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GameStop ($GME) Proved the Market Is RIGGED

But not the way you think…

Written by Jason Williams
Posted January 29, 2021

If you haven’t heard about the drama surrounding GameStop and the Reddit board (r/wallstreetbets) that’s been waging a battle against short sellers on Wall Street, you must have been living off the grid all week.

But in case you’ve been out in the mountains or something, I’ll sum it up real quick for you.

There’s a social media site called Reddit. It’s all just user comments that other users upvote or downvote. There’s a chat board on that site called r/wallstreetbets. It’s populated by retail traders who refer to themselves as “degenerates” and “idiots.”

These degenerate idiots figured out that some very aggressive hedge funds had sold GameStop shares short — and by a massive amount. Thanks to options trading, these funds were able to borrow and sell short more stock than the company actually had on the market.

And the “degenerates” on Reddit saw an opportunity to “stick it to the man” by driving GameStop’s price up and forcing those short sellers to buy back shares at a super-high price. This is known as a short squeeze.

How high would the shorts have to buy back at? Well, just a month or so ago, you could have bought GameStop shares for less than $15. At its height, so far, it has gotten up to $483.

It has cost short sellers tens of billions of dollars in margin calls. 

So that’s the short version. Retail investors figured out how to win while making Wall Street lose a little. It's been the best rout of Wall Street since Billy Ray and Louis took down the Duke brothers.

But the drama goes even deeper after what happened Thursday morning…

How You Know It’s a Rigged Game

Several stock trading platforms have placed restrictions on the purchase of GameStop shares (and others getting caught up in similar Reddit-driven short squeezes). Remember, I'm talking about the biggest brokers in the world like Schwab/TD Ameritrade and Interactive Brokers.

On Wednesday, they announced limitations on margin buying for the shares. Basically, they said you could only buy as many shares as you had cash on hand. You couldn’t borrow money to buy the stock.

That’s a little heavy-handed, but it’s not too restrictive. You could still make an investment at least.

But yesterday morning, they decided that they know what’s best for their customers and restricted those stocks to sales only.

If you already owned them, you could sell them. If you wanted to buy them, well, too bad.

It literally took less than 48 hours for the institutions, politicians, and shills on CNBC and CNN to get together and rescue their billionaire friends from demise by retail investors.

And they did it by telling you what’s good for you. Who needs big government when we’ve already got big brokers and big media to decide what’s best?

But all that does is prove what all those folks on Reddit already thought (and what you already knew): The game is rigged, and it’s not designed for you to win. If you figure out a way to beat them at their own game, they’ll change the rules after the fact to make what you did illegal.

As I type this on Thursday morning, GameStop is down 31.55%. Two others caught up in the hype and restricted by brokers, AMC Theatres (NYSE: AMC) and BlackBerry (NYSE: BB), are down 50% and 40%, respectively.

But that’s not surprising to see shares falling when brokers have said you’re only allowed to sell them. There are no buyers to keep prices elevated anymore.

So we’ve got legitimate proof the game is rigged, and we saw the difference between “immediate action” for billionaire campaign donors versus “immediate action” for millions of Americans still unemployed.

Now we know who owns the markets and the brokers and the politicians.

So how do you win at a game that’s so stacked against you? How do you win when everyone from the president on down has been bought and paid for by massive corporations and multibillion-dollar donors? How can you be a retail investor when even the social justice warriors on CNBC are saying you’re the bad guy and should be punished?

You find a game where they don’t make the rules.

Back to Crypto

This probably sounds strange coming from me after my article about how silver is going to be a better investment than Bitcoin in 2021. But after watching the reaction this week, after watching the most powerful people in the world collude to shut out the little guys because we’re not supposed to beat them, I’m certain that the only way to beat them at their game is to refuse to play.

But when you’re playing with their currency, you’ve got to play by their rules, no matter how arbitrary and inconsistent they are.

And if even Robinhood (allegedly a company seeking to deliver power to the people) has the hedge funds' backs before yours, the only game you can play that they don’t control is crypto.

I'll be the first to admit that I’m no expert on the industry, but I do believe it’s here to stay. I also believe that trying to pick a winning coin is a fool's errand; they’re all the same.

I know that’s going to tick off a whole bunch of crypto fans, but it’s true. Bitcoin is the granddaddy. Ethereum is the Burger King to its McDonald's. The others are Wendy’s, Carl’s Jr., Hardees, In-N-Out, etc.

The reason for investing in cryptocurrencies is the same for one as it is for all the rest — they’re decentralized assets that aren’t controlled by a sovereign government (that’s bought and paid for by billionaires).

Now, normally, you’d think gold. It’s not a fiat currency. It’s not controlled by governments, so to speak, but it’s also not digital — that’s something keeping young investors from becoming gold bugs.

They’d rather buy a currency you can easily carry with you wherever, and access from wherever, whenever you want to access it. And that’s cryptocurrencies in a nutshell.

Now, I still think silver has given us a setup for bigger short-term profits. But when you’ve got proof that the market is being manipulated from above, it’s tough to really put your faith in anything trading on it.

And, speaking candidly, silver might end up being something pushed on r/wallstreetbets too. Miners get heavily shorted, and the MO for this group is to look for things you can buy a lot of with a little cash.

With silver prices where they are, you can buy a lot more ounces of it for a few grand than you can buy of gold.

And with over 3 million people on the board (for comparison, Goldman Sachs has about 3 million customers), they could easily pick a silver stock or other silver play and drive it to the moon as well.

And let’s be honest, if they wanted to, they could make a concerted effort to drive Bitcoin and other cryptos up dramatically too.

With so many of them getting restricted by their favorite broker — Robinhood — they’re probably more than a little fed up with the oligarchy. I could see a lot of them closing out their YOLO positions in GameStop and moving those funds right over to cryptos.

So if you want to potentially catch the next Reddit rally, and you want a way to win at a rigged game, crypto might just be your best bet.

At least you won’t have to play a game where the rules are changed daily to make sure the overlords come out on top.

To your wealth,

jason-williams-signature-transparent

Jason Williams

follow basic@TheReal_JayDubs

After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter, and co-authors The Wealth Advisory income stock newsletter. He also contributes regularly to Wealth Daily. To learn more about Jason, click here.

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