Gamestop case: you gave the people guns to distract them, now they are surprised because they attack the buildings. Robinhood recapitalized
In this piece we will combine the chronicle of what happened, even in the European night, and different considerations.
Yesterday we stopped with platforms such as Robinhood, Webull and TD Ameritrade blocked purchases on Gamestop and on other titles defined as speculative, three initiatives have begun:
- move to platforms that still deal with these titles;
- initiate lawsuits against these platforms;
- they take to the streets and protest.
Platform traders have done all three of these things, and the most effective one has been to abandon the most popular platforms to move to others. By doing so they put platforms like Robinhood in even more difficulty, which, evidently, did not have broad enough shoulders, sending them into liquidity crises: in fact, the big investors, Citadel in the lead, closed their positions because they were burned in their open positions, by other small traders have left because they have been prevented from trading certain stocks. The result was a very strong liquidity crisis, that is cash, because, from what leaked this morning, Robinhood was also discovered on Gamestop. The company was forced to do two things immediately:
a) readmitting the excluded securities, Gamestop in the lead, to the negotiations on its platform;
b) obtain a billion capital increase from its investors, confirm the rumors of a liquidity crisis behind the decision to block the securities on the market.
This made Gamestop explode again which, afterhour, took back all the losses, going from 198 to 341 dollars and thus massacring the "Shorts" still present on the market and not yet covered. So after Melvin Capital, which received three billion from Citadel (the same one who later punished Robinhood ..) others still risk heavy losses:
The fact that certain platforms speculate on the stock exchange like their customers is another example of the madness that finance has reached. This step should be completely forbidden, otherwise you risk other serious accidents like those that have happened in recent days.
Whatever happens, it will end badly: these speculative shares might not have been worth the 3 dollars of November, but they are not even worth 300. If Michael Burry bought them on the 5 dollars their fair value would have been, by hypothesis, 20 or 25. These little ones traders will get burned if they don't get out soon, and burned will be the last ones left with the match of shares in hand.
At the same time this storm, indeed this half revolution, is only the result of the insane monetary and economic policies of recent years, especially in the USA: instead of using resources to create REAL jobs in the Real Economy, with REAL tangible investments , everyone was given $ 600 and dozens of apps for trading, with a pressing publicity that pushes them to "Get rich", taking Elon Musk etc. as examples. Tens of millions of kids have been armed with financial rifles and then one is amazed if they organize themselves into an army and attack the palaces of power. Investing in the real economy was too difficult, too complex, it required too many steps now made impossible by a suffocating bureaucracy, now enjoy the crowds of traders who attack every speculation made by the funds of the billions. At most you can try to maneuver them, if you are good.
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The Gamestop case article : you gave the people guns to distract them, now they are amazed because they attack the buildings. Recapitalized Robinhood comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/caso-gamestop-avete-dato-i-fucili-l-popolo-per-distrarli-ora-si-stupiscono-perche-assaltano-i-palazzi-robinhood-ricapitalizzata/ on Fri, 29 Jan 2021 07:42:38 +0000.