Caution Danger! — A Perfect Storm of Risk

Published on
January 31st, 2021
Duration
35 minutes


Caution Danger! — A Perfect Storm of Risk

The Expert View ·
Featuring Raoul Pal

Published on: January 31st, 2021 • Duration: 35 minutes

Real Vision CEO and co-founder Raoul Pal makes an emergency update to all Real Vision members on his current views as founder of GMI. The combination of market maker positioning, hedge fund positioning, retail positioning, excessive leverage, market technicals, and real economic risk from COVID are the biggest set of sell signals Raoul has ever seen, and although he understands why everyone is jumping on the current anti-establishment narratives around Robinhood, he believes people are missing the bigger story here of unprecedented market risk. All the stars are aligning, and Raoul is extremely concerned about what could unfold as soon as this week. In addition to outlining the major risks looming large, he updates his positioning and makes the case for owning equity puts, bonds, dollars, gold and bitcoin. Filmed on January 30, 2021.

Comments

Transcript

  • GL
    Guy L.
    3 February 2021 @ 03:12
    I did the exact opposite and leveraged into longs extremely hard. Yes the short gamma setup is primed for a sharp drop, but it can also result in a sharp rally. If volatility falls, all of the delta hedges for the new hedges that were put on come off, which results in buying pressure. The first key was that VIX had a historical spike that arguably overshot the magnitude of the market drop. The most important fact though, was the hedge funds were puking longs to cover shorts and cut gross exposure. They were selling quality names like Apple, which was down nearly 4% on the day, because those names have the most liquidity and the least volatility (so they can get back in near where they got out when this squeeze insanity ends). This presented a rare opportunity to buy best in breed companies at a true discount driven by forced selling. They don't want to sell AAPL. They're long AAPL. They were forced to sell. That presents a perfect buy the dip opportunity, which then kickstarts a vanna rally. The following week was more FAANG earnings and they looked primed to beat. Overall this was an incredibly strong long setup. And isn't it nice to be able to leverage long quality companies like AAPL? In such a situation there is no shortage of participants willing to buy these names at a discount.
    • KL
      Kerrie L.
      3 February 2021 @ 03:56
      Too bad you didn't do a video! I would have like to have heard a counter argument.
    • JS
      John S.
      3 February 2021 @ 08:49
      Well done - and that was courageous.
    • MB
      Mathew B.
      3 February 2021 @ 13:37
      I suspect your time horizon is shorter than Raoul's. How long do you expect to carry long vanna?
    • PR
      Peter R.
      12 February 2021 @ 17:46
      prefered trade? when stocks start to waterfall, short btc and be ready to buy back very quickly...great video by the way, im only a few years away from understanding this shit!
    • AW
      Anastasija W.
      26 February 2021 @ 01:41
      Don't know if you are still around but mind linking us to wherever you are watching hedge fund gross exposure? Thanks!
  • ab
    a b.
    16 February 2021 @ 01:33
    any update on this risk? what about having a large cash position like 30-40% as a hedge and dry powder?
  • DV
    Dean V.
    11 February 2021 @ 01:29
    Any update on this?
  • SR
    Sangamesh R.
    31 January 2021 @ 22:49
    Bought more TLT March call options just to diversify the portfolio.
    • LM
      LUIS M.
      7 February 2021 @ 21:47
      OUCH.....!!!! I bought the same TLT March call options and the bet is not working at all.... I am down ~50%..... :-(
  • RH
    Rob H.
    5 February 2021 @ 22:19
    I'm a week late on watching this, but I have to hand it to Raoul for making these calls, it doesn't matter if it plays out the way he said. What matters is he is concerned as a market professional and he is being honest about his concern. I'm always nervous so I'm always hedged some, but when I see things like this it makes me look at things a little closer. So thank you for going out on a limb to warn us.
  • RB
    Richard B.
    5 February 2021 @ 00:54
    stewards enquiry on this call?
  • RB
    Richard B.
    5 February 2021 @ 00:54
    stewards enquiry on this call?
  • RG
    Richard G.
    4 February 2021 @ 18:49
    Any thoughts about your thesis? Timeframe extended perhaps or change?
  • DR
    David R.
    1 February 2021 @ 19:56
    Thanks Raoul, just hedged my portfolio with UVXY long. Cheap way to sleep better at night.
    • PC
      Petros C.
      4 February 2021 @ 11:36
      How does UVXY work from your experience? Is this description accurate? How long do you plan to hold the ETF? https://www.optionsbro.com/uvxy-explained/
  • TB
    Tad B.
    2 February 2021 @ 13:35
    Anyone keeping an eye on Taiwan ? Two US carrier groups and one from the UK in the south China Sea. Taiwan are issuing daily reports of multiple Chinese fighters & bombers in their airspace with US planes shadowing them.. Lots of threats of 'war' by Chinese officials if Taiwan publicly claims independence. Doesn't look good. Not much in the news about this. Would be good to hear an expert view. Then we have Burma. But North Korea have gone quiet for the time being, so at least there are no more missile tests, landing off the coast of Japan...... at the moment. It's difficult to see clearly with all those black swans flying about.
    • GT
      Glen-Andrew T.
      3 February 2021 @ 07:17
      Probably not much in the news about it because the carriers/planes have been around that area, toying with each other for at least 5 years now, without any major escalation.
    • PC
      Petros C.
      4 February 2021 @ 11:28
      I am on vacation near a naval base in Hainan island, south China sea. Life is normal as usual. I bet foreigners will be frog-marched out of the area asap, if things are about to get hairy. The local police knows where all foreigners reside.
  • RR
    Rodrigo R.
    3 February 2021 @ 21:02
    Keep up the good work. You are NOT the tan Gartman.
  • JK
    Jeanne K.
    31 January 2021 @ 23:33
    Sorry, Raoul your missing what a political, social, and ethnic, bombshell this story is. Citadel reportedly paid Jenet Yellen, the Democratic Treasury Secretary, $800,000 in speaking fees in the last 3 yrs. Robinhood was paid millions by Citadel and the high-frequency traders for pre-trade data so they could front-run the retail traders, the very rubes they've been shouting their contempt and disdain for. After the crash in 2007 for the first time since the Great Depression, no one went to jail for committing massive fraud. Maybe your not old enough to remember but the financial press printed emails from the rating agencies bragging about how much they could get for selling triple-A ratings and laughing about how stupid the investors buying from the likes of Goldman Sachs were. The chairman of Goldman Sachs stood before congress and stated it wasn't his job to protect investors from their own stupidity. Eric Holder refused to prosecute the rating agencies for fraud. His reasoning was that rating agencies were allowed to sell fraudulent ratings to corrupt investment firms as a form of free speech. stockholder paid vast amounts in fines that were never accounted for. None of the bankers incurring the fines paid a thing and none of them went to jail! Do you think no one noticed? Biden is wiping out high paying working-class jobs, $100,00 plus, and trying to pile on regressive taxes that don't touch his urban, Wall Street, Tech, constituency. And now the Democratic party is going to once again going to bail out the hated hedge funds and screw the little guys that are beating them? Do you really think Americans are going to put up with the regulators changing the rules to bail out these guys and crushing these small investors? I don't disagree with your technical analysis of what these losses can do to the market. But the real question is going to be where have the completely captured regulatory agencies and the NY bank-owned Fed been? In reality, these hedge funds produce nothing but income inequality and contributions for the Democratic party. If they pull the rug out from under the Reddit traders counting on the ability of the big tech firms to censor the unrest and anger this will create we are all going to be in for a very rough time.
    • JK
      Jeanne K.
      31 January 2021 @ 23:38
      Sorry about the bad editing!
    • JC
      Jon C.
      31 January 2021 @ 23:55
      Agree with everything you wrote but they still will stick it to the little guy as they are either 1. Completely blind to the non elite 99% 2. Simply don't care 3. Are in the pocket of Wall Street and need to do as the paymasters say 4. Too gutless to do the right thing 5. Or all of the above. The GME trade is the fightback to this and it truly it is as much about the morale stand as it is the money. For the WSB guys 2007 is still very fresh in the mind and they can see all the planets have aligned and have the whole of the internet backing the play. There is also the life raft of bitcoin which makes the final outlook very different from 2007. Whatever happens is going down in history for the good or the bad.
    • EB
      Edward B.
      1 February 2021 @ 00:33
      Sorry Jeanne, you started out fine, but as you started to lay this all on the Democrats, it became apparent that you are the one missing the larger point, because of your skewed political bias. The larger point is that "BOTH" parties have contributed to the massive debt this country is carrying and the f**king mess we are in today. I am sure your comment would resonate well on the FOX News message board...if you haven't already posted it there.
    • WZ
      Weiwu Z.
      1 February 2021 @ 01:16
      Jonathan C. I'd prefer not to use the master-slave mindset or evaluate a financial decision by gut/gutless. You can observe actual master/slave at work in China with CCP, and they are quite different than what you are observing here.
    • tc
      thomas c.
      1 February 2021 @ 01:47
      6.5m on WSB maybe 10m soon. What if half of them support a crusade to blow up a rotten system? Maybe $15B-$20B? That's a lot of firepower. wouldn't be surprised if this does what the GBT failed to do and we see a real major reset. Appreciate Raoul laying it out clearly. Know your risks. Jeanne, it's not just the Democrats. Politicians are 99.999% rotten eggs.
    • CK
      C K.
      1 February 2021 @ 10:20
      "Maybe your not old enough to remember (the) emails from the rating agencies" LOL - early 30s Mediterranean / Caribbean retirement has definitely helped him age well... On a serious note - I don't think anyone is missing the extremely significant political, social and ethnic aspects of this story but I just don't think that it is RV's mission to tackle and solve them. I come to RV to hear that X happened, for whatever reason, which may lead to Y that can be mitigated through Z so I can consider what positions I can take to protect myself. I then go to other forums to discuss and debate the reasons - I'm not downplaying their significance at all and agree that drastic changes are required.
    • WM
      Will M.
      1 February 2021 @ 16:29
      I am with a few of the others here in that it just doesn't matter which political party you want to label, they are essentially the same. Just not sure RVT is the place for this discussion though. I need to stay focussed on protecting my wealth and investments and thats why I am here.
    • to
      thomas o.
      1 February 2021 @ 19:03
      With the capital now a fenced off armed camp, makes you wonder why?
    • Mt
      Miami t.
      3 February 2021 @ 20:47
      Best comment on the entire post. The system is rotten and rigged and nobody should close their eyes or shut their mouth about it.
  • Mt
    Miami t.
    31 January 2021 @ 18:52
    Thanks Raoul, great update as always! But it leaves me with some questions. You are pointing your finger a bit to the retail investors causing this mess. But last week my broker for example cut off all margin for GME. This means that you can only buy GME if you have 100% of the funds in cash available. People who could not finance this in their account had to sell a portion of their shares. So in my mind; at this current point in time, all the retail long positions are unleveraged. The problem is at the other side; hedge funds who have the leveraged short side of this mess. So aren't they the only ones to blame then for this coming mess?
    • BP
      Brent P.
      1 February 2021 @ 00:24
      You are wrong about all retail being unleveraged. They are highly leveraged through calls
    • Mt
      Miami t.
      3 February 2021 @ 20:35
      No they are not. You cannot buy calls on leverage. Maybe the market maker has leveraged the underlying risk. But you have to have 100% of the premium in cash in your account.
  • JS
    John S.
    3 February 2021 @ 02:32
    Dear Raoul, When you talk about the GMI crash pattern I know there is information on the internet showing one of 2010 in Taiwan market. However, we would’ve grateful if you could accompany with a chart in order for us to have a better overview of how does this pattern currently looks like for you. I hope you can explain this to us. Many thanks.
    • MC
      Mike C.
      3 February 2021 @ 03:03
      Hi Jon, GMI Crash Pattern is just like a double top except the second high is lower than the previous high. Its basic Dow Theory which has been around for decades. These patterns self validate when the price breaks below the previous cycle low on accelerating volume. In market indicies it helps if you have other cross correlations (bonds, volatility, fx, credit, etc) affirming the pattern. The more cross correlating affirmations you have the stronger the signal. Raoul gets to call it his GMI crash pattern because, well this is his platform and he gets to say whatever he wants without anyone calling him out on it. A great book is "Technical Analysis Explained" by Martin Pring. It has all the patterns in it. Martin Pring was "the" TA guy when I started out. There are probably lots of other TA books people could recommend to you.
    • JS
      John S.
      3 February 2021 @ 07:19
      So is the gmi crash pattern a classic double top?
    • JS
      John S.
      3 February 2021 @ 07:21
      What is the name of the pattern of this gmi crash pattern? Can we say is a double top or has another name. Thanks for the initial comprehensive explanation above.
    • MC
      Mike C.
      3 February 2021 @ 11:34
      Yes Jon , Take a look at Investpedia to get started on Dow Theory: www.investopedia.com/terms/d/dowtheory.asp Good luck Jon. Mike :-)
    • JS
      John S.
      3 February 2021 @ 16:28
      I read a lot about technical analysis but the gmi crash pattern could not find anywhere and I went crazy searching each and every of the books... thanks for letting me know it is a double top with a lower high.
  • MB
    Mathew B.
    3 February 2021 @ 13:36
    Jeremy Grantham agrees https://www.youtube.com/watch?v=RYfmRTyl56w
  • RB
    Richard B.
    3 February 2021 @ 13:29
    Perhaps an update on whether it safe to go back into the water? Given the strength of the warning?
  • CK
    Cristina K.
    2 February 2021 @ 15:56
    We are a world of bunch of wimps with this ridiculous virus. God help us if we would have something like the Spanish flu...
    • MB
      Mathew B.
      2 February 2021 @ 16:18
      Why is Covid less serious than Spanish Flu?
    • TP
      Timothy P.
      2 February 2021 @ 18:41
      It is interesting the level of fear being promulgated from something that has a survivability rate of 99.7% for anyone under 65. This new hype of virus "variants" is suspect as well. It never was the cases, truly. It was the actual mortality that mattered. But now we're rounding the hump, there has to be a new narrative for all the newfound mini-dictators to extend their rules and lockdowns. They don't want to give up their power so easily, and they overestimated the cost of scaring the living shit out of the population and the backlash that will fuel in the future. Witness the lack of trust in any government right now regarding health -- they've flip-flopped so many times "no human transmission, oh wait, there is.." or "don't wear masks,...oh wait, wear TWO" that no one believes them -- except for those wrapped in their own fear. The proper response is to isolate the truly vulnerable (65 >) and get on with our lives. You know, like we did with every other pandemic before this one.
    • JS
      John S.
      3 February 2021 @ 07:22
      I think if we have had a covid with the hygiene level and the world like Spanish or post ww1 would have been as bad as Spanish flu.
  • AS
    Alan S.
    1 February 2021 @ 04:43
    Raoul seems to think this potential crisis would be bullish for BTC but last March when there was a crisis BTC lost 50% in an hour. Thoughts anyone?
    • SR
      Steve R.
      1 February 2021 @ 04:59
      It depends on your risk tolerance and time horizon. Since BTC can move very quickly you'd have very little chance to take action once the move starts or to get in on any rebound unless you are staring at the screen all day and nights. I (personally) prefer to just buy and hold, and not to trade it, and to accept any short term pain for potential long term gain.
    • AC
      Anthony C.
      1 February 2021 @ 09:53
      Use profits from the TLT call to buy BTC cheaply?
    • AS
      Alan S.
      1 February 2021 @ 10:50
      Yes, I'm with Steve on this. The key thing is to believe in your long-term outlook and stick with it. Unless you believe that in the meantime there's going to be a massive correction, a la March 12 last year, much better to sit tight than to enter the slippery slope of trying to guess short-term moves.
    • BA
      BURHANUDDIN A.
      2 February 2021 @ 00:41
      From what I saw in the interview Raoul seems to be bullish on BTC for the 1 year period, if the 4-year BTC price cycle thesis following from a halvening is true. However if things turn bad next few weeks, as Raoul is cautioning, I think there might be a liquidity crisis, which could lead to BTC being sold to cover it. like last March.
    • RC
      Rich C.
      3 February 2021 @ 06:21
      And during every other significant sell off.
  • LB
    Lacy B.
    1 February 2021 @ 06:55
    Thank you Raoul! This was by far the clearest explanation to this saga I’ve head yet. Much appreciated.
    • RC
      Rich C.
      3 February 2021 @ 06:20
      It may be right in a few months. All except for Bitcoin being immune to the liquidity driven sell off. Does anyone on this platform think that would back test? Making that statement hurts your credibility.
  • MC
    Michael C.
    2 February 2021 @ 02:06
    I just received a call from my FEMA source 2/1/21 8:30PM The source is impeccable as I was informed several days before the reefer trucks showed up in NYC as temporary morgues on the national news and then I was informed several days before NYC started digging mass graves on the island in NY harbor. Approximately 5-7 days my informant said to get N 95 masks, double/triple mask if not available, and continue strict social distancing. Tonight my informant said a bulletin came out of Dr. Osterholm, Univ of Minn office, to immediately get a vaccine, no matter what the brand as the P1 mutation out of Brazil is worse than anyone expected. Osterholm was on Meet the Press yesterday and said there's a cat 5 hurricane off shore with this strain, massive wave, 6-14 weeks out. As Raoul pointed, the situation could become much, much worse.
    • RB
      Richard B.
      2 February 2021 @ 05:17
      Thanks. How about South African? Seems those have been infected once are more prone oddly.
    • KL
      Kerrie L.
      3 February 2021 @ 04:02
      Thank you for sharing this info. I've been reluctant to have my immune compromised elderly mother get the RNA vaccine. This info could change my mind.
  • PH
    Peter H.
    3 February 2021 @ 01:29
    Ouch indeed. Didn’t expect an epic rally after this.
  • MC
    Mike C.
    1 February 2021 @ 01:47
    Wow....1353 likes and only 60 dislikes....everyone is bearish....
    • JC
      Jey C.
      1 February 2021 @ 03:23
      People are not bearish per se, they just appreciate the insight
    • FR
      Florian R.
      1 February 2021 @ 13:22
      Always good to consider multiple perspectives and not tunnel vision like a fool.
    • JL
      John L.
      1 February 2021 @ 18:35
      Idk, my sisters, who are graphics designers, are calling me with FOMO
    • DR
      David R.
      3 February 2021 @ 01:27
      True story. Many 14-year-olds are trading US stocks based on tips from TikTok, on newly opened brokerage accounts they opened - lying on their application which obviously wasn't' checked anyway.
  • DS
    David S.
    1 February 2021 @ 17:22
    More virus porn. Come on man! This isn't a measles or ebola outbreak. It's more contagious than the regular flu, and more deadly to older people and those with comorbidities...like any of the regular flus. This lockdown insanity is the real global killer. Plus the PCR cycle farce that's driving cases exponentially higher. A virus so deadly you have to get tested to find out if you have it. #insanity
    • DS
      David S.
      1 February 2021 @ 18:42
      That being said, I definitely appreciate the details about market structure issues....just not the virus boogeyman or variants...all viruses mutate, that's why there's a new flu vaccine every year.
    • CA
      Chris A.
      1 February 2021 @ 19:46
      It doesn't matter what you or I think. You have to trade the market we are given and that Market is extremely fragile right now. Whether you believe the virus is a real threat or not does not matter when the world is being locked down due to it.
    • DS
      David S.
      1 February 2021 @ 20:30
      I get that Chris, but in the US CA, NY and IL are reopening, not shutting down like the EU. This virus is driving everybody mad. Yes, it will mutate as they all do.
    • DR
      David R.
      3 February 2021 @ 01:23
      What virus? I got MS Security Essentials for free.
  • fa
    francisco a.
    2 February 2021 @ 21:42
    Thank you Raoul. I started taking the actions you recommended.
    • RC
      Rich C.
      2 February 2021 @ 21:55
      Ouch
  • TW
    Thomas W.
    2 February 2021 @ 19:56
    Great piece agree with much of it, except that further lockdowns more bearish. Maybe real economic activity yes of course, but we are not yet in an environment where that matters at all. Ridiculous as it is. The longer people are at home with nothing to do the higher the markets go. Hundreds of millions of people around the world sitting at home trading stocks because they have nothing at all to do. IMO that was what has been the biggest thing we all missed over the last 9 months, how incredibly bearish the virus is for the real world, but how insanely bullish it as been on paper (stocks/bonds etc). It is an absurd time to be alive. Re-opening the world will probably be the most bearish event we have ever seen for the markets. Just my view could be totally wrong
  • TP
    Timothy P.
    2 February 2021 @ 18:33
    Translation - "The legacy financial system is broken, and it worked for a long while because of the unwritten rule that the big boys cover each other's asses, and push any losses on to the taxpayer. Please trading degens, don't push it too hard because things will break -- and then there will be accountability and consequences." I say hammer on this gordian knot of centralized garbage services until the whole thing springs leaks. Back in 2008, now renamed to the cutesy acronym "GFC" (Not so funny and cute to the people who lost their jobs, careers and homes) the same plea was modified to allow entities that were "too big to fail". In my book, you get over-levered and naked on a bad trade -- you deserve to get hit. Don't trade if the total risk is beyond what you can handle. The apologists coming forward saying "well, it isn't so easy to hedge these positions" should turn inward and ask themselves why these hedge funds PUT THEM ON IN THE FIRST PLACE. As a Crypto Finalist -- someone who believes that crypto will eat legacy finance's lunch for them, I say hammer away and show all those regular people out there how broken it truly is. Once everyone realizes the emperor truly has no clothes, then we can move on and build something that will take care of this festering rot we call banking/finance.
  • MB
    Mathew B.
    2 February 2021 @ 16:19
    Raoul, loved this. Can you say some more about where the short gamma is? Is it just two firms or are there lots more? If banks are no longer to warehouse risk (like interbank options traders used to), la this a factor in market instability?
  • RG
    Richard G.
    2 February 2021 @ 15:23
    So much for the liquidity event causing selling. Stimulus including Fed will provide any liquidity the markets need. If not they will change the rules.
  • MC
    Michael C.
    2 February 2021 @ 11:58
    @JL. Methinks thou doth protests too much...;) And it appears the GME and other Reddit corners are breaking. But it will make good reading like the Hunt silver corner, the Great Northern corner, and the Piggly Wiggly corner....;)
  • VK
    Viresh K.
    2 February 2021 @ 11:03
    Hm, I agree with some of this, i.e. looks like we're overbought, HF's grossing down, but rest seems like noise/
  • JL
    J L.
    31 January 2021 @ 20:00
    Some stuff people might be seeking answers on: -- PROBLEMS WITH A GME CAPITAL RAISE THEORY In theory GME could do a capital raise. But they would likely slaughter the golden goose before they were able to monetize it, and possibly destroy GameStop's reputation forever if it was seen as a betrayal. Imagine a scenario like this: -- GME announces a very large capital raise -- Perception is that squeeze = broken by new shares -- Hedge funds are perceived to win via GME mgmt -- GME shares collapse before the raise is completed -- Reddit decides it hates GameStop forever -- GameStop as a company goes bankrupt So basically GME could destroy its share price AND enrage its fan base at the same time. GME's direction from here is probably binary. It either goes to the moon on forced covering, or it goes through the floor. If management did an ill-timed rise, they could collapse the shares, be perceived as helping the hedge funds, destroy their reputation with their own fan base, and not get the capital raise funds anyway (because the stock collapsed too fast). -- WHY SHORTS CAN BE MORE THAN 100% OF THE FLOAT Naked shorting is a different thing than having shorts be more than 100% of short float. I explained it elsewhere like this: The percentage of short float for a shorted company can legally expand beyond 100 percent because the shares, as a form of collateral, can be rehypothecated more than once by the share lending entity. Alice is long XYZ shares. They are lent to Bob so he can short XYZ. Chuck goes long XYZ and buys the shares from Bob, not knowing nor caring Bob borrowed them first from Alice (all these people are at Schwab, the computer is making assignments). Dave then goes short by borrowing shares from Chuck, and Ed goes long via buying the shares from Dave. If XYZ distributes a dividend, the actual payment goes to Ed. Then Dave, who is short, has to pay the dividend amount to Chuck, and Bob, who is short, has to pay the dividend amount to Alice. Alice (long) → Bob (short) → Chuck (long) → Dave (short) → Ed (long) Company dividend goes to Ed → Dave pays dividend proxy to Chuck → Bob pays dividend proxy to Alice In the manner above, the synthetic float can expand beyond 100% via matched up demand from longs and shorts, with the whole thing starting via rehypothecation of Alice's shares. This is legal and different from naked shorting (which is starting a short transaction before the borrow is confirmed). Rehypothecation of shares can expand the share float beyond 100% in the same way rehypothetication expands the money supply beyond 100% — whether it's done by a traditional entity or a shadow entity (I think). -- WHY THE SQUEEZE IS RATIONAL / HOW IT ENDS IF IT WORKS Some are talking about GME as being irrational because there is no way the company is worth its market cap. The fundamentals of the company don't matter. What matters is the squeezers' ability to force the hedge funds to cover. If the Reddit army can push share prices high enough, the hedge funds will be forced to cover. These funds are still more than 100% short, as evidenced by S3 partners and borrow rates of 30-50%. The way you win a squeeze is you EXIT with sell orders as your target is FORCED to buy. Something like this: -- the hedge funds' risk managers demand the positions be covered -- the funds' prime brokers demand the positions be covered -- the losses get so big the hedge funds buy to cover at market -- the only prices they can get are $1,000 to $3,000 per share Imagine a retail investor holding 10 GME shares. He has a sell limit order at $3,000 just in case. The squeeze is successful, the hedge funds go into margin call liquidation, and some poor bastard hedge fund manager has to buy back at a $3,000 print because he can't risk having to buy at a $6,000 print. In so doing that manager transfers $30,000 from his fund into the pockets of the retail investor who was long 10 shares. That is how it ends if the Reddit army wins. They force a cover at "infinity squeeze" prices, and the capitulating hedge funds buy back their shares at somewhere north of $1,000 or more. The blood of the hedge funds -- FORCED TO COVER BY THEIR BROKERS -- carries the price to that infinity level. -- HOW MUCH THE SQUEEZE COULD COST WALL STREET The cost of this squeeze to Wall Street could be anywhere from $50 to $100 billion. To get that number, just look at the open float of 50 million shares and imagine the share price goes past $1,000 per ounce. Then keep in mind that, if the price truly melts up, the funds will be forced to pay virtually ANY price to cover their shorts. They hit the bid on whatever sell orders the squeezers have put into the market. The reason they pay that $50 billion to $100 billion is because if they don't, it could become $100 billion to $200 billion. -- WHY REDDIT COULD REALLY DO THIS Global virality and increasing firepower. The WallStreetBets message board had 2.2 million users a week or two ago. They have been adding half a million to million users per DAY. At last check they were 7.5 million. And at the same time, it's the easiest thing in the world to participate in the GME squeeze, simply by purchasing shares. You have auto mechanics in New Zealand and students in India buying GME shares. This thing is global and the funds look dead in the water. Melvin Capital is reportedly down 53% for Jan. That could just be the beginning.
    • JL
      J L.
      31 January 2021 @ 20:15
      p.s. To clarify, the cost of the squeeze by itself, in direct GME-related losses, could be $50-$100 billion. The all-in cost to the market, and to hedge funds as a group, due to market meltdown, collapsing hedge fund books, Redditor winnings recycled into other squeeze plays, portfolio contagion, investor panic etc. could be many, many multiples of $50-$100 billion.
    • MH
      Michael H.
      31 January 2021 @ 22:37
      great summary. i think at this point the infinity squeeze scenario is well understood by most people who have been paying attention - the question of whether or not it can occur is simply one of faith and belief. or non-belief. or of government intervention.
    • MC
      Michael C.
      31 January 2021 @ 23:29
      Hurts my head...lol
    • JL
      J L.
      1 February 2021 @ 02:35
      @ Michael H. Generally agree, though certain aspects of the mechanics were fuzzy for many people. The government intervention question also has wild dynamics never before seen. For instance, if the government actually does intervene, who is hurt and who is helped? An intervention could be seen as bailing out the hedge funds, and their brokers, while crushing hundreds of thousands (millions?) of retail investors (because a real intervention would mean GME plummeting by 90% in value or more). Does the government really want to be seen throwing a lifeline to giant hedge funds -- who got here through their own stupidity -- while blowing out the accounts of hundreds of thousands of little guys? Does the government want to be seen handing a profitable payday to the hedge funds that doubled down on their shorts in the teeth of the squeeze, assuming that someone higher up would bail out their position in an anti-free-market way? Speaking of the free market angle, the hedge funds caught in this short squeeze vice were arrogant enough to stay massively exposed, in a stock that was shorted far past 100% of the float, well after it was clear there was serious and vocally telegraphed squeeze risk. Shouldn't the funds pay for that arrogance? Aren't they big boys and girls? Is a short squeeze not a legitimate exploitation of structural mechanics -- the sort of thing that "smart' hedge funds do all the time? And if the hedge funds do get blown up here -- how is that different than a bunch of mortgage firms getting blown up in the financial crisis, with various hedge fund players profiting from being long credit default swaps? And if a $50 to $100 billion loss causes some heavy dislocation but doesn't destroy the market's function -- shouldn't it be allowed to happen? Wasn't that the thinking in terms of why Lehman was allowed to fail, before realizing there was a systemic glitch in the chain? If some type of bailout or shutdown is actually arranged, I would argue a big settlement should also be arranged, in which the retail investors who were long GME in rational anticipation of a legal squeeze -- it's not illegal to say "WE LIKE THE STOCK" on a message board -- are compensated for the government's involvement on the playing field. The hedge funds and brokers should not get a free pass if they are bailed out, in other words -- they should cough up tens of billions and give it to those who were rationally long GME before a flag was thrown on the field. If the government bails out the hedge funds and brokers and does NOT do that, imagine the hatred for the system that would follow -- and rightfully so. The optics would be, "When the elites blow up the system and wreck the economy a la 2008, they get free money and nobody goes to jail. When the little guy does it, they do the financial version of Tiananmen Square." I think government officials, or at minimum the political leaders on left and right, understand the shape of the danger here, which is why you saw this wild bipartisan unity in terms of being angry at Robinhood, and vocalizing on the side of Reddit investors, when Robinhood halted GME trading.
    • MS
      Maxwell S.
      1 February 2021 @ 03:25
      Great explanation JL. How would this play out if the price of GME is more than the funds can afford to pay?
    • JL
      J L.
      1 February 2021 @ 04:30
      @ Maxwell S. I'm no expert on transmission vectors, but my sense is that if hedge funds get vaporized, the prime brokerage operators would take the big hit. Prime brokerage is a highly lucrative business which basically involves catering to all aspects of the hedge fund business. A top-tier prime broker provides a kind of omnibus hedge fund brokerage account with all the investment bank trappings: Financing, custody, execution, OTC derivatives, custom products, white glove concierge service, etcetera. A few years back, Marc Cohodes told the story to Grant Williams about how 2008 was a nightmare beyond belief for his hedge fund. Goldman Sachs basically blew out the fund on grounds of risk mitigation (even though the fund was well positioned going into the crisis). That was an instance of the Goldman Sachs prime brokerage unit looking out for Goldman Sachs, and killing off a hedge fund as collateral damage. If a comparable situation unfolds with GME, prime brokers could start laying the hammer down to protect their firms against losses, and then absorbing huge losses anyway if their fund clients blow up before the risks are mitigated. This would presumably impact the top-tier prime brokerage operators -- Goldman, Morgan Stanley, JPMorgan, etc -- but not necessarily by a large enough margin to create systemic risk on its own. (Or probably not rather, but if there are hidden daisy chains who knows).
    • SR
      Sam R.
      1 February 2021 @ 15:37
      Thanks for the description of re-hypothecated share lending; I wasn't clear of the mechanics until now. A great description of the plumbing of the clearing system here, if anyone wants to go further down the rabbit hole: https://www.zerohedge.com/markets/its-not-just-robinhood-reddit-rebellion-has-clogged-entire-financial-systems-plumbing Incidentally, this supports Raoul's warnings about the fragility of the system. Reminiscent of certain features of the 08 crisis. This was also interesting: https://www.zerohedge.com/markets/stunning-way-some-desperate-funds-covered-their-gamestop-shorts suggesting that hedge funds are fast exhausting every avenue to cover their shorts Could the squeeze continue? My sense is that it could, although last Friday's op ex could have marked the top. For sure, it has become bigger than mere profit-seeking. The HODLer generation has discovered Wall Street's kryptonite and they're not afraid to use it. Whether or not this was orchestrated, it's clear that the wallstreetbets phenomenon has its own momentum: - Righteous indignation against the 0.1%, bringing to a head years of resentment against a system perceived as rigged in favour of bankers, rising wealth inequality, bailouts for the rich, indebted youth with reduced prospects... etc - Support from high-ranking politicians and a diverse group of other prominent figures - Sophisticated influencers promote strategies with higher chances of success and likely to do most damage to institutions - Seeming reluctance for the authorities to act, bearing comparison to last summer's protest/riots - Get-rich-quick upside with limited downside - reddit user DeepFuckingValue being the poster child for the former; 'stimmy' checks ensuring the latter - Rapidly growing user base fueled by media coverage and increasing international participation - Reality-TV style heart-string tuggers: "With the proceeds from the GME calls I bought 3 days ago, I can now afford chemo for my dog..." etc - Reflexive reinforcement from the other half of wall street, who will jump on any trend that's currently working - Hive mind/mob mentality, depending on which way you see it, incentivizes actions that would otherwise be irrational However, if it goes much further, the risks become increasingly exogenous and non-linear. To reiterate and expand: - Prime brokers will do everything they can to avoid taking the hit; they'll protect themselves first. Likely they increase margin requirements on shorted stocks, meaning hedge funds are forced to sell other positions: contagion - Brokers not sufficiently capitalized to continue operating normally with such unprecedented lopsided risk. One or more may be unable to post sufficient collateral, forcing them to cease trading - Extremely bullish positioning coupled with growing downside risks causes a rush for hedges, i.e. put buying, which leads to (a) a spike in put premiums, which feed into VaR models, and (b) selling by options dealers in mirror image of the GME gamma feedback loop dynamic. This could be accompanied by dealers taking off delta-hedges on their record high short call positions. - VaR is one component that would tend to induce positive feedback, where selling begets more selling. CTAs (i.e. systematic/trend-following strategies) are another - In addition, systematic selling from risk parity strategies is a further risk to equities, and could put pressure on bonds too (as in March 2020) - Active funds continue to lose AUM - Melvin being only the latest example - meaning less capital available to arrest sudden market drawdowns. - Expecting passive to come to the rescue would be like expecting a trickling tap to keep filling up a bath once the plug is pulled. The most important factor to watch if any of the above do begin to play out is the Fed's reaction function. The current system has already been exposed as fragile and not fit-for-purpose, but there's no way reform (e.g. blockchain based settlement) could be implemented in time. Most likely whatever the Fed did would be heavy-handed, rushed, and have unintended consequences.
    • MC
      Michael C.
      1 February 2021 @ 22:34
      @JL. Would you happen to be long GME? And at what price? Asking for a friend....;) Full disclosure: I have no GME.
    • JL
      J L.
      2 February 2021 @ 08:39
      I'm not at moment and it shouldn't matter even if I were. Also, it's possible the hedge funds are using deceptive tactics to manipulate the appearance of short float (making it look as if they are getting out when they aren't). The below SEC document illustrates some of the weird stuff that may be going on. Excerpt: "Trader A may enter a buy-write transaction, consisting of selling deep-in-the-money calls and buying shares of stock against the call sale. By doing so, Trader A appears to have purchased shares to meet the broker-dealer’s close-out obligation for the fail to deliver that resulted from the reverse conversion. In practice, however, the circumstances suggest that Trader A has no intention of delivering shares, and is instead re-establishing or extending a fail position." https://www.sec.gov/about/offices/ocie/options-trading-risk-alert.pdf
  • JK
    John K.
    31 January 2021 @ 19:31
    Another funny part of the GameStop situation is I've seen multiple people on various parts of the internet saying they sold a large chunk of their other stocks to buy GameStop. So that's another source of selling pressure if the gamestop trade continues tomorrow. I'm slightly doubtful they can do it as people have gotten burned in the past couple of days between dogecoin and the most recent GameStop selloff. My big concern is the consequences of this. Gamestop seems like its sparking a wave of pump and dump groups especially in crypto where it's far easier to create a pump due to low liquidity in the space. There is a risk the US cracks down hard on this type of stuff and crypto may be caught in the crossfire, unfortunately.
    • JD
      John D.
      31 January 2021 @ 23:36
      would like to hear other peoples opinion on John K's thoughts
    • BA
      BURHANUDDIN A.
      2 February 2021 @ 00:46
      Yeah there was a really nasty pump & dump with XRP (Ripple) a few hours ago.
  • TB
    Tad B.
    1 February 2021 @ 22:22
    Well explained. Thanks..... I think :(
  • BC
    Bill C.
    1 February 2021 @ 21:51
    There's plenty of good content on RealVision - Ash (and his filing cabinet), Ed, Mike Green and so much more. But these 'heart-to-heart' cautionary warnings backed up by reasoned opinion that make RV worth paying for. Most grateful.
  • NC
    Nic C.
    1 February 2021 @ 19:18
    Timing is everything as they say!
  • ND
    Nivtej D.
    1 February 2021 @ 18:46
    Thank you for the flash update. As new investor this market is really tough to understand.
  • RW
    Richard W.
    1 February 2021 @ 18:25
    Thank you Raoul. I just sold all my non- gold and silver holdings. This NOT on you, but you made me realise just how vulnerable the system is right now. Some people don't enjoy what you say, but I understand that the system is far more complex than I can grasp, and hence I employ your wisdom, which I filter through my own lens of reality. That, in essence, is why I pay my subscription.
  • df
    diamantino f.
    1 February 2021 @ 18:20
    Panic!!!Covid...
  • FP
    Fred P.
    1 February 2021 @ 18:03
    Hello Raoul, Thank you for this video, it made me realize that I had way too much risk on. Thankfully a countertrend rally today so I could adjust my position.
  • SF
    Stefano F.
    1 February 2021 @ 08:01
    I have been a subscriber of rv since day 1 and I heard a lot of times Raul saying... the most important peace I have ever written...rv is becoming zerohedge... operation fear ...call long bond and usd againt him in the last 8-10 months but here we go again...one day he will be right I imagine.. furthermore the quality of rv is lately going down a lot...the quality is going down proportionally to the increase in quantity...few video are worthy watching now
    • JF
      John F.
      1 February 2021 @ 08:47
      RV has been calling the "top", in US equities at least, since about April last year. Based on the comments below, RV subscribers certainly love their bear porn. Having said that, still highly value the insight from all RV contributors. They (and the quality) can't be perfect all the time. As a suggestion and an interesting exercise, some RV subscribers might find it valuable to see Raoul put on his 'bull' cap for a moment and present the opposing view to what is his 'caution danger!' scenario.
    • VK
      Vipin K.
      1 February 2021 @ 09:49
      It's all about RISK v/s REWARD if you get IT......... but RV gets IT!!!!
    • AE
      Alexander E.
      1 February 2021 @ 11:34
      Wtf are you guys talking about? He was bullish on Crypto and Bitcoin last year, he has his concerns about the equity market, but they are absolutely justified.
    • AT
      Anthony T.
      1 February 2021 @ 13:32
      You must have missed the Gold and Bitcoin bull call since last year
    • AP
      Alfonso P.
      1 February 2021 @ 14:29
      agree on the quality vs quantity concept, trying to be everything for different audiences?
    • BP
      Bradley P.
      1 February 2021 @ 14:36
      Raoul tried to peer behind the curtain to identify secondary risks...not easy to do with incomplete data. Leverage is an issue, when hedges derisk at same time, that could be a problem. Make your own investment decisions. I appreciate these backgrounders.
    • GH
      Glen H.
      1 February 2021 @ 17:26
      I do agree that harping on Covid is getting old, but give Raoul his due. If we would have all bought BTC we’d be sitting pretty. And, you have to agree this market has lost its mind... extremely fragile with lots of metrics at extremes.
  • Dv
    Daniel v.
    1 February 2021 @ 16:22
    Although I bought some puts I would not be suprised if we make new highs soon.
  • LM
    Luca M.
    31 January 2021 @ 23:10
    Thank you for the heads-up, Raoul. Very in-depth and clear as always. I'll hold on to my long-term treasuries, gold and (irresponsibly outsized) crypto long positions. Not sure what to do with a small silver position I have, as well as some other small positions in the equity market (among them a cannabis ETF and a couple psychedelic stocks). I'll probably keep them open and ride the wave. What would you do?
    • JH
      Jesse H.
      31 January 2021 @ 23:12
      If it were me, I would keep the silver position FWIW. It may go down, but there is only one direction it can really go over the next 12-24 mo. Cheers.
    • ND
      Nicole D.
      31 January 2021 @ 23:24
      Keep your silver its going up a lot.
    • MA
      Melanie A.
      1 February 2021 @ 00:47
      FWIW I'm keeping my cannabis ETF positions (similar to Bitcoin I expect some dips and will likely add)
    • MD
      Michael D.
      1 February 2021 @ 03:24
      Looks like WSB is targeting silver now, so ride that out IMO!
    • JM
      John M.
      1 February 2021 @ 04:12
      Wonder what Raul thinks about the reddit crowd attempt to push silver higher? Could it have success & implications?
    • WM
      Will M.
      1 February 2021 @ 16:16
      Buy a bigger silver position.....
  • CP
    Curt P.
    31 January 2021 @ 22:33
    You neglected the biggest risk of all. Wait for it. In 28 days from now, you will be sh*tting yourself that you missed it.
    • OS
      Ollie S.
      31 January 2021 @ 23:03
      What’s that curt?
    • JD
      John D.
      31 January 2021 @ 23:09
      What is that Curt?
    • SH
      Sean H.
      31 January 2021 @ 23:23
      ???
    • JR
      Jorge R.
      1 February 2021 @ 01:41
      Curt is worried that nobody will remember his birthday on February 28th.
    • WM
      Will M.
      1 February 2021 @ 16:15
      Looks like this comment fell flat.....
  • BT
    Brian T.
    1 February 2021 @ 15:57
    Dear RP, I agree with most of your statements and insight and truly appreciate your understanding and perspectives!! You're the man!! -(of course I always watch for advice from DLS in the comments as well!!!)- I would be interested in ONE quick piece of advice, on an honest question here. IS THERE any chance that another foreign power (ie China) could be watching all of this and think to themselves- "let's let the US self destruct by adding into stocks that bust hedge funds, destabilize the system, and then try to BUY up as much US stocks as we can while everyone is running for the exits?" ARE there any rules AGAINST this kind of thing happening?? Thank you in advance for all the Friday videos!! Love the new angle on your room as well, btw. God Bless, BT
  • JM
    John M.
    1 February 2021 @ 15:52
    Silver doing very well!
  • DM
    Don M.
    31 January 2021 @ 23:20
    Please explain why GMI crash pattern is to be feared in stocks but ignored in Bitcoin which just fulfilled this exact pattern.
    • RP
      Raoul P. | Founder
      1 February 2021 @ 02:08
      It didnt take out the low.
    • DM
      Don M.
      1 February 2021 @ 03:36
      Beg to differ Raoul Bitcoin peaked at about $41,950, it then fell to $32,522. It then rallied to a lower high at about $40,093 before falling through $32,522 to $30,067 and eventually $29.236. Is that not the GMI crash pattern?
    • DM
      Don M.
      1 February 2021 @ 15:25
      Apologize if it's just my ignorance on how the crash pattern works.
  • ME
    Mark E.
    1 February 2021 @ 15:09
    Thanks Raoul, appreciate that you essentially gave up a weekend to share your thoughtful insights into a potential train wreck and how to avoid getting crushed. A word to the wise is sufficient...
  • PW
    Patrick W.
    1 February 2021 @ 14:49
    Darn #RVBets driving up TLT210319C170 while TLT is going down. :)
  • SR
    Steve R.
    1 February 2021 @ 14:37
    Thank you for this. I am a "waiting bull." I have been a fairly long subscriber and remember the Grant Williams expression, "Buy when everything is on sale." I did a little last March and am waiting for another "crash." I am a little cautious because, as Raoul said, the market can go down, up, and then crash. I am a CPA, not a virologist, but my understanding is that viruses "evolve to be less lethal and more contagious." It in its "Darwinian" interest to make sure that its host doesn't die, and that it spreads rapidly. The new variants may be evidence of this. I hope so. Since I received the coronavirus for Christmas, so I hope my immunity can handle South Africans and Brazilians. There is another "Steve R" making comments and he is the smarter person.
  • JM
    Jason M.
    1 February 2021 @ 12:19
    Started well.. then we progressed from RH/Primebrokers to South African variant of virus.....
    • JV
      Juan V.
      1 February 2021 @ 14:36
      100% agreed. All this talk of variants is utter nonsense and the biggest difference between now and March is people are rightly seeing through the BS, which is why some countries protest lockdowns/vaccines whereas they were totally obedient in March. Different set of circumstances. Also he seems to be missing the fact that COVID was as bad as it was in March 2020 because it was an unexpected event, it was an external shock. It isn't, anymore.
  • JV
    Juan V.
    1 February 2021 @ 14:34
    Lost me with the COVID nonsense... the idea that COVID will again cause the same level of shock as we saw before is dumb. Lightning doesn't strike twice in markets. Also governments know how to react: Print money. Also like... Look at the numbers Raoul, it's not as bad as march as far as COVID goes. They also know how to react to the GME situation: Print money.
  • KP
    Kris P.
    1 February 2021 @ 13:50
    What about a position in the vix?
  • DB
    Danielle B.
    1 February 2021 @ 02:31
    Can we have a video on how to buy puts?
    • SJ
      Srinivasa J.
      1 February 2021 @ 05:29
      https://www.youtube.com/watch?v=z6lu992JvCk
    • AT
      Anthony T.
      1 February 2021 @ 13:33
      https://www.youtube.com/watch?v=dQw4w9WgXcQ
  • pk
    philip k.
    1 February 2021 @ 01:29
    Viruses are not living breathing things, alive yes
    • SL
      Shawn L.
      1 February 2021 @ 02:00
      Even the notion of them being "alive" is questioned, as they do not grow or make their own energy. These are parts of the definition of live. Viruses have no ability to maintain a type of homeostasis. They are created and simply replicate or fall apart. This is why that exist in a partial state of being partially alive and partially inanimate.
    • FR
      Florian R.
      1 February 2021 @ 13:22
      He means it can change.
  • SK
    Sergejs K.
    1 February 2021 @ 13:17
    Here we go again...
  • JT
    Joseph T.
    1 February 2021 @ 13:02
    Raoul: Great guidance. Always appreciate your passion to share. JJ
  • SJ
    Srinivasa J.
    1 February 2021 @ 02:14
    Raoul said Hedge funds and mutual funds are short of cash and need to raise cash for settlement with clearing houses. So they will sell their liquid assets like stocks and bonds. Hence both bonds and stocks should go down, Why will TLT go up when the big guys are selling their bonds to raise cash while we expect stocks to go down? Sorry not following the rationale on TLT buying as a a risk hedge.
    • TW
      Todd W.
      1 February 2021 @ 04:31
      I think he means they will sell stocks, then buy bonds
    • SJ
      Srinivasa J.
      1 February 2021 @ 05:31
      They sell anything to meet the liquidity. If they sell stocks and buy bonds, how will they have liquidity to meet their obligations under the new clearing and settlement rules? Am I wrong?
    • FP
      Fred P.
      1 February 2021 @ 12:04
      Steve van Metre does good job explaining the initial down, then up movement of bonds in such an event: https://www.youtube.com/watch?v=DofvGTKnwHU
  • JS
    JD S.
    1 February 2021 @ 07:38
    Great read, 5 year Market Trends: https://survivalnomicsnow.com/great-reset-markets-trends-next-5-years/
    • MJ
      Matt J.
      1 February 2021 @ 11:34
      That's a massively ugly, ad happy site. How about having all your points on one page, rather than getting people to click a new page for each point (blatant attempt for more pageviews & ad clicks). Create a user-friendly site and you'll make much more money than with all the cheap tricks.
  • JF
    Jess F.
    1 February 2021 @ 11:33
    Where is Herucles when we need him, who will be the hero to clean the Wall Street stables?
  • JB
    Jake B.
    1 February 2021 @ 07:55
    A lot of words, not a lot of data... CFTC data doesn’t agree with comments re positioning. The macro guys all say the market is super long reflation, but the sector data shows energy is an all time low % of the S&P500. Also regarding COVID data... in March it wasn’t priced in. Now everyone has seen every model and if it’s not already priced in I’d be very surprised.
    • JB
      Jake B.
      1 February 2021 @ 07:58
      In addition late last week the market hedged at the lows. Implied volatility premiums were up above 100% even after the sell-off
    • AV
      Andrej V.
      1 February 2021 @ 11:33
      #HedgeyeProcess
  • dm
    daniel m.
    1 February 2021 @ 11:06
    Hi, this video cannot be powershared with friends. Any reason?
  • JJ
    Jules J.
    1 February 2021 @ 10:58
    Thank you Raoul, this is batshit crazy! Complexity distilled into plain English, nice work.
  • GT
    Gerald T.
    31 January 2021 @ 19:57
    That is a great analysis and exactly why I joined RealVision Pro. Thank you Raoul !! I am now only in Gold, Goldminers and Crypto. Would it be better to sell off and go to cash? At least partially? Would appreciate your view, I know it is really difficult to know exactly, but what would you do?
    • RE
      Renato E.
      31 January 2021 @ 20:16
      If the market tanks, almost everything will go down in the initial phase, including Gold, Crypto and miners. Hope you bought bullion and not some ETF...
    • GT
      Gerald T.
      31 January 2021 @ 20:42
      After watching for a 2nd time, I got my answer, you would be a buyer not a seller for both Gold and BTC.
    • GT
      Gerald T.
      31 January 2021 @ 20:44
      After watching for a 2nd time I got my answer, you would be a buyer not a seller.
    • GT
      Gerald T.
      31 January 2021 @ 20:46
      Good point Renato. Yes I have vaulted bullion. Just thinking maybe to sell off some and buy back later cheaper. Or just hold.
    • YF
      Yee F.
      31 January 2021 @ 22:53
      Why bullion and not ETF?
    • GT
      Gerald T.
      1 February 2021 @ 10:15
      Yee, Physical gold you own is outside the system (well apart from being in third party vault, which I am working on) ETFs like GLD are supposed to be 100% backed by gold, but much of the time this is borrowed. GLD is OK for short terms trading, but not if you want to have a secure store of value.
  • AA
    Alexander A.
    31 January 2021 @ 23:59
    Make this shareable NOW, please
    • RP
      Raoul P. | Founder
      1 February 2021 @ 02:07
      you have the power share feature ...
    • SL
      Shawn L.
      1 February 2021 @ 02:27
      Valuable things have production costs otherwise it would be worth less. Would you expect Apple to hand out free iPhones?
    • GT
      Gerald T.
      1 February 2021 @ 10:08
      I have used 8 of my 10 shares on this. Feedback so far "Wow, this guy is good!"
  • JC
    Jon C.
    31 January 2021 @ 23:36
    Fed will step in with liquidity and keep the shit show running instead of doing the hard but right thing to do and let the hedge funds fail.
    • SJ
      Srinivasa J.
      1 February 2021 @ 03:26
      Agree on letting people who make mistakes fail. If they get bailed out each time, they repeat the mistakes and expect Aunt Yellen or Uncle Powell to rescue them.
    • CK
      C K.
      1 February 2021 @ 09:40
      Possibly, but your options will increase in value between the correction and the fed stepping in - just need to ensure timely monetisation. The Fed will only step in after the event, albeit possibly quite quickly, not before it to avert it (if it doesn't know it's coming). My understanding anyway...
  • RB
    Richard B.
    1 February 2021 @ 08:58
    In Asia markets much more focused on Chinese bringing down short term CNY rates. Maybe Complacency ?
  • PH
    Paul H.
    1 February 2021 @ 07:10
    Is it time to get out of equities to allow settling.
  • DS
    David S.
    1 February 2021 @ 06:41
    Hope I can get a bar like Raoul's someday.
  • RB
    Richard B.
    1 February 2021 @ 06:12
    Excellent summary thanks. Surely GME et al raises capital and the short pressure abates and the stocks weaken. The regulators have to nip this in the bud fast. I cant believe Biden's left wing leaning admin. wouldn't bail Robinhood, even if it helps the hedgies!. But with Cov 19 to boot, a systemic mkt situ would be "grit to the mill" , especially as they struggle to get their fiscal package through.
  • SR
    Steve R.
    1 February 2021 @ 04:44
    Awesome, cheers Raoul. Will be interesting to see when WSBs eventually cotton on to the fact they can participate in wealth creation outside of the current financial system via Bitcoin. Not sure why they haven't worked this out yet as many of them will likely have nothing left when all these current shenanigans have died down.
    • AB
      Alastair B.
      1 February 2021 @ 05:48
      Judging by reading the comments on Reddit a lot of them have basically nothing now, so it won’t make much of a difference.
  • MS
    Mathias S.
    31 January 2021 @ 18:30
    Sorry Raoul, all viable arguments... still f***ed up shit! ... how is it even POSSIBLE to short (read BORROW & SELL) >100% of shares outstanding/ float? While this was public knowledge... when is GME floating new shares? I hope EVERY market participant has learned a final lesson: DO NOT ACCEPT LIMITED UPSIDE FOR UNLIMITED DOWNSIDE RISK! Raoul, I appreciate your deep & thought provoking insights very much, Thx a million!
    • Mt
      Miami t.
      31 January 2021 @ 18:42
      I dont get that either, hope Raoul can explain it a bit more. If I want to short a stock, I have to locate those stocks, once I found someone who is willing to lend the stock to me, then I can short. But why can institutions short 150% of all the shares out there? Of ever worse, not every holder of GME would want to lend his shares (hence the WSB community), so how can they 3, 4 5 times shares the located shares available?
    • FS
      Fernando S.
      31 January 2021 @ 19:50
      This probably has something to do with 'rehypothication' (fiat double spend for the cryptoheads) and Jeff Sniders work SOMEHOW but I'm not knowledgeable enough to know for sure
    • JB
      James B.
      31 January 2021 @ 22:56
      Check out this video, it should clear up a lot of your questions: https://www.realvision.com/shows/the-interview/videos/caitlin-long-and-dr-manmohan-singh-the-real-mechanics-of-monetary-policy-and-the-plumbing-of-the-financial-system Basically it’s hard given the fact that everything in the financial system is just an IOU to workout who owns what / who is borrowing what. More money to be made if you can sell/lend the same exact thing twice. BTW, When you buy a stonk the terms of service of your broker likely stipulate that stonk can be lent out. Terms of service is where every company over the past decade has realized they can secretly fucks us over ;)
    • SS
      Socrates S.
      1 February 2021 @ 00:18
      Alice owns a bunch of shares. Bob borrows them and sells them to Charlie. Danielle borrows them from Charlie and sells them. The same shares can be sold over and over, creating a short interest greater than 100%.
    • SJ
      Srinivasa J.
      1 February 2021 @ 05:26
      Scroll UP and see the explanation by JL on how there can be more than 100% of shares shorted. Cleary explained by JL.
  • YH
    Yeong H.
    1 February 2021 @ 01:10
    Why TLT? Can someone please elaborate on that for this newbie? Thank you!
    • SL
      Shawn L.
      1 February 2021 @ 02:01
      Bonds will rally during risk off periods as money escapes risk in stocks and runs over into safer bonds.
    • JE
      John E.
      1 February 2021 @ 02:20
      TLT is trading at about 152, yielding ~1.5%. If yields collapse the TLT yield falls which means its price goes up. RP notes 170 as a target for those interested in calls. That would be a healthy return.
    • SJ
      Srinivasa J.
      1 February 2021 @ 02:43
      Shawn, John My understanding per Raoul's talk is that Hedge and Mutual funds need to raise cash to meet the changes in Clearing settlements. He said they will sell bonds and stocks. Hence both TLT and stocks should go down as there are more sellers. 1. So why will TLT go up? Kindly explain why bonds are safer? Is there not a risk that Hedge funds will sell bonds to raise cash? If not, Why so? Kindly explain please. Thanks 2. Why would regular investors put money in TLT which is trending down rather remain in cash until things settle?
    • PD
      Pierre-Luc D.
      1 February 2021 @ 05:25
      I think there is a dynamic between TLT going down due to liquidity required to reduce leverage, and being pushed up from a risk off factor. If you look at what happens in March you can see these violent moves up and down and higher up, with an up trend on average.
  • JR
    Jorge R.
    1 February 2021 @ 01:39
    Thanks for a great video, Raoul. I want to make an important point. When you said: "What they don't realize is their 401k is involved in this too." The WSB people who are holding GME with "diamond hands" don't have a 401k. As a generalization, they're not doing this to make money, but to pull down the system that has unfairly prevented them from building a 401k like everyone else. WSB isn't a strategy, it's a riot. A riot as in "the language of the unheard."
    • SJ
      Srinivasa J.
      1 February 2021 @ 02:16
      The Hoodies can be retarded longer than the Hedgies can be solvent.
    • bt
      brian t.
      1 February 2021 @ 05:10
      WSB people went as far as renting a plane pulling a banner that read : Suck My Nuts RobbinHood ,around San Francisco near RH HQ..and a Bill board in time square... This is just the start! The divide is picking up traction. More so the populist movement, that brings people together, and we see where it is being directed.
  • TR
    Timothy R.
    1 February 2021 @ 05:05
    Is no one concerned interest rates jump if equities crack? pensions are gonna get 7% one way or another
  • AL
    Andrew L.
    1 February 2021 @ 04:36
    RP - top of mind was counter party risk.
  • JH
    Jesse H.
    31 January 2021 @ 23:09
    Thanks, Raoul - good stuff, and much appreciate this alert / warning. You have given these for a long time, and these (crazy) markets have defied all reasonable logic and expectation. And here we are, at record margin, record valuations, and record bullish sentiment. I took my chips off the table a long time ago now. No sleep lost here. Financially and morally, happy to not participate at this stage. Best regards, Jesse.
    • JH
      Jesse H.
      31 January 2021 @ 23:11
      Question: Do you think the GameStop fiasco was the “shoe shine boy” of today’s markets? Cheers.
    • AB
      Alastair B.
      1 February 2021 @ 04:31
      My students are buying GME. Something is amiss
  • LA
    Linda A.
    31 January 2021 @ 23:52
    Thank u RP! These WSB gang does not care if they bring down the system. They make angry, misdirected (at hedge funds) & "to the moon" comments, only to realize later that they may be hurting their own 401k's and other people in the process. I hope this does not get too ugly. Isn't this what the exchanges are for -to prevent this type of rogue behavior & to prevent market crashes? I feel everyone has a right to trade but when u have all these hi profile people siding with WSB it stokes them to new heights. I am actually scared at what is occuring.
    • SL
      Stephen L.
      1 February 2021 @ 00:45
      The naked short sellers selling counterfeit shares they don't own are the ones to blame for this. Not the Redditors.
    • SJ
      Srinivasa J.
      1 February 2021 @ 03:23
      Many of these ruthless short sellers have destroyed companies that probably would have survived and retained the jobs. Hedge funds enjoyed special status and did many destructive things and got bailed out many times. Most of these WSB Hoodies do not have 401ks. They are mad at the system that enriches a few at the expense of many. These are young people who feel they have been betrayed by the government changing the diapers of Hedge Funds and Banks each time they make a mess. Why doesn't the government roll out a PPP to common citizen? Is it the governments role to intervene in markets? Is that not corporate socialism? Yes, The Hoodies will remain retarded longer than the Hedgies can be solvent.
  • op
    osman p.
    31 January 2021 @ 22:56
    Raul is not only a good investor but also has a heart of gold. (or bitcoin as he would prefer) Wasting his weekend to make the video cause he genuinely cares about the RV community. With that, I agree with all the risk observations made but disagree on the outcome. 1- The liq. crunch may be felt, but you are forgetting an important pocket that is full with cash: private funds (private equity and credit) sitting on >$1.2 trillion. These guys will gladly inject SAC, Melvin, Maplelane with billions at %5. You know better than anyone how these guys butter each other up in Penthouses on Park ave. I am sure Scwartzman wont even wait for the ink on the contract to dry before wiring the goodies to buddy Cohen. 2-Similar situations with individual HF blowing up and threatening to bring down brokerages happened many times when I was at HSBC and I am sure you have seen the same at GS. These will be taken care of at the PB level, the big guys such as Morgan, Goldman, UBS and Saxo won't even break a sweat with all the excess recapitalization and also these guys are far less levered thanks to safer controls such as Regulation T. I appreciate the warning..
    • WZ
      Weiwu Z.
      1 February 2021 @ 00:32
      Pardon me but what is RV community?
    • PS
      Patrick S.
      1 February 2021 @ 02:51
      Real Vision
  • JG
    Joseph G.
    31 January 2021 @ 23:34
    If there is a significant drop in markets will this not trip algos into selling positions at a time when there will be a paucity of buyers?
    • MS
      Maxwell S.
      1 February 2021 @ 02:44
      Isn’t that what a liquidity crisis is?
  • RM
    Robert M.
    31 January 2021 @ 23:48
    Why does the fact that the short position is larger than the market cap of GME mean that the funds are unable to cover their short positions, as Raoul said?
    • SL
      Stephen L.
      1 February 2021 @ 00:46
      If you owe me 60 apples but only 50 apples exist on the planet (and most of them are owned by people who don't want to sell them) then how are you going to get me my apples?
    • SL
      Shawn L.
      1 February 2021 @ 02:33
      As Stephen said, but I will extend... The price of those 50 apples would then exponentially rise attempting to find a price which would allow purchase of said apples. It is clear that very quickly those 50 apples would cost more than any short investor's capital pool. This results in a blown up or bankruptcy for the short investor. There is alway a theoretically price in which every holder will sell, its just sometimes at a currently unimaginable level. Ask any bitcoin holder an the smart ones say, "I will never sell". But set the price at an unimaginable $100 million per coin and I bet some will sell.
    • SL
      Shawn L.
      1 February 2021 @ 02:36
      It does bring up an interesting thought or question. Is there any asset so valuable the current "world's" capital pool can not afford? In my opinion I would say 'yes' and it applies to things such as family members and time left here on earth. It just goes to show there are some things more important than money. I have heard them called 'lifestyle coins'.
  • PK
    Patrick K.
    1 February 2021 @ 00:37
    I was with you until The Virus. Covid is, as Covid does.... Res Ipsa Loquitur. Thank you; I do appreciate the weekend video.
    • SL
      Shawn L.
      1 February 2021 @ 02:25
      It will affect spending behavior regardless of how we feel about it.
  • ES
    Eric S.
    1 February 2021 @ 01:02
    Eurodollars yay or nay?
    • SL
      Shawn L.
      1 February 2021 @ 02:24