It is believed that the first shorting of a stock occurred in 1609, when Flemish merchant Isaac Le Maire attempted to short Dutch East India Company’s shares. A year later, the company convinced the Dutch government to outlaw short-selling, saying the likes of Le Maire were harming innocent stockholders, including “widows and orphans.” The Vereenigde Oostindische Compagnie (VOC), better known as the Dutch East India company was set up in 1602, head-quartered in the Oost-Indisch Huis (East-India House) in downtown Amsterdam, which still stands today. It was founded as a private merchant company that was granted a two-decade long monopoly by the government for spice trading mainly in the Dutch East-Indies, known today as the Republic of Indonesia. For many whom slept through their Economics and History lectures, VOC was far more wealthy than Apple, Microsoft, Amazon, ExxonMobil, Berkshire Hathaway, Tencent, and Wells Fargo put together!
And while many will point to the Dutch Tulip Mania as the first financial bubble as the downfall of VOC, I submit that one ought to examine it closer and instead look at other definable bubbles such as the South Sea Bubble in 1700s England, the 19th-century railway bubble, the dot-com bubble and the US Housing Crisis in 2008.
One is hard pressed to back up the Tulip Mania as a real financial crisis. In fact, a great book on the subject entitled Tulip Mania, penned by Deborah Moggach, was unable to find a single bankruptcy filed due to the market collapse. In fact, while the trade of tulips was frenzied, it was more Dutch Calvinists — Christians — whom spun the stories out of thin air in a Pride Before The Fall story.
Economies change no matter how hard the Old Guard fights to keep them in play. Social interactions and cultural values, too, change as a population expands, contracts, and eventually becomes educated. With a good portion of the US in an on again off again lockdown during COVID, a fascination with the financial machinations among the labor class has presented itself with a deeper dive into the casino driven stock exchange. The influx of capital in the form of ongoing unemployment and stimulus checks — no matter how meager they are compared to the tens of trillions doled out to the hedge funds — is allowing the labor class to acquire expertise in areas they were previously prevented from participating in. And for all those whom lament how the Redditors are pooling their resources together to collectively launch asymmetrical and protracted campaigns against the Old Guard of financial hegemony, I submit is it really any different than how fellow hedge funds are bailing out each other in the #GameStop fiasco?
Hedge fund giants Steve Cohen and Ken Griffin are joining forces to bail out a fellow trader whose positions in runaway stocks like GameStop have been getting hammered. Griffin’s Citadel and Cohen’s Point72 Asset Management are investing a combined $2.75 billion into Melvin Capital Management, which has seen its recent bets on stock declines thwarted by a small army of investors with get-rich-quick dreams.
I mean why only shut down the buying of GameStop? They didn’t shut down the selling which only benefited the predators of Wall Street whom were taking horrendous losses! Status quo is what all systems seek. Moreover, though, how did 136% of GameStop become shorted? Ah, therein lies the rub as the bard would say. Quid quo pro is how they end up. Hype and hyperbole have always been the constant suitors of Wall Street. Jim Cramer, the former comedic clown with bells and whistles, now trots out stocks on behalf of his corporate masters. Even Citron, the giant whom is bowing out, had this to say about their own complacency. Andy Left, founder of Citron, a firm whom used to deliver research on short positions, fell on his sword, but not before condemning Redditors for beating him and his cronies at their own game. [Left] previously said GameStop will fall back to $20 a share “fast” and called out attacks from the “angry mob” that owns the stock.
“20 years ago I started Citron with the intention of protecting the individual against Wall Street, against the frauds and the stock promotions were just all over,” Left said in a YouTube video on Friday. “Where we started Citron was supposed to be against the establishment, we’ve actually become the establishment.”
The same may be said of the Real Estate Sector. The 2008 Financial Crisis was completely engineered by hedge funds and financial institutions. And banking upon the short term memory of the US taxpayer, we are back there again. CDOs have merely become CLOs. Tranches for new home construction abound with virtually nothing other than blind faith to back their occupancy. And the firms crawling out of the woodwork to exploit this mayhem are a dime a dozen. Each have their own brand of sycophants blue skying investment up front and when it comes to pay the piper, they all slither back under the rocks from whence they came.
And it is going to get far worse as we careen through 2021. On the one hand, you have the very same players whom lost their shirts in the #GameStop war wildly speculating in housing. And remember, while on the one hand, Jay Powell, Fed Chairman ordered that trillions of dollars be pumped into BlackRock — $12 Trillion in bond buybacks at last count — with virtually zero transparency, BlackRock’s CEO is none other than Larry Fink. And honestly, if you look at the big names out there today, they are all the same ones whom created the 2008 Zombie Crisis. And make no mistake that Powell has in upwards of $11.6 Million tied up in BlackRock.
It’s the same old tune, over and over again. The same pundits roll out their mantras that Trickle Down Economics are good for all even though 50 year’s worth of studies have now disproven it. It’s the story that the labor class has no idea how to work with money even though the Redditors beat Wall Street at its own game. And finally, it is the same old ideology that Inspectors and Field Service Technicians have no idea how to properly perform their duties which allows for a ten times increase in the amount of paperwork now levied upon their services — paperwork which clearly makes them misclassified employees.