the “modern gold” and only last week the whole of Pakistan had no electricity because the National Grid collapsed and the internet was turned off in Myanmar (Burma for Americans) due to political problems so wonder how that stacks up.

    • YuShan says:

      At the moment everybody is super positive and jumping on momentum trades like stocks and crypto. Gold won’t do well in that scenario. Gold is mainly a tail hedge against things going seriously wrong.

      • Anthony A. says:

        Yellen said (publicly) she doesn’t like Bitcoin. She said it was for laundering money. Probably some truth to that. I’ll bet “they” go after it……probably just to figure out how to track buyer and sellers and TAX them.

        • YuShan says:

          Of course they will. All major central banks are planning their own digital currencies, so they are going to be highly regulated.

        • Happy1 says:

          Yes, there will be a coordinated effort on the part of central banks to illegalize cryptocurrency.

      • YuShan, AREN’T THINGS GOING SERIOUSLY WRONG AS WE SPEAK??!! Short sellers are trying to teach Reddit, et. al., a lesson from their Sunday night opening bid surge on silver. We are already over the cliff, but like the Coyote vs. Road Runner, all is fine until we hit the hard earth below.

        • YuShan says:

          The market is broken and the system corrupt, but there isn’t a lack of trust yet among the general public and it is all just a confidence game.

          I just read an article in the NYT about how a simple buy&hold will make you rich and the comments are full of people gloating how well they have done in past years… Well of course! With interest rates falling from 16% to 0%, babyboomers investing en masse (will be net sellers soon and millennials are too broke to buy that supply at current prices). Massive multiple expansion too over that period: Shiller P/E on the S&P500 went from 6.7 in 1982 to 35 right now. So no, future returns will be nothing like they were in past decades.

          But as long as everybody believes in it everything stays OK. After all, the Fed has our backs! So we first need to see that trust breaking down. But when it happens it will be swift and it will catch most people off guard.

    • Mora Aurora says:

      The POG (Price of Gold), follows a fairly regular, seasonal, price pattern (and by analogy so do quality gold stocks).

      I have found the “Gold (CMX) 40 Year Seasonal (1976 – 2015)” chart very helpful over the years to time enhancement of my portfolio. There is also a chart for silver.

      Essentially, I buy at the summer lows and sell, if so inclined, at the fall highs.

      [My idea of a quality gold stock, as stated previously, is a producer with a low AISC (All In Sustaining Costs per ounce) in a relatively stable jurisdiction, preferably Canada, Australia +/- USA.]

      (As always, DYODD, Do Your Own Due Diligence).

    • RightNYer says:

      It’s not that they don’t think it’s broken. It’s that everyone thinks they can get out in time. It’s always that way, and obviously statistically, most people can’t and will ride the collapse all the way down.

  17. AlbieOK says:

    Once again, if you’re not paying for a product, you are the product. Rinse, spit, repeat.

  18. Gold, silver, bitcoin, & GameStop smokescreens cover up
    the real issue: falling “productivity” (GDP) due to:

    – Calling in sick (Covid).
    – Bankrupt, defaulting “cities” (Hoovervilles).
    – Border closures.
    – “All against All” riots. &
    – The tragedy of the (hyperbolic) commons.

  19. Earl says:

    wow, we keep blaming the Fed on all of this. What about the democratic and republican politicians who are to blame too. All the business class in this country? When we as a country say greed is good (yes they say that and mean it) and corporations and businesses are only in existence to make a profit then you will have problems. This is not a good philosophy to live by and definitely not one to run a society on. (Which is why we allow monopolies which kill jobs, communities, innovation, and is bad bad bad risk management. “To Big to Fail” wow that is a problem right there!).

    Quit blaming the Fed for everything. They were just doing their job! They are mandated by law to protect the people from unemployment (people with no work and income will quickly blow up an economy, see Afghanistan) and to keep price stability (that’s inflation! Especially important to old “Gold Standard types” who read excessively or remember high inflation from the 70’s and when Volcker blew up the economy to bring it down again. But remember “Gold Standard” types, we don’t live under a “Gold Standard” anymore. Things are very different economically from those long gone days you studied in school and maybe witnessed).

    When you have a government that doesn’t work, then this is what the Fed has to do to keep us from spiraling into complete madness. The Lender of last resort. The Fed was formed I thought by bankers over 100 years ago. To do this so they didn’t have to keep doing it. Bankers are smart. When we get a big boom get ready for the big bust because capitalism runs by “greed” and “fear” When fear comes and the bust why not start letting the public, yes taxpayers, pay for this instead of us spending our money.

    Quit bitching about the Fed, and demand a government that works. Start by getting rid of the existing incumbent bought off politicians currently in there! Start with Mitch “I make my money from China and my wife” McConnell. That dude is bought and paid for to the max. Both parties need to be over-hauled (or keel-hauled). And not with a bunch of social justice “do-gooders” please don’t ask for that. They’re the worst!

    • Bobber says:

      Let me get this straight. The Fed isn’t a problem because Congress is a problem? That thinking wouldn’t pass muster in a pre-school, so why should it be accepted on the world’s largest economic stage?

      The fed played the lead role in this debacle, as the so-called experts in economics and money supply. Do you think AOC or Linsey Graham understand economics at the level required to monitor the money supply? Of course not. They rely on the Fed to act prudently.

      The Fed’s mandate is to promote employment and price stability. That much is true. But the Fed completely botched this. Put simply, the Fed decided on its own it would try to prevent the onset of periodic healthy recessions, which are required to promote the LONG-TERM health of the economy and prevent financial instabilities. Its policy of promoting debt buildup through incessant interest rate reductions sacrificed the long-term health of the economy for short-term gain, for no logical reason. The Fed continued to pursue this policy even though it caused the 2000 and 2008 financial bubbles and collapses.

      Did Congress mandate the Fed should reduce interest to zero? Did Congress mandate the Fed back itself in such a corner, it cannot even increase interest rates a quarter point without causing a massive deflationary spiral? Did Congress mandate the Fed should continually increase debt as a percentage of GDP? Of course not. The Fed did this on its own, by following some illogical interpretation of its mandate, and it’s been doing this for a long-time.

      Even a child will give up, eventually, when it cannot fit a square peg into a round hole. Apparently, large organizations, once embedded in a problem, do not have this same level of practical thinking.

      • VintageVNvet says:

        GRR eat comment b, perhaps your personal best yet! Thank you.
        Couple of minor dis, but not diss agree mints:
        1. AOC actually appears to have both the intelligence and education to understand what the FED actually does and has done to the working folks from top to bottom, especially recently for the clear benefit of their rich and richer owners.
        2. The logical reasons for: ”Its policy of promoting debt buildup through incessant interest rate reductions sacrificed the long-term health of the economy for short-term gain, for no logical reason.”
        Is, OF COURSE,,, mostly ”political” as well as following the logical orders of the owners of the FED, etc., etc.
        3. Have personally seen very small children of all and every description keep trying to beat the square peg in the round hole and vice versa, until they were hauled away kicking and screaming,,, as it seems likely some of the folks in both guv mint and Fed will be sooner or later.
        In spite of the many obvious ”pre-cursors” to our current situation not turning out so well for some of the most egregious of the failed oligarchy, I am an eternal optimist and continue to hope and pray sensible people will at least come to be the majority and actions and results will proceed accordingly.
        After all, isn’t that what a ton of the language in our Constitution is about? That being the peaceful transfer of power, rather than the, let’s just say, ”non peaceful” type…
        Current situation probably better than the vast majority of the last couple thousand years for We the Peedons,,, been having that exact debate for the last 40-50 years or so, and it always comes down to better access,,, and, in that light, IMHO, we are actually doing better through the darpanet than ever before in her and his story.

        • RightNYer says:

          “There are four boxes to be used in the defense of liberty: soap, ballot, jury and ammo. Please use in that order.”

        • BuySome says:

          4+1 boxes….The soapbox was restricted in order to ensure the ballot box went in favor of obtaining a hand selected group which ruled from the jury box that the ammo box could be seized regardless of the iron clad document previously accepted by all free states’ representatives. Liberty died in the corner of the room, and the stab wounded corpse was then promptly placed on display in a pine box so that all the passing mourners could be forewarned of what happens to those who present a threat to the select. Silver Certificates were to be left in lieu of flowers. No substitutions from column A, free fortune cookie on the way out. By order of the new commandants.

    • Happy1 says:

      The Fed is part of the very large and clearly unconstitutional regulatory apparatus that was never intended by the founders. They are completely untethered from our control. This is a product of congressional action, they have ceded virtually all regulatory action to the regulatory state so that they can avoid blame from voters and remain in power.

      But the solution now is to destroy the regulatory agencies. The Fed being the worst, but unelected people at EPA and Dept of Justice and elsewhere must be drastically pruned back. This is unlikely but it is the only solution. If this does not happen, we are in for a long slide to mediocrity.

      So it is correct that Congress is at fault, but those faults are decades old, dating to the 1930s. The solution now is to eliminate the Fed.

  20. Say It Aint So says:

    How can you expect the little man from Main street to sell? The pundits have been blasting the Fed since 2009 and yet the market continues to rise…now to levels that are considered parabolic. But with interest rates in the toilet and no one ever goes to jail (remember all the PE’s gutting companies after running them into the ground?) what’s to fear? Every pundit is now criticizing liquidity as too much but no one can explain when the collapse is coming? So everyone has FOMO…I spoke with a friend of mine who’s 401K blasted off since 2015….you think these boomers who are all in their late 50’s are going to sell now? Another friend of mine has 80% of his retirement in Apple stock and he has tripled his money since 2013…You think he is going to sell?
    Most of the pundits have missed the last 8 years and are still waiting for the crash that may not come now that 2021 is being predicted as the biggest recovery ever…

    • Happy1 says:

      If your friend doesn’t sell, he will eventually pay a hugh price. See “nifty 50” and dot-com bubble.

  21. CCDragonfly says:

    History doesn’t repeat but it rhymes… The things I am seeing now remind me of ’98/’99. Instead of punting in options of internet co., individuals are playing with bio tech/AI/battery tech etc… I can’t walk into the local country store without someone asking for stock tips. I am a retired banker and people I know have been asking for investment advice since the summer and perhaps worse, asking about options.

    My best guess is the party continues into ’22 when the SP takes out 5,000. There will be some scary vol along the way but this bubble has some legs. Unless some tail event knocks it over first, the Fed starts prepping the market for tightening mid/late ’22. Bubble bust in late ’22/’23. ’23 is really the only time for the Fed to try and tighten, it will not want to do anything in ’24 a presidential election year.

    Thank you Wolf and all commentators, I have enjoyed reading for years.

    • RightNYer says:

      Earnings won’t rise, so the only way for the S&P to hit 5,000 is for P/E ratios to rise to 50-60. Yikes.

      • Anthony A. says:

        Fake earnings coming next along with costs hidden in off balance sheet SPV’s. Then throw in some phantom revenue from future sales. Remember Enron?

        Stonks to the moon, Alice!

      • qt says:

        More stocks buybacks coming!!!

    • Lisa_Hooker says:

      The markets and economy are going to crash – a few years after we are all dead. It’s just not fair. ;-)

  22. MooMoo says:

    If people are entranced with what “CONgress” is “doing” they are looking at the wrong entity. Repeat after me = “markets can only be manipulated in the direction they wish to go.” The stock market will be choppy, but it is not overbought. It has nothing to do with earnings or dividends. Capital needs a place to park…and there is no place to go. Government bonds produce nothing. And government is broke. Equities are the last refugee for capital…so they are stuffing the assets that used to be in the govt. bond market into equities… which is 10:1 ratio. The equity market is tiny compared to fixed income…which now yields 0%. So that ‘anti’ trade wins… collectibles, paintings etc and equities, which are semi tangible and somewhat portable.

    Hate to break it to you all – -but equities have NOT seen their high.

    • MooMoo, two phrases come to mind: THE BULLS AND THE BEARS MAKE MONEY ON WALL STREET, BUT THE PIGS GET SLAUGHTERED. And the more ancient one: A FOOL AND HIS MONEY ARE SOON PARTED. When the air pocket comes, any bids at all will be many, many percentages below your ask.

      • VintageVNvet says:

        How about, “A fool who persists in his folly becomes wise?”
        And, my current fave, I am SO protected because, ” God protects drunks and fools, and I qualify for both.”
        Infinite fun there for us eternal skeptical optimists, eh?
        Especially We the Peedons who have, like, fully accepted our situation!

      • MooMoo says:

        I will (and am) be long downside puts, far out of the Money..and covered.

    • RightNYer says:

      Maybe, but I am not willing to put new money into a market with a PE of 40. Good luck to everyone who is, but it won’t be me.

      • MooMoo says:

        PE was HIGHEST at the 2009 market low… PEs don’t reflect Value of underlying

        • RightNYer says:

          Yes, because earnings cratered, reducing the denominator. Here, earnings were basically kept up because of massive stimulus and printing. For example, consumers were able to buy even more iPhones because the government was providing extra money to do so. So the earnings have a lot less room to “recover” because they were artificially held up the entire time.

    • Lisa_Hooker says:

      Much of the current market appreciation is based on “I’ll have what he’s having.”

  23. Mr. House says:

    Its been broken since 2008, some just decide not to see it.

  24. Robert says:

    We really should place this article in a time capsule so that in 100 years people will know what happened. The internet will be so censored by then(if it exists at all) that no one will know why they’re living in mud shacks in the shadow of great crystal towers.

    How can you discount corporate credit when junk credit is treated like gold? The Fed has given unlimited credit cards to every large corporation in America. Yet there’s squabbling over $1400 checks (wasn’t it $2000?) to the people.

    • BuySome says:

      If they’ll need an explanation, here it is: Richard Nixon never really understood the game of Ping Pong. The only way to win is to sieze the net, wrap it around your opponents neck, and tighten it until he screams “Uncle X!”. The variable should have been Sam, but so far has been Mao. People didn’t get it some were saying “Don’t change Dicks in the middle of a screw, Vote for Nixon in ’72”. Other than a short-lived good play on Reagan’s part to stifle an evil empire’s aspirations of domination and enslavement, it’s all been downhill ever since.

    • Island Teal says:

      You already got $600……

      • RightNYer says:

        I didn’t.

        • VintageVNvet says:

          If you are poor enough, apparently from what I read on the 202 1040 instructions, you will be getting that $600 as a rebate on your taxes.
          Not sure at this point on the likely increase, $1400 to make the total of $2K that the former pres asked for and the current pres continues to ask for,,, but the $600 is apparently safe for those of us with low enough income(s).
          Discussed with the better half yesterday that we should wait to the last minute to file, since THEIRS owes us this year anyway, but with the hope that they will pay even more if we wait a month or so…
          ”Liquidity levels” is all there is left to debate in this ”same as always” situation,,, LOL

  25. robert scheetz says:

    Hedging makes perfect economic sense in the commodities market. But I can’t see its value for equities??

  26. The FED is the patsy. Stop blaming the FED. The crime goes deeper than that.
    Capitalism is dead, and the capitalists are in the first stage of grieving: denial.
    The capitalists are faking it, and the FED is enabling the charade.
    Capitalism died because profits dried up. Profits dried up because the capitalists exploited them all, sucking profits dry wherever they went. They went to the US, and sucked it dry. They then went to China, and sucked it dry. Then to Mexico… For centuries, they’ve been doing this.

    Profits are gone, all dried up. And without profits, there is no capitalism. RIP.

    So the capitalists in denial are faking it: blame the virus, blame the FED, ask the FED for more funny money, zombie corporations, corporate buybacks, pump and dump, short squeeze . . . anything but earnings.

    Capitalism is dead, long live the capitalists.

    • To all you Fed Defenders, in legal terms the Fed is AN ACCESSORY TO THE CRIME OF MISPRICING A SCARCE RESOURCE, CAPITAL AND CREATING FINANCIAL MARKETS THAT RISK BRINGING DOWN THE ENTIRE U.S. FINANCIAL SYSTEM. An a major accessory or ENABLER at that.

    • Old school says:

      If you knew very much you would know that corporate profits had been running top the top end of historical averages which is 10%. That is not necessarily a good thing and indicates that probably corporations have colluded with government because free markets keep profit margins in check.

      Also in western societies with capitalism water contamination is measured in parts per million where in third world nations no measurements are taken inany towns.

      You would also realize that you are enjoying all the fruits of capitalist that came before you such as a toilet, hot water, central heating and probably the biggest deployment of capital ever a smart phone and the invisible network that goes with it.

      If you want to live in a world without capitalism you can find an isolated place and try to start you a homestead and see if you enjoy a world without capital.

      • Jonas Grimm says:

        Capitalism didn’t build anything. It’s a system. The people built it because they thought that playing by that system would get them better lives. Turns out, in the end, capitalism without boundaries only benefits the few.

        There are alternatives to our current system. I won’t use the dreaded ‘S’ word because even I don’t think that’s an absolute solution. But crowing about how we owe everything to capitalism is nothing but market cultism. You owe your wellbeing to the people who came before you, not some nebulous system of exchange and transactions.

        • Old School says:

          The problem with socialismis on average people will not work to provide for someone else’s family as hard as they will their own family unless they are forced to. It’s not natural.

    • MooMoo says:

      I’m sure Communism will work out just fine.

      Maybe, just maybe, if government (that wonderful socialist entity) didn’t, through mandate, force pensions funds to buy its own garbage debt – we wouldn’t be in this mess at all.

  27. gorbachev says:

    The market for me has always been consistent.
    They try and take your money and you try and take theirs.

    • Lisa_Hooker says:

      They seem to be better at it than me. Then again, I can’t have the rules changed to my orders. Mobile goalposts are a great help.

  28. Not all trades get to the exchange. Brokers provide clients with stock from their own port, at the market price more or less. Online brokers will open a short without borrowing the shares. This has gone on for a long while. Brokers trade against you, using your portfolio as collateral to sell options using margin retail investors cannot afford. Used to be the joke in the 90s, when the analyst from a big broker would come on CNBC, bullish on XYZ, while his traders were busy selling it. Somehow a cesspool of institutional corruption became a matter of national security. This market isn’t going to break down, it’s going to break upwards. The Reddit mania is microcosm. Yellen is already in hearings on Gamestop in order to figure out what to do about the upcoming NYSE melt-UP. Fed policy to inflate works best when money flows into the system incrementally. A 20% percent rise in stock prices in one day would destroy confidence in these institutions. So it might be they crash the market to provide context (past as prologue) while they remain confident they can implement nondisruptive money flows to liquify markets at whatever level the market stabilizes, and once the money flows are in place leverage allows the players to take prices to their old highs very quickly. They are confident in these tools. Draghi may be Italy’s new PM, and Merkel is out. Austerity takes a holiday.

    • Lisa_Hooker says:

      Call eTrade or any other on-line broker. Ask them what the margin interest rate is for a $20k account. Then ask them what the rate is for a $2000k account. Surprise.

  29. Duane says:

    (Blue Oyster Cult song “Career of Evil”, dedicated to Ken Griffin’s Citadel Securities)…

    I choose to steal what you chose to show
    And you know I will not apologize
    You’re mine for the taking
    I’m making a career of evil
    I’m making a career of evil

    (Patti Smith wrote the lyrics)

  30. Sam says:

    “Most people do not listen with the intent to understand; they listen with the intent to reply.”–Ernest Hemingway.

  31. Jack Milard says:

    Look at US 30 year treasury bonds yields today 1.94%. Oh man, my good friend last year bough a bunch of these in April-2020 is crying now that his US long bond ETF’s are down 11% year to date.

    I told him don’t buy these things as rates can easily back up from such very low levels, the lowest in history if not one of the lowest. I will continue stick with my CD’s, US treasury strips and gold and it has done it’s job 6.5% to 7% doubling my money very 10 to 10.5 years.

    This is my average over the last 20 years. I don’t expect this to continue but all I need is 3.5% to 4% a year and will take that over the next 10 to 12 years. I see a 4.5% to 5% average over that time which is very achievable by 2032.

  32. Ed C says:

    Call me old fashioned but … why don’t they start by re-instituting the uptick rule on shorting?

  33. Mortadell says:

    Like I said recently Wolfsters
    I’m made even more money today playing OTC stocks, maybe even $20K
    Don’t be afraid the trend is your friend
    You only have to hold some stocks for one hour
    Its the new chicken in every pot don’t you know.

    The one main advantage I have with these stocks is the main reason all you beautiful people congregate here; I read, books!!

    Not one of those people short or long do any DD they follow the crowd.
    I’m serious when I say my trading account is up over 100% this month
    Is it easy? No way, but if you can read and have an attention span its like taking money from a baby.
    May you all live long and prosper :)

  34. sunny129 says:

    ‘The stock market is broken’

    May be for the bottom 90% but not for the top 10% who own over 90% of wall st wealth. Billionares became more rich during pandemic in ’20! Mr. powell sees no bubbles. Ms. Yellen took 810K from Citadel for her speech!
    With regulatory capture in place, Foxes are in charge of henhouses.

  35. Tom S. says:

    I think the key point here is the, “for all to see”. Most people do not want to think about money, markets, etc…but will be forced to in the face of inflation.

    I’m not necessarily opposed to globalism, but when all the central banks are doing QE at the same time to fix a health care crisis, and the rich get richer, I don’t necessarily enjoy the fruits globalism either. One irony is that Yellen talks about the shrinking middle class and at the same time does her best continue to funnel wealth upstream with phony interventionist measures.

  36. Yort says:

    The entire global financial system has already been broken, the markets chose to ignore it for now (today was no reason to cheer via economic data other than mooor free money printing to buy mooor votes). It took 40 years to break capitalism…congrats?

    Stagflation is a future high probability, with higher future prices across the board, lower real productive growth. Hedge accordingly…

    Per Liz Ann Sonder today:

    Sharp decrease in Q4 productivity, which fell -4.8% (worst since 1981) vs. -3% est. & +5.1% in prior quarter … unit labor costs +6.8% vs. -7% in prior quarter; employee hours +10.7% vs. +37.1% prior; real compensation -0.6% vs. -7% prior

  37. mike oxbig says:

    The mkt is doing exactly what it is supposed to do. Which is balance with debt.
    If debt goes to the moon, what is the other side of the balance sheet supposed to do? Go down? lol, right.

    All those looking for another 2000 or 2008 will have a lot of explaining to do.

    Because it is never ‘different this time’.
    The mkt will do the same thing it always does when the central banks engage in project Zimbabwe, or John Law is running them, or whatever.

    There may be a correction, but there will never be another bear mkt until the whole shootin match is destroyed by those lunatics at the fed.

  38. Richard Greene says:

    I don’t see how the speculation ii GME, or any other stock, shows the stock market is “broken”.

    In fact, the stock markets have accommodated huge volumes of trading in recent months.

    GME is just one example of the type of speculation common near the end of bull markets.

    We citrrently have the highest market valuations in history with two valuation indicators that are excellent for long term (10 year) market forecasting — The Price Sales Ratio and US Stock Market Capitalization as a Percentage of GDP.

    This bull market, which I consider to have started in March 2009, has been extended by unprecedented money supply growth in the past year (M2 up about 27.3%) which boosted bond prices, stock prices, real estate prices, crypto-currency prices, and recently commodity prices too.

    With GME. some people will win, and other will lose, in the short run. Probably mainly losers in the long run — it is a failing company with an unprofitable business plan. I doubt if it is worth $5 a share today, but for now some people are willing to pay a lot more than $5, and other people are just as willing to sell their shares for a lot more than $5.

    The stock market is not broken just because some people paid over $400 a share for GME — and other people sold their GME shares to them for over $400.

    The stock market matched up those people, and hopefully they are happy it was easy to make a trade, and their commissions were low.

    Robinhood did their customers a favor by trying to limit the obvious wild speculation, at the expense of hurting their own business in the short run. Their customers could have bought GME elsewhere is they really wanted to speculate.

    … At least Tesla sold 500,000 cars last year, and the electric car segment is growing, even if the stock valuation seems very inflated. There are plenty of stocks with no earnings at all. and some penny stocks with no earnings or sales!

    If anyone is interested, Al Gore is selling shares in his Manhattan Gondola Line, intended to carry Wall Street executives to work after the streets of New York City are flooded from the rising seas, caused by global warming.
    Guaranteed to double your money in 60 minutes.

    • RightNYer says:

      Richard, I think you’re missing the forest for the trees. This particular bout of speculation regarding GME does not, in and of itself, prove that the stock market is broken. But this mania didn’t develop in a vacuum. The elites, which include Congress, Wall Street, the Fed and the rest of the Government-Wall Street complex, have created a situation where assets are obscenely overpriced, by almost all metrics.

      This means that stocks at reasonable prices, homes, and others are out of reach of much of America, including the young. Meanwhile, good jobs have been sent out of America for the benefit of the capital class, and we keep accruing debt which is nearly guaranteed to leave them worse off than their parents (which historically, has been the reverse of American progress) They feel like the economy doesn’t work for them, and that they’re set up to fail. When that’s the case, why NOT gamble and hope to get rich quick?

      I liken it to lottery tickets. You know how the lower middle class and poor buy more lottery tickets than the upper middle class and wealthy? Well, that’s because they feel that their lives are hopeless, and that the only way to improve their station is to gamble. The chance of winning is infinitesimally small, but it’s higher than 0.

      The same applies to the public capital markets. Greedy, reckless people are bailed out, and there’s no incentive to be responsible. So why shouldn’t these people try to get rich off a short-lived mania? If it fails, what do they have to lose? Some savings? So what? Their debts will be forgiven and they’ll be able to get more “stimulus” later anyway.

      • Richard Greene says:

        “The same applies to the public capital markets. Greedy, reckless people are bailed out, and there’s no incentive to be responsible. So why shouldn’t these people try to get rich off a short-lived mania?”

        Greedy, reckless people have no savings to invest in stocks bonds etc.

        It is the individual savers/investors, pension funds and insurance companies, who ARE responsible long term investors, who have been (temporarily) rescued by an unprecedented Fed policy of expanding their assets by $3 trillion to support $3 trillion of federal deficit spending.

        People can gamble their money on whatever they want to — the stock market is not broken because some people used internet communications, in a failed attempt to corner the market in GME, and failed. … That is just a SYMPTOM of excessive speculation common near the end of bull markets.

        I have written to President Biden, asking for a $14,000 stimulus check — $1,400 is peanuts.

      • 91B20 1stCav (AUS) says:

        Right-when yer right, yer right!

        may we all find a better day.

  39. yossarian says:

    wolf, thanks for the great summary of the situation. what i’ve been curious about is whether this situation was a one off or it’s going to keep happening. $gme is off 35% today but i’m not sure it’s over. i’m watching these guys on reddit and it’s fascinating. i haven’t been actively in the market since 2008 but the $gme situation has gotten my attention. i’ve been playing around with simulated trading on ninja trader. it’s amazing the tools that are available at very reasonable prices these days. as corrupt as the markets are, technologically the playing field has never been more level.

    • VintageVNvet says:

      Yep, absolutely YES on your last phrase y,,
      Been saying a few years, since mostly retiring and reading much more widely than when reading/vetting a thousand or so pages of work related ”specifications” per week most of the previous 5 or so decades, but habit/enjoyment of reading the same, so keep at or at least close to that level reading news sources around the world, often, if not daily.
      Love the absolutely, ”different this time” level of communication, especially the vast increase of available to WE the PEEDONs communication through the ”darpa” net, now known as internet.
      Worked on that darpa net in the 1960s era, and even though I could see what ”might” happen, I was not one to be a civilian saluting any member of the military, as I had been there done that and did not want to do so anymore.
      For now, it really appears that we will continue to have a military who will not only follow their clearly prescribed role in the US Constitution, but will also, led by competent folks, will at least try to keep up with the military challenges from other countries of the current world who are doing their best to increase any and every advantage they might be able to grasp.

    • Happy1 says:

      GME is over. The short squeeze is played out. There is probably more inside money long than there is short at this point trying to front-run the crowd. This stock is worthless and the herd trying to drive it up will be completely fleeced in a few weeks.

  40. lenert says:

    Dunno about broken – still seems pretty well fixed.

  41. kitten lopez says:

    Wolf I need latitude here:

    i sat in the sun and thought long and hard before i sat to write this–

    i just finished a piece of writing that is indirectly also related to Wolf and his support and prompting of me to get back online and writing. that piece just turned out to be more than a blog post and in finishing a spate of rants to Wolf on the side, it helped me end a SENTENCE i’ve been struggling to finish for YEARS now.

    it wasn’t a writing for anyone but me, and those are rare and clear my focus. it was to end all writings for me for awhile, so this here is a straggler i MUST place here because of what i’ve told you, it’s got a good provenance. i read the comments and it is very related and important that i step forward and re-iterate that so many of you are looking for government or someone else someone more powerful than “you” to give you an answer or to publish Wolf elsewhere to give him the glory he’s pretty much immune from because “he’s died already”. i don’t know how else to put it.

    his own god, his own WIFE is more important than any glory he could ever get at this point.

    regarding Wolf on NY Times. I SHUDDERED IN HORROR. talk about trying to neuter the man and his word and reputation! love him or hate him any given week when he cuts your comments or disagrees with you, Wolf’s been here for YEARS. these days that’s way more hella solid than many of you with your own KIN after these past 5 years. TEN YEARS… twenty… going going GONE!

    so you think they don’t know he exists when literary agents routinely scour blogs for books and ancillary projects?

    i write because i’m not a “witch” but this stuff about THE ACTUAL POWER OF DOING IT OUR WAY COLLECTIVELY! YOU’RE IN THE DRIVER’S SEAT! GREEN LIGHT! GO! is all red-light blaring sirens saying: “LOOK! EVERYTHING’S A SHAM! TAKE OVER YOUR WAY!”

    r/wallstreetbets is beautiful and when i caught the look in the PBS newshour old guy’s 28 yo grandson living at home in a bedroom bigger than our apartment, the one who put in something like $283 and he’s STILL holding! why?

    because PETUNIA WAS RIGHT AGAIN: Did you SEE THE LOOK IN HIS EYES when he said he was gonna hold?… seriously HOLD… he wasn’t worried about losing $283 fucking dollars! HE’S A 28 YEAR OLD BEAUTIFUL MAN LIVING IN HIS PARENT’S HOUSE WITH A ROOM FULL OF TOYS AND EVERYTHING BUT A WOMAN / AND FOR $283 HE’S ON LOCKDOWN BUT HE’S IN THE 5D WITH A BUNCH OF GUYS ONLINE WHO’RE STILL DOING THOSE DUTCH OVEN FART THINGS WITH THEIR BLANKETS AND THEY’RE IN IT TOGETHER!

    He was HOLDING onto a vision of God and if this can fly off social media and get some teeth, he’ll/they’ll learn to do the same in the real on the low, to keep the game private and blowing it up online and thus killing its power.

    the power is WE SAW IT WITH OUR OWN EYES.

    and that’s why i write. because when i first landed here from that ZH, i knew Wolf couldn’t be bought and he was too much of a cross of James Bond with the young wife and the sailboat life in SF, and Bartelby the Scrivener.

    Wolf’s eyes are clean and solid. he is his word. / and his wife makes it impossible for him to wanna cheat because she’s the kind of woman people wanna cheat WITH.

    but because he’s died, he’s not for sale. he’s here because of something bigger even though he loves this gig. but he’s also a part of something more wild and evidence of that is his friendship with the likes of ME!

    friendships and all relationships bring other families of kin together, and i’m getting ready for my place in that somewhere somehow.

    in the meantime i had to write because THIS place and the future Wolf Meets are a part of it.

    i’m not a witch but i feel other forces unseen, other people, energies, waiting in the wings to approach Wolf on some future …collaboration in the Real.

    i don’t know what. i’ve felt it for awhile. they’re waiting for their moment and how to approach him eventually.

    so i know i’m not the only one who sees a lot of potential for serious change emanating from the minds that populate this place. i feel it. so do you. that’s why many of us are here, lurkers included. i SO know Unamused is still here. i talk about him as a way to wink and say hello.

    he keeps tabs on us.

    anyhow, so you all need to get past the phase of “this can’t be happening!” and start to realize the faery tale ain’t what you thought it was, but the excitement is you see how LITTLE it takes to up-end everything and all you thought you were helpless to change.

    so stop looking over Wolf’s shoulder for someone prettier and newer to come in the door. he’s IT. and this an amazing group of minds and you all remind me of a story i read some smaller movie producer wrote about Neil Simon saying he’d wanna do a movie “if” they let him, and he was horrified to realize you’re NEVER on top. you’re always asking someone else for permission to do what you wanna do.

    and he felt defeated as a little guy.

    but when stuff is busting at the seams, and the people who think they still run things—Petunia said people who act like drug addicts who’re still in charge—(shrug)… do i need to spell it out?

    we waste so much. no more looking over shoulders for someone better to come in.

    we’re IT…. yeah, “The Pretty Ones Now.” / i keep on hearing that in my head and i laugh because it’s actually an old inside joke between a couple of us leos who …well, we weren’t ever really JOKING.

    (smile)

    Motorcycle Steve as he now calls himself. rode all the way out here on his motorcycle and whether he came out on purpose to love us or some other woman, HE AT LEAST SCHEDULED A GRUELING CONSTANT RIDE CROSS COUNTRY BASED ON THAT LAST WOLF MEET.

    no! no one’s gonna act like this isn’t rocket fuel. / i’m the pretty one now because i see things differently: i see things you all have been WASTING all this time. / often it’s yourselves.

    okay, done with request for latitude./ back to not writing much. that was leakage from my earlier writing where i finally blended my economic fantasies with culture and terra firma.

    i had to write this to finish the connections that were glaringly obvious because they always were in the comments sections here, but you all didn’t seem to see it earlier either, so i’m just covering ALL my bases. no more nudge nudge wink wink anymore. i ended up siding with all sorts of causes i wouldn’t have, because of such vaguenesses.

    that’s also how i know we’re not as separated by ideas as we THINK we are. / the internet is evil, y’all.

    why i’m taking another break to venture into how to make a living in Shut Down Real Life.

    Thanks, Wolf./I’m out. i won’t even answer back if someone says something. i promise.

    and please post this. i thought long and hard and like James knows and is used to, remember that my tantrums or melt downs don’t reflect on YOU as a person AT ALL. this is all me, you all.

    xxxxxxx

  42. elkern says:

    Thx, Wolf, I haven’t followed this that closely. The Short Squeeze worked beautifully, doinking a bunch of Hedge Funds (Oh, the humanity!) and making some dough for the Reddit Raiders. I like the added bonus that some Pension Funds made some real money off the Hedge Funds – usually the predator/prey relationship goes the other way.

    But GME – and likely many other shorted “stonks” – was probably over-valued before this play, and is certainly over-valued now. I hope the Reddit Raiders had/have the sense to bail out quick; I fear that they have attracted amateur trend-followers who will now get hit hard, as GME price falls back down to Earth. As you (and even Kate McKinnon!) noted, GameStop is losing money using an obsolete business model (Software is non-physical, so you really don’t need storefronts to sell it), so it’s “natural” price is Zero.

    Bonus problem: If this turns into A Thing, Quants & Banksters will figure out ways to make money off the amateurs; that’s what the the really rich people pay them to do.

    • RightNYer says:

      The real issue with Gamestop is not that software is physical (after all, a lot of collectible video games exist in cartridge form), but the fact that you have a very limited market. The likelihood of a particular Gamestop location having that 1989 original Mario Brothers and the likelihood that someone interested in that game happens to walk into that location is very low.

      This type of business model is much better suited to being moved online, where you can easily connect sellers and potential buyers.

  43. Brad Tifman says:

    Congress to “investigate,” is like a dog investigating its owner.

  44. DawnsEarlyLight says:

    This podcast is strangely whole-fully satisfying, but horrifically frightening.

  45. Dan Munson says:

    Hey Jack Milard, I bought in 2018 long term 34 year 3.47%, 3.49% US treasury strips and sold them last May, 2020 for a 24% profit, capital gain.

    Add in another 7.8% in compound interest and I am a happy camper with a almost 32% return in 2 years. Even as I sit in cash making little interest right now, I will be looking for the 30 years+ US treasury strips yields will go. Since they are above 2% now, I will buy in at 3%+ yields in coming year, months.

    I have done this for years and have made on average 9.156% a year over the last 11 years. I retired and live off only 70% of my net after tax interest and reinvest all the capital gains for years now. I got my first social security check just last month which now makes my investing much easier with a $1,800 a month cushion now.

    • mtnwoman says:

      Can you explain more what you are doing? and what a “strip” is?

      Where are you getting 7.8% compounded interest?

      I need some safer investment vehicle than equities.

      Thank you.

  46. Andrew Stanton says:

    The volume in GME suggests that most of the manipulation was done by other institutions rather than small retail traders. What hedge fund manager could resist taking advantage of a competitor caught in a squeeze?

  47. MonkeyBusiness says:

    There’s a great article over at SFGate by Drew Magary. It’s very rare to see something as honest as that. Some choice quotes:

    “From stem to stern, the American economic system is corrupted to boost the market as a collective entity. And THAT is where you put your money.”

    “Hence, the average American’s best way to survive the vagaries of the market is to invest in ALL the corruption, not in bits and pieces of it.”

    “The reason networks and papers treat the Dow as a barometer for how the American economy is doing is because it’s actually a barometer for how the RICH people are doing. Everything about our government and the companies buying favor with it is designed to keep rich people happy. The game is rigged, and only a sucker goes against the riggers.”

    “So invest in all the terrible people and make the miracles of oligarchy pay off for YOU. The numbers will bear it out, and the numbers don’t give a f—k about anything else.”

    I mean Wolf has mentioned some of these things, but seriously this man has no illusion left.

    • Tom S. says:

      If the economy is an engine and money is the oil, the mechanic is pouring in quart after quart and its spilling out the top and taxpayers will be charged for every last drop.

    • RightNYer says:

      Interesting piece, but the main problem with his thesis is that he assumes that the government can keep this game going forever. It really can’t, nor can it “rescue” the market. All it can do is play a long con game. Make people THINK you can do so so they buy in and don’t panic. As long as people really believe it, the market staying up becomes a self-fulfilling prophecy.

      Also, he wrote this:

      “Those guys want you to look at the market and be like, “ZOMG THIS IS SO RISKY! NONE OF IT IS REAL!””

      No, that is not true. If all of the people, collectively, thought “This isn’t real” and dumped it, their game would fall apart. So no, they want people to think it is real, and that it’s not risky, so they can continue collecting their fees.

  48. Norma Lacy says:

    Dear Esteemed Wolf – I just saw your byline for this particular article on zero hedge. Well done. I hope it brings you many good things.

    And, for the record, this particular article is one of your most cogent and thoughtful.

    cheers!

  49. kitten lopez says:

    My Dear Vintage Viet Nam Vet:

    With all the respect due you and your honorable family, you only buttress MY statement that Wolf is radical.

    American Heritage Dictionary:

    RADICAL (adj): Arising from or going to a root or source; basic.

    Departing markedly from the usual or customary; extreme or drastic.

    Relating to or advocating fundamental or revolutionary changes in current practices, conditions, or institutions.

    —-as for radical simplicity, and its danger, all our Jesuses–the original and follow ups—have all been murdered because of the danger of reminding everyone of the LOGICAL enlightened self interest of not being a DICK.

    —–

    Petunia was right long ago when she first said on here, and i paraphrase… something about the rich being the sloppy ones but: “don’t tell the poor how to manage their money; they HAVE to manage it well or they DIE.”

    when she said that, i thought of artists, and that’s why there are sooo many artists here, often on the low. artists are the same. we may SEEM like airy fairy touchy feely flakes, but you wouldn’t BELIEVE the amount of brilliant creative math goes into all that we are. because if we didn’t manage our money well, we’d DIE.

    i’m learning that everything’s upside down because we’ve been complicit in our own propaganda. i first heard this about those who’re in advertising and media and think they’re so hip for being insiders, but we are its biggest dupes as we worship at its alter as we dole it out dutifully to others.

    to find out at every turn in my life that when i figured i was most swaggeringly independent, i was just a step n’ fetchit. ugh…

    so yes. RADICAL is basic obvious and simple, but only when you’re not in what Baldwin called The Lie.

    a lot of us were in The Lie because i think as RightNYer reposted from the Chronicle (SF), to be smart in this system was to PROP up the b.s. to benefit. to fight is futile.

    and Thank You for Your Service. I’m terribly ashamed that I did not say that much earlier.

    x

    p.s. Sorry Wolf that I sorta lied about not responding to anything anyone said. it looks like my original epic comment is pending so i’m gonna use the grey area of saying: “I thought if you killed THAT one, this one might be okay.”

  50. BuffaloBob says:

    When I was a Broker and Principal back in the 80s and 90s, Robinhood’s scam was called “front-running” and it was explicitly against the law.

    Basically, Robinhood is stealing money from retail, giving it to institutions, and taking a cut along the way. It tells institutions what retail is doing and lets institutions trade in front of them. This is, and should be a crime.

    To their discredit, the exchanges began blurring the bright line against front-running by letting high frequency traders cut the line on trade executions about a decade ago. Technology was used as an excuse to subvert fairness and law.

    Face it retail, you are the mark. The deck is stacked against you. Play at your own risk.

    • Thanks BB, there was a lawsuit CaPers vs Goldman I believe, they were trading in front of their clients. The other issue if you would care to comment has to do with (online) brokers filling trades out of account, esp shorts.

  51. SocalJim says:

    In my opinion, the market is not broken. Market valuations makes sense if your base case is a 90s style goldilocks economy … an extended period of low inflation with above trend growth.

    However, I disagree. My base case is moderate inflation with slightlly below average growth which makes me neutral equities.

    If your base case is stagflation, then you would want to underweight equities.

    The market seems to think the current inflation spike is just a temporary blip that will go away. I disagree. We will see.

    If your base case is goldilocks, then overweight equities.

    • RightNYer says:

      I don’t know about how inflation will shake out, but above average growth, I am just not seeing how that could happen.

      • You remind me of that women in Congress, “I was allowed to believe these [false] things.” There is plenty of inflation, mostly asset inflation. You are watching it “shake out”. You also know what the Fed will do and when they will do it. There is no inflation “spike” in RE or stocks. The Fed is completely transparent (so far). The central banks have been pumping the global monetary base since before GFC. The dollar firming, jobs returning, and disinflation in the EM. Meanwhile AI technology advances regardless, a new generation of robotics will forestall any labor market tightness. Real question how is this generation of tech spending different from the 90s. Remember when companies resisted the new windows upgrades? At least government gets it, Sen. from Utah wants all parents to get a monthly check.

  52. Ron says:

    Kudos wolf free speech and honesty unheard of in this con game will not end good for rich as song said nowhere to run nowhere to hide

  53. historicus says:

    Broken?
    A Rod has an IPO….
    I’m waiting for J Lo’s….
    yippee….

  54. paul says:

    After i heard, what Robinhood was doing, i think it´s a good reaction to send this submarine to their bankrupt hedgefonds-colleagues.

  55. SpencerG says:

    “The idea that the stock market is where price discovery takes place on a rational transparent basis… has now totally imploded.”

    I almost laughed as I read that description of the stock market!

    Price “discovery”??? As if!

  56. asdf says:

    Great article. The postscript is the “Ethics Waiver” for Treasury Secretary Janet Yellen whose role in this story cannot be overlooked. Yes, the same Yellen who received close to $1 million in “speaking fees” from Citadel….

  57. Higher Vibration says:

    Ask yourself this:

    What are the chances of Reddit being bought by the CCP
    Musk tweeting about Supporting Game Stonk
    and a Chinese Billionaire saying Hold the line and buying shares of GME,
    Also Meme Diamond Hands.

    all by accident?
    and Hedge Funds connected to BlackRock

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