The news this past week has been, in part, all about the Gamestop story. Or rather, it's been about the fairy tale that a bunch of small scale investors, using their internet discussion capabilities, suddenly and spontaneously had the bright idea of coordinating all their efforts, and squeezing what appeared to them to be a massive short on Gamestop and a few other stocks. Take that, Wall Street crony crapitalism! Admit it: it's a fairy tale that almost all of us have entertained at one time or another as Mr. Broker-Banskster gets hoist on his own over-speculating petard, the more so because shorting is a wonderful way to drive companies that Mr. Bankster doesn't like out of business . The little guy struck back, and Mr. Bankster got caught well and royally screwed.
This narrative caught on so quickly and deeply that last week, when I did my News and Views from the Nefarium, I talked about another subject, and one "listener" promptly attacked me (in some pretty foul language I might add; Americans are now so stupid that they cannot emphasize any point without dropping f-bombs); how dare I (ran his "argument") that I talk about what I was talking about, rather than talking about those ordinary "patriots" who had just done battle with The Big Guys, and won!
My reason for not talking about it until now was that the story had that peculiar "bearer bonds scandal odor" or "2008 banker bailout odor" to it that one learns to recognize hanging around stories like this; it hovers over them like a malodorous green cloud. For example: one thing I thought as the story first broke was that as the price of Gamestop stock started to soar and to put the squeeze on the shorters, that the amounts of money needed to put on that squeeze were probably way beyond a bunch of "financial populists" being able to raise. "Best to wait," I thought, "to see what crawls out of the woodwork."
Consider, for example, the "adjustments to the narrative" that one reader here, M.D., shared:
The second article (from the Washington (Com)Post, argues the case for shorters being heroes as follows:
What about short sellers? These are specialists who research stocks that might go down, sometimes because bosses are illegally covering up bad news about their companies. When short sellers identify a case of fraud or similar, they borrow and sell the stock, hoping to buy it back at a lower price later. Again, there is nothing evil about this. To the contrary, it’s a way of keeping prices honest. A market without short sellers is like a political system without investigative journalists.
This, however, is not how GameStoppers see things. They have gone after a short seller named Andrew Left, hacking into his social media accounts, sharing his personal information online, ordering dozens of pizzas to be delivered to his home in the middle of the night, and texting his children with threatening and profane language, according to the Wall Street Journal. Perhaps not surprisingly, Left has announced he will stop playing the game. Irrational stock prices will be that much likelier.
The brazenness of these people is breathtaking. Consider that line from the first paragraph cited above: "A market without short sellers is like a political system without investigative journalists." I don't know about you, but for my part, I've not seen too many investigative journalists out in force in recent months. And then there's this pithy aphorism: "Irrational stock prices will be that much likelier."
Really? Give me a break.
(And, on a personal note, I actually like going into Gamestop and actually like being able to see products, handle them, turn them over in my hand, just as I like going into used movie vendors' stores looking for movies, an activity abruptly halted by lockdowns and nosebag mandates.)
But as I said, my initial reaction was suspicion of, and skepticism about, the "financial populist" portion of the narrative, and voila, the website of Pam and Russ Martens, Wall Street on Parade, has a much more intriguing and balanced presentation of the story, almost as if they were real investigative journalists, because they're not buying either the "financial populist" narrative nor the "short sellers and hedge funds are heroes" narrative either:
It's well worth pondering those first three paragraphs:
Dark Pools owned by the biggest names on Wall Street – such as Goldman Sachs’ Sigma X2, JPMorgan Chase’s JPM-X, UBS’ UBSA, Morgan Stanley’s MSPL, and Credit Suisse’s Crossfinder — have been making tens of thousands of trades in the shares of GameStop on an ongoing weekly basis. FINRA, Wall Street’s highly compromised self-regulator, reports the Dark Pool data on a stale basis, two to three weeks after the trading has occurred. It is then lumped together for the whole week, rendering it useless in terms of monitoring price manipulation. The chart above is taken from the latest available information from FINRA. (See our previous reporting on Dark Pools in Related Articles below.)
It’s a fair guess that you haven’t heard a peep about Dark Pools on the evening news. The fact that you haven’t is a perfect commentary on why mainstream media is failing the American people when it comes to exposing Wall Street’s serial looting of the little guy.
But when a bunch of quixotic posters on a Reddit message board can be parlayed into the exciting narrative of a Robinhood band taking on the evil hedge funds, it goes viral on the evening news – sucking in hundreds of thousands more unsophisticated retail investors.
And lest we forget, "research" is needed to create the bubbling opportunity:
Wall Street On Parade previously described how the retail investor was sucked into the dot.com bubble as follows:
“First, Wall Street brokerage firms issued knowingly false research reports to the public to trumpet the growth prospects for a specific company; second, the firms lined up big institutional clients who were instructed how and when to buy at escalating prices to make the stock price skyrocket. This had an official name inside the walls of the manipulators: ‘laddering.’ Next, managers of the fleets of stockbrokers at the various brokerage firms instructed their flock to stand pat as the stock prices soared. If the stockbroker tried to get his small client out with a profit, he was hit with a so-called ‘penalty bid,’ effectively taking away his commissions on the trade. This sent the clear warning to other stockbrokers to leave their clients in the dubious deals. Only the wealthy and elite were allowed to capture the bulk of profits on these deals.
“Jack Grubman, a stock analyst at Salomon Smith Barney, was at the center of this era of collusion. He was charged by the SEC for ‘fraudulent research.’ He never went to trial or was criminally charged. He paid a $15 million fine, was barred from the industry, and walked away. His haul while at Salomon Smith Barney according to the SEC, ‘exceeded $67.5 million, including his multi-million dollar severance package.’ ”
The Martens end their article with the following warning:
Before you buy into the David versus Goliath saga of GameStop, it would be wise to step back and do some homework on what’s really going on.
To that I can only add my own "hear hear!" but with this caveat: we've not yet seen everything come out about this story. But what has come out thus far is perhaps enough to learn some important lessons about what might be possible to do, and how narratives are created and driven. And at the very least, it is perhaps also a warning about not doing any business with those large banking and brokerage houses... whatsoever.
See you on the...woops, I almost forgot today's high octane speculation, which as it turns out for today, is really high octane speculation.
As all this is going on, enter Texas once again, and this little gem of an article shared by G.B.:
There you have it. The Attorney General of Texas is wanting some answers, and notably, the answers he wants concern the appearance of coordination among all involved players:
“Wall Street corporations cannot limit public access to the free market, nor should they censor discussion surrounding it, particularly for their own benefit. This apparent coordination between hedge funds, trading platforms, and web servers to shut down threats to their market dominance is shockingly unprecedented and wrong. It stinks of corruption,” said Attorney General Paxton.
“I’m hopeful that these companies will step up and cooperate with these CIDs in order to clear any confusion over why stock purchases were forcibly closed and why even conversation around these stocks was silenced.”
Overlooking for the moment theFASAB-56-like effort to remove all public scrutiny and conversation about what has just happened, and concentrating on just the "apparent coordination between hedge funds, trading platforms, and web servers," (which is a polite lawyerly way of saying that both sides - the shorters and the "financial populists" - were coordinating partners in the event) I have to wonder if G.B.'s speculation which accompanied the email sharing the article might be true (and herewith is G.B.'s high octane speculation): does the presence of the heavy algorithmic trading in Gamestop and other shorted stocks involved in this story, plus the apparent coordination suggested by Texas Attorney General Paxton, perhaps point to another actor, one which, perhaps, neither side of the human actors anticipated? Are we looking at, perhaps, something caused by AI run amok? Well, maybe. That, in any case, was G.B.'s speculation. Here's mine: why is it that, again and again, we keep coming back to Texas? Is that state's attorney general's involvement indicative of yet other agendas, agendas perhaps connecting with Governor Abbot's attempts to woo the NASDAQ data center to Texas? While there's nothing concrete to suggest such a connection right now, I would not be a bit surprised.
See you on the flip side...