Keith and The Girl Forums - 3486: I’m Fine w/ Matt Bachus

So the GameStop thing, how is it that a physical video game retailer is going to what makes many people rich?

First you have to understand a few things,

Shorting - Basically, you as an entity can borrow stock from a broker at a small % rate, sell it in the market, and buy it back at a lower price, keep the difference between the sale and purchase and return the stock (Deliver) back to the broker. The Broker lends out your shares to the person wanting to short. Just like how a bank will lend out the money you keep with them to a person seeking a loan.

For example, I decide I want to short KATG stock. It's currently trading at $130 a share but i feel like its gonna go down because of reasons. I hit up my broker, I want to short 100 shares, they say sure its a 20% borrow rate, I've now got 100 KATG shares borrowed at 20%. I sell them in the market at $130 each, my short position is now at $13,000. I just made 13k wow right? And i'm only paying 20% on it daily, which comes out to $7.12.

I still have to return (deliver) these shares though, so lets say i did this on a Monday, come Tuesday the stock goes up to $150 a share because KATG announced a Spotify partnership, I'm now $2000 in the hole, oh no. But come Wednesday it comes out online that early KATG recordings are extremely problematic and suddenly the stock plunges down to $90 a share.
It is now Wednesday and I decide to buy back the 100 shares i borrowed at $90 a share for a total of $9000. I then deliver the shares back to the broker and the short position is closed.

Lets look at my numbers now,
13k (from when i sold them) - 9k (from when i bought back) = 4k Profit. I just made $4000 in 3 days. and only paid $14.24 to do so because of that $7.12 borrow rate.

Stupid easy money right?

Synthetic Shares - For the longest time people on Wall Street have denied the existence of Synthetic Shares. Why? Because it breaks the game/system. And is illegal. But has it stopped them from gaming the system? Nope. This is what leads companies to ruin and is usually used at the end of the life of a company, a company that is headed for bankruptcy. like... GameStop. A synthetic Share is a fake share created for the purpose of making money and defrauding investors.

Available Shares - Companies when they go public on the stock market issue a certain number of shares. That is all that will ever exist and should exist, until the company decides to issue more shares into the market. Off the top of my head GameStop had issued to date something like 76 Million Shares back in December 2019.

Now that we know this, what next?

Naked Shorting - Like you learned up top, shorting involves real shares. Naked shorting involves Synthetic shares. It works the same way as regular shorting so why do it? Because if a company were to go bankrupt all its shares disappear worthless. So everyone who naked shorted, sold these synthetic shares into the market and was under contract to deliver these back to the broker, now keeps the profit and doesn't have to return them because there isn't a company to back them up anymore.

Remember Blockbuster? Toys R Us? Many small medical research companies that never saw the light of day? All naked shorted into bankruptcy.

GameStop
GameStop is a brick and mortar store in the age of digital gaming. Who buys physical anymore you might be thinking. The hedge funds thought the same exact thing. "GameStop is going to die soon, its gonna go bankrupt, look its only trading at $2, we can absolutely drive the price down to $0 and make millions off it." Paraphrasing of course but this is pretty much what happened.

They naked shorted the shit out of GameStop, creating MILLIONS upon MILLIONS of Synthetic shares over the 76 Million shares properly issued by GameStop. How many shares are out there? Hard to say but back in January 2020, short interest (the amount of shares shorted versus the available shares) was reported to be over 200%, and then it was said that "Oh no that was a mistake, its actually close to 140%"

Wait. 200%? Meaning, 76M x 2 = 152,000,000 Shares shorted??? How is that possible?? If there should only be 76 Million shares out there???

Crazy. How was it reported that the short interest is 200% when the max reported by regulation can only be 140%? Why is it even allowed to be 140% ?? I don't know, ask the regulatory bodies.

I know this sounds wild, and it is. How are they getting away with this? Well, they're rich. Hedge funds are rich, brokers are rich, Market Makers are rich. The regulatory bodies are staffed by people who work for the rich and will work for the rich hedge funds when they leave the regulatory bodies. Its all rigged in their favor. They made the rules and they broke them, and continue to break them.

How can we win in a system that's largely biased against the poors?

DFV - DeepFuckingValue
So this dude Keith Gil that goes by the name of DeepFuckingValue or DFV for short on Reddit, started posting his theories about GameStop early in 2019. Think of him like a stock rain man, he saw the writing on the wall, YOLOed 50k into buying call options of GameStop. Basically betting that the price of GameStop would rise to $16 or go over it by April 16 2020.

(Heres a video that will explain calls and puts https://www.youtube.com/watch?v=EfmTWu2yn5Q)

Everyone on Reddit in the WallstreetBets subreddit made fun of him and his analysis of GameStop. GameStop was trading at $2 a share and losing steam, how would it go to $16 by April?

What happened?
In January 2021 the price of GameStop ran up very quickly and reached a max of $483. Because of these Call options DFV had, he had the right to buy 100 shares of GameStop at $16 each per contract. Remember this dude YOLOed 50k into getting these contracts. This man became incredibly wealthy in that moment, 9 figures wealthy.

But what caused this ramp up? How did it suddenly go from $2 in December 2019 to a max of $483 only a month later in January 2020?

The start of a short squeeze happened. At the time the media was pushing GameStop, Cramer was pushing GameStop, they were trying to deceive the poors and the behest of the hedge funds, brokers, and market maker. They wanted the poors to buy into GameStop to think that GameStop was gonna be this sudden cash cow only to rip the rug out from underneath and ruin lives. What they didn't account for was the buying pressure.

The way the market is supposed to work, is that if there's buying pressure there's demand. If there's demand, the price can go up right? They didn't count on the demand. It very quickly got out of control. As the price rose the liquidity requirement for maintaining short positions rose. Hedge funds need to have a certain amount of cash on hand to be able to pay for their short positions if the price happens to get away from them.

Remember my example from up top? 100 shares at $130 each sold for $13,000? if the price is skyrocketing to $400, those 100 shares are worth $40,000. I'm $27,000 in the hole. The Broker is gonna tell me, hey. You need to deposit 40k by the end of the day to make sure you can cover the cost of the shares you borrowed. But I dont have 40k. what happens to me? They liquidate my account and sell everything to cover the short position because they don't have confidence in me paying them what they're owed. On top of that if my account doesn't cover it all I will be going into debt and possibly bankruptcy because of it.

So, the hedge fucks lost control of the price in late January. If they didn't stop it the short squeeze would certainly bankrupt them all because of how exposed they were.

At the time Robinhood was for the poors, or so we thought. The poors were buying Gamestop through Robinhood. And Robinhood turned off the BUY and SELL button. The greatest transfer of wealth was stopped. It wasn't only Robinhood, it was Webull, Etrade, all those free trading apps. They shut off the buy and sell buttons at the direction of Citadel LLC. Citadel is the Market Maker. They are the ones who facilitate every trade and transaction in the market. And they are the ones who are responsible for everything. They are the ones who allow naked shorting to happen.

When the buy and sell buttons were turned off the price lost all steam.
By Late February the price was at $40. I personally put in 1.5k to buy 5 shares at the height of the action. Imagine how shitty i felt knowing my 1.5k turned into $200. Feels bad man.

I like many others stuck around on reddit. Fueled by anger. We'd been duped. And theres nothing more dangerous than a bunch of angry nerds. The amount of research that went into the coming year was astounding. Reading this research I came to the belief, like many others, that the hedge fucks are stuck. They had hoped to bankrupt GameStop but it backfired. As a community, and it can be proven by watching the daily numbers, the poors have not sold their stock. I haven't sold my stock. I actually bought 20 more. others have bought hundreds of shares more.

Will GameStop go out of business? No, They're debt free, are under leadership of Ryan Cohen, the founder and former CEO of Chewy.com, if you don't know about Chewy.com, its the amazon of pet stuff. Their whole operating procedure is unlike anything any other company has. Ryan Cohen will transform, and has started to transform GameStop. you mentioned NFTs. GameStop is creating its own NFT marketplace where digital games will be able to be bought and sold by anyone. The way it is now when you buy digital you're only buying the license to have it on your computer or console. But you don't really own it. You can't even sell it like you can with physical copies. With this NFT marketplace it will revolutionize used game sales. Developers will forever receive royalties on every game sold on the marketplace. Gaming will never be the same once it launches.

Go take a look at the GameStop (GME) price action for the last year, sure it dips at times but it always comes back. At this point its a waiting game. There's other factors at play like the pandemic and the housing market and inflation and the state of the economy. But one thing is for sure, GameStop has yet to squeeze fully, and all those short positions will need to be closed at some point because the hedge fucks are bleeding money having to pay the borrow rate every day. When the day comes we will set the price and I'm not selling till it looks like a phone number.

I really only gave you just a tip of the story and as simple as I could there's so much more to know.

Here is a link to more reading from the research I mentioned

Bookcase with all the Research, pick one and read at your leisure

If you read anything, read these
I tried linking directly to them but for some reason there isn't a direct link that I can find so just use the above link to find the bookshelf and find the appropriate cover to read it.

The MOASS Thesis 2.0
https://online.fliphtml5.com/lvrgy/i...?1628248410000
Citadel Has No Clothes
https://online.fliphtml5.com/lvrgy/n...?1628213122000
Blackrock Bag Holders, Inc.
https://online.fliphtml5.com/lvrgy/r...?1636195372000
The Everything Short
https://online.fliphtml5.com/lvrgy/p...?1636196350000
Walking Like a Duck, Talking Like A Duck
https://online.fliphtml5.com/lvrgy/b...?1636197796000
House of Cards Part 1
https://online.fliphtml5.com/lvrgy/m...?1627821135000
House of Cards Part 2
https://online.fliphtml5.com/lvrgy/r...?1627821305000
House of Cards Part 3
https://online.fliphtml5.com/lvrgy/e...?1627821832000

Also, if you've never seen "The Big Short", I'd recommend watching it. It covers what happened in 2008 with the housing market but it lets you in on just how fucked up the stock market is.