I’ve found two Regional Spanish banks that I’m suspicious are holding gme swaps

CategoriesGamestop_, Issue 2023Q2

The honorable u/  itsabittricky writes:

Tl;dr I suspect Unicaja and Evo Banco (Bankinter) are holding gme short swaps due to strange and dramatic fluctuations on their balance sheets, similar annual cash flows, proximity to Granada (which mayoman keeps visiting), Evo Banco being owned by Apollo Global Management.

NOTE there is no smoking gun definitive proof, I just want to post this prediction publicly so if I end up being right I got a receipt for the call.

Lately I’ve been trying to educate myself on income statements/balance sheets/cash flow statements for banks and companies, with a blossoming global banking crisis I figure now is a great time to test my understanding by making predictions on which banks are likely to collapse based on their annual statements. If anyone considers themselves good at reading these kinds of reports please let me know if I got anything fucked up or if there’s other points of information I should review.

I’ve been looking at Unicaja bank annual data and noticed some pretty weird data fluctuations, they had a massive pump in earnings in 2021. So massive the total earnings actually eclipsed their total revenue (for people new to this terminology, earnings is revenue minus expenses, so actual company profit). Here is their 2021 earnings visualized courtesy of yahoo finance:

Ordinarily its impossible to make money in a year in excess of what a bank manages to make in revenue (obviously), this can only occur if the bank receives money from somewhere other than its revenue stream, either it makes extra money off of previous years operations / it sells a bunch of assets / it receives an external cash injection. As you can see from that graph, Unicaja with a 900mil revenue manages to make 1,100mil profit in 2021.

Even more interesting, they seemed to have spent all of that money to the point of losing money in Q4 2022.

Quarterly earnings 2022:

You could attribute this earnings loss on the 100mil drop in revenue for the quarter from the previous month.

Cash flow: <image missing>

Some impressive cash burning. Cash position at start of 2021 6.6bil, end of 2021/start of 2022 21.3bil +223%. Cash position at end of 2022 4.6bil – 78%. So it looks to me like Unicaja received a cash of injection of 10-15bil which was spent in a year.

Here is another bank that had a similar boom in earnings 2021 Evo Banco aka Bankinter.

Approx 1.3bil in earnings off 1.55bil in revenue.

What do these banks have in common, apart from similar annual cash booms and declines? Both banks are headquartered in the South of Spain Andalucia (Unicaja in Malaga and Evo Banco in Madrid) which Mayoman has been visiting a lot these past few weeks, check u Bellweirboy posts on Mayoforce track, Mayoman is there right now, was there Tuesday last week March 14, Saturday 25 Feb, and has visited on many other occasions these past two years. It’s possible its a favorite holiday destination Granada is a beautiful city and he just wants to go nuts before the boom but I do not believe he would visit this often these past months, the finance world is too crazy for anyone to be on holiday and my impression of Mayoman is he will struggle until the very end.

Another interesting point of note, Evo Banco is owned by Apollo Global Management. If you’re curious about their involvement in this whole saga I recommend having a read through u BadassTrader’s Billionaire Boys Club series, specifically the Apollo Missions entries. Its a fascinating glimpse into that big old club we’re not apart of (fuck they club the people in it are trash).

The following is straight data from Annual Statements for Unicaja. I’m focusing on 2021 Q2 to Q3 as that’s when the dramatic fluctuations occurred, and 2022 Q4 to give you an idea of where they’re at on these data points today. Note that there wasn’t any huge movement in these balance sheet entries prior to Q3 2021.

Cash and balances at Central banks: 8,855mil (21Q2) to 15,376mil (21Q3) +74%. Now 4,662 (22Q4) -70%

Financial Assets at Amortized Cost (Loans and advances to customers): 27,939mil (21Q2) to 55,386mil (21Q3) +98%. Now 55,316mil -0.1%.

If you’re wondering what amortized cost means I’m also wondering. “You can say that the total cost a business has recorded on its balance for the purchase of a particular asset is the amortized cost of the asset.” https://incorporated.zone/amortized-cost/

So, the price at purchase. Reminds me of this fair value shit. “Fuck our clients are going to skin us alive if they find out these assets we bought with their money is down 90%, lets just record it at amortized cost which just so happens to be the price that doesn’t reflect -90%.” Or “holy fucking shit we shorted this asset at $1 and now its fucking $80 shit fuck shit.”

Investments in joint ventures and associates: 368mil (21Q2) to 1,030mil (21Q3) +180%. Now 976mil -5%.

Tax assets: 2,770mil (21Q2) to 4,760mil (21Q3) +71%. Now 5,063mil +6%.

Financial liabilities held for trading & at fair value through P&L: 24mil (21Q2) to 29mil (21Q3) +20%. Now 53mil +82%.

This fair value price could be $1 for a market value of $100.

Financial liabilities held at amortized cost: 59,916mil (21Q2) to 99,616mil (21Q3) +66%. Now 88,937mil -11%.

Customer deposits: 48,691mil (21Q2) to 82,041mil (21Q3) +68%.

Customer deposits and Loans and advances to customers sections really got me scratching my head, cos retail has barely moved. Retail deposits 91,652mil (21Q2) to 94,726mil (21Q3) now 90,081mil (22Q4). Same lack of movement for retail loans and credit. So all this balance sheet movement was completely unrelated to retail. Wonder who these customer deposits and loans represent.

Other issued securities: 366mil (21Q2) to 1,916mil (21Q3) to 3,329mil (22Q4) +810% over the 18 month period. This is a huge jump.

What do all these numbers mean? I got no idea. The annual reports do not detail exactly what securities/assets/derivatives/liabilities are being traded or held, it could be anything. Maybe these movements are nothing out of the ordinary and I’m just regarded.

I’m pretty confident when I say that something big hit Unicaja’s books in Q3 2021 unrelated to retail and it made big waves.

Some data for Evo Banco aka Bankinter, 2020 Q4 to 2021 Q1:

Financial Assets held for trading: 2.1bil (20Q4) to 4.5bil (21Q1) +110%.

Financial Liabilities held for trading: 1.3bil (20Q4) to 3.4bil (21Q1) +146%.

Derivatives Hedge Accounting ASSETS: 406mil (20Q4) to 303mil (21Q1) -25%.

Derivatives Hedge Accounting LIABILITIES: 520mil (20Q4) to 320mil (21Q1) -38%.

2021Q4 to 2022Q4 (now)

Derivatives Hedge Accounting ASSETS: 216mil to 479mil +122%

Derivatives Hedge Accounting LIABILITIES: 277mil to 421mil + 51%

Non-current assets and disposal groups classified as held for sale 106mil to 262mil +147%

Other financial liabilities 2.1bil to 3.4bil +61%

Accumulated other comprehensive income 115mil to -129mil -212%

Again, no dramatic movements for Evo Banco retail numbers for the periods.

These banks are making crazy moves. Maybe it ain’t related to gme, but these do not look like healthy balance sheet decisions to me. But then again, who the fuck am I but a humble ape?

Unicaja finance reports: https://www.unicajabanco.com/en/inversores-y-accionistas/informacion-economico-financiera/informes-financieros Bankinter finance reports: https://www.bankinter.com/webcorporativa/en/shareholders-investors/financial-information/quarterly-reports/2022

GameStop reports profitable Q4 results

CategoriesGamestop_, Issue 2023Q2, Site Updates_

Estimate $-0.13

Actual $0.16

Fourth Quarter Overview

  • Net sales were $2.226 billion, compared to $2.254 billion in the prior year’s fourth quarter.
  • Selling, general and administrative (“SG&A”) expenses were $453.4 million, or 20.4% of sales, compared to $538.9 million, or 23.9% of sales, in the prior year’s fourth quarter.
  • Net income was $48.2 million, compared to a net loss of $147.5 million for the prior year’s fourth quarter.
  • Inventory was $682.9 million at the close of the period, compared to $915.0 million at the close of the prior year’s fourth quarter, reflecting the Company’s ongoing focus on maintaining a healthy inventory position.
  • Cash, cash equivalents and marketable securities were $1.391 billion at the close of the quarter.

Full Year Overview

  • Generated net sales of $5.927 billion for the fiscal year, compared to $6.011 billion for fiscal year 2021.
  • Increased full-year sales in the collectibles category, which is an area in which the Company continues prioritizing long-term growth.
  • Completed the majority of implementations and upgrades related to the Company’s infrastructure, systems, shipping capabilities, and online and mobile platforms.
  • Initiated cost cutting initiatives and headcount reductions over the course of the year to increase operational efficiency.
  • Established an equity incentive program for store leaders and tenured associates to increase their compensation and strengthen alignment of interests with fellow stockholders.
  • Set a go-forward strategic direction focused on efficiency, profitability and pragmatic growth.


The 2023 US Bank bailout: BTFP, Bank Term Funding Program

CategoriesGamestop_, Issue 2023Q2, Site Updates_

As you may have seen on the news, the 2008-style government bailout of banks has arrived. In contrast to the financial crisis of 2008, this time they are making the bailout look like not-bailout. The technical term they came up with is BTFP, Bank Term Funding Program, which is a bailout by another name.

They are also specifically avoiding admitting that we are already in a recession. All the media is controlled so you get silly headlines like “The weekend US officials hatched a plan to stave off a banking crisis” from Financial Times. Make no mistake: nothing was fixed in the global financial system since 2008, and the pandemic shock, when they printed infinite money into their own pockets, only made it so much worse.

A quick note on the relation between interest rates and treasury prices. When rates rise, treasury prices fall. That’s the design of the system. So when interest rates rise and you had $100 of treasuries in your pocket, now you have only $90. That’s how central banks are currently failing. And if you don’t raise the rates, then the currency becomes worthless from infinite money printing. In a way, the entire global financial system is a balance between money printing and raising rates.

The BTFP “not” bailout works by (1) guaranteeing uninsured deposits as if the are insured – which is illegal, and the working class will pay the bill, of course, and (2) swapping (“buying”) treasuries “at par”, as opposed to “mark to market”. This means that when the interest rates went up, and the value of treasures went wayyyy down, instead of banks failing, and depositors’ money disappearing, instead the US guvm’t will support banks as if they never lose value.

The bank assets can now be swapped (sold) to the guvm’t at par value (100%) rather than at, say, a $620B loss. Chase sits on a $0.6T holy crap! unrealized loss, from which would take them around 5 years to recover – they are essentially bankrupt, and every other bank is essentially in the same situation. Every financial institution has been destroyed by the raising interest rates. But wait!

What the US guvm’t just did, with SVB, is allow banks to never lose money, no matter what.

When you saw on the news a few months ago, the Australian central bank failing, the UK central bank failing – that was because when interest rates rise, treasuries’ value falls, making banks insolvent. With the new BTFP facility this will no longer happen.

I’m additionally worried that the US may favor US banks only, and let the rest of the world burn and other countries fail. You may see this as your currency deteriorating sharply against the dollar, and the dollar becoming very, very expensive. However, at the same time, the Fed has a history of secretly bailing of select foreign banks, e.g. central banks of France and Switzerland, recently. So the currency wars may become very political.

What do we, the working class, get as help from the government? That’s the neat part: nothing. We still have to bear the cost of inflation. Everything is more expensive (by 15-30% annually), and there is less of it. That is the cost of infinite money printing. Usually the cost would be, anyone holding treasuries sees their money disappear. But not anymore! The guvm’t will pretend that treasures never lose value, so banks don’t pay the cost of raising interest rates. But we do – dollar by dollar, we will pay more while getting less, while the owners of financial institutions continue making reckless, impossible bets to enrich themselves beyond imaginable, at our expense.

The financial system works in very technical ways, and most people don’t understand how it works. That’s why we still allow this robbery to continue. Maybe I’ve explained it poorly ^ above, but I only now myself realized that the BTFP facility disconnects inflation for the rich and inflation for the poor. It also upsets me that very few people are paying attention to the SVB bailout, and the huge consequences that may become of it. I’m angry and upset.

Bank Term Funding Program: The Not-A-Bailout Can Kicking Bailout

CategoriesGamestop_, Issue 2023Q2, Site Updates_

A fantastic writeup by u/ WhatCanIMakeToday :

The Federal Reserve has put for a new Policy Tool to “support American businesses and households by making additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors” make sure banks have enough cash to stay afloat… for now. [Federal Reserve]

How BTFP works

  • BTFP offers loans of up to 1 year to, basically, every financial institution they work with (“banks, savings associations, credit unions, and other eligible depository institutions”) .
  • Financial institutions put up collateral (“Treasuries, agency debt and mortgage-backed securities, and other qualifying assets”) to get cash.
  • This lets financial institutions get fast access to cash without needing to sell those securities in a fire sale that would crash markets. (“BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.”)

The really interesting bit is BTFP values the collateral assets at par. (“These assets will be valued at par.”) Par value means full face value.

A bond selling at par is priced at 100% of face value. Par can also refer to a bond’s original issue value or its value upon redemption at maturity. [Wikipedia]

Current face refers to the current par value of a mortgage-backed security (MBS). [Investopedia: Current Face]

The Federal Reserve has an FAQ about this different valuation:


Normally, this collateral would be valued at market value (e.g., mark to market). However, this is a problem for many banks, like SVB, holding a lot of long term low interest rate debt. (Keep in mind that many fixed income assets are going to be low interest rate debt simply because interest rates have been low for a very long time!) The 1% bonds and MBSs everyone holds are paying very little compared to 3-5% alternatives after the Fed raised interest rates. This interest rate problem is why the current value of those low interest rate assets dropped. And, when banks like SVB needed to sell assets quick for cash, the value of those assets dropped even more.

BTFP is coming in to say the Federal Reserve will swap those qualifying low interest rate assets for full cash value (for up to a year). 🦵🥫

How does BTFP compare to the 2008 TARP Bailout?

Technically, the Federal Reserve purchased toxic securities in 2008 [Wikipedia: TARP] which means the Fed paid cash to financial institutions for low interest rate MBS debt so that the Fed could hold them to maturity. This let all those MBS debt mature naturally and kept these low value assets off bank books so banks wouldn’t fail. [FRED: Assets: Securities Held Outright: Mortgage-Backed Securities (Wednesday Level)]

Technically, BTFP is more like a swap where the Fed exchanges cash for low interest rate assets at full face value (instead of an outright purchase). Within a year, the swap should be reversed. This gives banks a year to bolster their balance sheets. (HAHAHAHA Can you imagine banks actually doing this?.)

This is more of a technicality than a true difference.

If a bank goes under, the Fed would have given cash to the bank and held on to the low interest rate collateral. This is effectively same as purchasing the assets at face value (clearly overpaying current market value) — a Not-A-Bailout Bailout.

If a bank doesn’t go under, the assets for cash swap is just can kicking for a year. The Fed now temporarily holds assets that have a low market value (e.g., “Assets held under agreement to return”). The bank holds cash equivalent to the full face value of the asset which makes their balance sheet lookbetter to hopefully avoid a bank run, but that cash needs to go back to the Fed when the swap is over. The underlying problems are still there: the assets continue to have a low market value and, in a year or less, the swaps are unswapped putting the banks back into the same position they are in today. (But if withdrawals get too high, the bank no longer has cash to swap back so the bank goes under and we’re back to a Not-A-Bailout Bailout.)

Then the question is: how will interest rates change over the next year?

↗️ If the Fed keeps interest rates steady or going up, this interest rate problem gets worse for banks and more of these low interest rate assets become toxic, just like 2008, with more bank failures.

↘️ If the Fed lowers interest rates, these low interest rate assets regain market value BUT inflation increases. The can is kicked and problems grow bigger.

The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down. When inflation is too low, the Federal Reserve typically lowers interest rates to stimulate the economy and move inflation higher.[Federal Reserve Bank of Cleveland]

It is impossible for the Fed to fight inflation and keep banks solvent.

🦵🥫 The third option, kicking cans, is clearly in play. BTFP sets up this 1 year swap for banks to bolster their balance sheet. But, a similar program has already been in use for more than a year: Overnight Reverse Repurchase (ON-RRP) Agreements currently above $2T every day.

The Fed has already been letting banks swap bad assets for good assets, overnight. Here’s my prior explanation of ON-RRP (from a year ago):


All the peaks show up after Shit HappensTM which means the Overnight Reverse Repo number isn’t a leading indicator of bad shit happening. Instead, banks use the ON-RRP as a result of bad shit happening. So, we see that some Bad Shit Happened for banks in 2021Q1 which lines up pretty well with some idiosyncratic risk in the financial system.

From FRED: “A reverse repurchase agreement (known as reverse repo or RRP) is a transaction in which the New York Fed under the authorization and direction of the Federal Open Market Committee sells a security to an eligible counterparty with an agreement to repurchase that same security at a specified price at a specific time in the future. For these transactions, eligible securities are U.S. Treasury instruments, federal agency debt and the mortgage-backed securities issued or fully guaranteed by federal agencies.”

Fed sells a security (Treasury or some kind of federally guaranteed debt) and agrees to buy it back the next day. Basically, this allows banks using RRP to park assets overnight in exchange for USA Guaranteed Securities. Treasuries we know are gold standard top shelf collateral. I imagine any USA Guaranteed Security gets the same treatment.

This RRP deal lets banks “polish turds” by trading in crappy assets on their books for Treasuries and other USA Guaranteed Securities, overnight. At the end of each day, the bank’s balance sheets “look good” with all these USA Guaranteed Securities. (Except, the balance sheets are probably shit because the next morning, they get swapped back. So they do the deal again the next day.)

Now, if that’s the right understanding… then when RRP usage is stable or decreasing, the banks are doing good at improving their balance sheet positions. Basically, if we see RRP dropping over time, it means banks are holding less turds that need polishing. But we’re seeing increases in RRP over time. This means the banks have more turds that need polishing.

If I’m right, I think RRP reflects the how big the shit pile is at the banks. And, if you look at which participant banks are using it, you can see which banks are the shit bag holders.

Now, for those of you who don’t like talking shit, I think it’s equally valid to think of it as bandaids. After “Bad Things Happen”, banks use the RRP facility as bandaids to get them through the tough times. What’s supposed to happen is that the banks heal their wounds and clean up their balance sheets. The problem we see now is RRP keeps going up. This means the banks are taking more damage and keep bleeding out. Despite the Fed having upped the bandage supply a couple times, the banks keep using up all the bandaids.

Since the global pandemic that auto mod won’t let me name, banks have been using ON-RRP to swap their assets on hand for Treasuries which they can use as gold standard top shelf collateral. Every night, banks swap swap assets with the Fed so the bank books look good. Every morning, they swap back and now the bank is in trouble. Lather, rinse, and repeat. Every day since March 2021.

Enter BTFP which lets banks swap worth-less (the so-called toxic assets in 2008) mark-to-market assets for cash because ON-RRP isn’t a big enough “turd polisher” and bandaid. And, let’s be realistic, a year long swap is just less paperwork than swapping every night for a year.

Banks have been dependent on ON-RRP to stay afloat and will be dependent on BTFP to keep going. The $2T+ ON-RRP usage shows us that, even with 0% reserve requirement [Federal Register], banks have dug a hole much deeper than $620B and the Federal Reserve is polishing turds and layering on more bandaids trying to keep it all from crashing.

We Don’t Talk About Moral Hazards

Former Treasury Secretary Larry Summers doesn’t want to talk about Moral Hazards (“it’s not a time for moral-hazard lectures“), which have been made significantly worse after the 2008 Bailout [Moral Hazard: The Long-Lasting Legacy of Bailouts], with Wall St effectively holding innovation and our economy hostage. Unless we let Wall St shift the burden of their losses to Main St taxpayers again:

… there will be “severe” consequences for the innovation sector of the US economy……very substantial consequences for Silicon Valley — and for the economy of the whole venture sector…[Former Treasury Secretary Larry Summers on Bloomberg]

As taxpayers on Main St are expected to foot the bill, either directly through a bailout or indirectly through inflation, we absolutely should be talking about Bruno.

EDITS: Added formatting, images, and links because of automod


The 2023 Real Estate Crash Started 5 Months Ago – and it Just Took Down its First Banks

CategoriesGamestop_, Issue 2023Q2

From u/catbulliesdog :

TA;DR: Illiquid Assets are now Even More Entangled with Liquid Markets than when I wrote about the new Real Estate Crash Last Year and now Banks are Blowing Up because of It

EDIT: I started writing this update/sequel early last week, and then on 3/9 SIVB and Silvergate detonated, and it turns out SIVB has a ton of property bonds, which may or may not be bad, but are DEFINITELY ILLIQUID and this is the root cause of their problems.

EDIT2: And then on 3/10 SIVB failed and was taken over by the FDIC – this is extremely unusual because the FDIC likes to do this kind of thing over the weekend to minimize disruption, the fact that the bank couldn’t make it a few hours to the close of business on Friday is the opposite of good.

I’m going to end up talking a lot about Bonds in this post, so, lets go over what a bond actually is, and how they work, because I know you lot of smooth brained virgin baboons have gained basically all of your so-called knowledge from a Chappelle’s Show Wu-Tang Financial skit.

A Bond is at heart a financial instrument representing debt that can be traded back and forth like a stock or other commodity. Bonds are described in four ways: Face Value, Coupon Rate, Yield and Price.

Face Value is the total amount the bond is worth at maturation (the date it expires).

Coupon Rate is the interest rate the bond pays.

Yield is the effective interest rate when accounting for Price and time to maturation.

Price is how much you can buy and sell a bond for today.

So say you’ve got a $100 (face value) bond that pays 4% interest over 10 years (coupon rate). Mike buys this bond for $71.50 (price). You bought it from Mikey the Moron for $25 (price) because he really wanted to go get a pizza and six pack tonight. Mike made this deal because while the bond is worth more, the money is inaccessible for 10 years, its illiquid, and he really wants to impress his lady friend tonight, so he needs the money now. You’re making 300%, which is 30%/year (yield), but you have to wait 10 years to get it.

This is basically what happened to SIVB, they bought an absolute fuckload of bonds at very low rates, and now that rates have risen along with inflation, the yield on those bonds has collapsed, crushing the price. But, they needed access to money before the 10 years was up, so they had to unload their bonds at a big loss to get cash now, just like Mikey.

Now, there’s lots of complex bullshit that gets piled on top of this, so that people can pretend they’re super duper smart and too cool for school, but at the end of the day, that’s the gist of it, you’re buying and selling pieces of loans.

**** Below is the point this DD was originally supposed to start before a bunch of banks blew up last week due to issues with illiquid property assets… exactly as predicted ****

So this is a follow up to the post I wrote almost a year ago about the 2022 2023 real estate crash. Do you want to know more?

Obviously, I had the timing wrong on 2022 being the culmination instead of the start, so even though I’ve been fairly certain this has been happening since November 2022, I waited until we had confirmation with defaults and bankruptcies to post more. How did I know this started back in November? Simple, that’s when we began to see max limit withdrawals hit on REITs (Real Estate Investment Trusts). Here is evidence from DecemberFebruary, and March. When the March numbers come in, we’ll be at 5 straight months of multiple private “smart money” REITs hitting max withdrawals limits. Here, let me show you what that looks like as a photo, and don’t worry, its not like the ones your uncle/dad told you not to show at school.

r/Superstonk - The 2023 Real Estate Crash Started 5 Months Ago - and it Just Took Down its First Banks, Your Mom Already Called Me

You know how all through 2021, the rich were selling stocks as fast as humanly possible? And how the Federal Reserve board members just luckily managed to cash out right at the top because of “ethics concerns”? Yeah, that’s what’s going on now and has been for months. The “smart money” is running like Ricky Bobby when his suit is on fire.

Now, you’re going to hear a lot about how similar this is to 2008 and how nothing was learned etc etc, and that’s all true, but its important, very, very important, to understand how things are different than they were in 2008, because they are, and these differences are pretty significant. So lets take a second to remember:

r/Superstonk - The 2023 Real Estate Crash Started 5 Months Ago - and it Just Took Down its First Banks, Your Mom Already Called Me

Now, there are three distinct types of financial instruments at play here that are all going to get lumped together, but are very different and its crucial to understand what they are and how they differ if you want to know what’s going on.

  1. MBS – everyone remembers these, go watch “The Big Short” if you need a refresher course. The big difference today, is that unlike 2008, in 2023, the mortgages underlying the MBS notes are largely good, and being paid. They have other, horrifying problems, but the loans themselves are to people who can afford to pay them and at reasonable rates.

  2. CMBS – this is like MBS, but for commercial properties, think office buildings and shopping malls and hotels and Dollar Stores and these are all fucking worthless dogshit wrapped in catshit, dipped in bat guano. The underlying notes are bad, the property values are trash, and the revenue backing them is mostly non-existent.

  3. REIT – this is a Real Estate Investment Trust, the general expression covers an incredibly wide variety of financial instruments that all deal with investors pooling money to buy income generating properties, like houses and apartment buildings (or things like strip malls and commercial office parks and old folks homes) and then pay out dividends to said investors from the income generated. Many of these are perfectly fine, many, many, many more of them are bumper cars full of dynamite and nitroglycerine.

Ok, now what kind of problems do these sorts of debt instruments face?

MBS – Really simple here, everyone is focused on the loans that make up the MBS, are they good or bad? This is because the loans in the MBS in 2008 were bad. However, this ignores the fact that the MBS is a derivative financial instrument. And the mortgages that make up that derivative can be great, while the derivative itself fucking sucks like an industrial vacuum at a Tijuana Donkey Show.

Remember when I was explaining bonds a few paragraphs ago? Yeah, this is where the problem comes in. When the yield falls, the price follows it down until it reaches equilibrium again. On Tuesday, 3/7/2023, 10 year Treasuries went over 5%. This means that any note paying like say 2 or 3%, like a lot of MBS is, has to take a 40 or 50% price cut to give the same return. When you’ve got $50 or $100 billion of that 2 and 3% MBS, all of a sudden you’ve got yourself a real problem even though the bonds themselves aren’t going to fail.

CMBS – these are literally full on repeating the 2008 cycle. They started to go bad/come due in March of 2022, just like the MBS did in March of 2007. So.. big crash from this idiocy in fall of 2023 I guess. This was incredibly obvious, I have DD going back to 2020 pointing this out and the March 2022 date for the chaos to begin, and I’ve found news articles from as far back as 2018. Don’t believe anyone who says this shit was unforseen. It was forseen, and it was uncared about.

r/Superstonk - The 2023 Real Estate Crash Started 5 Months Ago - and it Just Took Down its First Banks, Your Mom Already Called Me

REITs – and this is the new thing this time around, which is only just starting to blow up, and is the single largest bubble in history. Yes, bigger than the tulips, the gold rush, the ’29 and tech bubbles combined. Now, to show you just how much of a complete clusterfuck football batting practice mess this is going to be, I’ll use data from FRED and the REIT industry groups own website. First, what effect the mass rising of REITs has had on housing prices:

r/Superstonk - The 2023 Real Estate Crash Started 5 Months Ago - and it Just Took Down its First Banks, Your Mom Already Called Me

Yes, you’re seeing that correctly, relative to income, home prices are now higher than at the top of the ’07 and ’08 bubble. And to be clear, this is NOT due to a housing shortage like the press likes to say. Relative to population, the US has MORE housing than we did in 2008. Do You Want to Know More? (its the one on the bottom right of the pinned posts, I can’t link to the original because of the sub its in, also its old enough the attached charts appear to have all dropped off)

Now, how are these REITs paying for all that expansion and purchasing? They’re using funds from investors to buy property with cash, low leverage, very safe, right?

r/Superstonk - The 2023 Real Estate Crash Started 5 Months Ago - and it Just Took Down its First Banks, Your Mom Already Called Me

Oh. Oh no. That’s probably not good. Well, surely this gigantic explosion of unsecured debt is being reflected in the ratings of how safe these REITs are as investments.

r/Superstonk - The 2023 Real Estate Crash Started 5 Months Ago - and it Just Took Down its First Banks, Your Mom Already Called Me

I swear to Christ you couldn’t make this stuff up if you tried. Those two charts literally show the debt getting BETTER/SAFER ratings as the amount unsecured increases. Fucking unbelievable. Well, at least there haven’t been any warning signs coming out lately, right? The following are headlines from some major news sources over the last three weeks (dates are in American format, month/day):

Office Landlord Defaults are Escalating as Lenders Brace for More Distress – Wall Street Journal 2/23

Brookfield Defaults on Two Los Angeles Office Towers, $748M in Loans – Globest 2/15

Pimco, Brookfield Office Defaults Signal Deepening Property Pain – Bloomberg Law 3/1

These are all office buildings in New York, San Francisco, and LA, but at various scales this is happening all over the country. Publicly listed REITs in the US alone have a combined market cap of over $1.3 Trillion. That doesn’t include non-US REITs or non-public REITs. To give you a size of the scale of how out of control REITs have gotten, I’ll just use a line copied from the industries own website:

Today, U.S. REITs own nearly $4.5 trillion of gross real estate with public REITs owning $3 trillion in assets.

Yes. that’s right. $4.5 TRILLION of overvalued property assets. Across every single property asset class, housing, commercial, medical, farmland, timberland, offices, retail, data centers, you name a kind of real estate, these things are in on it. Much like a mortgage backed security, or a stock or a bond or anything else, REITs are not inherently bad for investors or bad for society. What is fucking terrible is that they’ve grown wildly out of control and are heavily overleveraged on wildly overvalued assets, to a degree unprecedented in human history, thanks largely to various Central Banks across the world overprinting.

Oh, and if you’re wondering how they own $4.5 Trillion in real estate with only $3 Trillion in assets? The difference is made up by $1.5 Trillion in debt. Unsecured, investment grade debt.

r/Superstonk - The 2023 Real Estate Crash Started 5 Months Ago - and it Just Took Down its First Banks, Your Mom Already Called Me

Ok, so, you ready for the fun part yet? All this stuff with the REITs and CMBS I’ve been talking about? IT HASN’T HAPPENED YET.

What we’re getting right now with SIVB and soon to be a bunch of other banks is a result of capital requirements, greed, illiquidity, and Fed printing. Federal banking regulations require banks to keep a certain amount of “safe” assets like MBS or Treasuries on their books as a % of their total capitalization. These are reserve assets, and they’re usually long term, low yield, stable debt. During the pandemic, the zero rates and money printing flooded the banks with cash. So the banks had to get more reserve assets. Many just grabbed a ton of very low % long term bonds and patted themselves on the back for generating yield off of free money in a low interest rate environment, marked it all Hold-To-Maturity (HTM), paid their executives big bonuses and called it a day.

Now a couple years later, and rates and inflation have risen. Driving the yields of those long term bonds into the dirt. As yields started to rise, these assets should have been marked down in price, and the banks should have hedged the risk from them, or realized some losses. However, because these bonds were marked HTM, the banks could just ignore the unrealized losses they were generating on them. No need to reduce profits or hedge risks if we can just ignore the problem for a decade until it goes away! Unfortunately for the banks, the whole reason they’re forced to have these reserves in the first place is so that depositors can get their money out if they want to. And over the last few weeks, many depositors decided they wanted their money back. The bank didn’t have enough cash on hand, so they had to sell these HTM reserves at a big loss.

This is not a unique problem to SIVB. If you look at the balance sheets for most of the big banks, they all have this problem of massive unrealized losses on HTM marked securities they bought during the pandemic. If anything happens that causes the banks to need a lot of cash or liquidity, they’re all going down the same way. And this is BEFORE we get to the issues with the lack of liquidity from all the bad property debt and CBMS fraud. Or in other words:

r/Superstonk - The 2023 Real Estate Crash Started 5 Months Ago - and it Just Took Down its First Banks, Your Mom Already Called Me

Finally, you’re probably asking what you can do to save yourself. Well, here’s the fucking great news. You’re reading this on Superstonk, which means you probably already own GME. I want to be clear here. GME isn’t the lifeboat, the Titanic, Noah’s Ark, that door Rose wouldn’t share with Jack, or even the fucking Iceberg. GME is the goddamnedit OCEAN. And when in doubt or fear or a crisis, you should always listen to the master:

r/Superstonk - The 2023 Real Estate Crash Started 5 Months Ago - and it Just Took Down its First Banks, Your Mom Already Called Me

Signing off CS #105xxx (yes, I was one of the first 11,000 people to DRS and open a Computershare account) Early, not wrong. I love each and every one of you. You’re all beautiful people and you’re going to do amazing things.

PSA: Shill shops are real – a major one got exposed last week. Are you getting played?

CategoriesGamestop_, Issue 2023Q2

By the great u/Conscious_Student_37 :

TLDR: A major shill shop was exposed last week, and their tactics, targets, and clients are very similar to what we deal with here. Given the latest flood of disinformation, FUD, and drama, I’ve put together the facts to paint a very clear picture: we are threatening the business interests of some very powerful players. I believe the low cost of disinformation and disruption means that yes, excessively rich fat cats often do pay for their goals and interests to be pushed on the internet. If we look closely at their actions, we can very clearly identify their goals and what they would push on us. The FUD waves lately happen to further those goals… so let’s get smart.


Professional Shill Shop, Exposed

Last week, a group of journalists exposed the Israel-based shill shop “Team Jorge”. They tracked their activity through multiple campaigns: https://www.theguardian.com/world/2023/feb/15/aims-software-avatars-team-jorge-disinformation-fake-profiles

Here are the key excerpts:

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

“Canalean” is a bot account name.

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

Note that this is just a government watchdog implementing a new rule that made fuckery more publicly transparent. Also note that the accounts use simple negativity and accusations of corruption/complicity to attempt to discredit the watchdog.

Of particular importance is the revelation of how far they go to build credibility and look like natural members of the group:

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

They look like real people.

This has become a very common thing. Consultancies now offer services to protect people/corps/entities from these attacks:

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

Sound familiar yet?

IMPORTANT NOTE: It would be naive to think that they aren’t ‘among us’, however accusing other people of being shills is wrong and you shouldn’t do it. It’s also most likely that unsuspecting apes are going into other platforms like the bird cesspool, 4chan, and other less-secure subs on Reddit, consume shill content, and then bring those (somewhat strong) opinions back here. Remember: people who get fooled by shills are victims, and the work these shops do is very high quality. The only answers are kindness, respectful discourse, and a rigorous approach to fact checking. That’s why I’m posting this DD: we have to look at the facts.

The recent explosion of negativity over efforts to change FTD policy, promote DRS more widely, and generally completely fuck up Citadel’s business model… it’s suspicious to me. It’s suspicious because of the rigorous DD I have done on what Citadel/Virtu/Wall St are doing, and what the new regulatory direction is going to do to them. I will share these details with you now. I can only conclude that we are threatening their business interests in an extreme way, and I believe they would try to stop us. Let’s go:

Enemy Shows Hand: Citadel/Virtu Rule Comments

One of my favorite things to do is read through the comment letters submitted by Citadel, Virtu, and other Wall St players. Whenever they take action, it tells us something about them. We get to see how their highly-paid lawyers argue and what their priorities are. It’s great.

Over the past year and a bit, thousands of apes commented on three rules. This kind of push from individuals has never happened before. Ever. Not even close. This is important and we’ll come back to it later.

Here are the links to the comments. Just check it out and scroll down…and down… and down. Makes me happy to see.

  1. Short sale reporting, which includes identification of when and how firms are using the MM naked shorting exception: https://www.sec.gov/comments/s7-08-22/s70822.htm. Superstonk post here https://www.reddit.com/r/Superstonk/comments/xypz9m/dont_let_citadel_get_away_with_this_take_5/

  2. Swaps reporting: https://www.sec.gov/comments/s7-32-10/s73210.htm. Superstonk post here: https://www.reddit.com/r/Superstonk/comments/yggyr0/swaps_shorts_and_securities_lending_want_better/

  3. Securities loans reporting: https://www.sec.gov/comments/s7-18-21/s71821.htm. Superstonk post here: https://www.reddit.com/r/Superstonk/comments/wprhuq/citadel_securities_pulls_a_fast_one/

Citadel wrote a response to securities loans and swaps, while Virtu wrote a letter for short sale reporting. By looking at their letters, we know more about how they are reacting.

Short Sale Reporting

Virtu letter here.

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

Data on when these fucks are using their special exception, you say? It’s going to cost you 193 million to comply, you say? Oh no.

We saw a lot of complaining from Wall St (including Hester) about this rule. They argued against it very strongly. Many comments, many pages. This rule gives us data to catch them out and creates more opportunities for regulators to catch them out. It isn’t huge, isn’t a magic bullet, but it’s real and costs them money and presents a major risk. By the way, the whole “this doesn’t actually matter” / “focusing on the wrong things” is a standard disruption tactic. The conclusion here is that this rule pissed them off.

When rule changes actually don’t matter, we don’t see theater. We see this: https://www.sec.gov/comments/s7-21-22/s72122.htm. These are the comments for a change to the DTCC board of governers, where about 1/3 of their board must be replaced. The DTCC commented and said hey, this is good. And basically no one else did. There wasn’t a big push against. SEC using kid gloves vs. the DTCC. Weak shit. That’s the contrast we are talking about here. You can also go back in time with the SEC rules and look at what wall st hated and what they didn’t really care about. They don’t pay lawyers for theater. They pay them to make money.

Securities Lending

This one really freaked wall st out because they have to report their lending activity every fifteen minutes. No one on Wall St wanted it. Citadel commented:

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

oh no, not the fund managers!!11

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

Less short selling? More squeeze risk? Less ability to hedge your shorts? How awful.

And, of course, they trotted out the classic line: THIS WILL HURT RETAIL. Fuck them.

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

This line will become important later.

Swaps Reporting

Major drama over this one. Citadel’s letter is here.

Hilariously, they copy-pasted the same arguments from the securities lending rule lmao

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

how much do these guys get paid, fr

Same stuff generally – this is bad, don’t do this, you don’t have the authority, etc etc.

So we can see that Citadel and Virtu are getting pissed about these rules. They are putting significant amounts of money and time into fighting them. Good. This is a sign that the new rulemaking agenda is something they would prefer didn’t happen. Gensler is doing things they don’t like.

We need more evidence though. So let’s go further and turn to another source of information to double check those conclusions.

Enemy Shows Hand: Politicians Bought By Wall Street

Wall St will give their politicians orders to do things, but they don’t do so all the time. They DID do it for the rules we commented on. For example, after we got finished with swaps and shorts… a group of politicians submitted a group letter (unusual), LATE (very unusual) that says “do not pass this rule don’t do it fuck please”. So that’s unambiguous. But whom do the serve?

We can go look at these politicians and see who owns them. Surprise surprise, it’s wall street. Here are the receipts for the millions wall st paid to buy them:

Bill Huizenga https://www.opensecrets.org/members-of-congress/bill-huizenga/summary

Patrick Mchenry https://www.opensecrets.org/members-of-congress/patrick-mchenry/summary

Alma Adamshttps://www.opensecrets.org/members-of-congress/alma-adams/summary

Madeleine Dean https://www.opensecrets.org/members-of-congress/madeleine-dean/summary

Bill Foster https://www.opensecrets.org/members-of-congress/bill-foster/summary

Vincente Gonzalez https://www.opensecrets.org/members-of-congress/vicente-gonzalez/summary

Ann Wagner https://www.opensecrets.org/members-of-congress/ann-wagner/summary

Josh Gottheimer https://www.opensecrets.org/members-of-congress/josh-gottheimer/summary036944

And this is what they don’t hide!

From this, we know that their owners sicced them on this rule so they really don’t want it. They looked at the state of play after the comment period closed and decided they needed more support. I believe it’s because of us.

What else are these bought-and-paid-for politicians saying about the latest regulatory efforts? This:

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

“scorched earth”, you say?

Also, these guys tweet. They are constantly gunning for Gensler. We now have a very concrete set of actions all demonstrting that wall st does NOT like what the chair is doing, and they are activating resources to fight it hard. “The most ambitious agenda in the SEC’s 87-year history” combining with the unprecedented wave of involvement from individual investors is brutal for them.

And this isn’t even the most intense part!! It keeps going:

The Rules That Fuck

Since almost the start of his tenure, GG has been talking about changes to PFOF. Maybe banning, maybe making changes to dismantle it, etc. Now you will learn something new and fun: whenever Gensler spoke on these rules and made his intentions clear, Virtu’s stock price got completely fucked. Here’s what happened when Gensler said he was weighing banning PFOF:

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?


And here’s what happened last June when he got explicit about the rules that were later proposed on Dec 14 2022:

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

Fs in the chat

Since this whole thing started, Virtu’s stock price has absolutely fucking tanked, 40% in total now. This means wall st is very clearly saying with their money: these rules are going to fuck the wholesaler business model through the earth’s crust. And Virtu’s business model is Citadel’s business model – if Citadel were dumb enough to be publicly traded, they’d suffer the same fate. Another major concrete piece of evidence that these rules, and Gensler, are a threat to their businesses.

We also saw Virtu threaten litigation and etc. Which they followed through on:

The Rules That Fuck, Part 2

On Dec 14, 2022, the rules finally arrived. Virtu was already suing the SEC at this point. (link to article) And they explicitly demanded the transcripts of what Dave Lauer and Gensler talked about. Another concrete piece of action this time directly targeting two “battleground” figures around here.

Doug Cifu, CEO of Virtu, put together a long and involved statement regarding these rules that could have been titled Please Don’t Do This I’m Fucking Begging You. And here’s when we return to the “it’s bad for retail!” Ol’ Reliable that Citadel and Virtu like to use:

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

fuck you bro

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

fuck you, again

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

warrant deez nuts in your mouth

And we see EXACTLY what they are going to be saying in their comments on these new rules. They will be trying to speak for us. We have to say, very clearly: FUCK THEIR BUSINESS MODEL, WE DON’T WANT IT TO EXIST.

Did I mention Citadel went on TV to complain?

r/Superstonk - PSA: Shill shops are real - a major one got exposed last week. Are you getting played?

Citadel could lose billions, you say?

They also did the classic negative op-ed in the WSJ.

So let’s sum up:

  • We have been commenting like no group has in the history of comments.

  • We are causing reactions and they have to fight us. They are activating their politicians and using a lot of lawyer time. They don’t want these rules.

  • Gensler is proposing rules that threaten the very existence of how they do things, and has been fucking up Virtu’s stock price for over a year. It’s down 40% since he started. L M A O get fucked doug.

  • These new rules, if implemented, will DISMANTLE their precious system and cost them the billions they need to keep us down.

  • Virtu is already suing over it.

  • Citadel is complaining on TV and in the Wall st journal, and said the quiet part out loud: it will cost them billions and take apart what they’ve worked so hard to build.

  • We are a threat to their big, primary argument that what they do is good for us.

So how do they stop this? They fucking gaslight you. They trick you. They disrupt, distract, divide, and discourage.

Disrupt, Distract, Divide, Discourage

Now we come to the FUD over the last two days. We have the chair of the SEC, for the first time ever, REQUESTING TIME WITH US to discuss these new rules. To talk about FTDs, and DRS, and more. To encourage us to comment, which I can only conclude is to fully counter the “retail loves what we do for them” line of bullshit.

And look at what happened. Tons of negativity, all of it shallow. Dave’s bad, Gensler’s bad, blah blah blah. Driving the wedge. Disruption. Distraction. Trying to separate us from the two major figures that are pushing the rules that threaten their existence. Downplaying the new rules and saying nothing matter. This is not a coincidence.

WE KNOW FOR A FACT that these rules threaten them. Our comments are a major political problem for them. We actively disarm what they have made clear is a primary line of legal argument: that what they do is good for us.

It is not good for us.

We don’t want them.

Now, these rules that scare them so much are complicated and dense. 1600 pages of research and finely-tuned arguments to deal with the lawyers that we know for a fact are already at the gates. It’s hard for any of us to get through and understand which makes it easy for bad actors to come in and trick you. It makes it easy for misinformation / disinformation to spread.

Over the month of March, I will be posting DDs on each of these rules. I will walk you through what they mean, and delineate exactly how they dismantle the Citadel business model.

I cannot emphasize enough how big of a threat these rules are to their control over the market, and their control over the stock we like.

Don’t get fooled. Stay focused. And remember: all we’re talking about here is taking five minutes giving the SEC a piece of your mind. That truth can get lost in all the drama. But really, all we want to say is that enforcement matters to us, major fines matter, major punishments matter, and wholesaling is toxic as fuck. There are wrinkles to be gained of course, and we’ll be putting together lots of help for you to sound smart and look good. It’s going to be great. LFG.

As always, thank you for reading.

The Order Auction Rule: The Party’s Over

CategoriesGamestop_, Issue 2023Q2

As always, the comment guide is at the bottom. You can just scroll down if you want.

Too Ape, Didn’t Read

This rule turns this:

r/Superstonk - The Order Auction Rule: The Party's Over

Into this:

r/Superstonk - The Order Auction Rule: The Party's Over

Here is what Citadel has to say:

r/Superstonk - lol no
lol no

So if we all comment together:

r/Superstonk - It is known.
It is known.


The Order Auction Rule is “The Big One”. This is the one that bans PFOF without banning PFOF. It prohibits any firm, including Citadel, from directly internalizing order flow. They have to send your orders to a public auction where anyone could offer a better price. This is a big deal because it means that pension funds can interact directly with our (attractive) order flow, and the middle man (Citadel) is cut out. It also means that the centerpiece of Citadel’s entire money party is gutted and removed. That’s not all – it also prevents Citadel from fucking around with 4+ decimal prices, and prevents fee/rebate farming specifically for OUR orders. AND ON TOP OF THAT, it specifically includes things to combat time priority races, similar to IEX (i.e. it fucks over HFT shops like Citadel’s).

In short, this rule is a shot to the heart. This is the big one. This is the one they want to go away, above all the others. This is why they’ve been fighting so hard.

Do not let this opportunity pass you by.

Let’s go.

The Basics

Press Release: https://www.sec.gov/news/press-release/2022-225

Fact Sheet: https://www.sec.gov/files/34-96495-fact-sheet.pdf

Full Text: https://www.sec.gov/rules/proposed/2022/34-96495.pdf

Citadel’s Letter: https://www.sec.gov/comments/s7-32-22/s73222-20158676-326602.pdf

The proposed rule would PROHIBIT a restricted competition trading center from internally executing certain orders of individual investors at a price unless the orders are first exposed to competition at that price in a qualified auction operated by an open competition trading center (full rule text, summary section).

Execution priority requirements would, among other things, prohibit giving priority to the fastest auction response or to the auction response submitted by the broker-dealer that routed the segmented order to the auction.

This rule does a few amazing things:

  1. Public auctions come before internalization.
  2. Public auctions have execution priority rules that mess with HFT shops (like Citadel’s)
  3. Dark pools, if they want to host auctions, must become transparent and start submitting data to public feeds.

Put simply, this rule labels systems like Citadel’s as “restricted competition trading centers” and firmly places them second in line for any order execution. Other exchanges that are actually open/lit are designated as “open competition trading centers” with transparency/open access requirements; these are firmly placed first in line for order execution.

Cirque du Citadel

Previously, we refreshed our knowledge of how Citadel’s circus works. It all relies on pumping tons of individual investor order flow into their internal systems, and using the lax regulations for those internal systems to do whatever the fuck they want with those orders, and all the information that comes with them.

Now: our orders are considered extra juicy for market makers and Wall St participants. Taking the other side of a trade is like a little, microseconds-long game of poker. You have some information about what is going on, and the other guy has some information about what is going on. You’re both placing a bet. If you know more than they do, it’s very likely you can make money off the situation. What Citadel does is choose opponents that don’t care about making an optimal bet. And then they pull out as many cards of whatever kind they want to maximize return.

r/Superstonk - If your order is internalized, Citadel can pull out as many fake shares as they want. Take away the internalization, and...
If your order is internalized, Citadel can pull out as many fake shares as they want. Take away the internalization, and…

They love to choose you. Why? Because you don’t care about what’s going on in the markets right this microsecond. You just like the stock. In fact, the BEST THING an individual investor can do is buy a good company and wait (i.e. DCA). So if you’re being smart, you’re acting as Citadel’s favorite thing: a completely blind opponent. There are lots of good trades to be made with our order flow.

So Citadel likes to stand between us and institutional investors like pension funds, and pocket a lot of the money that can be made. They steal from you and they steal from pensions, and they tell everyone how amazing it is that they provide such a service. They pay a lot of money to stand in the middle like that. Their business model depends very heavily on it. By absorbing so much of our order flow, they can say “oh we saved retail investors billions” (maybe half a cent per share) and make themselves look great. Because they are getting our juicy order flow and lit exchanges are not, they look better in comparison – and that lets them get even more order flow because they are the “superior” choice. But that superiority is an illusion. A quote from dlauer:

“Wholesalers are only able to provide price improvement because they have “first dibs” on any order they receive. They are the exclusive operator of a flash order facility in which they have a free option on every order.”

The core idea of the rule is this: “Hey, what if the pension funds just got to interact with individual investors directly? Institutions get better prices because middlemen aren’t taking a cut, and individuals get a better price because middlemen aren’t taking a cut.” In this scenario, Citadel loses billions.

And THAT is what the auction is. Every order needs to FIRST go to an auction where institutions and individuals can interact. EVERYONE gets to compete with Citadel, rather than Citadel keeping their own little system where they can take the other side of every trade.

Fuck the middlemen.

Wall Street Hates Competition

r/Superstonk - Gary's Thunderdome
Gary’s Thunderdome

If there’s one thing Wall Street hates… it’s a fair fight. Citadel and their ilk have a near-monopoly on order flow: Broker-dealers route more than 90% of marketable orders of individual investors in NMS stocks to a small group of six off-exchange dealers, often referred to as “wholesalers … The wholesaling business is highly concentrated, with two firms capturing approximately 66% of the executed share volume of wholesalers as of the first quarter of 2022.”

And this is just the overall market. Within certain stocks, that monopoly might reach over 70%… or 80%. Or higher. A single wholesaler could control almost all the order flow for a particular stock on a given day. Could you imagine?

They hate fair competition because it means they could lose. They want riskless profit. And right now that’s exactly what they get, day in and day out. An auction takes a sledgehammer to their cushy current position.

Lots of lawyers are hard at work to make sure this rule never happens. Citadel’s lawyers, and Virtu’s lawyers, and Schwab’s lawyers, and Fidelity’s lawyers… any fund or firm that has their lips firmly latched onto the tit of the current market structure will be railing against this. And that is exactly what we have seen.

So how do we outplay these lawyers? Enter Title 15 U.S.C. 78k-1 of the U.S. legal code on the objectives of the SEC:

r/Superstonk - No wiggle room for them here - their current monopoly isn't fair and that's obvious to anyone who looks.
No wiggle room for them here – their current monopoly isn’t fair and that’s obvious to anyone who looks.

THIS is the line to push. This is their weakness because the facts are undeniable. So let’s push it.


How to Comment

  1. Open your email. The SEC’s email is rule-comments@sec.gov. Copy/paste this title into the subject line: Re: Order Competition Rule, File No. S7-31-22, Release No.34-96495
  2. Take a look at the talking points here: https://pastebin.com/25gxYr1j.
    1. These points include things like enforcement, calling out Citadel’s bullshit about benefiting retail investors, emphasizing fair competition and calling out the Citadel/Virtu monopoly, supporting the fact that the rule forces dark pools to be transparent, etc.
  3. Copy and paste the ones you want.
  4. Rephrase them / write more in your own words
  5. Submit

Overall, we want to support the rule with one exception: The rule allows for orders to go to Citadel FIRST and then to the auction for fair competition. This still gives them a major information advantage which should be removed. So there is a point to be made about brokers first routing to the auction and only then, if someone doesn’t take your order, routing to Citadel.

Take the time to comment on this rule. This is an existential threat to Citadel AND any wholesaler that would take its place, were Citadel to fail. We don’t want another Citadel, we want the system taken apart.

So let’s get after it.

Citadel’s letter to the SEC: A desperate plea thinly veiled as concern for investors

CategoriesGamestop_, Issue 2023Q2

As u/ SirMiba writes:

Link to Citadel’s letter: https://www.citadelsecurities.com/wp-content/uploads/sites/2/2023/03/Joint-Consensus-Position-Letter-to-the-SEC-March-6-2023.pdf?utm_source=twitter&utm_medium=social&utm_campaign=market_letter

Let’s just go through the relevant parts of it, shall we?

NYSE Group, Inc., Charles Schwab & Co., and Citadel Securities are pleased to present a consensus position to the Securities and Exchange Commission (the “Commission”) on its recent equity market structure proposals (the “Proposals”). We share a commitment to ensuring that the U.S. equities market remains the most liquid, efficient, and competitive in the world, thereby strengthening our economy, supporting issuers, and helping to secure the retirement futures of everyday Americans.

Citadel et al claims commitment to (of US markets):

  • Liquidity
  • Efficiency
  • Competitiveness

For the benefit of:

  • The economy
  • Issuers
  • retirement of every day Americans

We believe that this more targeted approach will result in significant benefits for U.S. equity market participants, while meaningfully reducing the risk of negative outcomes for markets and investors, including the risk of firms retreating from being liquidity providers – which would be particularly detrimental to retail investors.

Citadel claims the points presented in their letter will:

  • Benefit US equity market participants
  • Reduce negative outcomes for …
    • markets
    • investors
    • firms retreating from being liquidity providers (which would be particularly detrimental to retail investors)

Minimum Pricing Increments, Access Fees, and Round Lots.

… we recommend reducing the minimum quoting increment to a half-penny for symbols trading at or above $1.00 per share that are tick-constrained to significantly narrow the number of symbols covered in the Proposal. We define “tick-constrained” to mean symbols that have an average quoted spread of 1.1 cents or less and a reasonable amount of available liquidity at the NBBO.

Citadel proposes to reduce the $0.01 minimum price increment to $0.005, for

  • Stock with shares above $1.00
  • tick-constrained
    • Citadel definition: symbols that have an average quoted spread of 1.1 cents or less and a reasonable amount of available liquidity at the NBBO [1]
    • SEC definition: Stock that have a time weighted quoted spread of $0.011 or less calculated during regular trading hours.

Citadel wants to narrow down the tickers with $0.005 minimum price increments to liquid stocks with thin spreads. Why? Because Citadel as a Market Maker (in other words, a Market Manipulator) can also make money off the spread of stocks. They can trade at $0.0001 and therefore beat the best bid or ask from participants limited to $0.01 increments. For example, if the market maker buys the stock at $10.005 and sells it at $10.015, they earn a profit of $0.01 per share. If the current best bid for a stock is $10.00 and the best ask is $10.01, a market maker can offer to buy the stock at a slightly higher price, say $10.005, which is still less than the best ask price, then sell it at $10.00. Citadel wants to keep more decimals for themselves, especially in less liquid stock with large spreads, where they can make more money on “””market making”” (see: market manipulation).

Their proposal is fully self-serving and in THEIR own interest. They can only argue that they deliver better prices if they have access to prices that most others don’t. In the end, this is fully self-serving and not in the interest of anyone else but themselves. While this proposal could be argued to not go far enough, Citadel et al wants to keep their special privileges that makes them money, at YOUR expense.

[1] NBBO stands for National Best Bid and Offer. It represents the best available bid and offer prices for a security or stock, which are aggregated from all the major exchanges and displayed to traders and investors. The NBBO is calculated by taking the highest bid and the lowest offer from all of the exchanges that are trading the security.

Separately, we recommend setting a market-wide harmonized trading increment of $.001 for all symbols trading at or above $1.00 per share. In our view, the minimum quoting[2] increment and the minimum trading increment do not need to be the same.

This means nothing to you as an investor and/or trader, because quoting a stock price, bid, or ask at some amount of decimals does nothing for you if you cannot trade at those levels.

[2] A stock quote is the last price at which an asset traded. The bid quote is the most current price and quantity at which a share can be bought. The ask quote shows what a current participant is willing to sell the shares for.

Finally, we recommend accelerating implementation of the revised round lot definition, but not the odd lot dissemination on the securities information processors (“SIP”), as contained in the Commission’s Market Data Infrastructure Rule (“MDIR”). We would encourage the Commission to revisit industry comments on the odd lot dissemination before full implementation of MDIR.

From this excellent post, part 1 out 3, the post links to all other parts at the bottom:

Odd Lots are orders of shares that are less than 100 and…

  1. Do not get calculated into the NBBO, they do not affect the price.
  2. They are short exempt, immune to the uptick rule
  3. Are not required to be reported to the Tape, are visible on proprietary data feeds only. They don’t affect the price but those subscribed to the feed can track volume and price trends.

The SEC asks this question: “Should the implementation of the definition of odd-lot information, which would include odd-lots priced better than the NBBO in NMS[3] data, be accelerated? Why or why not?”

The answer is YES. Odd lot information that would benefit household investors and traders should NOT be hidden from them. Together with the DD linked above, it is clear to me that the reason Citadel proposes to not accelerate odd lot information is because it makes it harder to manipulate the price, short stock (especially in regards to the uptick rule) and gives them an information advantage over household investors.

Again, their proposal is fully self-serving and in THEIR own interest. It does not help you, it does not make your investing or trading better, it doesn’t help pension funds, it helps Citadel.

[3] The National Market System (NMS) regulates how all major exchanges disclose and execute trades. It is the system for equity trading and order fulfillment in the U.S. that consists of trading, clearing, depository, and quote distribution functions. The NMS governs the activities of all formal U.S. stock exchanges and the NASDAQ market.

Order Execution Information (Rule 605).

We strongly support enhancing execution quality disclosure, and thus recommend implementing this proposal while taking into account technical feedback from market participants*. We note that comprehensive and accurate data is critical to enabling both regulators and market participants to assess the impact of any other changes made to current market structure.*

Short on rule 605: SEC Rule 605 is a regulation that requires market centers to provide execution quality statistics to the public on a monthly basis. This transparency is intended to help investors make informed decisions about where to place their orders and promote competition among market centers. Market centers subject to the rule include exchanges, associations, and ATSs. The rule is one of several regulations aimed at promoting fair and transparent trading practices in the US equity markets.

Note here the “market centers” is, from the SEC’s proposal: “Regulation NMS defines the term “market center” to mean any exchange market maker,27 OTC market maker,28 ATS, 29 national securities exchange,30 or national securities association.31 This definition was intended to cover entities that hold themselves out as willing to accept and execute orders in NMS securities”

The new proposed update to rule 605 is about broadening its scope of affected companies to, for example, broker-dealers. It is sorely needed, but its effect on Citadel is probably limited (although this rule proposal is highly technical, and I might miss something here). BUT, Citadel agreeing with this rule is IMO most likely due to it posing no real change / threat to them. Either way, it’s an opportunity for them to pretend to care about transparency and they took it.

Although, I am sure that they will provide a lot of feedback on the changes to try walk the SEC back on some of it.

Retail Auctions & Best Execution

Retail Auctions. We recommend withdrawing this proposal for a number of reasons, including the unprecedented nature of requiring certain market participants to utilize a specific trading protocol. At a minimum, the proposal should be indefinitely paused until the execution quality impacts of the narrower quoting increments and modernized round lot definitions above can be fully assessed, and a more credible economic analysis of the potential harms and benefits of any proposed significant changes to order execution can be conducted.

This is the anti-PFOF and internalization rule, and you can guess why Citadel is against it. The rule makes “wholesalers” like Citadel obligated to post orders for an “execution auction”, where participants can bid and win the orders. Brokers would also be able to send orders ´directly to auction. While this is not the “place an order, it goes to the exchange, match with a seller / buyer, done deal” that household investors want, it is much better than the PFOF and internalization scheme that Citadel runs. This would most likely make their life MUCH more difficult, and it reflects as much in their reasoning for going against it.

unprecedented nature of requiring certain market participants to utilize a specific trading protocol

As opposed to what, Citadel? Banning market makers altogether? Letting market makers have brokers route orders and never letting the orders see the light of day until it is convenient for you? Citadel tries to make it sound scary that they should be forced to use a trading protocol as market makers, that protocol being a simply auctioning protocol. When they say “certain market participants” they mean people like themselves with special privileges and advantages that household investors do not have.

At a minimum, the proposal should be indefinitely paused until the execution quality impacts of the narrower quoting increments and modernized round lot definitions above can be fully assessed, and a more credible economic analysis of the potential harms and benefits of any proposed significant changes to order execution can be conducted.

And this is their argument for pausing the proposal: Give us time to whine about how the minimum price increments hurts our ability to “””provide the best execution””” for household investors and pay some economic think tank or whoever wants our money to conduct “””research””” (see: lie with statistics) on how retail auction rules would hurt pension funds :'(

Again, this is as blatant as it gets. The SEC proposes to take away their ability to route orders and internalize them, giving household orders a much better chance at hitting exchanges and at the very least eating into their control of the market, and they propose to delay that forever. I wonder how, I wonder why.

The same goes for this bile:

Best Execution. We all strongly support the principle of Best Execution, but similarly recommend withdrawing this proposal. FINRA and MSRB’s best execution rules, and related notices and guidance, have served to protect investors for many decades. We would support further clarification and refinement to existing best execution obligations that would take into account the effects of the tick size, access fee and order execution disclosure adjustments called for above. We are concerned that the current best execution proposal, with overly prescriptive and impractical requirements for managing a new category of so-called “conflicted transactions” may unnecessarily disrupt decades of market progress for investors.

“may unnecessarily disrupt decades of market progress for investors” Market progress how? How does a market progress? Reminder: A market is when many sellers and buyers meet up in one place to trade with each other. THAT IS ALL IT IS. If trying to promote orders in a market actually get to the market disrupts “market progress for investors” then something in the market is entirely broken and needs to be reworked from the ground up. ALL this is, is a complaint that their business is under attack from regulators, even with bought and paid for commissioners, and they could lose everything they have been spending billions of dollars on building.

Citadel is not FOR markets.

Citadel is not capitalist.

Citadel is not for trading.

Citadel is for consolidating power.

Citadel is for hiding information.

Citadel is for having special privileges over others.

Citadel is for market manipulation.

Citadel is for taking your money.

Fuck Citadel. Go comment on SEC’s proposals.





The Bigger Short. How 2008 is repeating, at a much greater magnitude, and COVID ignited the fuse. GME is not the reason for the market crash. GME was the fatal flaw of Wall Street in their infinite money cheat that they did not expect.

CategoriesGamestop_, Issue 2023Q2

By u/  Criand

0. Preface

I am not a financial advisor, and I do not provide financial advice. Many thoughts here are my opinion, and others can be speculative.

TL;DR – (Though I think you REALLY should consider reading because it is important to understand what is going on):

  • The market crash of 2008 never finished. It was can-kicked and the same people who caused the crash have still been running rampant doing the same bullshit in the derivatives market as that market continues to be unregulated. They’re profiting off of short-term gains at the risk of killing their institutions and potentially the global economy. Only this time it is much, much worse.
  • The bankers abused smaller amounts of leverage for the 2008 bubble and have since abused much higher amounts of leverage – creating an even larger speculative bubble. Not just in the stock market and derivatives market, but also in the crypt0 market, upwards of 100x leverage.
  • COVID came in and rocked the economy to the point where the Fed is now pinned between a rock and a hard place. In order to buy more time, the government triggered a flurry of protective measures, such as mortgage forbearance, expiring end of Q2 on June 30th, 2021, and SLR exemptions, which expired March 31, 2021. The market was going to crash regardless. GME was and never will be the reason for the market crashing.
  • The rich made a fatal error in way overshorting stocks. There is a potential for their decades of sucking money out of taxpayers to be taken back. The derivatives market is potentially a $1 Quadrillion market. “Meme prices” are not meme prices. There is so much money in the world, and you are just accustomed to thinking the “meme prices” are too high to feasibly reach.
  • The DTC, ICC, OCC have been passing rules and regulations (auction and wind-down plans) so that they can easily eat up competition and consolidate power once again like in 2008. The people in charge, including Gary Gensler, are not your friends.
  • The DTC, ICC, OCC are also passing rules to make sure that retail will never be able to to do this again. These rules are for the future market (post market crash) and they never want anyone to have a chance to take their game away from them again. These rules are not to start the MOASS. They are indirectly regulating retail so that a short squeeze condition can never occur after GME.
  • The COVID pandemic exposed a lot of banks through the Supplementary Leverage Ratio (SLR) where mass borrowing (leverage) almost made many banks default. Banks have account ‘blocks’ on the Fed’s balance sheet which holds their treasuries and deposits. The SLR exemption made it so that these treasuries and deposits of the banks ‘accounts’ on the Fed’s balance sheet were not calculated into SLR, which allowed them to boost their SLR until March 31, 2021 and avoid defaulting. Now, they must extract treasuries from the Fed in reverse repo to avoid defaulting from SLR requirements. This results in the reverse repo market explosion as they are scrambling to survive due to their mass leverage.
  • This is not a “retail vs. Melvin/Point72/Citadel” issue. This is a “retail vs. Mega Banks” issue. The rich, and I mean all of Wall Street, are trying desperately to shut GameStop down because it has the chance to suck out trillions if not hundreds of trillions from the game they’ve played for decades. They’ve rigged this game since the 1990’s when derivatives were first introduced. Do you really think they, including the Fed, wouldn’t pull all the stops now to try to get you to sell?


A ton of the information provided in this post is from the movie Inside Job (2010). I am paraphrasing from the movie as well as taking direct quotes, so please understand that a bunch of this information is a summary of that film.

I understand that The Big Short (2015) is much more popular here, due to it being a more Hollywood style movie, but it does not go into such great detail of the conditions that led to the crash – and how things haven’t even changed. But in fact, got worse, and led us to where we are now.

Seriously. GoWatchInside Job. It is a documentary with interviews of many people, including those who were involved in the Ponzi Scheme of the derivative market bomb that led to the crash of 2008, and their continued lobbying to influence the Government to keep regulations at bay.

Inside Job (2010) Promotional

1. The Market Crash Of 2008

1.1 The Casino Of The Financial World: The Derivatives Market

It all started back in the 1990’s when the Derivative Market was created. This was the opening of the literal Casino in the financial world. These are bets placed upon an underlying asset, index, or entity, and are very risky. Derivatives are contracts between two or more parties that derives its value from the performance of the underlying asset, index, or entity.

One such derivative many are familiar with are options (CALLs and PUTs). Other examples of derivatives are fowardsfuturesswaps, and variations of those such as Collateralized Debt Obligations (CDOs), and Credit Default Swaps (CDS).

The potential to make money off of these trades is insane. Take your regular CALL option for example. You no longer take home a 1:1 return when the underlying stock rises or falls $1. Your returns can be amplified by magnitudes more. Sometimes you might make a 10:1 return on your investment, or 20:1, and so forth.

Not only this, you can grab leverage by borrowing cash from some other entity. This allows your bets to potentially return that much more money. You can see how this gets out of hand really fast, because the amount of cash that can be gained absolutely skyrockets versus traditional investments.

Attempts were made to regulate the derivatives market, but due to mass lobbying from Wall Street, regulations were continuously shut down. People continued to try to pass regulations, until in 2000, the Commodity Futures Modernization Act banned the regulation of derivatives outright.

And of course, once the Derivatives Market was left unchecked, it was off to the races for Wall Street to begin making tons of risky bets and surging their profits.

The Derivative Market exploded in size once regulation was banned and de-regulation of the financial world continued. You can see as of 2000, the cumulative derivatives market was already out of control.


The Derivatives Market is big. Insanely big. Look at how it compares to Global Wealth.


At the bottom of the list are three derivatives entries, with “Market Value” and “Notional Value” called out.

The “Market Value” is the value of the derivative at its current trading price.

The “Notional Value” is the value of the derivative if it was at the strike price.

E.g. A CALL option (a derivative) represents 100 shares of ABC stock with a strike of $50. Perhaps it is trading in the market at $1 per contract right now.

  • Market Value = 100 shares * $1.00 per contract = $100
  • Notional Value = 100 shares * $50 strike price = $5,000

Visual Capitalist estimates that the cumulative Notional Value of derivatives is between $558 Trillion and $1 Quadrillion. So yeah. You are not going to cause a market crash if GME sells for millions per share. The rich are already priming the market crash through the Derivatives Market.

1.2 CDOs And Mortgage Backed Securities

Decades ago, the system of paying mortgages used to be between two parties. The buyer, and the loaner. Since the movement of money was between the buyer and the loaner, the loaner was very careful to ensure that the buyer would be able to pay off their loan and not miss payments.

But now, it’s a chain.

  1. Home buyers will buy a loan from the lenders.
  2. The lenders will then sell those loans to Investment Banks.
  3. The Investment Banks then combine thousands of mortgages and other loans, including car loans, student loans, and credit card debt to create complex derivatives called “Collateralized Debt Obligations (CDO’s)”.
  4. The Investment Banks then pay Rating Agencies to rate their CDO’s. This can be on a scale of “AAA”, the best possible rating, equivalent to government-backed securities, all the way down to C/D, which are junk bonds and very risky. Many of these CDO’s were given AAA ratings despite being filled with junk.
  5. The Investment Banks then take these CDO’s and sell them to investors, including retirement funds, because that was the rating required for retirement funds as they would only purchase highly rated securities.
  6. Now when the homeowner pays their mortgage, the money flows directly into the investors. The investors are the main ones who will be hurt if the CDO’s containing the mortgages begin to fail.

Inside Job (2010) – Flow Of Money For Mortgage Payments


1.3 The Bubble of Subprime Loans Packed In CDOs

This system became a ticking timebomb due to this potential of free short-term gain cash. Lenders didn’t care if a borrower could repay, so they would start handing out riskier loans. The investment banks didn’t care if there were riskier loans, because the more CDO’s sold to investors resulted in more profit. And the Rating Agencies didn’t care because there were no regulatory constraints and there was no liability if their ratings of the CDO’s proved to be wrong.

So they went wild and pumped out more and more loans, and more and more CDOs. Between 2000 and 2003, the number of mortgage loans made each year nearly quadrupled. They didn’t care about the quality of the mortgage – they cared about maximizing the volume and getting profit out of it.

In the early 2000s there was a huge increase in the riskiest loans – “Subprime Loans”. These are loans given to people who have low income, limited credit history, poor credit, etc. They are very at risk to not pay their mortgages. It was predatory lending, because it hunted for potential home buyers who would never be able to pay back their mortgages so that they could continue to pack these up into CDO’s.

Inside Job (2010) – % Of Subprime Loans

In fact, the investment banks preferred subprime loans, because they carried higher interest rates and more profit for them.

So the Investment Banks took these subprime loans, packaged the subprime loans up into CDO’s, and many of them still received AAA ratings. These can be considered “toxic CDO’s” because of their high ability to default and fail despite their ratings.

Pretty much anyone could get a home now. Purchases of homes and housing prices skyrocketed. It didn’t matter because everyone in the chain was making money in an unregulated market.

1.4 Short Term Greed At The Risk Of Institutional And Economic Failure

In Wall Street, annual cash bonuses started to spike. Traders and CEOs became extremely wealthy in this bubble as they continued to pump more toxic CDO’s into the market. Lehman Bros. was one of the top underwriters of subprime lending and their CEO alone took home over $485 million in bonuses.

Inside Job (2010) Wall Street Bonuses

And it was all short-term gain, high risk, with no worries about the potential failure of your institution or the economy. When things collapsed, they would not need to pay back their bonuses and gains. They were literally risking the entire world economy for the sake of short-term profits.


During the bubble from 2000 to 2007, the investment banks were borrowing heavily to buy more loans and to create more CDO’s. The ratio of banks borrowed money and their own money was their leverage. The more they borrowed, the higher their leverage. They abused leverage to continue churning profits. And are still abusing massive leverage to this day. It might even be much higher leverage today than what it was back in the Housing Market Bubble.

In 2004, Henry Paulson, the CEO of Goldman Sachs, helped lobby the SEC to relax limits on leverage, allowing the banks to sharply increase their borrowing. Basically, the SEC allowed investment banks to gamble a lot more. Investment banks would go up to about 33-to-1 leverage at the time of the 2008 crash. Which means if a 3% decrease occurred in their asset base, it would leave them insolvent. Henry Paulson would later become the Secretary Of The Treasury from 2006 to 2009. He was just one of many Wall Street executives to eventually make it into Government positions. Including the infamous Gary Gensler, the current SEC chairman, who helped block derivative market regulations.

Inside Job (2010) Leverage Abuse of 2008

The borrowing exploded, the profits exploded, and it was all at the risk of obliterating their institutions and possibly the global economy. Some of these banks knew that they were “too big to fail” and could push for bailouts at the expense of taxpayers. Especially when they began planting their own executives in positions of power.

1.5 Credit Default Swaps (CDS)

To add another ticking bomb to the system, AIG, the worlds largest insurance company, got into the game with another type of derivative. They began selling Credit Default Swaps (CDS).

For investors who owned CDO’s, CDS’s worked like an insurance policy. An investor who purchased a CDS paid AIG a quarterly premium. If the CDO went bad, AIG promised to pay the investor for their losses. Think of it like insuring a car. You’re paying premiums, but if you get into an accident, the insurance will pay up (some of the time at least).

But unlike regular insurance, where you can only insure your car once, speculators could also purchase CDS’s from AIG in order to bet against CDO’s they didn’t own. You could suddenly have a sense of rehypothecation where fifty, one hundred entities might now have insurance against a CDO.

Inside Job (2010) Payment Flow of CDS’s

If you’ve watched The Big Short (2015), you might remember the Credit Default Swaps, because those are what Michael Burry and others purchased to bet against the Subprime Mortgage CDO’s.

CDS’s were unregulated, so AIG didn’t have to set aside any money to cover potential losses. Instead, AIG paid its employees huge cash bonuses as soon as contracts were signed in order to incentivize the sales of these derivatives. But if the CDO’s later went bad, AIG would be on the hook. It paid everyone short-term gains while pushing the bill to the company itself without worrying about footing the bill if shit hit the fan. People once again were being rewarded with short-term profit to take these massive risks.

AIG’s Financial Products division in London issued over $500B worth of CDS’s during the bubble. Many of these CDS’s were for CDO’s backed by subprime mortgages.

The 400 employees of AIGFP made $3.5B between 2000 and 2007. And the head of AIGFP personally made $315M.

1.6 The Crash And Consumption Of Banks To Consolidate Power

By late 2006, Goldman Sachs took it one step further. It didn’t just sell toxic CDO’s, it started actively betting against them at the same time it was telling customers that they were high-quality investments.

Goldman Sachs would purchase CDS’s from AIG and bet against CDO’s it didn’t own, and got paid when those CDO’s failed. Goldman bought at least $22B in CDS’s from AIG, and it was so much that Goldman realized AIG itself might go bankrupt (which later on it would and the Government had to bail them out). So Goldman spent $150M insuring themselves against AIG’s potential collapse. They purchased CDS’s against AIG.

Inside Job (2010) Payment From AIG To Goldman Sachs If CDO’s Failed

Then in 2007, Goldman went even further. They started selling CDO’s specifically designed so that the more money their customers lost, the more Goldman Sachs made.

Many other banks did the same. They created shitty CDO’s, sold them, while simultaneously bet that they would fail with CDS’s. All of these CDO’s were sold to customers as “safe” investments because of the complicit Rating Agencies.

The three rating agencies, Moody’s, S&P and Fitch, made billions of dollars giving high ratings to these risky securities. Moody’s, the largest ratings agency, quadrupled its profits between 2000 and 2007. The more AAA’s they gave out, the higher their compensation and earnings were for the quarter. AAA ratings mushroomed from a handful in 2000 to thousands by 2006. Hundreds of billions of dollars worth of CDO’s were being rated AAA per year. When it all collapsed and the ratings agencies were called before Congress, the rating agencies expressed that it was “their opinion” of the rating in order to weasel their way out of blame. Despite knowing that they were toxic and did not deserve anything above ‘junk’ rating.

Inside Job (2010) Ratings Agencies Profits

Inside Job (2010) – Insane Increase of AAA Rated CDOs

By 2008, home foreclosures were skyrocketing. Home buyers in the subprime loans were defaulting on their payments. Lenders could no longer sell their loans to the investment banks. And as the loans went bad, dozens of lenders failed. The market for CDO’s collapsed, leaving the investment banks holding hundreds of billions of dollars in loans, CDO’s, and real estate they couldn’t sell. Meanwhile, those who purchased up CDS’s were knocking at the door to be paid.

In March 2008, Bear Stearns ran out of cash and was acquired for $2 a share by JPMorgan Chase. The deal was backed by $30B in emergency guarantees by the Fed Reserve. This was just one instance of a bank getting consumed by a larger entity.


AIG, Bear Stearns, Lehman Bros, Fannie Mae, and Freddie Mac, were all AA or above rating days before either collapsing or being bailed out. Meaning they were ‘very secure’, yet they failed.

The Fed Reserve and Big Banks met together in order to discuss bailouts for different banks, and they decided to let Lehman Brothers fail as well.

The Government also then took over AIG, and a day after the takeover, asked the Government for $700B in bailouts for big banks. At this point in time, the person in charge of handling the financial crisis, Henry Paulson, former CEO of Goldman Sachs, worked with the chairman of the Federal Reserve to force AIG to pay Goldman Sachs some of its bailout money at 100-cents on the dollar. Meaning there was no negotiation of lower prices. Conflict of interest much?

The Fed and Henry Paulson also forced AIG to surrender their right to sue Goldman Sachs and other banks for fraud.

This is but a small glimpse of the consolidation of power in big banks from the 2008 crash. They let others fail and scooped up their assets in the crisis.

After the crash of 2008, big banks are more powerful and more consolidated than ever before. And the DTC, ICC, OCC rules are planning on making that worse through the auction and wind-down plans where big banks can once again consume other entities that default.

1.7 The Can-Kick To Continue The Game Of Derivative Market Greed

After the crisis, the financial industry worked harder than ever to fight reform. The financial sector, as of 2010, employed over 3000 lobbyists. More than five for each member of Congress. Between 1998 and 2008 the financial industry spent over $5B on lobbying and campaign contributions. And ever since the crisis, they’re spending even more money.

President Barack Obama campaigned heavily on “Change” and “Reform” of Wall Street, but when in office, nothing substantial was passed. But this goes back for decades – the Government has been in the pocket of the rich for a long time, both parties, both sides, and their influence through lobbying undoubtedly prevented any actual change from occurring.

So their game of playing the derivative market was green-lit to still run rampant following the 2008 crash and mass bailouts from the Government at the expense of taxpayers.

There’s now more consolidation of banks, more consolidation of power, more years of deregulation, and over a decade that they used to continue the game. And just like in 2008, it’s happening again. We’re on the brink of another market crash and potentially a global financial crisis.

2. The New CDO Game, And How COVID Uppercut To The System

2.1 Abuse Of Commercial Mortgage Backed Securities

It’s not just /u/atobitt‘s “House Of Cards” where the US Treasury Market has been abused. It is abuse of many forms of collateral and securities this time around.

It’s the same thing as 2008, but much worse due to even higher amounts of leverage in the system on top of massive amounts of liquidity and potential inflation from stimulus money of the COVID crisis.

Here’s an excerpt from The Bigger Short: Wall Street’s Cooked Books Fueled The Financial Crisis of 2008. It’s Happening Again:

A longtime industry analyst has uncovered creative accounting on a startling scale in the commercial real estate market, in ways similar to the “liar loans” handed out during the mid-2000s for residential real estate, according to financial records examined by the analyst and reviewed by The Intercept. A recent, large-scale academic study backs up his conclusion, finding that banks such as Goldman Sachs and Citigroup have systematically reported erroneously inflated income data that compromises the integrity of the resulting securities.

The analyst’s findings, first reported by ProPublica last year, are the subject of a whistleblower complaint he filed in 2019 with the Securities and Exchange Commission. Moreover, the analyst has identified complex financial machinations by one financial institution, one that both issues loans and manages a real estate trust, that may ultimately help one of its top tenants — the low-cost, low-wage store Dollar General — flourish while devastating smaller retailers.

This time, the issue is not a bubble in the housing market, but apparent widespread inflation of the value of commercial businesses, on which loans are based.

Now it may be happening again — this time not with residential mortgage-backed securities, based on loans for homes, but commercial mortgage-backed securities, or CMBS, based on loans for businesses. And this industrywide scheme is colliding with a collapse of the commercial real estate market amid the pandemic, which has business tenants across the country unable to make their payments.

They’ve been abusing Commercial Mortgage Backed Securities (CMBS) this time around, and potentially have still been abusing other forms of collateral – they might still be hitting MBS as well as treasury bonds per /u/atobitt‘s DD.

John M. Griffin and Alex Priest released a study last November. They sampled almost 40,000 CMBS loans with a market capitalization of $650 billion underwritten from the beginning of 2013 to the end of 2019. Their findings were that large banks had 35% or more loans exhibiting 5% or greater income overstatements.

The below chart shows the overstatements of the biggest problem-making banks. The difference in bars is between samples taken from data between 2013-2015, and then data between 2016-2019. Almost every single bank experienced a positive move up over time of overstatements.

Unintentional overstatement should have occurred at random times. Or if lenders were assiduous and the overstatement was unwitting, one might expect it to diminish over time as the lenders discovered their mistakes. Instead, with almost every lender, the overstatement increased as time went on. – Source


So what does this mean? It means they’ve once again been handing out subprime loans (predatory loans). But this time to businesses through Commercial Mortgage Backed Securities.

Just like Mortgage-Backed Securities from 2000 to 2007, the loaners will go around, hand out loans to businesses, and rake in the profits while having no concern over the potential for the subprime loans failing.

2.2 COVID’s Uppercut Sent Them Scrambling

The system was propped up to fail just like from the 2000-2007 Housing Market Bubble. Now we are in a speculative bubble of the entire market along with the Commercial Market Bubble due to continued mass leverage abuse of the world.

Hell – also in Crypt0currencies that were introduced after the 2008 crash. Did you know that you can get over 100x leverage in crypt0 right now? Imagine how terrifying that crash could be if the other markets fail.

There is SO. MUCH. LEVERAGE. ABUSE. IN. THE. WORLD. All it takes is one fatal blow to bring it all down – and it sure as hell looks like COVID was that uppercut to send everything into a death spiral.

When COVID hit, many people were left without jobs. Others had less pay from the jobs they kept. It rocked the financial world and it was so unexpected. Apartment residents would now become delinquent, causing the apartment complexes to become delinquent. Business owners would be hurting for cash to pay their mortgages as well due to lack of business. The subprime loans all started to become a really big issue.

Delinquency rates of Commercial Mortgages started to skyrocket when the COVID crisis hit. They even surpassed 2008 levels in March of 2020. Remember what happened in 2008 when this occurred? When delinquency rates went up on mortgages in 2008, the CDO’s of those mortgages began to fail. But, this time, they can-kicked it because COVID caught them all off guard.


2.3 Can-Kick Of COVID To Prevent CDO’s From Defaulting Before Being Ready

COVID sent them Scrambling. They could not allow these CDO’s to fail just yet, because they wanted to get their rules in place to help them consume other failing entities at a whim.

Like in 2008, they wanted to not only protect themselves when the nuke went off from these decades of derivatives abuse, they wanted to be able to scoop up the competition easily. That is when the DTC, ICC, and OCC began drafting their auction and wind-down plans.

In order to buy time, they began tossing out emergency relief “protections” for the economy. Such as preventing mortgage defaults which would send their CDO’s tumbling. This protection ends on June 30th, 2021.

And guess what? Many people are still at risk of being delinquentThis article was posted just yesterday. The moment these protection plans lift, we can see a surge in foreclosures as delinquent payments have accumulated over the past year.

When everyone, including small business owners who were attacked with predatory loans, begin to default from these emergency plans expiring, it can lead to the CDO’s themselves collapsing. Which is exactly what triggered the 2008 recession.


2.4 SLR Requirement Exemption – Why The Reverse Repo Is Blowing Up

Another big issue exposed from COVID is when SLR requirements were leaned during the pandemic. They had to pass a quick measure to protect the banks from defaulting in April of 2020.

In a brief announcement, the Fed said it would allow a change to the supplementary leverage ratio to expire March 31. The initial move, announced April 1, 2020, allowed banks to exclude Treasurys and deposits with Fed banks from the calculation of the leverage ratio. – Source

What can you take from the above?

SLR is based on the banks deposits with the Fed itself. It is the treasuries and deposits that the banks have on the Fed’s balance sheet. Banks have an ‘account block’ on the Fed’s balance sheet that holds treasuries and deposits. The SLR pandemic rule allowed them to neglect these treasuries and deposits from their SLR calculation, and it boosted their SLR value, allowing them to survive defaults.

This is a bigbigBIG sign that the banks are way overleveraged by borrowing tons of money just like in 2008.

The SLR is the “Supplementary Leverage Ratio” and they enacted quick to allow it so banks wouldn’t fail under mass leverage for failing to maintain enough equity.

The supplementary leverage ratio is the US implementation of the Basel III Tier 1 leverage ratio, with which banks calculate the amount of common equity capital they must hold relative to their total leverage exposureLarge US banks must hold 3%Top-tier bank holding companies must also hold an extra 2% buffer, for a total of 5%. The SLR, which does not distinguish between assets based on risk, is conceived as a backstop to risk-weighted capital requirements. – Source

Here is an exposure of their SLR from earlier this year. The key is to have high SLR, above 5%, as a top-tier bank:

Bank Supplementary Leverage Ratio (SLR)
JP Morgan Chase 6.8%
Bank Of America 7%
Citigroup 6.7%
Goldman Sachs 6.7%
Morgan Stanley 7.3%
Bank of New York Mellon 8.2%
State Street 8.3%

The SLR protection ended on March 31, 2021. Guess what started to happen just after?

The reverse repo market started to explode. This is VERY unusual behavior because it is not at a quarter-end where quarter-ends have significant strain on the economy. The build-up over time implies that there is significant strain on the market AS OF ENTERING Q2 (April 1st – June 30th).



2.5 DTC, ICC, OCC Wind-Down and Auction Plans; Preparing For More Consolidation Of Power

We’ve seen some interesting rules from the DTC, ICC, and OCC. For the longest time we thought this was all surrounding GameStop. Guess what. They aren’t all about GameStop. Some of them are, but not all of them.

They are furiously passing these rules because the COVID can-kick can’t last forever. The Fed is dealing with the potential of runaway inflation from COVID stimulus and they can’t allow the overleveraged banks to can-kick any more. They need to resolve this as soon as possible. June 30th could be the deadline because of the potential for CDO’s to begin collapsing.

Let’s revisit a few of these rules. The most important ones, in my opinion, because they shed light on the bullshit they’re trying to do once again: Scoop up competitors at the cheap, and protect themselves from defaulting as well.

  • DTC-004: Wind-down and auction plan. – Link
  • ICC-005: Wind-down and auction plan. – Link
  • OCC-004: Auction plan. Allows third parties to join in. – Link
  • OCC-003: Shielding plan. Protects the OCC. – Link

Each of these plans, in brief summary, allows each branch of the market to protect themselves in the event of major defaults of members. They also allow members to scoop up assets of defaulting members.

What was that? Scooping up assets? In other words it is more concentration of powerLess competition.

I would not be surprised if many small and large Banks, Hedge Funds, and Financial Institutions evaporate and get consumed after this crash and we’re left with just a select few massive entities. That is, after all, exactly what they’re planning for.

They could not allow the COVID crash to pop their massive speculative derivative bubble so soon. It came too sudden for them to not all collapse instead of just a few of them. It would have obliterated the entire economy even more so than it will once this bomb is finally let off. They needed more time to prepare so that they could feast when it all comes crashing down.

2.6 Signs Of Collapse Coming – ICC-014 – Incentives For Credit Default Swaps

A comment on this subreddit made me revisit a rule passed by the ICC. It flew under the radar and is another sign for a crash coming.

This is ICC-014. Passed and effective as of June 1st, 2021.

Seems boring at first. Right? That’s why it flew under the radar?

But now that you know the causes of the 2008 market crash and how toxic CDO’s were packaged together, and then CDS’s were used to bet against those CDO’s, check out what ICC-014 is doing as of June 1st.

ICC-014 Proposed Discounts On Credit Default Index Swaptions

They are providing incentive programs to purchase Credit Default Swap Indexes. These are like standard CDS’s, but packaged together like an index. Think of it like an index fund.

This is allowing them to bet against a wide range of CDO’s or other entities at a cheaper rate. Buyers can now bet against a wide range of failures in the market. They are allowing upwards of 25% discounts.

There’s many more indicators that are pointing to a market collapse. But I will leave that to you to investigate more. Here is quite a scary compilation of charts relating the current market trends to the crashes of Black Monday, The Internet Bubble, The 2008 Housing Market Crash, and Today.

Summary of Recent Warnings Re Intermediate Trend In Equities

3. The Failure Of The 1% – How GameStop Can Deal A Fatal Blow To Wealth Inequality

3.1 GameStop Was Never Going To Cause The Market Crash

GameStop was meant to die off. The rich bet against it many folds over, and it was on the brink of Bankruptcy before many conditions led it to where it is today.

It was never going to cause the market crash. And it never will cause the crash. The short squeeze is a result of high abuse of the derivatives market over the past decade, where Wall Street’s abuse of this market has primed the economy for another market crash on their own.

We can see this because when COVID hit, GameStop was a non-issue in the market. The CDO market around CMBS was about to collapse on its own because of the instantaneous recession which left mortgage owners delinquent.

If anyone, be it the media, the US Government, or others, try to blame this crash on GameStop or anything other than the Banks and Wall Streetthey are WRONG.

3.2 The Rich Are Trying To Kill GameStop. They Are Terrified

In January, the SI% was reported to be 140%. But it is very likely that it was underreported at that time. Maybe it was 200% back then. 400%. 800%. Who knows. From the above you can hopefully gather that Wall Street takes on massive risks all the time, they do not care as long as it churns them short-term profits. There is loads of evidence pointing to shorts never covering by hiding their SI% through malicious options practices, and manipulating the price every step of the way.

The conditions that led GameStop to where it is today is a miracle in itself, and the support of retail traders has led to expose a fatal mistake of the rich. Because a short position has infinite loss potential. There is SO much money in the world, especially in the derivatives market.

This should scream to you that any price target that you think is low, could very well be extremely low in YOUR perspective. You might just be accustomed to thinking “$X price floor is too much money. There’s no way it can hit that”. I used to think that too, until I dove deep into this bullshit.

The market crashing no longer was a matter of simply scooping up defaulters, their assets, and consolidating power. The rich now have to worry about the potential of infinite losses from GameStop and possibly other meme stocks with high price floor targets some retail have.

It’s not a fight against Melvin / Citadel / Point72. It’s a battle against the entire financial world. There is even speculation from multiple people that the Fed is even being complicit right now in helping suppress GameStop. Their whole game is at risk here.

Don’t you think they’d fight tooth-and-nail to suppress this and try to get everyone to sell?

That they’d pull every trick in the book to make you think that they’ve covered?

The amount of money they could lose is unfathomable.

With the collapsing SI%, it is mathematically impossible for the squeeze to have happened – its mathematically impossible for them to have covered. /u/atobitt also discusses this in House of Cards Part 2.


And in regards to all the other rules that look good for the MOASS – I see them in a negative light.

They are passing NSCC-002/801, DTC-005, and others, in order to prevent a GameStop situation from ever occurring again.

They realized how much power retail could have from piling into a short squeeze play. These new rules will snap new emerging short squeezes instantly if the conditions of a short squeeze ever occur again. There will never be a GameStop situation after this.

It’s their game after all. They’ve been abusing the derivative market game for decades and GameStop is a huge threat. It was supposed to be, “crash the economy and run with the money”. Not “crash the economy and pay up to retail”. But GameStop was a flaw exposed by their greed, the COVID crash, and the quick turn-around of the company to take it away from the brink of bankruptcy.

The rich are now at risk of losing that money and insane amounts of cash that they’ve accumulated over the years from causing the Internet Bubble Crash of 2000, and the Housing Market Crash of 2008.

So, yeah, I’m going to be fucking greedy.