If prime brokers fall, banks fall:

When hedge funds get margin called, the prime brokers are the ones responsible for closing their positions.

If the prime brokers can’t close their positions, they’re liable.

If prime brokers are liable, it means the banks are liable.

If the banks are liable, it means the GME/AMC squeeze could bankrupt several banks.

The head of Morgan Stanley’s global prime brokerage business retired a few weeks ago. They say it’s a health problem but my sense is he knew what was coming.

Everyone on the planet will soon learn about what’s happened in the stock market.

As long as the story is told properly and not just by the mainstream media, then I hope we’ll have retribution.

People should be in prison for their crimes.

How is it that the people at the top of banks and institutions who make all the money through prime brokerage businesses, high frequency trading and stealing money from people around the world do not pay for bringing down the whole system?

Do not blame Reddit, the retail investor, social media or the Internet for this crisis, as much as the media wants to make you believe.

This was caused by banks. This was caused by hedge funds. This was caused by financial institutions.

Why?

They got greedy – one of the seven deadly sins that has existed for as long as humans have been alive.

Greed is a very powerful force.

If I give you a billion dollars, a lot of people then want two billion dollars. Doesn’t matter if your life doesn’t change at all, people still want it. Some will do anything in their power to cheat and game the system to get it.

This is what Citadel has done for years. They’ve been stealing investors money through payment for order flow and cooking their accounting. Wrote about it here. 

But they’re just one party. So many others have been caught committing crimes and yet because the system is created by these same people, they never suffer.

Let’s do a thought experiment for a second.

If you counterfeit cash in America and are caught, it’s potentially a 20 year federal prison sentence.

How is it that hedge funds, banks and institutions can naked short? Naked shorting means they’re shorting stocks they don’t own, or don’t even exist. How is it that these people who are creating fake shares out of thin air do not suffer the same consequences as people who are counterfeiting money?

THEY’RE LITERALLY CREATING MONEY OUT OF THIN AIR THAT DOES NOT EXIST.

A few people like Wes Christian and Dr. Susanne Trimbath have been fighting this problem for years on Wall Street but no one will listen to them. Why? Because this charade is so profitable for Wall Street that no one wants to change the system.

The only way the system gets reformed is if it completely blows up.

Was watching Michael Lewis interviews today about one of his latest books called Flash Boys. It’s about how high frequency traders are essentially front-running investors around the world by filling their orders at pennies higher than what they paid. Imagine this – a high frequency trading firm can have 1000 straight days never losing money. Even in down markets when most people are losing money selling, they make even more money because so many orders go through their exchanges.

This is how Citadel has built itself into a behemoth in the financial markets. Using payment for order flow with Robinhood and multiple other brokers, they get access to retail investors' trades before they happen. They use their high frequency trading algorithms to front run all their trades and make money off them every time anyone trades. They make billions of dollars off this charade.

You know what the craziest part about all of this is? It’s entirely legal. It’s legal to pay brokers right for access to people’s trades. They make money every time you transact. Payment for order flow needs to be banned because as long as this loophole exists in the system, someone will front-run and take advantage of this. IEX, an exchange started by a Canadian from Markham who was featured in Flash Boys (shout out Canada), was set up to solve this issue. 

This should outrage people because they’re losing billions of dollars every year because of this. For the small retail investor this is not as significant. If you’re a mutual fund or hedge fund trading hundreds of millions of dollars a year, pennies on the dollar for all of those transactions adds up to a lot of money.

Once this squeeze all happens, I hope the American government takes a hard look at what they’ve allowed to happen. The economy could go into a depression because of this. They can’t continue to print money, otherwise their currency could hyperinflate and that would ruin the US dollar as the global reserve currency. However they can’t let that many banks fail because that affects the entire world.

Bankers made billions of dollars in profit over Covid while most of the world suffered. Hundreds of millions of people have gone into poverty while the rich who control assets have made trillions of dollars. Wealth redistribution needs to happen because without it, revolutions and wars could come. 

In today’s day with multiple countries having access to nuclear weapons, that is a very scary thought.

However I’m optimistic. After all of this happens, I hope bankers and those who allowed this situation to happen suffer the harshest consequences allowed by the law. The world is going to be looking for punishment and if governments don’t punish those who let this happen, we have much bigger problems on our hands.

Banks are going to fail once this squeeze happens. If governments around the world intervene in the wrong ways, we’re going to enter a period of massive turmoil.

Governments around the world – your citizens are watching.

I hope you choose to be on the right side of history.