Many of you who take an interest in the financial markets would have been shocked by the goings on of several US stocks during the week of January 23rd. ‘Gamestop’ a flagging digital gaming company was suddenly propelled into the stratosphere by a group of private investors intent on ‘sticking it’ to the investment elite! Why and how did this happen?
For too long only privileged accredited investors with a net worth of over £500,000 were eligible to invest in hedge funds where returns were as high as 30% APR! These insane returns by today’s banking standards are quite normal where only a tiny fraction of these gains have ever been paid out to ordinary investors. Step in an internet group called ‘Wallstreetbets’ who got together to try and shift the status quo.
During the week of 23rd January, the internet chat rooms were awash with angry individuals who for too long had seen the financial markets manipulated at the expense of the average ‘Joe’ wanting his investments just to keep pace with inflation.
Insider knowledge showed that several hedge fund managers had ‘shorted’ or sold (expecting the price to drop) several failing companies that have been seriously affected by the COVID crisis. One of these stocks was ‘Gamestop’. They supply digital games. Private investors were incensed that the amount of short-selling was deliberately targeting this and several vulnerable companies which would further compromise their ability to recover. The rest as they say is now history.
As the ‘Wallstreetbets’ community invested together during the week, huge gains were made in the stock price. Within the space of a couple of days we saw the liquidation of at least two big hedge funds while others were severely or terminally wounded. This left hedge fund managers almost suicidal with one manager actually crying during an interview he gave saying it was ‘unfair.’ I beg to differ!
The average ‘Joe’ has been screwed for too long by the fat cats of Wall Street and London. All managed funds take a disproportionately high commission for simple transactions that severely dent the bottom line for the average investor. They manipulate the market with these tactics and it costs people their jobs, their livelihoods and their self-respect. These practices have seen many previously profitable and worthwhile companies go under and the incredible thing is the practice is entirely legal.
So desperate were the hedge fund managers to protect what was left of their funds that they actually applied pressure to brokers to ‘cease’ trading during trading hours in order to re-evaluate their books. This would allow the stock to fall back to a point where their losses would be minimised. The centralised broker ‘Robinhood’ caved in to the request and private investors were once again screwed when they were no longer able to trade out of their buy positions for a well-earned profit. The following day these trading exchanges and ‘Robinhood’ re-instated the trading of these stocks, but by then the damage was done. The brokers had manipulated the market with the compliance of the fat cats to stick it back to the private investors, but not before billions of dollars were lost in hedge fund managers’ books!
Once the market re-opened, the private investors waded in once again sending the prices higher and higher. This battle has fundamentally shifted the bias from the fat cats of Wall Street to the average ‘Joe’, who in the space of just one week were able to join their forces together to bring about a shift on the way the financial markets will work once the enquiry is over.
There is a class action law suit against the brokers for ceasing trading of these stocks which is strictly against the regulators rules. The hedge fund managers had ‘oversold’ their positions to a point where they could never have anticipated the ‘Wall Street Bets’ brigade to influence the market the way they were able to, striking back against the manipulation of the hedge fund bosses.
With ‘decentralised’ digital exchanges there is more transparency and less potential for market manipulations!
Digital currency exchanges are not under the normal confines of financial regulation and this is why the returns are so high compared to the shenanigans of centralised exchanges. The people that run de-centralised exchanges saw the huge gap between the ‘have’ and ‘have nots’ in regard to the paltry returns and have taken measures to re-balance the opportunities available so people like you and me can also benefit without a massive income or disposable income.
I am not a financial advisor or licensed to give advice, but I can tell you what I have learned since entering into this exciting investment market and until such time as the regulators try to re-address the huge imbalance between the ‘fat cats’ and the ordinary guy, I will not be returning to centralised financial institutions any time soon!
As with all investments, these can go up as well as down. However for those seeking stable non-volatile returns of 10% PA or more with No Tie In Period, then digital crypto currency is the space to enter. Several highly respected and hugely successful brokers in this space are now offering 10.5% PA on what is known as ‘stable’ coins. These financially authorised coins are linked directly to the value of currencies like the Dollar or Euro. 10.5% PA may appear a wonderful return and it is, but we need to be aware that with fiscal stimulus seeming never ending, the inflationary aspect of the huge amounts of cash being printed means that unless you are getting at least 5% PA for your money, then your hard earned capital is probably losing value over time.
The days of the rich getting richer and the poor getting poorer one day will be a thing of the past!
The meltdown of the establishment and their greed and control over the markets is in its final chapter. The surge of decentralisation of financial markets is unstoppable unless governments ban the internet! For the first time in history you and I can now reap the rewards on offer without having to go ‘cap in hand’ for the crumbs on offer by the banks and big institutions.
With the advent of first the internet, then social media and now digital currency, we, the people, can generate just as much as a return on our cash as those people in sharp suits looking down on us from their ivory impenetrable towers – and it’s not before time!
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