Are Billionaires too Wealthy? 💸 Should they Sell All of their Assets to Solve World Poverty?

Finance & Investing
Philosophy
38 mins
/
Mar 01, 2021
/
ep. 20
Choose your favourite podcast platform
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This episode follows on from last week's episode where we unravel the WallStreetBets/GameStop saga.

Today, we discuss what net worth consists of and whether simply injecting certain countries and populations is the solution to solving the world's fundamental problems.

  • Is wealth bad?
  • Are Elon Musk and Jeff Bezos too wealthy?
  • Why do rich people get so much hate?
  • Trying to comprehend their net worth?
  • Are they sitting on $180+ billion of cash?
  • What is meant by 'net worth'?
  • Are Musk and Bezos doing good for humanity and the planet?
  • Should billionaires sell all their assets to solve world poverty?

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What is Getting It?: In a Nutshell

A conversation where we explore topics both familiar and unfamiliar to us to find out what makes them interesting, so that we can expand our horizons and further our understanding of the world and people around us.

From science to lifestyle design, languages to religion, plus everything in between - anything can be interesting if exposed to you through the right lens. We hope to spark your curiosity through open-minded and thoughtful discussion, as well as a healthy dose of overthinking.

About us

Subaan is currently a 5th year medical student, motion designer, and an avid rabbit hole explorer. At the moment, he’s taking a break from his studies to explore avenues outside of Medicine, mostly software engineering and tech. He has keen interests in lifestyle design, technology, investing, and metabolic health. Follow him on Instagram and Twitter.

Dan is a final year medical student, pianist, and random fact connoisseur. He spends most of his time learning about languages, playing sports, music, and geopolitics. Follow him on Instagram and Twitter.

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Note: This transcript was generated using Otter.ai. Therefore the transcript will not be 100% accurate in some parts.

Daniel Redfearn  00:01
Hello, and welcome to Getting It

Subaan Qasim  00:03
the conversation where we try to understand life just that little bit more.

Daniel Redfearn  00:07
My name is Dan,

Subaan Qasim  00:08
and my name is Subaan.

Daniel Redfearn  00:10
We're both medical students based in London.

Subaan Qasim  00:12
And in this episode, we go in depth into the battle between Wall Street bets and the hedge funds that almost brought down the financial markets. As a quick disclaimer, neither of us are formally educated in this field. So there may be inaccuracies in some of the fine details, especially when discussing trading platforms not allowing the purchase of particular stocks and how these platforms actually make money. Furthermore, we go very in depth into certain aspects of how the stock market works and the whole story involving GameStop. Wall Street bets in the hedge funds. If you like the sound of that, then hopefully this will be a fun lesson for you. If not, no worries, we just wanted to warn you in advance. Although this episode gets somewhat technical, I don't want you to think that this is all what investing is like, ie being very complicated and feeling that huge money is always lost. What happened in the stock market last month has never happened before. It's unveiled a lot about the inner workings of the stock market, as well as seeing the rise of the retail investors. sometime in the future, we will do an episode that explains what investing in the stock market is how to do it and why you might also want to do it. Finally, after I finish summarizing the whole situation, we talk about the morals and ethics surrounding wealth accumulation and its utilization. We think that it will be better as a standalone episode that we'll upload next week. So on that note, let the waffling begin. Good evening, Dan.

Daniel Redfearn  01:38
Good evening. How you doing today?

Subaan Qasim  01:40
Pretty good. How are you?

Daniel Redfearn  01:41
Yeah, I'm not too bad. Thank you. Okay. That's some pleasantries out the way. Yeah, I actually know a bit more pleasantries. So what have you been up to in the last few weeks?

Subaan Qasim  01:50
Just uni works. I've started my fourth. I'm in my fourth year. So I'm doing my project. Now my final BSc project, which was meant to involve the dismount of lab work, but it doesn't. So I'm mostly just home, reading papers writing stuff up and analyzing data. So

Daniel Redfearn  02:08
So if it wasn't for COVID, you would be in the labs, right? Yeah. Okay. And because of COVID, instead, based sort of

Subaan Qasim  02:17
lab project based lab lab is a shame. But

Daniel Redfearn  02:20
you mentioned to me that you're still going to have a lab induction and stuff.

Subaan Qasim  02:24
Yeah. So it will be very small, basically. So my actual lab period might be in like a week, a single Monday to Friday, just to do some kind of insulin, glucagon assays. That would be about it. And then I'll just go back and analyze the data.

Daniel Redfearn  02:39
Have we talked about what you were studying at the moment, because it's fairly interesting.

Subaan Qasim  02:44
Well, so I'm doing endocrinology, my BSc is in endocrinology. My project right now my my, my final project is right up my alley. It is the hormone the hormonal control of fat oxidation, using metabolic phenotyping. That's if we end up actually doing the metabolic phenotyping part because whether we get the data and stuff for that is unknown. So the title of my project might have just changed slightly in the focus in which I wrote it might have to change slightly, but the premise of the hormonal control is still there. So that's kind of what the project is about. And what's interesting is, I said is right up my alley, I was just going through my photos, like from like years ago, basically just through uni photos and stuff, just having that kind of nostalgic moment, just, oh, man, it was so good. Just sitting for 70 hours in the library instead of 70 hours in my room doing my work. And I noticed that I don't I don't know if they do this at Kings, but in the Imperial library is frequently on the back door of the toilet. So when you're inside, and you lock the door, you will see like a recruitment sheet for a study.

Daniel Redfearn  03:50
Yes, I remember that. They will have like the

Subaan Qasim  03:53
things so you can just take their contact details and contact them when you're not in the toilet. Because using your phone on the toilet isn't? Yeah, yeah, no one does that. Yeah. So I remember I took a picture of one because that sounds really interesting. And then when I was applying for projects, I thought one of the the names of the supervisor, like one of the names was kind of familiar. But yeah, anyway, I've got my project now. And then also hang on a second. This picture that I'm looking at is the study that I'm analyzing right now and basing my project off. So if I had actually taken part I wanted to take part because it was, you know, I like stuff about metabolism and fat oxidation relate to before and after exercise, depending on whether you consume carbohydrates or not. So it was, you know, I would have found it really interesting to just be a part of it. So it would have been really funny if I took part in it. And I'm now one of the Saudis. I'm analyzing the data, it would have been anonymized. But there would have been some kind of interest Yeah, of interest. But I wouldn't have known until literally a couple of days ago when I just noticed that because, yeah, so the actual project so the actual study that was being done by The PhD student in the lab is slightly different. And mine's kind of like a spin off of it because we have, you know, extra data and stuff. So I can analyze this pot and do that. So I guess I wouldn't be a direct conflict of interest there. But I guess I would be one of the subjects or may have been one of the subjects, you maybe would have to announce it at the

Daniel Redfearn  05:18
paper or something. Oh, yeah. When I

Subaan Qasim  05:21
figured out what I what if I just never noticed, then what,

Daniel Redfearn  05:24
then there'd be some audit or something? Yeah, in a few years.

Subaan Qasim  05:28
Yeah. So I thought that was really interesting was at home on how the world comes around.

Daniel Redfearn  05:32
Yeah, that is interesting. I mean, I remember back to my BSc project last year. And I was very lucky with the timing because I managed to get all the data just before lockdown started. And, you know, I wasn't able to go into the hospital anymore. So yeah, I was very lucky with the timing. And I just remember that the project for me was arguably the most enjoyable bit of the whole BSc. So hopefully, that's the case for you as well. And yeah, I think I said before, that's enough of the pleasantries, because obviously, we didn't like each other. Yeah, in real life. So it's hard. It's hard to, to be pleasant too. But um, yeah. If you don't mind, would you like to just give a brief introduction to what we'll be talking about today, it's a pretty interesting topic,

Subaan Qasim  06:15
songs and money. So if you are not accustomed to the finance based vocab stocks, is basically a term for stocks. So we're not going to be talking all about stocks, we'll start with a bit about it. Because what's happened over the last month or since January was a historical moment, in terms of the stock market investing the whole financial system, it was actually history in the making. It could have like the entire financial system, or at least the stock market, and all of that could have actually just collapsed. Just, it was insane. And, Dan, you had a part to play in that somewhat.

Daniel Redfearn  06:56
very sly, I did have 500 shares in Vietnam. But so okay, just before we get started into it, do you want to give a quick overview, even before we talk about investing in shares and stuff, just an overview of what happened? Like, yeah, for a couple of minutes.

Subaan Qasim  07:13
Yeah. And just to clarify, yeah, so for a little bit, we'll talk about what's kind of happened over the past month and a half. And then I guess the main actual meat of the talk will be more about wealth. And just because that has kind of stirred up a lot of conversation about wealth and money, and big money and the institutional investors and stuff like that. And you know, the disparity within the financial markets and stuff. But yeah, just to kind of summarize what's happened with the stock market was related to Wall Street bets, and GameStop. So GameStop is a store in America, that's, you know, that sells game is like blockbusters, a brick and mortar store is basically similar to what game was in the UK, it was basically the same kind of saw your trade and stuff, you buy games. And so then, basically, people were or the big company, like all the big hedge funds and stuff, were kind of shorting the stock. And now I'll get on to explaining what shorting means. But basically, you're just kind of betting on that company going out of business, or, you know, decreasing in value. And then you make money on that, I guess most people have an understanding that, when, like, the simple thing to do with stocks is you buy low sell high. With a shorting, you're essentially selling high buying low, so you still make you make money on the downturn, basically. And that's what a lot of hedge funds, and a lot of companies were doing to GameStop because they were like, the company is probably going to die. You know, everyone's you know, with game consoles, everyone is just, you know, downloading their games these days and stuff. Everything's online, no one really goes into game stores to actually buy their games or trade them in because especially if you download in the country, the man, so yeah, there was this whole thesis basically going around that, you know, GameStop is just gonna die. So the

Daniel Redfearn  08:51
consensus was GameStop was dying. And then giant investment firms and hedge funds were basically investing. Essentially, putting money down, hoping that GameStop will fail. And, like, you know, the stock price for will keep going down. And, yeah, they'll make money off of that. Right.

Subaan Qasim  09:16
Yeah. Because that's basically what they're kind of betting on, although it's not exactly betting. So the other side of the story comes in through Wall Street bets, and Wall Street bets

Daniel Redfearn  09:27
is the sweet world of Reddit.

Subaan Qasim  09:29
Yeah. It's a forum on Reddit, I think called forums on Reddit, or just like a subreddit. Yeah. Okay. A subreddit is a subreddit on Reddit. And it's an interesting community. It started off pretty legit back when it first started in terms of actual you know, finance advice or you know, all I think this is gonna happen to this company, maybe invest in this, you know, just people talking about stocks and finance and stuff. It was just a kind of normal community. And then it started to make a slight change. And now there's this,

Daniel Redfearn  10:02
because it grew right, it started growing fairly substantially.

Subaan Qasim  10:05
Yeah. And the reason for that was because of a company called Robin Hood, kind of so Robin Hood was like the first brokerage app, they can just get on your phone, and you can buy and sell shares without any charges being incurred, and you download the artmaking account and just start buying shares, basically. So that just kind of gives power to the little guys like us. Well, if you're listening, and you're not so little, not you, but yeah, so you know, we have small amounts of money. And sometimes you can get these amount of fees, we just, we don't really get those fees, right, in terms of buying and selling shares. So commission free trading for everyone in the public, I think their motto is to make fine, like finance for all or something like that. But that's the whole name of the company is about Robin Hood. So

Daniel Redfearn  10:52
and I don't intend to interrupt your flow. But just to keep like chunk and checking, you know, just to make sure I'm following. So you started off explaining what GameStop is, as a company. Yep. And why large firms were shorting on GameStop, essentially, hoping to make money off of GameStop failure over time. Yeah. And so that's been going on for a while. And then the other side is we're talking about Wall Street bets, the subreddit. Yeah. And the growing community on Wall Street bets. And, you know, you mentioned Robin Hood, that's a reason for its growth, like, you know, because normal people were able to engage in the stock market. Okay. And so on the timeline, now, we're talking about the Wall Street banks getting bigger. And then So what happened?

Subaan Qasim  11:34
Okay, so it all kind of bases around one person's thesis? Is he goes by DFV. Deep, as you see. Yeah, exactly. I think he also has a few other things. I think boring kitty is one of them. Basically, some dude on that that was his name on Reddit. And he, I don't really know his background too much. But I think he was involved in in finance and stuff slightly. But basically, in 2019, he put down his thesis on Wall Street bets as to why GameStop isn't a giant company and why he's actually buying shares of GameStop hoping, not hoping Well, you know, almost expecting them to go up because he thinks the his actual promise in the company rising back up. And there are a few things related to that. There's an online retailer, mostly based in America called chewy, their CEO took a big stake into GameStop. And I think he's actually the CEO of GameStop. Now. So yeah, and then because they're experts in online retail, they're, you know, pop over key, who is going to help push GameStop on to a more kind of online retailing business in terms of the actual physical goods, to diversify into that. And so they're not only based in terms of brick and mortar stores. There were also other things like the company's like, it's got, like decent cash flow, I think, but I don't know his thesis entirely, I didn't really look into it, because I'm not really looking into investing into GameStop. But anyway, but he had a substantial kind of thesis for GameStop being successful in the future and not actually going bankrupt. And this started in 2019, I think mid early to mid 2019, you put up this thesis, and you're just kind of explaining it. He also did live streams, show it like just kind of explaining his thesis and discussing stocks and stuff. He was a very small guy, I think he at most before he blew up with this whole situation in January, and just slightly before that. He was getting like 20 viewers at most in a single stream. So it's a very small kind of community. But almost rebuts other people were also like, seriously, and they were like, yeah, you know, is, it seems quite legit, what you're saying? is all very reasonable. So they're like, yeah, I'm gonna buy some shares as well. And, you know, invest for the long term and see, hopefully see the company, you know, right. Rise up again,

Daniel Redfearn  13:45
rose up to the moon.

Subaan Qasim  13:46
Sorry, sorry, straight up to the sky. Yeah, should we explain all the memes and stuff?

Daniel Redfearn  13:53
I mean, we can do like a vocab list. Maybe after the full explanation,

Subaan Qasim  13:57
vocab list in the show notes. And, yeah, they were like, so lots of people on Wall Street bets, were also starting to go behind the fvs thesis and be like, yeah, you know, it's actually kind of legit, more people getting involved in trying to, you know, research GameStop. And eventually, they realized that there was 140% short interest on the on GameStop by these hedge funds. So hedge funds are, you know, typically known for using very aggressive trading

Daniel Redfearn  14:31
strategies. Do you want to quickly explain what a hedge fund is?

Subaan Qasim  14:33
Yeah, so that's basically what I was gonna kind of say, um, I don't know the ins and outs of a hedge fund and hedge funds actually work since I've never worked in one. I don't own one either. So yeah, basically, from what I see, they use pretty aggressive trading strategies to just make money in every single circumstance. And they're usually doing a lot of derivative trading and stuff as well. But the reason they're called hedge funds is because they essentially hedge their position. In basically everything they do, or at least in a lot of things that they do, if they think one thing is going to go up, but actually, there's also the possibility goes down, right. So if they buy a position in something expecting it to go up, but then it goes down, they lose money. So they'll also hedge their position by also putting in a position on the downturn, right. So if it does end up going down, at least, they will make some money and won't lose so much, right. So they're hedging, basically, all of their positions, or a lot of their positions, although they don't hedge it, particularly in the same company every time. But, say, within a sector, or sometimes there'll be literally hedging on countries economies and stuff, it it, it gets really complicated very quickly. And I barely know anything about it. But that's kind of general gist of hedge funds, they use pretty aggressive trading strategies to make a lot of money as quick as possible. They're pretty brutal about it, a lot of the time, or at least some firms are very brutal, or some hedge fund managers are very brutal in the way they do it. So yeah, the, the people on Wall Street bets, started noticing that there's a lot of people shorting the stock, over 100. So 140% of the shares were shorted on GameStop. So more than the actual shares even available were shorted. So what is shorting? Basically, shorting is making money when the price goes down. So like it so buying long is you buy the share, and the price goes up, and you sell, right. So he got activated. But that's the essence of a classic, you know, investing in the stock market, you're going long on a position, buy low, sell high.

Daniel Redfearn  16:34
So with GameStop, if I was longing on GameStop, when, so maybe a few months ago, and the price of one share was $10. Roughly, maybe you're so if I bought it at that point, and then I sold it at a later point, when it was at when it was $30. That's long in right because yeah, I've sold the share for more than I bought it for made money.

Subaan Qasim  16:55
Yeah. And in that case, you have tripled your money if it went from 10 to 13. You sold it. So yeah, if you bought, you know, 10 shares at $10. And it now went to $30. And you sold all of those 10 shares you've made What $200? Yeah, yeah. So that's I think, most people understand that. shorting is basically the other way around where you sell a share that you don't even own so I have no shares in a company and say $100, I now short the stock, because I think it's going to go down for whatever reason, maybe, you know, I think that their product isn't that good. And they've been selling less and less. And in the next earnings call, I think they're going to report bad news. So I think their stock is going to go down. So I want to make money on that. Right? So I short the stock from $100. And then if it goes down, I'll make money on the difference. So say if it went from 100 to $50, and then I buy back my position at $50. I now make $50.

Daniel Redfearn  17:51
So just to clarify it, because this is something I only learned recently, myself. So if we use that analogy of $100. Share. The thing is, so you have an obligation to buy it back, don't you? Yes, you have to buy it back.

Subaan Qasim  18:06
So let me give an example in terms of an actual physical good, see if you had your say, okay, you have your iPad, right? And say you just bought it for 1000 pounds, right? Okay. Okay, the big boy, iPad iPad Pro. Okay? 1000 pounds. Okay, so you have that and say I want to borrow it off you. So I'm not done. Let me borrow your iPad for a month. Okay, so you give it to me, you don't need it for whatever reason. And me being me. And I like technology. I know that a new iPad is coming just around the corner. So I know that your iPad is going to drop in value. Right? So even though it's still valued at 1000 pounds right now. I'm going to sell it to someone I just saw your iPad that I borrowed a few on eBay. Okay, so I sold it for 1000 pounds. So I've got 1000 pounds in my pocket. But I still need to give your iPad back to you. So because I was smart, and I knew the new iPad was coming out the so the new iPad now comes out. And now your iPad that I originally sold has dropped in value. And so other people are selling it maybe four or 500 pounds, just random numbers. So I now buy your equivalent iPad for 500 pounds. And now I give it back to you. Yeah, so I've just pocketed that. 500 pounds.

Daniel Redfearn  19:23
Yes. So I nothing's changed for me. I've still got my I've still got an iPad. Yeah, the same way but the big boy iPad. But the only thing is, yeah, so you sold that iPad, and then you bought it back for much cheaper. You get to keep the difference. And so you shorted

Subaan Qasim  19:36
on that iPad essentially essentially shorted the iPad out,

Daniel Redfearn  19:40
always already said,

Subaan Qasim  19:40
yeah. And that's how it used to work with physical goods and stuff. So yeah, and people still kind of do that already. Like when a new phone is coming out. People would just sell their phone or something because they know the value is going to drop. So they'll do that and then they'll get the new phone. They're essentially shorting it and saving money in that sense and getting the next phone. So that's what they're doing. The catch comes is in that, at least in the Western world, anything that you borrow in terms of monetary value, you typically have to pay interest on it. Okay, so I mean, interest in Islam is haram. So I just inevitably don't short anything. I mean, I don't really have access to short things, because you have to get certain checks to be able to do that. But yeah, so now what if you were charging me interest? So I asked to borrow your iPad? And you're like, yeah, okay, borrow it, but I'm gonna charge, you know, 10% or 5% interest or something. All right, on the value of the iPad, so it's 1000 pounds, for however long you borrow it. So 5% interest over the month, so I have to pay 5% of 1000 over Okay. So now, when So see if I did the whole thing, but I'm still paying that interest here. So how much interest is that? What? 50 pounds, okay, so I have to pay 50 pounds. So I borrowed the iPad of you for and it's valued at 1000. I sell it for 1000. And then I buy it back for 500. And then I give your iPad back to you. Now, I have to pay you back 50 pounds as well, because of the interest that you said you charge for me borrowing. So now I've only made for 50. Right? So there are costs incurred in it. So it's not so perfect. In terms of like just clean I mean, so if you just zoom out a bit, and I'll compare shorting to longing a stock, if you buy a stock for $100. And it goes how much money what is the maximum of money you can lose?

Daniel Redfearn  21:29
With the maximum amount will be $100. So if the price goes to zero, and you're selling it, yeah, it's very sad scenario. You're selling your shirt. For some reason your shirt you're selling is not worth anything. Yeah.

Subaan Qasim  21:41
Yeah, but I guess you'd have to, it would only go to zero if the company goes completely bankrupt. Yeah.

Daniel Redfearn  21:45
So they're not worth anything.

Subaan Qasim  21:47
Yeah, exactly. So he's gone for 100. The max, you can lose as your initial investment. The thing is, is up. If you're shorting a stock, you lose money when the price goes up. How much money can you lose? If you short a stock?

Daniel Redfearn  21:57
However much the price goes up?

Subaan Qasim  21:59
It takes a year. Yeah, technically infinite. So if the stock price, so you say if you shorted a stock at $100, expecting it to go down, but now it goes up to 150, you're off $50. Maybe it goes up to 200, you've lost 100,500, you've lost $400. It just keeps going it technically just won't stop. And at the same time, remember those shares you sell you borrow so you borrow them, and then you sell them? You're paying interest at the same time? Yep. And those interest rates can vary.

Daniel Redfearn  22:31
So it's very nasty, such as a sticky situation, in fact, and to continue with the iPad analogy. So just to clarify, I've got it. So I'm giving you my iPad, for a set period of time. No, no, not for a set period of time. That's a question I've gotten a minute. So I'm giving you my iPad, you've gone now and you've sold it for 1000 pounds, and then the apple went out, then they've discontinued iPads, and that half the iPads in the world were destroyed. So now that same iPad is worth 3000 pounds, and I'm saying to you, where's my where's my iPad? You have to buy that iPad? Yeah, back off the internet now, because you sold yours. You have to pay three grand for it to grow. But I see what you mean, in that. It's infinite. So what if it turns out that's the only iPad in the world left? You have to buy it back from whoever because you've got an obligation to for me. So that could be endlessly expensive. All you have to like file for bankruptcy,

Subaan Qasim  23:23
basically. So yeah, that's that's essentially how it works. And when it comes to like, oh, how long can you? How long can you short stock for? By by choice of words? How long? Can you just keep shorting a stock? Well, it depends how much money you just have sitting in your bank, right?

Daniel Redfearn  23:42
Because couldn't you just wait until the storm blows over? So with the iPads? Couldn't you just wait, for example, until the price goes down again,

Subaan Qasim  23:48
you're still paying interest. Okay, and there's the other thing is you're also paying. So because it's all electronic these days, it's hard to kind of imagine what's happening behind the scenes, your broker, so the broker is the person you kind of interact with, who then buys and sells the shares on your behalf and then like gives them to you. So my broker in this case is like trading two on two or something, or a lot of people in America would be Robin Hood. And you know, for a lot of the people on Wall Street, but they so they are borrowing the shares of someone because they're trading loads of shares. They're like, okay, I'll borrow the shares of this account, right? They don't actually split like they don't notify someone, oh, we're going to take the shares out of your account and give them to someone that is to kind of like pulled up so they're just doing that, but then they're being incur charges. So then they charge you and you have to pay the interest for borrowing it right. And you can just kind of keep doing this but if it just keeps going and so when you do this, you have to depending on the broker and stuff in certain rules, you have to have a certain amount of cash just sitting in your account to kind of show that Oh, I can't pay it back. But if the price a seat, you say you shorted a stock and the price keeps going up. And it's like your It looks like you're better You're going to be able to pay back the amount, right, and you have to keep a certain percentage of the initial investment in the bank account. They're like, I don't know, man, you don't have enough money sitting in your bank account for you to be able to afford if to afford to pay me back, if the price keeps going higher. So I'm going to force you know, is when you get like, I think it's like school margin code. So they will essentially be like, you have to give it back now, the money, so they will force you to basically give the money back. And so that means force you to buy the shares back, even though it's really high when you show it to the stock. So I don't know if that was entirely clear. I don't entirely understand that process myself. I mean, I've never really been involved in it. And it is quite complex to get your head around, especially when you're not dealing with physical goods. You're welcome to just generate another one, bro. Okay. Does that all make sense? Or do you have any questions?

Daniel Redfearn  25:50
I think it makes sense. Yep.

Subaan Qasim  25:52
Okay, so I said earlier that there were 140% of the shares of GameStop were shorted. How can more stuff be borrowed? You know, how can more shares that? Eat None? Or if there's a million shares available? How can 1,400,000 be shorted? So the way this works is just kind of the roundabout, you can just go on. It's like the perpetual loop of shorting where, okay, let's go back to the iPad analogy. I borrow your iPad. Okay, forget about the interest in any charges and stuff I just bought your iPad for which is valued at 1000 pounds. And now I sell it in the notion it with the intention of shorting it. And so I want to buy back later, right? So I sell it to someone. No, no. Okay. Let me start again. So I borrow your iPad for which is worth 1000 pounds. And now, I want to kind of short it, basically. So I want to hold it. But see, someone else also wants to do the same. So now they borrow your iPad from me. So it's a double borrow. So Armen owed an iPad, and you're owed an iPad. So there are two iPads owed now, technically. So I don't know if that makes sense. But that's kind of how it works. That's probably not a good explanation. But there are loads of videos on YouTube you can use to kind of explain it. But that's the general kind of notion where it's basically being borrowed twice, or, you know, I guess it can be borrowed even more times three times. So it can just kind of increase, like, continually increase, and then it ended up I think its peak around 140% of the shares of GameStop. were being shorted. So that's how much people were just like, yeah, this company is on, let's just short it. So that's the kind of situation GameStop was in, and that was the position had most had for, you know, a lot of hedge funds were kind of holding. And then, you know, DFV with his, you know, thesis and Wall Street bets kind of getting along within, you know, this makes sense I'm going to buy and then they will like, Oh, yeah, 140% short interest. That means at some point, all of these hedge funds to close that position, ie realize their gains are going to have to buy back the shares, and give them back to whoever they borrowed it from in like the metaphorically speaking, so they have to buy back the shares at some point. However, supply and demand, bro, if everyone who owns the shares just doesn't sell. So the hedge fund manager have to buy back from the other people who have the shares, those people don't sell the price goes up, because demand is high, or what price will you sell? Okay, what if I give you 100 pounds for the shirt, now, I'm not going to if I give you 200 pounds, so now the price starts hiking up. So this is basically what happened where a loads of people was jubitz just started buying the shares, and without the intention of selling them really. So when they were kind of going behind. Yeah, I think GameStop is going to go up. So I'm going to buy shares for long position, right. But then they were also like, man, if we just keep buying them, and we aren't going to sell them. Eventually, those hedge funds are going to get margin called IE, because they're paying interest, right. And they're losing money. Because when there's buying pressure, ie if I'm gonna buy a share, it's gonna knock up the price a bit, because there's a slight demand for it. Obviously, media buying a single share isn't really going to do much. But if 1000s and millions of people start doing it, start buying loads of shares starts going up, because there's a lot of demand, but there's a limited supply. So then price starts going up. And then people start to catch it. And then because of social media, and the way Wall Street bets is they're quite a funny group, right? They're a bunch of self. So they literally self proclaim themselves as as degenerates. That's the kind of vocab they're using rocket emojis, everything everywhere, stocks are going to the moon is all about YOLO in your life savings on options and stuff to like a game,

Daniel Redfearn  29:31
basically is very light hearted, to the point where it's almost a joke.

Subaan Qasim  29:35
Yeah, I guess that's part of the problem as well. Why people saw going against what she bets. Yeah, I mean, a lot of people have lost a lot of money or two bets by yoloing their life savings, because it's all about options, a lot of them and using options, not just buying shares, which you know, you're the kind of leverage because you control more shares than you actually pay for. So your options is a whole nother thing which gets you incredibly complicated. But going back to the, you know, everyone's kind of buying shows and getting on that bandwagon, right, and then it's all kind of spreading on social media, and then the price is going up. And as the price goes up, hedge funds, which have shorted it lose money, or just anyone, not just hedge funds, anyone who has shorted the stock starts losing money, or at least they might have been in profits right in the green, but that green is now decreasing, and it's gonna start going into the red. And then they're like, amen. Okay, let me just buy back some shares. Because so for the short position to close out the position they need to buy, buy back their shares. So they're like, Okay, I'm starting to lose my profits. Now, let me just buy back the shares was that do that is also demand. So they want to buy shares. So now they're trying to buy back shares to close out their positions, these people from Wall Street bets and stuff are also buying up shares, but not selling them to the hedge funds that want to buy back can stop losing money, so the price keeps going up. And this is what's called a short squeeze, where the short position because these headphones that are shorting millions of store like millions and millions of dollars, they're being squeezed out of their position that all they can do is no matter where the price of them, okay, fine, I'll just buy it at this price at this price. And because now there's so much buying pressure with these headphones trying to buy back millions, price keeps shooting, and it goes to the moon, because straight vertically, basically. And in the meantime, they are just losing loads of money. So one of the companies that had the largest short position on GameStop was Melvin capital. So they were probably the hardest hit out of all of this. They had a large, short position. And I think at one point, every $12 increase in the price was losing them like a billion dollars. Can you imagine that? considering the price went up so that at one point, I think like maybe if even if it was just for a moment, for that period of time, it was that's the kind of scale it was working on. Because they're working with huge amounts of money, huge amounts of shares, and huge amounts of options, which leverage shares. So that's the scale of money that was being lost by the hedge funds, to the point where Melvin capital actually had to be bailed out, they got a $3 billion infusion by Citadel, which is another investment firm. And yeah, so they had to basically get bailed out, they lost a huge amount of investors money, because hedge funds are usually controlling high net worth individuals money. So yeah, they lost a lot of money. And a lot of other hedge fund companies also lost a lot of money. And anyone else who shorted it probably lost a lot of money. I like at least on the way up, or if you're already on the way down, I guess it's kind of stay down now. So

Daniel Redfearn  32:38
you've probably made some money. But But conversely, there'd be the people, the people were investing much smaller amounts of money, but on for example, a part of Wall Street bets or parts of the wider community. Who Yeah, bought in when that so so for example, DFV right there, that user on Reddit, his his, like, money?

Subaan Qasim  32:58
Yeah. So he was also running options on it, I think. So. At the peak, I think his unrealized gain was like 58 million or 52 million, which was a huge amount. I think he initially invested like 25,000, or something. I don't know the numbers and tiny but I'm pretty sure his peak, you know, gains, but he didn't realize was at 52 million he kept holding, and then the stock side going down to is lower. But it's pretty much confirmed that he has sold out in some of his positions. I think he has, he's actually said that he has sold out of his at least some of his positions. Where should we go from here? There's a million ways you can go. Okay, so then it kind of came in. This is the part where it's hard to go viral, where the price starts shooting up, and these hedge funds were losing millions. And just the normal person realized that Oh, man, we have a lot of power to just hold mine. We can buy this shirt and just hold it. And then hedge funds lose money because they didn't you buy a bike at a higher price. So then everyone started going on Wall Street bits increased from like 1 billion users to 8 million in like two weeks. They're costing how much it grew. And it obviously became popularized, even big billionaires like, you know, Elon Musk started tweeting about it. He did retreat game songs. chamath Palihapitiya, who's a billionaire investor also took he actually took a position in GameStop as well. You know, he made a nice amount of money from it. Yeah, everyone started going on about it. And just, yeah, let's just stick it to the hedge funds man, because they're the ones who caused the financial crisis of 2008 or whatever all of these financial crises all because of the hedge funds. And then the little guy like us were the ones who get hurt the most like we lose our jobs, lose our homes, can't take out loans to try and build back our business or something. Yeah, these hedge fund companies that go bankrupt get bailed out by the government by billions, even though they lost billions billions when they were doing really aggressive trading that they knew was extremely risky, and they can take those risks. We'll just get bailed out by, I guess, in this circumstance by the next hedge fund next to them. But I guess in previous circumstances by the government, which is using taxpayers money or just printing out more money, so that was the kind of moral side of it, why XRP going viral because people had power unity and numbers kind of thing. So people really wanted to stick people just buying a single share in it, just so they can be a part of it. And people were willing, like, oh, man, okay, I guess are 500 pounds, I don't really care. If I lose this 500 pounds, I'll just put it all into GameStop just hold it just to stick it to the hedge funds. Right? That's what led it to go up and up. And then certain trading platforms started holding the buying of shares in these kind of companies. So these kind of stocks are now just referred to as mean stocks. Stuff like so GameStop was one of them. Another one is Blackberry. Another one is a an AMC locker. Yeah. Nakia these kind of things that everyone just think. I mean, I guess if you just initially look at them, you're like, yeah, they're dead companies, or at least dying companies. And so did the hedge funds, or, you know, these other institutional investors think that as well. So they're like, yeah, it's going to go down. So they're shorting them. But Wall Street bets are like no, bro. And they just mean the hell out the stock can just buy it and just do all these random YOLO plays on it. And just like, yeah, it's gonna go into the moon. So yeah, that's so with these mean stocks, that there were a number of mean stocks that started to just come into play as well like blackberry like AMC was probably the other main one, which is a is the ticker symbol for something. Media basically is like a cinema company. And people are sentiments are dying and stuff, especially with Disney plus, and nonvoters and many more, because the Coronavirus are, they're just going to go bankrupt. So that was the other company. So these trading platforms that provide commission free trading to the retail investor, retail investors like us. So companies like trading 212, Robin Hood, are the other ones who like free trade in the UK, I don't if they ended up stopping any shares. But yeah, these these companies stopped allowing buying of the shares. But they allowed selling. So they allowed you to keep. So they stopped you from buying, so I couldn't buy any shares of GameStop, when it was like, really on its straight vertical rise, I couldn't buy any shares of GameStop. But if I had shares, I could sell it. And now what do the hedge funds needs, they need people to sell it to them. And they will start lowering the price. So it will reduce some of their losses. And are they allowed to buy the hedge funds that they're buying back shorted stock? So they kind of need to So yeah, I guess no one really. So this is the part where it all starts falling apart. People are like, what the hell is happening in this really expose loads of things within the way this? Would the trading of these assets kind of come in? No one really knows what happens at this point. Like because it just exposed something that's never happened before. Oh, man, I really don't want to get into the details. But I guess you'd be confused by that. Because me just saying it like this. It then sounds like the head for hedge funds paid these companies to stop us buying it so that the hedge funds can stop losing so much money and close their positions out. First, that's what it seemed like to everyone got like next level angry, you know, emotions were running high. People were just like, I think Robin Hood was a robin hood, I think was Robin Hood in a day just got went from five star reviews down to one star reviews.

Daniel Redfearn  38:18
So this is because people normal people like you or me who wanted to join in on the hype train. Yeah. And we needed on the hype train to drive up the price our prices, yeah, they were being. So you'd go into trading two on two, or you'd go into Robin Hood in America, and you wouldn't be able to invest. And so that naturally influences the price of the share. And then the after that it sort of defeats what everyone was trying to do.

Subaan Qasim  38:43
Yeah. And I guess it also is due to part like bad communication from these companies. And so I'll kind of explain what probably happened. Still, no one really knows. The. So the companies are saying, Yeah, we're stopping buying of these shares to protect you as the investor. And then people are like, Whoa, it's my money, I choose what I want to buy. And if I'm doing a risky play, that's my choice, right? So you've been letting people on Wall Street better YOLO loads of options and stuff, but I can't just buy my simple share of GameStop to protect me, right so now these companies have to protect us retail investors, right? This is the kind of notion that was going around like oh my god, okay, these people are corrupt. Now, the hedge funds have paid these companies to stop us from buying but we can sell so that the hedge funds can then buy those shares offers and close out the position and not lose so much money. And that's what was going on for a few days. People thought that that's what was happening for for a few days. And now this is the power gets really complicated and yeah, really started exposing certain things within the financial system and how all of this stuff works. Okay, so we just had a quick toilet break. And hopefully we can just go on from there, because this is probably going to be quite a long one. I was not intending, it's probably been around like 14 minutes of me speaking about how stocks work and what's shorting and this whole kind of story that's happened over the past month and a half, still got a little bit more to go, because I've kind of left on the note where it seems like these trading companies, you know, all these trading apps that we use to buy or the normal lay person tends to use to buy the shares and stuff. It seems like these companies are now going on the side of the hedge funds when they initially made their companies to get the retail investor into investing in, you know, proper asset management. So it seems like they were going against that ethos, and everyone was angry. But I think there's a lot more context to it, because a lot of information came out afterwards about how the financial system works, and how these companies actually make money. And we have to start by understanding that to actually understand probably the bigger picture as to what actually happened. So yeah, this is probably going to be split into like three episodes, because we got a few other topics to go into, which is outside of this whole stocks and Wall Street bets stuff. So how do how does a company like trading to one two, or Wall Street bets up Wall Street bets, Robin Hood, make money. So with Robin Hood, we are essentially the product in terms of how they how they make money. So whenever you're buying a shirt, or selling a shirt, there is always a bid price and an asking price, and there's a slight spread between the two, one will be slightly higher than the other. And you could essentially make money on that. But it's usually like a 1% difference, it'd be inefficient, especially if you consider other charges that you'd usually have to go through. It'd be inefficient to try and make money with these spreads, right? Unless you're doing it millions, if not billions of times. And then you can make a lot of money that way. And that's what these people like these companies know market makers are. So one of the companies I think, is Citadel. So they are like investment company in America. And they they have this market making strategy where when we click Buy on Robin Hood, or trading to one to Robin Hood, well, let's just use Robin and Robin Hood will take that information, and then essentially sell that information to a company like Citadel, who will then say, if we want to buy a share of Apple, they will then buy a share of apple and then sell it to us kind of thing, or just they'll have the shares of Apple and sell it to us. So they're, they're the ones making the money. But what if you want to buy just point one of a share of apple? Well, yeah, okay, so that's a fairly new thing of these fractional shares only in the past couple of years really, really recent, for like trading two ones who I think so fractional shares, they it's kind of like pulled up money, there's probably multiple orders going through and trading to want to have a cash supply. So they will kind of put the money forward for the whole share, even though they'll only give that tiny bit to you. But someone else will buy that other shirt and stuff. So that's why they need a certain amount of cash, right? It's called liquidity, they need to be liquid to be able to provide this cash pool enough, right. So if you think about all the millions of things that are going on, in the stock market, millions of interactions, millions of buyers and sellings, every single second, there needs to be enough liquidity in the market, basically, meaning that there needs to be enough activity going back and forth. If I need to buy a share, someone needs to sell it to me if someone wants to sell a share someone needs to buy. So if you've ever bought or sold a share in a small company, a very small market cap company, so a small company in the stock market, they have low volumes of trading, ie, not they don't have that much activity, if you click Buy, it's not so instant, I've had some times where I'd have to wait for like a minute and it's like okay, now my orders being filled, because someone on the other side is now selling with these bigger companies like Apple Amazon Google because they're so big and so much activity and so much volume, the like it's almost instant, there's always Yeah, but you have these market a lot of that activity is probably from market makers. So these market makers, they just have huge piles of cash that they can provide this liquidity to the market this constant turning over where I click Buy on Robin Hood, and then Robin Hood give that information to like sell that data basically to that information that I want to buy it to a market maker like Citadel and that will then sell the buy the share or sell the shares and basically they're the ones who are going to sell the share to me if I want to buy it and then they'll do vice versa as well. So Robin Hood make money on selling that information to them. So Robin Hood's company is set it out or at least one of their big comp like customers are set it up really because they're the ones who they get money from. Citadel was also a company though they also have an investing like department or like subsidiary which was also involved in shorting game stock. So now you see where this potential conflict of interest comes in. Right? So they're like man Citadel, okay, Citadel investments are losing loads of money. So they kind of tell the brother like the other company, tell like Robin Hood to stop selling show or like, stop allowing people to buy shares, right. So you see a lot of conflict of interest.

Daniel Redfearn  45:00
This is what people were thinking this isn't necessarily like,

Subaan Qasim  45:03
yeah, this isn't necessarily what happened. So it's

Daniel Redfearn  45:06
sort of like speculation.

Subaan Qasim  45:08
Yeah. But it just seems like so like, it just, it's the perfect picture really the perfect painting. So it just seems so obvious Oh, man, this is what they're doing. they've they've gone corrupt as well. They're going for the big guy leaving the little guy. So the big guys are too big to lose. But we're we're small enough to lose is basically what the kind of sentiment that was going around was. So yeah, that's kind of how they make money by giving that information. There are a few other things but that's it, like Robin Hood do have a paid service as well to get access to stuff like margin, or like busy leverage you so you can borrow money more than you have and trade that in the hopes that you'll make even more money, and then you'll pay it back and stuff. So that's kind of how they make money, right? Same thing with trading to answer all these trading free commission free trading platforms probably have the same kind of strategy,

Daniel Redfearn  46:00
including trade into onto.

Subaan Qasim  46:02
Yeah, okay. And then in terms of how these orders actually get executed is pretty complex. It's not like, I click Buy, and then Robin Hood, take my money, and give it to whoever is selling the shirt, or the other broker that's selling the shirt, give my money to them, and then give that share. To me, that's Unfortunately, not how it works. So one reason is way more complicated, always seems to be with finance to be first, it's like, because they're trying to build on really old systems, you know, it used to be with slips, right paper slips in terms of buying and selling shares. So you're like, yeah, I can promise you this share is coming in three days, like kind of things are coming on horseback from the like, the other side of the country, be three days, but we'll be here, kind of thing. So obviously, they're kind of built on these systems and tried to make it efficient with digitalization if that's a word. But there are still some inefficiencies just embedded within it. So there's this like this whole light. So right now the system runs on a t plus two kind of system. So that basically means that it's like time plus two, as in two days, when when you buy a share Robinhood have cash pool, which they actually buy the share with, they don't use their money, they're not allowed to use your money. due to financial laws and regulations and stuff. They're not allowed to use your money directly, they use their own money. And then it's like on a t plus two basis. So two days later than they'll actually take the money. And obviously, they what you see on your phone or whatever is that the money is gone. And they also write it down on your record that you don't actually have access, or you shouldn't have access to this money. But yeah, so there's a delay in the system. And these shares need to be cleared, right. And the regulating body for that, I think is called the dtcc in America, at least. And that is so they need to like clear the shares and clear them through basically keep track of everything. And there's their like charges as well to do with volatility. And Robin Hood need to kind of keep a certain percentage of like money in their paws to be able to kind of sustain this. This is where we started breaking down where if you're not the like involved, like the CFO or the CEO of these companies, you won't really understand what's going on all these billionaire investors, like huge billionaire investors. So I mentioned to mark puppeteer earlier on recently over the past month or couple of months, whether they he started a podcast with some of his other billionaire friends, and it's called the Olin podcast really good. I really recommend you listening to and they recently had an interview with the CEO of Robin Hood and the CEO of Robin Hood. Bean has been on other interviews he got interviewed by Elon Musk on clubhouse. I don't know if you've seen that. So you know what it was like grilling him getting to the bottom of it and stuff. It's actually quite interesting. Even Musk is a better interviewer than he is interviewee. And it kind of makes sense, because he's so good at learning and just trying to get things down from first principles and break everything down. That makes sense. He's a really good interviewer. Because he will ask all the right questions. But anyway, tangent. This has been just a whole bunch of tangents, really. But it all kind of come back to the circle. It's tangent, tangent telling off. Oh my god. Okay.

Daniel Redfearn  49:07
So we're like, yeah, we're going further and further away.

Subaan Qasim  49:10
They just do come around an infinite amount of tangents on the same circle. We'll come back to the same point.

Daniel Redfearn  49:14
Yeah, if you're still following at this point, then congratulations.

Subaan Qasim  49:16
Yeah. Okay. So yeah, this is where it kind of becomes hard to understand what's going on. So you have this clearing firm who clears all the shares and the orders and basically going through. They, like Robin Hood also have to pay them in terms of fees and just charges depending on the volatility of the entire market or certain shares. And it's a certain percentage, right. So all of this Yeah. And plus the fact that Robin Hood also need to keep like a couple of days supply of cash in terms all the orders going through the dtcc, I think changed the pricing usually is a couple of percent or whatever. But it went up to 100%. Basically, Robin Hood had to give up $3 billion in cash for these fees straight up on that day. DTS. dtcc or whatever clearing firm or whatever, they might not be the dtcc? I don't know, at this point, no one really knows. Or maybe they do, but I don't. So basically this these companies were like, yeah, you need give 100%. Right, you have to pay it out in full, because the volatility is so high. So Robin Hood, we're like, we don't have this amount of cash on hand. So Well, the thing is, is the CEO came on saying that they don't have liquidity issues and stuff. But yeah, they basically needed to give up $3 billion in cash. They don't even I think they weren't even worth $3 billion. All of the funding they've done in the lifetime of the five years of the company, they haven't even raised 3 billion in total, there we expect to give up and Wonga, they actually ended up doing $3 billion of funding from investors. And you know, managed to get that through. But that's why they stopped these buying of shares because you buying it. They they can't they don't have the money to give it to them, although they said they didn't have a liquidity issue. So I'm not entirely sure what was actually going on. And even in the most recent interview that was on the on the on the all in podcast, he said that there wasn't liquidity issues, and I'm not entirely sure what happens at this point. But this is the kind of general notion that was or the general understanding about what actually happened, that they couldn't give them money, right? For you to actually buy your shares for you. So they had to stop that. And then why would they still allow selling? Okay, this part gets really complicated. And I can't really remember the reasoning behind it, and what actually happens, so I'll just kind of stop there. But you can see that these companies were kind of in a position where like, okay, we can't provide this money. So if we let you just keep buying shares, we're gonna go bankrupt, and just die, and then all your money goes with it, obviously insured to a certain amount. But yeah, that would just be a huge loss for everyone, the company and you. So there'll be a lose lose situation. So this was kind of like the middle ground as the were they? Okay, fine, we'll stop buying. And then initially, they just stopped it entirely, right. And then the The next day, they were like, Okay, this isn't going so well in terms of attention. So then they allowed it. So there were only a certain amount you can buy in a certain go. And then they were like lowering the limits and stuff. And eventually, they opened up once this whole kind of period went down. So basically, what this ended up causing is the GameStop stock to plummet back down, basically, and relieve the hedge funds. That's why everyone was angry. But it seems more like not that they were paid, it was more like they just kind of had to for their sake, and kind of for your sake. So they said they weren't protecting you as the investor for like protecting your money and stuff. Because like there's extreme volatility and stuff. That's just bad communications, like the media and communication teams need to be upgraded, let's say, and they were sending out kind of preset emails that just weren't designed for these for this scenario. So like, first time it's ever happened. But yeah, there was so much like this, they kept buying like this could have just put so much pressure on the system that everyone just starts like, it just starts collapsing, kind of. So this is the part where it just like starts collapsing. One in terms of understanding and knowledge, like no one really knows what happens at this point. Because it's just all kind of been there. And it's all just kind of work, they're not really knows. But people people might be involved in one part and just kind of know what we do. But they don't know how it links with everything else. So that's where it just gets really confusing. And I'll probably just kind of stop it there in terms of the situation with these companies and why they stopped selling shares. So who knows, maybe they did actually get paid out partly like by these companies party like Yo, man, stop letting them buy it. But I don't know, the the CEO of Robin Hood really seemed pretty sincere and weaboo as well as another big trading firm. That's unfortunate, not available as a trading platform that's not available in the UK. But you can't get in the US and other continents some other countries. Their CEO came out and kind of started explaining this and yeah, then people like Okay, fine. Maybe they weren't really being paid. They were just kind of in a sticky situation. That's that's just never happened before no one was prepared for an a kind of expose certain things. Why aren't things real time? Why isn't it just t zero? Right? I buy shares instant, right? Because I guess there is inefficiencies in the system in terms of having this will go across. And it's kind of expose things that need improving on for better or worse and you know, maybe stuff like the blockchain related to Bitcoin in the structure of Bitcoin is the blockchain where everything is accessible in terms of like everything is trackable when everything maybe this might help solve it. Obviously, there are inefficiencies with Bitcoin and the blockchain as well. But yeah, it's just sparking this conversation, conversation and people like, okay, yeah, change and actual investigation into all of this as needed to improve the system and make sure something like this doesn't happen in the future or not that it doesn't happen in the future, but something like this doesn't protect like composted, potentially destroying the entire market. So yeah, that would have been a big rip if that did happen. And I guess so this is kind of what's happened to all over January and then it died down quite quickly. And today was the first day of the hit. So loads of people are getting sued loads ahead. loads, loads of things are happening. DMV is has been sued for, I don't know, either securities fraud or like market manipulation and stuff, which I think is unfair. Like, he wasn't involved in any of that. All of this whole thing where people discussing it, and people were just like getting on each other's back and Wall Street, but headphones do that do this all the time, where, like a company will show a position, and then they will, like, publicize why they think they're shorting it like why why, you know, justifying their position, they'll go on news outlets and stuff, financial news channels and say, explain it, you know, write articles about it. So it's essentially the same thing really, and much smaller scale. And what people think is when the market is a different point, this when the stock when Jimmy rose to the moon, it wasn't actually so much the retail investors money that was causing that. It was actually other hedge funds and algorithmic traders, that were buying the stock even more at huge quantities, because they were just following on the on the trend. Because headphones, were probably saying like, Well, I mean, we didn't show this company, then our competitor hedge fund is getting burned by this, let's just go put in billions or millions to shoot up the price even more. So they were the ones who probably actually brought about the massive price action in terms of it rising. But we initiated it, we I guess we could say or take the credit for that. Because in the grand scheme of things, the total money that we all put in was probably as retail investors probably just like negligible almost. But it got the ball rolling, right. And then it's snowboard. And then we got the big dogs to take up the other big dog. So you know, it's a dog eat dog world who

Daniel Redfearn  56:35
will take the W? Yeah.

Subaan Qasim  56:38
Yeah, so now DFE had his first Congress hearing today. And I think some other hedge fund is also I think northern capital had been giving statements as well. But yeah, that's kind of a gasp, what's happened over the past month and a half basis and or, you know, or at least got really high P over the past month and a half. And I guess, because shorting is so risky. And you can see how much money can get lost and all the short squeezes and, you know, is an inherently risky kind of thing. It is more risky. Stocks are volatile, they are risky, in general, but shorting is even more risky in terms of just long in the stock in a simple manner. So comes to the question Where is short selling bad should even be allowed? And a lot of people even Elon Musk tweeted saying like, you know, shorting wouldn't he didn't say this exactly. But he was just going along the lines of you know, shorting is illogical. How can you sell something you don't even own? Like, you can't sell a call that you don't own x y Zed just? And you know, it makes sense. Like why can that even happen? has always been around as shorting. So

Daniel Redfearn  57:45
as long as the stock markets existed

Subaan Qasim  57:46
pretty much Yeah, like I said, they would use slips and just doing like that, I guess in the actual I get if shares what kind of written down on slips of paper and stuff. And that's where you get the old classic pictures done shouting some kind of off like office and stuff. Yeah, so I guess it'd be the actual trading of slips, like I said, I guess if you take the idea of Pokemon cards, right, that's exactly what they're doing back then. So at least from very early on shorting has been a thing. It's a quite an intuitive thing. If you people like us do it with products in general, like I gave the example of selling a phone, just as the new ones about to come out. So is still high, and then, okay, you're not shorting it, because you're not borrowing it and giving it back and stuff. But you're trying to make money on the downfall of the price, right, essentially, kind of

Daniel Redfearn  58:32
the concept is not just yeah, there's not this isn't confined to the stock market.

Subaan Qasim  58:36
Yeah, exactly. So yeah, is shorting bad, should it be allowed? A lot of people were just like, Yeah, man, just ban shorting. shorting should shouldn't be allowed. And I see where they're coming from. And I do partially agree, I personally disagree with shorting in any way, or like, I can't do it, because, or at least with these classical platforms, you need to take on an interest, you're boring the show, so you need to be interest on it, which is her answer. I just can't do it. So I inherently disagree, at least with that, that aspect of it, you know, straight away, so I just don't do it. But I don't think it should be banned, and it shouldn't be allowed. Why? Because it provides balance to the market. Otherwise, stocks would literally only go up. Stocks would never go down. Because there wouldn't there wouldn't be incentive for people to justify against why, like someone might say, Oh, yeah, I think the stock is gonna go up because x y, Zed and people like yeah, okay, buy into it. There's no incentive for someone to like say, actually, you know, this is a bit excessive or whatever. Right. So an example with Nikola motors. I don't know if you heard about all of that hydrogen vehicle company, making hydrogen, hydrogen fuel cell lorries and stuff. Basically, people were cooling up cooling it up for ages. Like, you know, this is all marketing. They don't actually have any products. They're basically a scam. Basically, it ended up being a food company, but a company An investment company called Hindenburg investments were Hindenburg research. They were like we are shorting Nikola motors. And this is our life, I think was like 30 pages like 40 pages or maybe longer. I don't know, I'm just saying random numbers, a very long document stating why Nikola motors was a fraud company. And they were incentivized to do that if they're a classically shorting their business model based on shorting and stuff, they're incentivized to actually find these four companies, it did turn out to be a Ford nigra motors gone off to one of my earlier invest. So you said the maximum that you can lose when you invest long on something is the amount you invest into it initially, your initial initial investment. So when I saw other side investing, there was a company called luckin coffee, which is a coffee chain in China. And everything just seemed so perfect about this company. And I did my, you know, fair amount of due diligence back then, even though it's probably subpar, compared to what should actually be accounted as DD. So I, I bought a position into luck and coffee. And I was like, you know, seems pretty solid after all of my research into it, and which wasn't that much. But it was enough to sort of position and I bought more in and I put my, my, like, a nice amount of money into it at my scale. And then in the end, they were exposed to being a fraud. They faked like $250 million dollars of like, cash flow, or profits or whatever, and all that. And then in one day, I woke up, and I just see the stock plummeted. 70%. And I was like, no. So yeah, that was pretty painful. But you know, it's a lesson learned. don't invest into Chinese companies. No, I'm joking. But yeah, it hurt, but I was in Luckily, it was a small amount compared to my main investments. But it was a good lesson. But yeah, someone who like I guess it was that was just kind of done through regulation, and just, you know, auditing and was probably noticed and stuff. But, you know, hedge or like these investment companies that are incentivized to make money on the downfall, you know, can expose these kind of things. They're incentivized to expose this kind of stuff, which has its benefits, right? It provides balance to the market, things need to go up, things need to go down, you know, Yang, Yin and Yang, basically. So that's my opinion on it, what do you think of short selling,

Daniel Redfearn  1:02:19
I it makes sense, from what you're saying about? What happens if you don't have short selling, I think that's a nice way to think about it, at least from my understanding, and you take it away, and then there's nothing sort of regulating the growth or like checking the growth of a share price. So and it has value as well, like, it just seems like you're being the bad guy, almost if you're shorting in a way, because you're, you know, hoping that a company fails. And, you know, that's just inherently kind of Yeah,

Subaan Qasim  1:02:48
or not necessarily. Yeah, failed, like, I guess, I guess in the game sort of circumstance, they were expecting it to just go bankrupt. certain times, they're like, I don't know, maybe this product that everyone is hyped, like, and Apple have released a new product, right. Everyone's hyping it, stock price is going up, but they're like, Nah, I think they like sales on actually going to be that high or something. And these shorted, right. And then when the next quarter, Apple released their earnings, they're like, yeah, we didn't really sell much of these, then a stock goes down, they make money for it. So they also get rewarded for, you know, smart thinking or, and stuff. So yeah, it provides. So I don't think short selling is inherently bad. But I think there are some practices within short selling can make it if that makes sense. Like, okay, one thing I don't agree with, how can you shoot, there should be a limit on being able to shoot over 100% of the stock, right? Because that's what actually probably led to this massive short squeeze, and then this entire kind of collapse around it as well. That much short interest. Like, I don't know, maybe it should be limited to 100%, if maybe not 100%, I don't know, I don't have any financial education or knowledge in that. But inherently, intrinsically, I feel bad luck with that I can't get along with 100 for over 100 potential interest. So maybe certain aspects of it need to be kind of reconsidered. Yeah. And then the other bad aspect of short selling is that some companies, so some hedge funds are really aggressive about it, they are literally betting on the company going bankrupt. And you know, that'll force people out of jobs, and, you know, people to lose a lot of money in that sense, or their livelihoods and whatnot. And they can be really aggressive because they have so much capital. So if it's a small company, like they could buy out that company, like five times over more than that, and basically control it, they can just do whatever they want with the amount of cut like cash they can put in and out of the company. And you know, Elon Musk has a real sore side for short sellers, because they were really putting Tesla under a lot of pressure, you know, earlier on, especially in like, 2017, you got hit really hard because of all the short sellers. And it was a tough time. You almost have to put a lot of his own wealth and capital on the line to just keep the company afloat and stuff. Yeah, so here's that's why the short shorts Have you seen those? Well, you haven't seen the short shorts, no. So basically, when Tesla go like that, fourth year profitable BD, you know, they do the spin off products like there's Tesla tequila as well as Tesla short shorts. So someone like tweed abandon short shorts. And all the physically short the physical short,

Daniel Redfearn  1:05:12
you know short shorts. Yeah.

Subaan Qasim  1:05:15
So they are short read short shorts lyase. What's the material? silk? Like short shorts? Yeah.

Daniel Redfearn  1:05:22
And I have letters

Subaan Qasim  1:05:24
3x y z sexy? Yeah, he does basically him just like putting it because I think he released that on his, just before he announced the Tesla earnings. Or like, you know, Tesla announced that fourth profitable year, quarter in a row. And just from the last on the stock price really went to the moon at that point, it really hit the inflection point. And there were a few other things as well. But yeah, I guess a lot of people, you know, have had experience with short sellers being really aggressive and just really just destroying the company. And they're trying to do a good thing, right? Like, okay, if you think the price is gonna go down, like, okay, just short it. So you can make your money, but don't be so aggressive in P. So money hungry, just I want to make as much money as I can and the price going down, you just cause so much selling pressure, and it just puts the company in a bad position. The reason these companies are on the stock market and stuff is that with the share price, they can, you know, put out shares to the stock market and raise money through that this share price or the value of the company, stock market is low. They can't raise capital as much so they can't raise money for investment. It's often Tesla needed a lot of that. So it was making it really difficult and soft for them. Yeah, really put the company close to the brink of bankruptcy. So that's why Elon Musk really doesn't like them. And when they do aggressive things like that, I do think it's, you know, ethically questionable, I'd say, sometimes hedge funds literally buy out companies. And then what I know there's a con remember his name, but he's like, he's brutal. People were scared of him like he would he'd like buy companies. And then that would basically going bankrupt and then give them loans. But then because the way it works, it's like that company then can't pay back the loan. And then they still go bankrupt. But then there's two shorting Yeah, yeah. So they buy the company. And they they they need loans and stuff. But then the hedge fund that the the hedge fund that bought that company, like short the position, force it down even further, so then they can't raise capital, but they're making the hedge fund is making money on the share price going down. And then that company files for bankruptcy. But the it doesn't affect the hedge fund in any way, just fix that company, because there's like some weird separation in how they acquire these companies. Or not. I'm just kind of chatting bs at this point. But there's something like that. But yeah, it's really aggressive. And that is not good man. Or at least I don't agree with it. And I could never do something like that. Yeah. So that's kind of the summary, a very long summary of everything that happened over the past month and a half and the kind of information that's been revealed. I didn't intend on rambling on for so long about this. I wanted it to be like, you know, maybe 1020 minutes, Max. But I thought I'd just kind of get the full picture in one go. So I guess this, this will kind of just be the end of part one where we just kind of initially talk about this because this kind of leads on to the part where we talk about is wealth acquisition, or like, as well with an acquisition of just cash and money bad in general, is it a bad thing to want to become wealthy have a lot of money have a high net worth? And you know, a lot of this is done through investing or stocks and stuff. So is it just a generally bad thing to be wealthy and want to acquire wealth? Because I feel a lot of people have a, like a bad taste in their mouth when they think of people like Jeff Bezos, or now Elan Musk, I guess not so much Elon Musk, but especially Jeff Bezos, you know, a lot of memes about him. And I remember at one point, it was like, cancel out, but we're, like, cancel Jeff Bezos, like that was all coming around. And all of these visualizations of how much you know how much his net worth is, is. And it's actually hard to kind of comprehend how much money that is. And yeah, people just having a large distaste against him if that makes sense.

Daniel Redfearn  1:09:05
Okay, so that brings me to a couple of questions that I've been meaning to ask you. I'm interested to see what you think about them. First of all about Jeff Bezos,

Subaan Qasim  1:09:13
thank you for listening to this episode

Daniel Redfearn  1:09:14
of Getting It. If you enjoyed this episode, or didn't, then feel free to leave us a rating and review on the apple podcast app, or on the apple podcast

Subaan Qasim  1:09:23
website. We'd love to hear your thoughts, ideas or questions about anything we discussed, so feel free to email us at thoughts at Getting It

Daniel Redfearn  1:09:30
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Subaan Qasim  1:09:34
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