{"id":978,"date":"2021-01-31T08:58:23","date_gmt":"2021-01-31T08:58:23","guid":{"rendered":"https:\/\/weblog2.com\/b\/?p=978"},"modified":"2021-01-31T08:58:23","modified_gmt":"2021-01-31T08:58:23","slug":"will-it-end-in-tears-as-expected","status":"publish","type":"post","link":"https:\/\/www.andreaswacker.com\/blog\/2021\/01\/31\/will-it-end-in-tears-as-expected\/","title":{"rendered":"will it end in tears as expected?"},"content":{"rendered":"\n

There are layers to what happens now with stocks and stories around it. I think it will end in tears. Trading options on the phone<\/a> is a reality. And weird. Other, by now established, retail traders like TD or Schwab have you go through some lengthy process before you can dabble in options. It feels like Robinhood let you do it without much fuzz. Fun game. As long as it lasts. RH is said to have $20B AUM. Almost as big as Citadel<\/a> with its $35B AUM. Citadel is also a “Market Maker”. An entity that connects buyers and sellers of stocks. Something Bernie Madoff did before he went off the deep end. Bernie also invented “Payment for oder flow<\/a>“. A scheme were the market maker pays for a third party to bring clients in. Robinhood makes most of its money from these kind of deals. It routes many of the trades that its 12 million customers make via Citadel. Bernie is busy right now, he can not do it, even if it he wanted to. <\/p>\n\n\n\n

The plot thickens when we look at Citadell backing Melvin with $2.75B <\/a> earlier this week. Melvin had shorted, among other actors, ailing games retailer chain GME. A short is a promise to provide a given stock at a given date for a given price. A great contract if you can get the stock cheaper than that. A really shitty contract if you can not. While the money you can make is limited by the price will be. The money you can loose has no such limit. If I would have shorted Tesla when I though their pricing was just outrageous, I would have lost 4 dollars for each dollar that I would have made that bet (short trade) with. I did not. Melvin did short GME though. And the price for GMA has gone up. Like allot. <\/p>\n\n\n\n

What happened next? Robinhood, that company that makes most of its money with Citadel, stopped allowing people to buy GME stock on their platform. Basically manipulating the market. Preventing that the people that congregate on CondeNasts reddit in the WallStreetBets section from keeping the price up, or raising it even further. <\/p>\n\n\n\n

It is pretty naive that people raise their pitch forks when in fact they only hold life sized paper cut outs of said farming devices in their angrily shaking fists. They seem to ignore the fact, that it is the people on the other side of the moat that gave them to them as a trade for the real thing and some confetti animation. <\/p>\n\n\n\n

So, yes, it will end in tears. The wsb \/ GME story. As well as Robinhood, as well as the concept that all that money from your bail out check and that you saved by not going to Bali and that you put ‘into the market’ will get you instant riches. <\/p>\n\n\n\n

In the end of every bubble the audience needs to get broadened. One needs more people to join the party. To keep the thing going for just one more round. In that it is not unlike the phase of a loosing war: All sorts of people get recruited to ‘turn things around’. The DJIA touched 31K. Where do you think would it go from here? The concept of asset price inflation can only carry you so far. <\/p>\n\n\n\n

But I have been betting on a falling market since it was overpriced at 11,500. The first time. More than 20 years ago. <\/p>\n","protected":false},"excerpt":{"rendered":"

There are layers to what happens now with stocks and stories around it. I think it will end in tears. Trading options on the phone is a reality. And weird. Other, by now established, retail traders like TD or Schwab have you go through some lengthy process before you can dabble in options. 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