Reddit Trading Frenzy Fades as Yellen Summons Agencies (reuters.com) 178
A social media-driven trading cooled on Wednesday as U.S. Treasury Secretary Janet Yellen called a meeting of top officials that could result in tougher markets regulation for hedge funds, small investors and stockbrokers. From a report: Mass buying by amateur traders over the past two weeks has driven wild price gyrations in companies that big U.S. fund managers had bet against, including videogame retailer GameStop and cinema operator AMC Entertainment. GameStop's U.S.-listed shares, which scaled as high as $483 last week, fuelled by posts on the popular Reddit forum WallStreetBets, deflated this week to $90 as fee-free broker apps including Robinhood imposed buying curbs. They erased early declines to rise 11% in pre-market trading on Wednesday, while shares of AMC gained 7.8%. GameStop"s Frankfurt-listed shares continued their pace of declines, falling 24% by 1030 GMT. Silver, which briefly surged on Monday as small traders bought up the metal, steadied about 10% below its recent peak. "The unwind is obvious," said Oriano Lizza, premium sales trader at brokerage CMC Markets in Singapore. But he added that it would be easy for nimble small investors to regroup and target fresh companies. "I think from a regulatory standpoint, the concern is that they could continue to do this," he said.
can anyone explain the silver thing? (Score:3)
i go on reddit and everyone is saying "dont buy silver, nobody is buying silver, its a lie"
then i go on cnn, reuters, wsj, and they say "small traders on reddit are buying silver"
i am rather befuddled.
Re:can anyone explain the silver thing? (Score:5, Funny)
i go on reddit and everyone is saying "dont buy silver, nobody is buying silver, its a lie"
then i go on cnn, reuters, wsj, and they say "small traders on reddit are buying silver"
i am rather befuddled.
If you can't see the answer in your question, I'm sure CNN has some ocean front property in Arizona to sell you...
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Re:can anyone explain the silver thing? (Score:5, Insightful)
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It's almost like you shouldn't trust a bunch of financial reporters who chum around with market manipulating trust funders for financial advice.
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No... they really aren't. Not anymore. For instance, they've been giving the false impression that the people saying that are anti-semitic white supremacy groups and russian troll farms.
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Then it still almost certainly isn't one of the couple thousand people in the world who fit that description.
Maybe someone has been slowly skewing your understanding of what "talks like a anti-semitic white supremacist" talks and acts like, slowly lumping in essentially their entire political opposition including most centrists.
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anti-semetic white supremacist => anyone i don't agree with.
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Then it's an MSM deepfake or a lefty loony trying to pretend they're a white supremacist and anti-semitic.
Re:can anyone explain the silver thing? (Score:5, Insightful)
Does having a child that is Jewish make one anti-semitic?
Does implementing policies that result in lowest unemployment rate since the records have been kept for black Americans make one a white supremacist?
Where would someone that claims a person of a particular race must vote for him?
I'm just trying to get a handle on what the criteria are.
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"No. When you say "MSM" just like that, It's a red flag. Just like if you use the word "leftist" or if your post reads like it was written by Boris Badanoff (that's an American cartoon if you don't know)"
Not really, saying MSM like that is an indication of someone who doesn't trust the current powers at be which is quite distinct from someone who says 'leftist.' Leftist is an indication of republican bias and any number of terms including russian troll farm, "free and fair election", etc indicate a strong
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The problem is when the mistrust extends beyond the legitimate criticisms about lack of focus: "What are their blind spots? What are they neglecting to cover?" and into the realm of "Everything is a lie."
That's the purpose of the FUD and tribalism being deployed, some of which comes from "powers that be", like our President until a couple weeks ago, to use the most obvious example. The acronym is primarily used as a way to dismiss something inconvenient to one's argument, and serves to signal a kind of alt-
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No. When you say "MSM" just like that, It's a red flag. Just like if you use the word "leftist" or if your post reads like it was written by Boris Badanoff (that's an American cartoon if you don't know)
Boris Badenov would write M&S, non MSM, as it must be moose and squirrel.
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Oh look, a sudden natsoc/commie/alt-right accusation directed at someone who criticizes the for-profit mainstream media which was caught lying. What a coincidence.
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there are absolutely no mentions of silver in any post before the supposed "small investor silver rally" and all mentions after it are "wtf, no one is buying silver, no one is massively naked shorting silver ergo we don't care"
Re:can anyone explain the silver thing? (Score:4, Insightful)
it's easier for news outlets to repeat that silver nonsense rather than going to /r/wallstreetbets and reading for themselves.
Funny that you still think its because its easier, as if 100% of all mainstream news agency have 100% lazy people and never try to show each other up on accuracy.
Maybe you think other folks are lazy in their analysis because you yourself are currently being lazy in your analysis.
The mainstream news is obviously curated in a way that doesnt justify your laziness theory any more than it justifies the honest reporting theory.
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The mainstream news is obviously curated in a way that doesnt justify your laziness theory any more than it justifies the honest reporting theory.
On the contrary, it is the height of laziness to simply print whatever the hedge managers tell them.
Research takes effort, and calling out rich people implies risk.
Lazy is easy; lazy is safe.
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Silver is massively short and artificially low. Has been for decades. Or so the metals guys have been saying since before I was paying attention. But the people talking about it aren't millennials on reddit - they are boomers on blogs. If there was any small investor rally in silver, it was people who have been expecting the end of the world since 1990 who thought that this might kick it off.
I think I even saw some Buscemi memes: Hello fellow monkeys, are you buying silver too?
Personally, I am enjoying
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No it's not artificially low.
And who are some of the biggest holders of Silver?
Oh yeah. The hedge funds.
Hmmm.
Re:can anyone explain the silver thing? (Score:4, Informative)
Based on this sentence "Or so the metals guys have been saying since before I was paying attention" I think you both agree. People have been pushing silver and gold hard at least since 1991 when I got my first paper route and the free newspaper subscription that came with it. Every time I opened up the finance page there was some add like: "Why X metal is set to shoot up this year." People have been pushing the artificially low line on these two metals for as long as I can remember. It has always been about suckering people into buying in order to reap the (usually pretty sizable) delta between the value of the actual gold you're buying and the price they charge to get that gold into your hands.
There are valid reasons to own these metals, but those reasons (to my knowledge) haven't ever been that they are "artificially low."
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Hey, you must just be waking up. That has been the general reporting vs reality situation for at least the past four years. In this case they are lying because the hedge funds have big silver stakes. They are trying to manipulate the people hurting the hedge funds into helping them.
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Simple enough.
The hedge funds are using CNN to spread the rumor that redditors are saying buy silver so they take their money out of the other stock to buy silver, or at least buys silver not new issues of the stocks.
Standard misinformation campaign.
CNN has been one the the entities at the head of corporate attempts to break this.
Re:can anyone explain the silver thing? (Score:5, Interesting)
The issue here is a matter of what's posted in the wallstreetbets subreddit by their core users vs whats posted by new (and likely shill) users. The people that started this would like to stay focused on a few stocks...mostly GME, and kinda AMC, and maybe a little bit BB and a few others. But they realize that the more they target, the more diluted their efforts become, so they'd prefer other stay focused.
Then come the new users. Some are probably just legit users trying to be helpful, looking for other highly shorted stocks and mentioning them without consideration of how other metrics come into play in making decisions. This is probably where some of the users recommending things like AAL come into play, and when they suggest it the core WSB users are saying NO. But some of these new users are also probably there as shills from the hedge funds, trying to distract users and break up their focus so that they are less effective and GME and other stocks go down. It is suspected by many that this is what is happening with SLV. Some shills promoted it, and a bunch of people (not wanting to miss getting in early) jump on it. Then the core WSB users come along and say DONT BUY SLV.
So what you have in the media is a bunch of "reporters" who don't really understand the dynamics in play, they hear that WSB is behind GME and AMC, they pop into the subreddit and look at some posts and see them pushing silver, and they don't see what's really going on. They then report on what they've seen. Unlike what you may see some people saying, this isn't fake news or the media lying....it's just sloppy reporting. Reporters new to a fad don't really understand what they're looking at, and their reporting reflects that.
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I think Robert Hanlon would disagree with you.
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There's some history to the silver thing. The housing crisis of 2008, along with the bailouts of too-big-to-fail corporations, renewed a fairly large (larger than it had been, anyway) interest in precious metals as an inflation hedge. Prices soared... and then plummeted a couple years later when the world didn't end as expected. The prevailing theory among the die-hard gold and silver "investors" is that the banks were manipulating metal prices to hide real inflation.
The silver bugs have been prophesying an
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It's fake news paid for by rich billionaires who backstab their way into wealth. WSB is running on two rules.
1: Buy Gamestop.
2: Don't sell it.
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So now I'm doubly confused. Why are redditers saying it's a lie? https://www.reddit.com/r/walls... [reddit.com]
Simples (Score:5, Insightful)
It won't be the only thing that needs doing - and it won't be popular - but it would take so much fake volatility out of markets, it would make it so much harder for artificial manipulation of markets.
The idea that you can sell something you don't own and then buy it later to cover your "sale" could only have been thought up in the dodgy world of financial markets.
Re:Simples (Score:5, Informative)
A futures market, where you buy or sell something at a fixed price well in advance to be delivered on a fixed date, is one of the most fundamental ways that markets transfer and timeshift risk. Like a farmer who cannot afford to risk a soft market for his crop so he sells it ahead of time for a fixed price, at somewhat of a discount over the anticipated price.
Short-selling could just as well be framed as a futures contract. "I agree to sell you a share in this company for $X on such-and-such date." If I think the price will go down before then, I'll wait to buy the stock so I can then purchase it on or before the due date and pocket the difference. (But wait, then I have an incentive to drive the price down, harming the company!)
I just don't see how you could effectively outlaw it.
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Yes, exactly. They should go ahead and re-frame short selling as a futures contract. As it is now, naked short selling creates stock from thin air.
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So selling call options you mean?
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A short
Re:Simples (Score:4, Interesting)
The history of futures trading is interesting. Originally futures were a way for people to manage risk. So a farmer might contract to sell part of his impending barley crop at a fixed price in the future rather than gamble on the spot price the day he delivered it. Similarly a brewer might buy an option to purchase some of that barley for a higher but guaranteed price in the future. In this way both the buyer and the seller were insulated from price fluctuations.
Futures trading is simply an extension of this process to share pricing. So I can purchase an option to buy or sell a company's shares in the future just the same way as the barley traders did.
So, why is 'Short selling' such a big deal? Mostly because for quoted companies their cost of borrowing is a function of their share price. If the share price falls their cost of borrowing rises and this affects the operation of the company. So there's a danger of it becoming a self fulfilling prophecy. If enough speculators 'short' a company the company can collapse even if it is fundamentally sound because most modern businesses rely on borrowed capital.
Re:Simples (Score:4, Interesting)
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You write, " Like a farmer who cannot afford to risk a soft market for his crop so he sells it ahead of time for a fixed price, at somewhat of a discount over the anticipated price," but in your example, the farmer is agreeing - in advance - the price of something she already owns."
In my example I was quite clear to show that short selling consists of selling something before you own it.
Another variation on the exam
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In my example I was quite clear to show that short selling consists of selling something before you own it.
How is that any different than futures?
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Futures don't add a stock to the the portfolio of the other side of the trade.
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Not really. With short sales the buyer takes delivery immediately (even if the seller doesn't actually have the stock), unlike a futures contract. A contract to sell is not the same as selling.
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To borrow the analogy. When you sell a promise to deliver grain at a future date, you aren't selling grain. You are selling a promise.
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The grain doesn't exist yet. It hasn't been grown. "Contracting has potential pitfalls. The forced buy back of contracts at a loss after a crop failure is one of the greatest dangers. To reduce chances of such an event, only a fraction of an expected crop should be forward priced through contracts until output is assured"
Re:Simples (Score:4, Interesting)
A farmer can ill afford a soft market, but he 100% can't afford to fail to deliver on a future contract without going bankrupt ... it's possible to get an additional loan when there's a soft market in the future, it's impossible to magic up more crops. In a drought he has to buy in, but if the farmers just plain oversold futures that presents an obvious problem. Future contracts are also destabilizing, they make black swan events worse.
The financial crowd loves the infinite downside aspect of future contracts, shorting and selling option contracts. Picking up pennies from in front of the steamroller is their bread and butter, letting them play that game is not great for society though. All these contracts should have capped penalties for non delivery, all mortgages should be non recourse and all demand deposit accounts should be full reserve. The fundamentals are fucked.
Re: Simples (Score:2)
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Contracts such as what? How do you define them? Many, many contracts specify a price for a thing to be done on or by a future date.
Say I contract to put a new roof on your house. But my real plan is to buy the roofing service from somebody else cheaper, and pocket the difference. In other words I am an "employer." But what if there's a labor shortage or the price of shingles shoots up before I get your roof done? I could be in a real bi
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And high frequency trading alongside all bot trading. These criminals eat profits from legitimate investors who chose wisely and hand them to manipulation firms exploiting lag.
goes back at least 300 years.... (Score:2)
The name "bear" in the stock market is linked to the old story of someone who tried to sell a bearskin before actually having killed a bear and taken it's skin. https://en.wikipedia.org/wiki/... [wikipedia.org] https://www.merriam-webster.co... [merriam-webster.com]
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Thales of Melitus, an ancient Greek philosopher is said to have invented what amounts to either an options or futures contract involving olive presses. They were long contracts, but the corresponding short is not a huge leap of logic, especially for Greek philosophers.
In the most common version, he buys rights to use the presses before the harvest is due based on his ability to predict a good harvest. When a big harvest came in he was able to rent them out for more than he paid. One facet of the story i
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thats awesome... you know whats funny is i heard the abbreviated version which just said he was good at olive farming. i didnt know about the contracts until your comment educated me.
wonder how many other historical stories are basically about the flow of money . . . .
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High frequency trading should also be outlawed while we are at it. The point of the stock market is to connect potential investors with companies that want investment. HFT creates money from thin air while contributing nothing to the economy as a whole. Its part of but not all of the reason why the health of the stock market actually has little to do with the health of a nation's economy. In other words how the Dow Jones can be at 30k points while the last 30 years have been nothing but outsourcing and cann
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I don't get it, though. Sure, that's kinda weird with stocks, but think about it in real life. If you buy something from the store, you're used to them having it in stock, and you take it home with you. If you buy it on Amazon you can see how many they have in stock, but it might be zero and they might ship it to you when they receive the next shipment from the manufacturer. You can still arrange to buy it at a price that they will honor later.
Pretty much all manufacturing, say for automotive parts, amo
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The idea that you can sell something you don't own and then buy it later to cover your "sale" could only have been thought up in the dodgy world of financial markets.
This is also a common practice in ecommerce retail known as "dropshipping". That's where an online retailer lists inventory they don't actually own, then purchase it and have it shipped when someone buys it. Most often, this happens when the supplier isn't very good at selling the product, or the ecommerce seller is aware of a target market the supplier isn't.
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I dunno if we need to outlaw shorting. Yes, it's kinda an ethically scummy practice.
What we need to do is ENFORCE THE RULES on naked shorting. You're not supposed to do it. You're supposed to cover your shorts.
One company naked shorting a stock for 140% of its total share balance? Insane.
And MULTIPLE FUNDS ARE DOING THIS! The Melvin collapse only destroyed about 8% of the total naked shorts in play on GameStop.
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The thing I don't understand about short selling is how does the broker of the shares make money. The idea is that a broker buys some shares and lends them to you, which you then hopefully return back to them when they are worth less money. How can that be profitable for the broker? Is it just that there are far more losers in short selling than winners?
The lending institution charges fees and interest to lend out securities it has a long position in. It may be required to hold a position (like a market maker) or It is betting the price will rise or stay the same. It doesn't lose money on a price rise, but it doesn't profit from it either. It loses money on a price drop because it can't close out its position. It may have hedged this risk though.
The borrowing institution is willing to pay the fees and interest because it is betting the price will go d
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Depends on the brokers. Some brokers charge a fee per transaction or have a subscription model.
RobinHood was new in that it didn't charge fees but it had to make money somehow, so they used customer information on what stocks they were buying and selling that information to their parent/sister companies that were then shorting/buying stocks on the other end based on that information.
Re: Simples (Score:2)
I gotcher regulatory standpoint right here (Score:5, Insightful)
Oriano Lizza, premium sales trader at brokerage CMC Markets in Singapore..added that it would be easy for nimble small investors to regroup and target fresh companies. 'I think from a regulatory standpoint, the concern is that they could continue to do EXACTLY WHAT WE DO ALL THE TIME,' he said.
Fixed that for you, you phony prick.
Re:I gotcher regulatory standpoint right here (Score:5, Interesting)
Remember when Goldman Sachs got found out for that "shadow trading" operation they ran? It was really clever:-
A GS customer would put in an order to buy shares... This would be recorded in an internal GS trade monitoring application - which is legal. The trade monitoring application would then use an ultra-fast connection to the stock market to purchase the exact same number of shares that their client had asked for, except this time it was GS making the purchase.
Almost every time, the GS purchase would nudge up the price of that particular stock. [Obviously, the GS software was designed to prioritize the right deals, of course.
But then, when the original [and first-to-be-made] client buy request hit the network, guess who just happened to have the right number of shares to sell the client? You got it: Goldman Sachs. Except... the GS purchase of that block of shares from the market would have pushed up the price... so when GS sold the shares to their client, they would make a [very thin] profit.
It was never much of a profit margin, but it doesn't have to be, because the volumes are huge and the bank assumed no risk - it already held the "buy" instruction from the client before it placed the order on the market.
This was one of those situations where GS weren't doing anything that was outright prohibited at the time [sorry, don't know if the rules have been tightened since] but when they were "found out" [it wasn't hard to spot from the transaction history, if you knew what to look for]. This is the nature of the "established players" on the market [and I don't mean to single out GS and imply that their approach is somehow unusual. Think of it a bit more like, say, Formula One car design. The big Teams all push the absolute limit of the rules to see what they can "get away with". Every now and then, one of them gets caught doing something "dodgy" and the rules get tightened and that specific dodgy practice gets outlawed. It's the same thing.
The real story behind this recent burst of interest is that a cooperative community of individual investors figured out a way to stick it to what is effectively the "banking cartel" and, clearly, they don't like it.
Shame, right?
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To be fair, short selling is tame compared with some of the other tactics used by the big players.
Remember when Goldman Sachs got found out for that "shadow trading" operation they ran? It was really clever:-
A GS customer would put in an order to buy shares... This would be recorded in an internal GS trade monitoring application - which is legal. The trade monitoring application would then use an ultra-fast connection to the stock market to purchase the exact same number of shares that their client had asked for, except this time it was GS making the purchase.
Almost every time, the GS purchase would nudge up the price of that particular stock. [Obviously, the GS software was designed to prioritize the right deals, of course.
But then, when the original [and first-to-be-made] client buy request hit the network, guess who just happened to have the right number of shares to sell the client? You got it: Goldman Sachs. Except... the GS purchase of that block of shares from the market would have pushed up the price... so when GS sold the shares to their client, they would make a [very thin] profit.
I don't recall this and I couldn't find a reference. Do you have one?
Goldman is a market maker, so what you are describing could be typical market maker practices.
Alternatively it could be frontrunning, but that has been illegal for as long as I can remember.
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Interesting. Thanks for that!
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Government regulation good, free markets bad.
"Democracy is the theory that the common people know what they want, and deserve to get it good and hard." -- H. L. Mencken
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Please try not to be a jackass. Government regulation succeeded in providing a somewhat level playing field and good times all 'round until Clinton, Bush and Obama dismantled it. Are you stupid enough to believe the Great Depression was the result of government regulation rather than a lack of it?
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Yes, as I regard the Fed as part of government.
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You shall get your regulation. Good and hard. Be happy.
Yellen needs to recuse herself (Score:5, Interesting)
It didn't take a month for her to violate her ethics agreement. [thenationalpulse.com]
Yellen took hundreds of thousands of dollars in speaking fees from entities such as Citadel, one of the hedge funds seeking to benefit from manipulating the market while others are locked out.
Section 6 of her ethics agreement states that Yellen must receive a written authorization to participate personally and substantially in any particular matter involving parties such as Citadel. But Psaki insists Yellen is already dealing with the matter, and “monitoring the situation.” This falls under the description of “actual or apparent conflict of interest.”
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What did you expect from an administration that is headed by a 50y-on-the-take corrupt multi-millionaire politician from Delaware with a family that has enriched itself to a combined value well over 1 billion.
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Let the healing begin (Score:2)
Persons of reduced intellectual ability are a protected group, bro.
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It is time to rethink life choices that led you to this moment.
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She shouldn't of been appointed in the first place. Someone so completely in bed with Wall Street could not possibly be impartial.
But hey, you didn't really actually think the Democrats were really all that different, did you? Biden will throw some peanuts to the liberals but he's mostly their to get the Establishment back in order.
These are all reasons Trump got elected in the first place. Sure, he's no different but a larger and larger portion of the country is ready to just set it on fire and it's not ju
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Since you're apparently incapable of summoning enough braincells to perform a simple Google search, here's the relevant facts: Yellen spoke for and was paid by Citadel in 2019.
I summoned some brain cells, and my simple Google search shows that Yellen herself [oge.gov] says that she received $337,500 from Citadel in October of 2020.
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Admins cry they won't be part of the revolving door, industry to admin to industry and back.
Yet here we are again.
There doesn't need to be explicit tit for tat. Just the open knowledge you can walk into a high paying job as a consultant of some type is enough for you to lay the friendly ground.
Having said that, all people, including business owners, want to sway politicians in their direction, as part of democracy. And there's something to be said for the notion government leads the way in unofficial and
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That is silly on its face. It means that everyone who has a prior business relationship with a company must recuse. I sold some games at GameStop last year; I can never regulate them this year.
Or, you know, you could declare your sales and the proceeds you made from them, and let the committee make a ruling on whether that constitutes a sufficient conflict of interest. Should they determine it doesn't then you get the "written authorization to participate personally and substantially" in the inquiry.
Nuance, rather than absolutes, is at the heart of good legislation.
This has an easy solution (Score:2)
Suddenly, short-term fuckery loses its appeal.
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Any sales under a year already face short-term capital gains - I just suspect a lot of the folks tinkering with Robinhood aren't familiar with filing taxes with lots of trading activity.
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Yeah, maybe you should rethink your approach.
Equality before the law? (Score:5, Insightful)
It is normal for large investors to flock together under the patronage of a hedge fund to troll a stock and bring down a company. But when small underdog investors turn to Reddit in herd to organize and do the same to bring it back up, it is not normal and must be regulated. Go figure.
this is what Robin Hood pulled (Score:2)
What makes these guys so qualified to tell us?
What is going to stop them from having us only buy from their uncles and cousins?
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no idea if im actually helping with anything, but eh, screw it/em.