I remember that when Obama was still in office in 2016, the official account of the US Embassy in China posted such a post.
He said:
One of America’s greatest strengths is our free market. A prosperous private sector is the lifeblood of our economy...The most important component of a healthy and free market is competition...
This passage is a speech made by Obama at the time.
For many years, the United States has been promoting their values around the world.
Especially during the eight years of Obama’s tenure, it happened to be a period when global social media was booming. Twitter, Facebook, these new types of social media were promoted all over the world. The United States also uses Twitter and Facebook as tools to spare no effort to promote American values .
The main content of American values can probably be summarized into two: "democracy" and "freedom" .
Among them, "democracy" is mainly embodied in the general election. Let's not talk about this much.
"Freedom" includes all aspects, mainly freedom of speech and freedom of the market .
Very interesting.
Four years later, let’s review these two elements of American “freedom” values and find that they both went bankrupt .
The key to bankrupt American freedom of speech happened to come from Obama’s successor, Trump.
As everyone knows, after the US Congress was attacked by a large number of Trump supporters, all US social media including Twitter and Facebook have permanently banned Trump, which made Trump no longer able to speak out. .
We have discussed this matter before.
The incumbent president of a country is so deprived of all the possibility of speaking to the outside world. So, what does freedom of speech in the United States mean? While laughing and cursing, American values also suffered the first bankruptcy.
Not only that, but on the 20th day after Trump was banned, the "free market" that the United States had always advertised also declared bankruptcy.
This is the recent famous "US stock market game station retail investors against Wall Street institutions incident" , to give us a vivid statement.
The cause and effect of the incident itself is a bit complicated, especially for those friends who do not understand the mechanism of short-selling stocks, it is a bit difficult to understand this.
Let's try to make popular science as simple as possible.
What is the short selling mechanism of stocks?
If you have seen the movie "Big Short", you must be able to understand this problem.
This film tells the story of the financial turmoil triggered by the US subprime mortgage crisis in 2008. Several insightful investment ghosts on Wall Street saw through the bubbles and false prosperity of the US real estate market in advance, and thus benefited greatly from shorting the subprime mortgages and became a minority. An investment man who made a lot of profits in the financial disaster.
It is difficult to summarize what themes are in this movie, or what core it wants to express. This movie does not even have an absolute protagonist, because there are 4 groups of people in the movie.
Including Michael (Christian Bell), the hedge fund manager who first saw the bubble.
And the hedge fund manager Mark.
Well, we don't need to know who the other groups of characters are. In short, because of various reasons, they have all discovered opportunities to short subprime loans, but there is no connection between them, and the money they can make in the end is also very different.
Simply put, you can understand "Big Short" as a popular science film full of humor and pungent irony. Yes, this movie even wants to give you some science about what is going on in the American financial system, the American stock market, the financial market, and all the assets together can be securitized and used for trading.
For most ordinary viewers, the greatest value of "Big Short" is to demonstrate the operating principles of short-selling institutions.
To understand this short trade, you need to understand 2 words, MBS and CDO.
MBS is the abbreviation of Mortgage Backed Securities, which translates as Mortgage Backed Securities.
This thing is very complicated. To put it simply, the U.S. banking industry has obtained mortgage loans from all buyers of houses. It will take 20 and 30 years for them to get the income from these loans. They want to make money early, so they securitize these mortgage loans. , Packaged into a financial product, called MBS, and then sold to various other financial institutions.
But these mortgages have different ratings. The highest level is AAA. The people who buy these houses are big bosses, and the probability of default is very small. From the next one to the BBB level, it is possible that those who are out of work also borrow to buy houses, and their mortgage default probability is greater.
But the banking industry is very smart, packing all mortgage contracts from AAA to BBB to minimize risk.
As long as American society develops normally and the real estate market will not collapse, they will be able to make steady profits.
Let's talk about CDO next.
CDO is the abbreviation of collateralized debt obligation, which translates as collateralized debt obligation.
You don't need to understand this too much, anyway, CDO is to re-guarantee the previous MBS, which is equivalent to an insurance. Then capitalize and securitize again.
The only difference is that MBS cannot be purchased directly on the stock market, while CDO can. The four groups of people in "Big Short" are short CDOs through bulk purchases.
In the end, it turns out that these four groups are betting on the future right. The U.S. real estate market did collapse in 2008. They made huge profits by shorting the real estate market.
Therefore, the key to shorting is to bet on the future. The shorts are short because they foresee a certain financial product will fall sharply in the future.
Of course, shorting the US real estate market is a bit complicated, mainly because the design of asset securitization is too complicated.
Let's take another simpler example, such as Blackwater shorting Ruixing Coffee. At that time, the Blackwater Company found through investigation that Ruixing Coffee’s business data was falsified, so its stock price was falsely high, and it will definitely fall in the future.
After understanding this point, the next short position is the following steps:
The first step is to find a broker to borrow a large amount of Ruixing Coffee stock, of course, you need to pay the broker’s interest in advance, and then the institution sells it at a high price to get a lot of cash;
The second step is to publish a short-selling report. Note that the content of this short-selling report is absolutely true. This report reflects the strength of short-selling institutions, just like the first few talented fund managers who discovered the real estate bubble in "Big Short";
The third step is to wait for Ruixing Coffee's stock to plummet, buy it at a low price at a suitable time, and return it to the brokerage.
Therefore, the short-selling institutions made the difference in this way.
The development of the matter is indeed as expected by the Blackwater Company. After the report was released, the stock price of Ruixing Coffee went from the highest point of $50 to only about $1 later, and the difference was more than 40 times.
So, these short-selling institutions are indeed powerful and insightful.
Going back to the game station stock incident , specifically, the game station company, which is a large-scale game product chain store in the United States, which specializes in selling all kinds of game consoles and game CDs. This is an offline physical store with many stores in the United States. The stock code is GME, and many people must have heard this term these days.
In recent years, due to the fact that game sales have basically been changed to online, coupled with the haze in 2020, GME's performance has been miserable. Of course, the stock of such a company has fallen sharply, once it fell to only $3, and it is in danger of delisting.
But you know, there are a lot of junk stocks, because of capital speculation, the stock price will rise. So GME's stock price once rose to $40. What is the reason behind this? We don't need to know. Anyway, it's all institutions.
At this time, Citron, a well-known short-selling institution in the United States, was a very famous hedge fund on Wall Street. A well-known short-selling institution that is almost as famous as Heishui-released a report on the short-selling game station. It believes that the latter's stock price is falsely high and its performance cannot support this stock price, and it will definitely fall sharply later.
According to normal development, after Citron releases a short GME report, the stock price will fall sharply, and short-selling institutions will make a lot of money.
But this time, American retail investors are united. They posted on the website, convened a large number of allied forces, established an agreement on offensive and defensive, and called on everyone to buy GME stocks frantically to raise the stock price.
Because the key to short-term profit is to buy back the stock and return it to the broker at the appointed time. Therefore, retail investors have driven GME's stock price crazy to a high of $400, so that the shorts must also eat at this price, which is called short-selling.
In the end, a large number of short-selling institutions, including Citron, were forced to buy a large amount of stocks at a high price. The funds in their hands were all used up. Eventually, they ran out of ammunition and food, and even reached the brink of bankruptcy.
Of course, some people say that, in fact, the main force of short-selling institutions such as Citron is still institutions, not retail investors. Of course it doesn't matter what the truth is.
The important thing is that Wall Street made a move and directly announced that GME stocks could only be liquidated and no further purchases were allowed.
Why does Wall Street do this? Because they declared that retail investors were manipulating the market and was "illegal."
In the end, GME's stock price fell sharply. American retail investors suffered a bloodbath, and short-selling institutions won the final victory.
For the whole story, someone drew 2 cartoons on the Internet to explain it. They said that the stock market is a big casino, and the banker is an institution. Most of the time, retail investors who come to bet are destined to not be able to play with the banker, because retail investors can’t unite. We all started fighting on our own, and in the end the organization would definitely cut the leeks.
But this time, the retail investors finally united and worked together to fight against the dealer.
As a result, the institutional bookmakers directly approached the casino owner, closed the casino, or reaped retail investors.
This is unreasonable, and it doesn't follow the rules of the game.
This also thoroughly proved that the "free market" in the United States has gone bankrupt. What is a free market? Wall Street personally changed the rules of the game, so no matter how you play, you can't play it anyway?
From Trump’s ban on Twitter to Wall Street’s ban on retail accounts, facts have repeatedly proved that the "free" values promoted by the United States are just a slogan. If it really touches Wall Street Capital, it will let you see that there is only a hard fist. Is the ultimate truth.
Text/Pippi Film Editor: Mu Nuanyue
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