More Short than Long – AMC – GME – BBBY

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Massive short squeezes are taking place in the market these days. More updates on the Reddit Rebellion.

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More Short than Long – AMC – GME – BBBY

01/27/2021

Podcast Transcript


Hey, this is Jeffrey Kamys with Stock Smart, another edition, the January 27th, 2021 edition. And again, we can’t get enough of it, but the short squeeze and obviously retail investors can’t get enough of it either as a short squeeze is again prevalent today with AMC which was about 65% short heading into the day, bouncing up to a high of 22 in the pre-market and it’s been hovering in between 14 and 15. Again, getting played heavily by the Reddit traders who have kind of grouped together.

[00:00:36]
It’s sort of like Fight Club for stocks, this group of people that are essentially trying to change the way that trading is done and kind of exposing these hedge funds which do sit in that cloak of silence if you will, I mean, they essentially because they’re not regulated by the SEC, because they’re private investment vehicles, private institutions are allowed to do things sort of secretive. And the reason that is is because they have what we call an accredited investor, which is someone who’s got over $1,000,000 to invest or net worth and the SEC and you know, the regulatory authorities they look at these people these investors as people who should know enough about the risk, so they’re not they don’t have to regulate these entities.

[00:01:24]
So hedge funds are allowed to pretty much operate in a secretive way. When the short position generally are taken by a lot of these hedge funds because they have to come up with creative solutions to beat the market and if they’re just going to return the S&P 500 return, no one’s is going to pay the 2 and 20% returns because hedge funds generally will charge you where a normal management agreement might be 1%, they’ll charge you 2% and then 20% of the earnings. So in order to justify those kind of large charges, hedge funds have to be a little bit more creative. And so they do that and they get to those places by you know, oftentimes maybe when there is a holding period where stock is not able to be sold.

[00:02:12]
They might short something on an IPO when that holding period is up, and you get insiders start to sell in that and that’s a clever way for them to pick up some gains in a cheap way because those stocks usually get sold pretty quickly on IPOs with insiders who are looking to take gains and get some money when they’ve been underpaid as they worked there with the incentive to be part of the stock-sharing program. So these hedge funds by the way, are getting absolutely destroyed right now. If you read any of the news, right now in Google one of the most searched items is shorting or shorting a stock and so it’s a topic that’s gaining in infamy right now and essentially again today AMC was one, GameStop is still doing crazy things, Fubo is heavily shorted.

[00:03:02]
And that’s a position, I actually like the stock. I mean it’s going to bounce around. You have to be careful if you’re going to be investing in it because you know that at some point, the shorts will want to sell and get out, but those stocks are definitely getting taken to the cleaners if you’re short. So again, it keeps going on.

[00:03:20]
And so now we’re seeing some of the trading places like TD Ameritrade said that they’re going to be rejecting trades which would seemingly as them, you know, making their own legislative or their own laws, which they are in charge of what they are allowed to do, they can refuse services essentially, but when people have positions in their account, they’re sitting there waiting to make trades, you know, you’re kind of at a disadvantage if you’re not allowed to get out of the positions and so for them to kind of on the fly, judge what is right and what is wrong and I guess what they’re saying is they’re saying these people who are trading on Robinhood, these retail investors they’re saying they’re uneducated which is always kind of

[00:04:02]
what Wall Street has said about the retail investor. They’re like, oh you don’t know what you’re doing. This is for us big boys, you know and that’s kind of what has always gone on and you really think they shouldn’t really police this and be able to judge one from the other as if someone doesn’t have the information because right now you have all these, you know, if either Xs or Ys or Zs, whatever generation they are, they’re educated, all that information is out there.

[00:04:27]
And if somebody’s willing to dig really deep you can find things about companies that may interest, you know, turn you into an investor, get you excited about, there’s a lot of information out there, you know much different than 30 years ago, when you know, you had to go to the library to research or something like that, to pick up maybe a periodical from a another city, but nowadays you can pick up all the information you want and these investors are educated and they know what they’re doing. And they understand what a short is and people because of books like the Motley Fool, one of the very first books that I read when I wanted to get in the industry and I am a financial advisor, by the way.

[00:05:06]
One of their books that I read many years ago when I was in my twenties, people are knowledgeable. They understand what’s going on. So the idea that somebody has to regulate or police them is kind of unheard of and really who needs to be policed or maybe opened up are these hedge funds that are using insane leverage, you know, a hedge fund with a billion dollars could have 10 billion in the market because of leverage and that’s really kind of crazy. That’s really where the market gets frothy and create problems. It’s not these individual retail investors who, yeah, maybe they’re using some of the leverage in their accounts to make trades.

[00:05:41]
But you know, it’s these hedge funds with billions of dollars in the market that’s creating the problems, I mean if you see the movie The Big Short that was done by banks that wasn’t done by individual retail people. That’s always who they put the blame on and they want to charge them with the problem now, but I’ll tell you this is very much like what I would call the Fight Club of stocks, you know, you have a bunch of people gang up from Reddit who are on this bulletin board, which is really great. It’s actually really kind of interesting. It’s funny.

[00:06:12]
I saw a post from someone who posted $25,000 and they were showing that they were paying their student loans and I guess they haven’t heard that Biden might forgive some so maybe they were a little bit too quick and early to pay those but I did see someone on this bulletin board which is on Reddit again. It’s a fantastic bulletin board and they keep, it’s pretty funny because they keep showing it’s called Wall Street bets and I’m sure you’ve heard of it, so Wall Street bets, they have funny pictures of like some of these hedge fund people or these noted shorters and they’re talking about like them going bankrupt, and they have these pictures and one is like, this is a face of a man days from bankruptcy, and so it’s kind of interesting.

[00:06:55]
That’s what’s going on in the market right now. So in the next couple days, I’m going to start answering Q&A. So we’re going to have questions and answers coming in from other investors. Other people who want to know what’s going on the market and I’m going to be receiving those and trying to answer as best as I can. If you have one you can go to the site here and hit the contact and send me a question, and we’ll try to get to it. Have a great day and will talk to you for this edition. We’re done. This is Jeffrey Kamys for Stock Smart for today. We’ll talk to you soon.

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