Op-ed views and opinions expressed are solely those of the author.
The Meme Stock Revolution (MSR) is upon us and it’s expanding.
Look, when we hit one of them the other day we made 40% and 50% on the trade (CLNE). Recently PUBM (PubMatic) and CLOV (Clover Health) have been added to the memesters’ list of stocks. Then one of my guys calls me and says that CLF (Cleveland Cliffs), a small iron ore company in Michigan – is a meme now, I had to stop and look at this whole thing again. Are you kidding? This little company? Iron ore?
I love the MSR. In fact, Carnivore Trading is about the democratization of Wall Street and putting the power of making real money in the market back into the hands of the people and OUT of the hands of the Wall Street houses, so we have been an advocate of the MSR from the beginning. It’s also in my DNA to love the underdog. My Dad was that way and so am I.
Carnivore Trading was vocal about what the DTCC and Robin Hood and the government did to screw the guys in GME and AMC early on when they refused to let them buy certain stocks. That was an outright illegal (in my opinion) attempt to crush the MSR movement in favor of the big players. It was masked as “we have to do something to bring some stability to the system and these GME traders are a bad, disruptive force.” Whenever the powers that be use that kind of BS to mask the truth, you can bet there’s some big money at stake and they’re scared.
The Reddit Army had taken hold and was running the stock GME up in the face of the hedge fund criminal shorts and I was loving every second of it. But then, when there were billions lost at the hedge funds, and if it kept going, there were going to be a number of hedge funds going literally out of business within days, the guys that all “own” the DTCC – the Depository Trust Clearing Corporation – all got together and said, all this trading is coming from Robin Hood. Let’s just require them to post more capital in order to continue to clear their stock trades through DTCC and they’ll have to do something to stop it. DTC is owned by the top investment banks. Robin Hood isn’t a part of the inner circle at the DTCC. And who does business with all the big investment banks? The very hedge funds that were getting their faces ripped off in the GME and AMC short squeezes.
Now you know the landscape. What happened is well known now. Robin Hood was forced by DTCC to come up with $1 billion in like a day, which they did. Robin Hood also restricted the buying of GME and BB and AMC and the few (at the time) meme stocks that were out there causing the “problem” at the big hedge funds in order to not have to come up with even more money EVERY day while this went on. This caused the stocks to collapse and the hedge funds were, in essence, bailed out by this move, which was forced by the DTCC which is, in essence, all the investment banks and brokerages that make their money from trading with the hedge funds.
But we have to understand a fundamental fact here. Wall Street asked for this. Wall Street – you wanted more trading income, so more trading was good, and you lowered commissions to generate more trading. You “tightened” the bid/ask spread decades ago by eliminating fixed spreads on stocks, and that caused even more trading to happen. Then you literally eliminated commission trades. Then you created fractional share ownership, allowing everyone on the planet with $50 to buy stock. More trading is good, right? You make more money. You’re happy, right? Carnivore Trading estimates 50 million new traders have entered the markets in the last few years because of three things: The ease of opening an account online or through your phone app, commission-free trades, and fractional share ownership. Add some stimulus gasoline to that fire and you have a Meme Stock Revolution. You locked up 10 million people in their homes, gave some money to them, and then left them with no job and nothing to do but trade stocks and chat online about stocks. And with social media, they talked to each other. Some of the smart ones you locked up found a strategy and they found some things that were very wrong on the Street and fundamentally, this private “cloaked in secrecy” cabal called the DTCC. Then they decided to blow it wide open – and they did!
The DTCC has looked the other way on naked short selling for decades. They’ve been sued for it repeatedly. Congress has made big, but only temporary, noise about holding hearings about it but nothing happens. Everyone drops the whole discussion. It doesn’t matter how outrageous the practice is, how “rigged” it is, how wrong it is, everyone just looks the other way because of, we suspect, the money and the power. The money from the Street just pays off the politicians to STFU and let things alone, and that’s because the hedge funds have a good scam going with the naked short selling and they’re paying the Street a lot of money in trading revenue. If you follow the money in this one, it’s so clear to see who the criminals are and what they’ve done but of course, nobody is going to do anything to them.
Well, the Reddit Army at Wall Street Bets, the heart of the MSR, figured out that the way to expose this scam and also probably make some money, would be to find those stocks that they liked that had huge short interest, like, too much to be right, and start a movement online to buy the stock and drive it up. And they did. The hedge fund short sellers didn’t think much of them at first, but then it caught fire and GME went from $20 to $400 and fast. That’s when the SHTF.
FAST FORWARD TO TODAY
We got through that period, the hedgies took some major hits – in the billions – but they survived, Robin Hood took a huge amount of flak for being perceived to be a part of the cabal and restrict the trading in GME and others, and the waters have calmed a bit.
Until this last couple weeks. What we are experiencing now is MSR 2.0. The movement is not only alive, it is morphing and fundamentally changing things in the capital markets. The meme stocks are running back up huge. Which we think is really cool and amazing. What is happening is that the number and types of stocks that are being called “meme stocks” are expanding. When an iron ore company is now a meme, then this is growing.
And more importantly, the Reddit Army and all the participants in the MSR are fundamentally changing and impacting Wall Street. Without them, AMC would be dead. Instead, just last week AMC raised $500 million in capital in an At The Market (ATM) deal. Some of my old Wall Street buddies did the deal. The demand was off the hook. So think about that. A company that was basically bankrupt is now sitting on so much cash, it can actually make things happen, do acquisitions, maybe even morph into something really cool and giant and great. GameStop (GME) might be alive but it wouldn’t be in the shape it’s in now, with a new awesome leader, and big capital coming their way. The MSR has allowed that to happen while at the same time, shining a light on the crooks at the DTCC and the hedgies that have exploited their insider status with the DTCC for decades and made money on abusive naked shorting.
The story of the Meme Stock Revolution is just getting started. It should be a movie. We wouldn’t be surprised if Purring Kitty and company haven’t already signed off on a movie deal. It should be one for sure.
Stay tuned for Meme Stock Revolution 2.0 to really get going. This could be fun.
Dutch Masters is the founder of Carnivore Trading, LLC. For more information and a free two-week trial, go to www.CarnivoreTrading.com.