The Democratization / Demonization Of Speculation

The market rigging game has suddenly been turned on its head.  The victims are happily doing the rigging.  Better yet they have discoved the true achilles heal of the money crowd who used to play against them. 

That vulnerability is that the pros all sell short with or without borrowed stock.  They stopped pretending about twenty years ago.  With the pros always short, they are a combine quite able to wreak markets to extract thier profits.  What none of them ever imagined is a massive herd of sheep known as day traders jamming in on the party and turning a massive short into a runaway train wreck.  

Imagine shorting a market able to absorb say two million shares at an average of $50.00.  all is good.  You collect 100 million dollars while putting up 50,000,000 as collateral.  good profit potential here.

now the sheep arrive and plow in a couple hundred million to sweep the market clean up to $100 per share.  You suddenly have to put up 200,000,000 more collateral.  Then the sheep smell blood.  They throw in another couple hundred million of buying power and this $50 turkey suddenly becomes a $400 eagle and you have to put up an unbelievable billion dollars.  Then they start buying you in to force delivery if that is still possible today.

In fact the lack of buy ins is why this has possibly gone out of control.

So of course  the pros stop trading and try to change the rules.  This is called a revival of the good old days of the VSE where small time short raids were rather common along with squeezes.

What is different is that we now have a massive engaged audience quite able to swamp a target market  with buying. The old game has now become deadly for the so called pros who really had one trick.

The Democratization / Demonization Of Speculation

BY TYLER DURDEN

FRIDAY, JAN 29, 2021 - 21:20

https://www.zerohedge.com/markets/democratization-demonization-speculation

How do you unrig a speculative rigged market? You don't. It simply crashes into a putrid sinkhole.

Gamed speculation--using knowledge of how markets can be pushed to profit those doing the pushing--has long been decried. Declaring that the unproductive profiteering of greedy speculators will be the death of the Republic goes back to Rome, and in American history, to Alexander Hamilton's battle in 1791 to pay the speculators who had bought up the new nation's war bonds for pennies on the dollar full value plus interest.

GameStop Moves Are 'Weird, Speculative': GMO's Ben Inker

Gamed speculation--and the cheery presumption that there will always be a liquid market of chumps willing to buy insiders' pumped-up balloons--inflate and pop bubbles, with devastating consequences not just for the broken speculators but for conventional investors who naively believed "the market" was in fact a market (smirk) rather than a mechanism to enrich those who have the capital and knowledge to engineer profiteering behind the curtain. (Please see the still from The Wizard of Oz below.)

An interesting intersection of dynamics has led to the curtain being ripped aside by the democratized speculations of WallStreetBets, a crowdsourced pool of speculative capital which shares many characteristics with online gaming and live-action role playing (LARP) only the gains and losses are in real dollars (the fortunes made and lost in GameStop (GME) are very real indeed).

Wall Street and the politicos who profiteer as insiders are naturally horrified by both developments:

1. That the curtain of how super-wealthy insiders and their only the wealthy can play entities such as hedge funds have manipulated markets behind the curtain for decades, leading to an unprecedented economic inequality in which the top 10% skim fully 97% of all income from capital. To have their game hijacked by a bunch of young gamers is beyond appalling to the New Nobility, who firmly believe their insider manipulations were the exclusive preserve of their crowd in the castle.

(Recall that ours is a thoroughly Neofeudal Economy, with a New Nobility of financiers, Big Tech monopolists, et al. who own the vast majority of capital and political power, and a restive mass of commoners holding either no capital or phantom capital that will dissipate into thin air in the next financial upheaval.

2. Not only are the mechanisms of manipulation now visible to all, an unruly rabble of commoners has ganged together to play their own version of the speculative game of skimming staggering profits from a rigged "market." How dare they!

No wonder the skimmers and scammers and political refuse that passes for "leadership" in today's America are shocked, shocked by the open and openly gleeful democratized speculation that (like cryptocurrencies) is enriching the wrong people, i.e. commoners. It's as if the debt-serfs, tax donkeys and decapitalized peasants stormed the castle at night and broke open the jewel box and the stash of champagne, and proceeded to swing from the chandeliers, mocking the self-serving privileged who'd been pillaging the nation for decades via their legalized looting.