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We Witnessed a Financial ‘Storming of the Bastille’ on Wall Street This Week – Matt Vespa
GameStop stock frenzy enters White House realm
Discord bans WallStreetBets amid GameStop surge, but Discord says ban is for ‘hateful and discriminatory content’
Everyone knows that stock prices can swing wildly up and down, regardless of any company fundamentals. Much of that has do to with hedge funds. These are like mutual funds, but they’re for the ultra-rich only. Most require at least $500,000 or $1,000,000 to buy into them, and there are all kinds of special regulations to keep small investors out. Hedge funds do much more buying & selling in order to manipulate prices and take advantage of mainstream investor psychology. This includes short selling, which essentially means selling fake shares on credit that will later be bought back to cover the borrowed shares. This has the effect of driving prices of struggling companies down even further. The price dip can in effect put the company out of business as it destroys confidence in the product, makes employee stock options worthless, and discourages new investment. It can also induce investor panic, causing massive losses, as it did in the housing crisis that put Barack Obama in office and caused some investors to lose most of their retirement accounts.
Small investors can also short sell and trade on margin, but the amounts are so small they have no effect on market prices. So, what happened with GameStop and AMC stock recently is that hundreds of thousands of small investors planned & executed a simultaneous buying frenzy of these short-sold stocks, driving the price to insane levels (the price of Game Stop went from $20 to $480). This had the effect of totally screwing over these slimy hedge funds, who lost billions. Karma is definitely a bitch! And these aren’t temporary losses. For short sells, if you start losing too much money, the brokers demand the shares or money to cover the losses, termed a “margin call.”
So now the ultra rich and their politician protectors are panicking, as social media can be used to do this to them at any time in the future. They’ve already began fighting back, starting with the usual Big Tech technique of banning user groups, citing “white supremacy” and “extremism.” Indeed, nothing says white supremacy like screwing over a bunch of hedge fund billionaires, right? As with Parler, they only need to find 1-2 posts that mention something extreme, then use it as justification to mass ban everyone. But this won’t be good enough as people are starting to learn ways around the bans such as alt accounts, alternate platforms, and even old school email groups.
So expect politicians to come to the rescue. They will likely do this in two ways:
1) Increased regulation, which is code for creating new laws that screw over small investors in the interest of “protecting” them. For example, they may ban option trading, short sells, or margin purchases unless you have a certain industry job certification or some minimum account balance. In other words, all the tools smart investors use to get rich will be limited to Wall Street pros and the ultra rich.
2) New financial transaction taxes; in other words, a tax is levied each time you buy or sell. Once again, this can be structured to screw over the small investor. For example, say they charge $20 per transaction. Someone trying to buy a share of $500 stock would start out with a -4% return. However, a $20 tax on a billion dollar hedge fund purchase is so small it wouldn’t even be noticeable.
The financial news networks are going to work creating fear and pushing that “something needs to be done to ‘protect’ the uninformed investor.” As with Covid, it’s all about creating an environment where more rights can be taken away from the average American and enhance the control of the Ruling Class.