1 00:00:01,793 --> 00:00:03,836 Jadie, are we good? Okay, good. 2 00:00:03,921 --> 00:00:05,339 I say we bring it. 3 00:00:06,131 --> 00:00:11,762 What was it like when your savings account gave you 5% interest 4 00:00:11,845 --> 00:00:16,475 as opposed to what I get which is a $15 fee for every time I bounce a check. 5 00:00:16,558 --> 00:00:17,684 Yes. 6 00:00:17,768 --> 00:00:22,064 It costs you money now to save your money. 7 00:00:22,147 --> 00:00:23,982 You used to be able to save your money and make money. 8 00:00:24,066 --> 00:00:25,400 I didn't even know that was an option. 9 00:00:25,484 --> 00:00:26,860 Completely impossible. 10 00:00:26,944 --> 00:00:30,572 The reason that your savings account interest rate is so low 11 00:00:30,656 --> 00:00:33,825 is because they're literally trying to incentivize you to invest... 12 00:00:33,909 --> 00:00:36,620 -Yes. -…by taking away the incentive to save. 13 00:00:36,703 --> 00:00:37,704 It's like zero interest. 14 00:00:37,788 --> 00:00:42,167 There's no other option in this world than stocks. 15 00:00:42,251 --> 00:00:46,505 My bank's savings account interest rate looks like a blood-alcoholic level. 16 00:00:49,424 --> 00:00:51,760 But it's not going to jail 'cause it's not that high. 17 00:00:51,844 --> 00:00:52,845 Yeah. 18 00:00:52,928 --> 00:00:55,806 So when you go into your bank, do they say, "Blow into this." 19 00:00:55,889 --> 00:00:58,517 And whatever registers, that's what they give you. 20 00:01:40,976 --> 00:01:42,686 Hello! 21 00:01:42,769 --> 00:01:45,063 Why, I-- Hello! 22 00:01:45,606 --> 00:01:47,733 No! I'm delighted! 23 00:01:47,816 --> 00:01:49,234 Good evening! 24 00:01:49,318 --> 00:01:51,945 Good morning! I don't know when you're watching this. 25 00:01:52,029 --> 00:01:53,197 My name is Jon Stewart. 26 00:01:53,280 --> 00:01:57,451 Welcome to an episode of what the kids are calling "Not Ted Lasso." 27 00:01:58,619 --> 00:01:59,870 It's Apple. 28 00:01:59,953 --> 00:02:04,458 Tonight we're gonna be talking about the stock market, as-- 29 00:02:04,958 --> 00:02:05,959 Really? 30 00:02:07,002 --> 00:02:08,753 A "whoo" for the stock market. 31 00:02:09,588 --> 00:02:12,674 Millions of Americans talk about the stock market every day, 32 00:02:12,758 --> 00:02:16,428 from the ballrooms of the richest Connecticut country clubs 33 00:02:16,512 --> 00:02:20,057 to the ballrooms of some of the poorer Connecticut country clubs. 34 00:02:21,558 --> 00:02:25,979 No matter what's happening in the world, all eyes are always on the market. 35 00:02:26,063 --> 00:02:29,358 We stock-watch while waiting to find out who's going to be president. 36 00:02:29,441 --> 00:02:32,027 We stock-watch while globally warming. 37 00:02:32,110 --> 00:02:35,280 And neither Santa nor a global pandemic 38 00:02:35,364 --> 00:02:39,284 can distract us from our minute-to-minute check-in. 39 00:02:39,368 --> 00:02:43,747 All happening just below Larry Kudlow's nipples. Oh, look at him. 40 00:02:44,915 --> 00:02:48,585 But our national obsession came from quite humble roots. 41 00:02:49,169 --> 00:02:51,797 The stock market began with a very simple premise. 42 00:02:51,880 --> 00:02:56,885 Let's have people invest their money in companies that they believe in. 43 00:02:56,969 --> 00:03:00,639 If the company does well, the people will do well. 44 00:03:01,431 --> 00:03:04,268 But you couldn't just drive to the company, 45 00:03:04,351 --> 00:03:05,602 give them your money. 46 00:03:06,186 --> 00:03:07,688 It'd be super weird. 47 00:03:07,771 --> 00:03:11,567 You needed a place, a building made of, let's say, marble. 48 00:03:12,943 --> 00:03:15,320 But you couldn't just go into that building made of marble 49 00:03:15,404 --> 00:03:16,655 and buy your stock. 50 00:03:17,489 --> 00:03:19,116 That'd be too much like a store. 51 00:03:20,367 --> 00:03:24,246 You'd need a broker, someone… better than you. 52 00:03:25,956 --> 00:03:28,917 So from the beginning, it was elitist. 53 00:03:29,626 --> 00:03:33,130 To buy a stock, you had to pay a heavy commission 54 00:03:33,213 --> 00:03:38,802 to whichever college lacrosse benchwarmer turned broker you could find. 55 00:03:41,180 --> 00:03:43,849 And the only folks more elite than the brokers 56 00:03:43,932 --> 00:03:47,311 were those who vouched for the brokers on television. 57 00:03:47,394 --> 00:03:49,771 My name is J. Paul Getty. 58 00:03:50,397 --> 00:03:54,735 The brokerage house of EF Hutton & Company is a firm with which I have had 59 00:03:54,818 --> 00:03:58,363 close and pleasant relationships for four decades. 60 00:03:58,906 --> 00:04:02,117 They have been helpful, and their service has been good. 61 00:04:13,587 --> 00:04:15,422 It's too late for me now… 62 00:04:18,007 --> 00:04:21,261 for I am more couch than man. 63 00:04:23,055 --> 00:04:26,099 More pillow than human. 64 00:04:28,060 --> 00:04:32,940 Given that the investor class was made up of literal Monopoly men, 65 00:04:33,023 --> 00:04:36,026 the stock market was wildly unequal. 66 00:04:36,109 --> 00:04:39,821 When the Federal Reserve started analyzing stock ownership in 1989, 67 00:04:39,905 --> 00:04:43,116 it found that the top 10% of households owned 68 00:04:43,200 --> 00:04:47,412 78% of the stock market. 69 00:04:48,580 --> 00:04:50,749 But the revolution was coming. 70 00:04:50,832 --> 00:04:51,834 Hark! 71 00:04:52,626 --> 00:04:53,627 Sorry. 72 00:04:55,712 --> 00:04:57,506 That "hark" even scared me. 73 00:04:58,090 --> 00:04:59,216 Hark! 74 00:04:59,299 --> 00:05:01,844 Its clarion call is upon us! 75 00:05:02,469 --> 00:05:04,096 The e-brokers have arrived! 76 00:05:04,179 --> 00:05:05,180 Eight dollars, my man. 77 00:05:05,264 --> 00:05:07,307 Eight? My broker charges me $200 for this trade. 78 00:05:07,391 --> 00:05:09,434 You're riding the wave of the future, my man. 79 00:05:10,227 --> 00:05:12,437 Ameritrade. Believe in yourself. 80 00:05:12,521 --> 00:05:15,524 But is a meth-head and his father in the market… 81 00:05:17,234 --> 00:05:19,319 still too high a bar? 82 00:05:19,403 --> 00:05:22,281 You know, I conceal this bad boy underneath my blanket 83 00:05:22,364 --> 00:05:23,532 just so I can get on E-Trade. 84 00:05:23,615 --> 00:05:24,741 Click. 85 00:05:24,825 --> 00:05:26,034 I just bought stock. 86 00:05:26,118 --> 00:05:28,412 If I can do it, you can do-- 87 00:05:32,833 --> 00:05:34,960 A fucking baby. 88 00:05:35,043 --> 00:05:39,006 If you want to get in the market, you just need to be a fucking baby with $6. 89 00:05:39,089 --> 00:05:41,049 A $6 fucking baby. 90 00:05:42,593 --> 00:05:45,554 By the way, someone needs to do a "Where are they now?" on that baby. 91 00:05:46,638 --> 00:05:48,515 Pretty sure he's hosting a podcast 92 00:05:48,599 --> 00:05:50,976 where he's just asking questions about ivermectin. 93 00:05:51,059 --> 00:05:52,769 "I'm just asking questions!" 94 00:05:53,770 --> 00:05:56,565 And calling women "females." "They're females!" 95 00:05:59,151 --> 00:06:03,238 Discount e-brokers democratized the stock market. 96 00:06:03,739 --> 00:06:05,699 And inequality went... 97 00:06:06,408 --> 00:06:08,619 up? Fuck, are you serious? 98 00:06:10,162 --> 00:06:13,957 They democratized the stock market, and inequality went up! 99 00:06:14,041 --> 00:06:15,459 Are you kidding me? 100 00:06:16,376 --> 00:06:18,837 Turns out, to really democratize this market, 101 00:06:18,921 --> 00:06:23,675 we were gonna need something that completely breaks down all barriers. 102 00:06:23,759 --> 00:06:27,596 Someone had to take away fees completely. 103 00:06:27,679 --> 00:06:28,889 We'd need a hero. 104 00:06:29,515 --> 00:06:31,183 Or not a hero. 105 00:06:31,266 --> 00:06:34,394 More like an app. We'd need some kind of an app. 106 00:06:34,478 --> 00:06:35,646 There we go. 107 00:06:36,813 --> 00:06:38,148 Robin Hood. 108 00:06:38,232 --> 00:06:40,400 The OG sexy socialist. 109 00:06:40,484 --> 00:06:44,530 The bow-and-arrow Bernie Sanders, leveling the playing field, 110 00:06:44,613 --> 00:06:48,033 stealing from the rich and giving-- 111 00:06:48,116 --> 00:06:49,576 Who is he giving it to? 112 00:06:49,660 --> 00:06:51,828 Robinhood has made it extremely easy for me 113 00:06:51,912 --> 00:06:54,873 to take the income I make from my commissioned paintings 114 00:06:54,957 --> 00:06:56,542 and invest it into stocks. 115 00:06:56,625 --> 00:06:59,545 Robinhood showed me that my money can work for me. 116 00:06:59,628 --> 00:07:02,047 My name's Azim, and I'm a Robinhood user. 117 00:07:02,130 --> 00:07:03,966 -I'm an investor. -I'm an investor. 118 00:07:04,049 --> 00:07:05,384 We are Robinhooders. 119 00:07:07,594 --> 00:07:09,930 Cozy-sweatered lesbians? 120 00:07:16,144 --> 00:07:19,106 In the stock market? Well, I never! 121 00:07:21,149 --> 00:07:23,944 By the way, in the '90s, they were referred to as "just friends." 122 00:07:24,653 --> 00:07:30,033 Pray tell, how has Robinhood managed to breach the palace walls 123 00:07:30,117 --> 00:07:35,289 and throw down the drawbridge for these sweatered Lilith Fair maidens? 124 00:07:35,372 --> 00:07:36,832 Robinhood CEO, tell us. 125 00:07:36,915 --> 00:07:39,751 I think the combination of zero commissions, 126 00:07:39,835 --> 00:07:42,337 no account minimums, fractional shares 127 00:07:42,421 --> 00:07:46,008 helped level the playing field for people to participate in the markets. 128 00:07:46,717 --> 00:07:49,887 Thank you, haunted Victorian boy. 129 00:07:57,144 --> 00:07:58,770 Zero commissions! 130 00:07:58,854 --> 00:08:02,649 And the markets were flooded with new customers. 131 00:08:02,733 --> 00:08:06,486 And not only that, on top of this no-commission model, 132 00:08:06,570 --> 00:08:09,489 the Federal Reserve's new low interest rates 133 00:08:09,573 --> 00:08:12,993 made savings accounts pretty much worthless. 134 00:08:13,076 --> 00:08:18,040 So even more stock buyers and money flowed into the stock market. 135 00:08:18,123 --> 00:08:21,627 In 2021, more money flowed into the stock market 136 00:08:21,710 --> 00:08:26,048 than in the previous 20 years combined. 137 00:08:26,131 --> 00:08:29,176 It was a golden age of wealth generation. 138 00:08:29,259 --> 00:08:35,474 The unwashed masses finally have their moment to get into the stock market, 139 00:08:35,557 --> 00:08:38,684 and it went up? Inequality went up? 140 00:08:38,769 --> 00:08:41,188 Are you fucking kidding me? 141 00:08:43,106 --> 00:08:44,566 And thus… 142 00:08:46,360 --> 00:08:48,695 "The Problem With the Stock Market." 143 00:08:49,279 --> 00:08:54,576 The grand pooh-bahs of the stock market keep creating easier access 144 00:08:54,660 --> 00:08:56,662 to this wealth machine 145 00:08:56,745 --> 00:09:02,543 yet somehow always still manage to be the greatest beneficiaries of that wealth. 146 00:09:03,252 --> 00:09:07,381 Perhaps if we examine exactly what happens when you buy a stock through Robinhood, 147 00:09:07,464 --> 00:09:10,342 we can understand the system a bit better. 148 00:09:10,425 --> 00:09:15,305 I'd pick up my phone, and I'd hit the old Robinhood "buy" button, and boom. 149 00:09:15,389 --> 00:09:18,600 My order doesn't go to the stock exchange 150 00:09:18,684 --> 00:09:21,812 because of something called "payment for order flow." 151 00:09:21,895 --> 00:09:26,024 My order somehow goes to this other company no one's heard of called Citadel. 152 00:09:26,108 --> 00:09:28,610 They're a middleman known as a market maker. 153 00:09:28,694 --> 00:09:30,821 They match buyers to sellers. 154 00:09:30,904 --> 00:09:36,827 And they have paid Robinhood hundreds of millions of dollars 155 00:09:36,910 --> 00:09:40,247 for the privilege of processing the order. 156 00:09:40,330 --> 00:09:42,791 And then Citadel or any market maker 157 00:09:42,875 --> 00:09:46,461 still doesn't have to take that order to the stock exchange. 158 00:09:46,545 --> 00:09:51,091 They just match it to other orders they've also already paid for. 159 00:09:51,675 --> 00:09:55,971 Or they slip the order into what are called dark pools. 160 00:09:56,054 --> 00:09:57,890 And dark pools are private exchanges 161 00:09:57,973 --> 00:10:01,435 where the big boys trade stocks in the dark. 162 00:10:01,518 --> 00:10:07,524 Yes, the actual name of that is dark pools. 163 00:10:08,358 --> 00:10:10,485 They named it dark pools. 164 00:10:11,778 --> 00:10:16,200 How fucking invincible do you have to feel 165 00:10:16,283 --> 00:10:21,580 to name the place where you conduct your least transparent business dealings 166 00:10:21,663 --> 00:10:23,123 "dark pools"? 167 00:10:24,833 --> 00:10:26,293 "Thank you for your order. 168 00:10:26,376 --> 00:10:30,464 I'll just take it down to my chamber of schemes." 169 00:10:34,426 --> 00:10:38,222 So now we know why Robinhood is free to use. 170 00:10:38,305 --> 00:10:41,099 They're being paid hundreds of millions of dollars 171 00:10:41,183 --> 00:10:45,103 by middlemen for the privilege of processing stock orders. 172 00:10:45,187 --> 00:10:48,190 So we know who their real boss is. 173 00:10:48,273 --> 00:10:51,401 But why the fuck would these guys pay hundreds of millions of dollars 174 00:10:51,485 --> 00:10:53,320 for that privilege? 175 00:10:53,403 --> 00:10:55,906 Let's ask Citadel CEO Ken Griffin. 176 00:10:55,989 --> 00:10:58,492 Payment for order flow is a cost to me. 177 00:11:00,619 --> 00:11:04,206 Well, yes. It costs you hundreds of millions of dollars. 178 00:11:05,040 --> 00:11:06,458 Why would you do it? 179 00:11:06,542 --> 00:11:11,630 We want to hold on to this democratization of finance that's taken place. 180 00:11:11,713 --> 00:11:15,175 If payment for order flow helps to maintain that as a reality, 181 00:11:15,259 --> 00:11:16,969 I think that's good for everybody. 182 00:11:17,803 --> 00:11:19,555 You're a really good person. 183 00:11:21,932 --> 00:11:23,725 See, Ken Griffin, he's just a nice guy. 184 00:11:23,809 --> 00:11:28,438 He's going broke to create this democratization of markets. 185 00:11:28,522 --> 00:11:29,815 Obviously not that broke. 186 00:11:29,898 --> 00:11:32,943 He does live in literally the most expensive house 187 00:11:33,026 --> 00:11:36,113 in the history of the United States of America. 188 00:11:36,196 --> 00:11:39,700 And also spends time at his other house here, 189 00:11:39,783 --> 00:11:41,952 and this other one here, 190 00:11:42,035 --> 00:11:44,288 and then there's this one here, 191 00:11:44,371 --> 00:11:47,165 and, of course, any of these here. 192 00:11:47,249 --> 00:11:48,959 You know what? Fuck this guy. 193 00:11:50,127 --> 00:11:51,837 So what's really going on here? 194 00:11:51,920 --> 00:11:55,549 How do these particular middlemen even make money? 195 00:11:55,632 --> 00:11:59,970 Say, Jason, you want to buy a stock for $10, 196 00:12:00,053 --> 00:12:03,140 and, Caroline, you're selling it for $9.99. 197 00:12:03,223 --> 00:12:07,352 Well, they'll internalize that trade and they'll make a cent per share. 198 00:12:07,436 --> 00:12:08,687 It doesn't sound like a lot, 199 00:12:08,770 --> 00:12:10,564 but if you do it enough over and over again, 200 00:12:10,647 --> 00:12:11,899 those pennies add up. 201 00:12:13,317 --> 00:12:17,279 So for every trade, they're skimming pennies off the top. 202 00:12:17,362 --> 00:12:19,615 How many fucking pennies puts you in all those houses? 203 00:12:19,698 --> 00:12:20,699 Let's break this down. 204 00:12:20,782 --> 00:12:25,078 First of all, the hundreds of millions that Citadel kicks back to Robinhood 205 00:12:25,162 --> 00:12:28,457 should be going to the retail investors, or at least a cut of it. 206 00:12:28,540 --> 00:12:31,293 And the pennies they're scooping on price differential 207 00:12:31,376 --> 00:12:33,420 should also be going to the retail investors. 208 00:12:33,504 --> 00:12:37,132 I mean, who came up with payment for order flow? Bernie Madoff? 209 00:12:37,758 --> 00:12:39,384 Yes, it was actually Bernie Madoff. 210 00:12:40,802 --> 00:12:44,264 It was literally Bernie Madoff who came up with payment for order flow. 211 00:12:44,348 --> 00:12:46,058 It was Bernie Madoff. 212 00:12:46,767 --> 00:12:48,977 Bernie Madoff came up with payment for-- 213 00:12:49,061 --> 00:12:51,104 Ber-- Let me-- 214 00:12:51,188 --> 00:12:52,981 Do you know the name Bernie Madoff? 215 00:12:54,358 --> 00:12:56,527 Bernie Madoff came up with payment for order flow. 216 00:12:56,610 --> 00:12:59,238 That's the business model that all these guys are working on. 217 00:12:59,321 --> 00:13:02,157 Bernie Madoff. Bernie Madoff! 218 00:13:05,285 --> 00:13:07,371 This should be illegal, 219 00:13:07,454 --> 00:13:10,999 which, by the way, it is in many other countries. 220 00:13:11,083 --> 00:13:15,003 Somebody should really tell the Securities and Exchange Commission about this. 221 00:13:15,087 --> 00:13:16,797 And it turns out somebody did. 222 00:13:16,880 --> 00:13:21,260 In 2004, a whistleblower wrote a letter to the SEC, 223 00:13:21,343 --> 00:13:25,889 saying payment for order flow lacks transparency, 224 00:13:25,973 --> 00:13:27,975 is anti-competitive, 225 00:13:28,058 --> 00:13:31,478 and creates an obvious and substantial conflict of interest 226 00:13:31,562 --> 00:13:36,066 between brokers and their customers, and should be banned altogether. 227 00:13:38,110 --> 00:13:41,905 Pray tell, unmask the hero of our tale, 228 00:13:42,698 --> 00:13:45,951 the brave whistleblower from the year 2004. 229 00:13:46,034 --> 00:13:47,077 It is… 230 00:13:49,037 --> 00:13:51,248 Citadel Investment Group! 231 00:13:52,583 --> 00:13:54,251 It appears that these companies 232 00:13:54,334 --> 00:13:57,504 don't so much want to democratize the stock market 233 00:13:57,588 --> 00:14:00,799 as bring in chump money for their penny game. 234 00:14:01,675 --> 00:14:04,303 So, what might happen, though, 235 00:14:04,386 --> 00:14:08,682 if these new chumps bringing in all this new money got wise? 236 00:14:08,765 --> 00:14:11,727 Small investors banding together to take on big firms 237 00:14:11,810 --> 00:14:15,314 by running up the stock price of video game seller GameStop. 238 00:14:15,397 --> 00:14:17,983 It's a stock worth just a few bucks a year ago 239 00:14:18,066 --> 00:14:20,694 and closed at $347. 240 00:14:20,777 --> 00:14:25,199 If you invested $5,000 into GameStop just two weeks ago, 241 00:14:25,282 --> 00:14:28,243 you would have made more than 86,000 bucks. 242 00:14:28,327 --> 00:14:31,747 The hedge funds that bet against it have lost billions. 243 00:14:32,497 --> 00:14:38,670 A bunch of Reddit users harnessed years of advanced meme training… 244 00:14:41,757 --> 00:14:46,428 to realize that the company GameStop was being massively shorted 245 00:14:46,512 --> 00:14:47,930 by hedge funds. 246 00:14:48,013 --> 00:14:51,225 Basically, hedge funds placed giant bets 247 00:14:51,308 --> 00:14:54,144 that GameStop's price would go down. 248 00:14:54,228 --> 00:14:57,314 The Reddit users thought, "Well, geez, 249 00:14:57,397 --> 00:15:00,901 why don't we all just get together and short-squeeze them?" 250 00:15:00,984 --> 00:15:04,279 Drive the price up, hold the stock, 251 00:15:04,363 --> 00:15:07,324 make a little money and, as a consequence, 252 00:15:07,407 --> 00:15:10,410 force those hedge funds into massive losses. 253 00:15:11,328 --> 00:15:12,579 And it worked. 254 00:15:13,413 --> 00:15:15,040 Really well. 255 00:15:15,624 --> 00:15:19,419 Discount online brokerage Robinhood barred users without warning 256 00:15:19,503 --> 00:15:21,463 from buying new shares of GameStop. 257 00:15:21,547 --> 00:15:22,881 I opened up the app. 258 00:15:22,965 --> 00:15:26,426 I saw that you could no longer press the "buy" button in Robinhood, 259 00:15:26,510 --> 00:15:29,137 and I said, "Holy ****." 260 00:15:32,683 --> 00:15:34,434 Don't be coy. Holy what? 261 00:15:35,769 --> 00:15:37,521 Holy what? What'd you say? 262 00:15:37,604 --> 00:15:38,856 Cock? 263 00:15:41,441 --> 00:15:44,027 Did you say "cock"? 264 00:15:46,113 --> 00:15:52,202 Why would Robinhood halt buying GameStop but not selling it? 265 00:15:53,287 --> 00:15:57,666 They said it was because they received a call from their clearinghouse-- 266 00:15:58,166 --> 00:15:59,251 Let's-- 267 00:15:59,334 --> 00:16:01,003 From their bookie, 268 00:16:01,086 --> 00:16:04,089 who said, "They're on their way! Get the fuck out of the house! 269 00:16:04,173 --> 00:16:05,966 They're in a black Lincoln Continental!" 270 00:16:06,550 --> 00:16:09,052 But other people were suspicious for a couple of reasons. 271 00:16:09,136 --> 00:16:12,264 One being a hedge fund called Melvin Capital, 272 00:16:12,347 --> 00:16:16,727 which racked up billions of dollars of losses in the GameStop frenzy, 273 00:16:16,810 --> 00:16:20,939 received a bailout from none other than… 274 00:16:21,023 --> 00:16:22,858 Citadel hedge fund, 275 00:16:22,941 --> 00:16:27,362 the utterly unrelated hedge fund owned by the same people 276 00:16:27,446 --> 00:16:30,407 who own Citadel Securities, 277 00:16:30,490 --> 00:16:36,371 which is the payment for order flow company that handles Robinhood orders. 278 00:16:36,455 --> 00:16:40,876 And if this sounds insane, it's because it's insane. 279 00:16:40,959 --> 00:16:43,086 Which really has to make you wonder, 280 00:16:44,213 --> 00:16:46,798 how dark are these fucking pools? 281 00:16:48,634 --> 00:16:49,968 And here's the kicker. 282 00:16:50,719 --> 00:16:54,264 This payment for order flow situation and GameStop mess 283 00:16:54,973 --> 00:16:57,267 are the part of the American stock market 284 00:16:57,351 --> 00:17:01,813 that is the most transparent, well-regulated, and straightforward part 285 00:17:01,897 --> 00:17:03,440 of our entire market system. 286 00:17:03,524 --> 00:17:07,277 There's a whole other back room of derivatives and swaps 287 00:17:07,361 --> 00:17:12,324 and less transparent transactions with even more fuckery 288 00:17:13,242 --> 00:17:17,746 subsidized by public union pension funds. 289 00:17:18,539 --> 00:17:20,540 It's unsustainable. 290 00:17:21,333 --> 00:17:24,419 One could compare it to the subprime mortgage market 291 00:17:24,502 --> 00:17:27,714 that has capacity to blow up the world economy. 292 00:17:28,632 --> 00:17:33,178 We will never understand all of it, and we're not supposed to. 293 00:17:33,262 --> 00:17:38,433 It took a bunch of Redditors to figure out the GameStop shorting thing. 294 00:17:39,560 --> 00:17:41,562 What the hell was CNBC doing? 295 00:17:41,645 --> 00:17:42,855 Show me the money! 296 00:17:42,938 --> 00:17:44,314 Look at all that green, baby. 297 00:17:44,398 --> 00:17:46,483 Wealth creation right in front of our eyes. 298 00:17:46,567 --> 00:17:47,526 Cha-ching. 299 00:17:49,361 --> 00:17:50,863 Watch your money grow. 300 00:17:52,447 --> 00:17:53,657 You're gonna make a lot of money. 301 00:17:55,576 --> 00:17:57,077 Thank the market gods. 302 00:17:57,160 --> 00:18:00,831 Because, baby, this stock is born to run. 303 00:18:09,923 --> 00:18:11,884 Someone should question him publicly. 304 00:18:13,093 --> 00:18:15,929 I'm sure that would have tremendous ramifications. 305 00:18:16,555 --> 00:18:17,806 Take a look at this. 306 00:18:19,266 --> 00:18:22,728 Our regularly scheduled programming will not be seen at this time 307 00:18:22,811 --> 00:18:26,106 so we may bring you this CNBC special presentation. 308 00:18:30,194 --> 00:18:31,612 -This is… -This is… 309 00:18:31,695 --> 00:18:33,155 -CNBC. -CNBC. 310 00:18:33,238 --> 00:18:34,156 CNBC. 311 00:18:35,324 --> 00:18:36,825 Our business is… 312 00:18:36,909 --> 00:18:37,993 -Lies. -Lies. 313 00:18:38,076 --> 00:18:39,953 -Damn lies. -Everybody lies. 314 00:18:40,037 --> 00:18:41,872 -We spread… -…propaganda. 315 00:18:41,955 --> 00:18:43,248 We sort of spread it everywhere. 316 00:18:43,332 --> 00:18:44,666 -It's all… -Nonsense and hooey. 317 00:18:44,750 --> 00:18:46,210 Phony as baloney! 318 00:18:46,293 --> 00:18:47,878 It's BS, if you will. 319 00:18:47,961 --> 00:18:49,546 -Because we're… -…bought and paid for… 320 00:18:49,630 --> 00:18:50,964 -…by… -…the system. 321 00:18:51,048 --> 00:18:52,299 -We promise… -We promise… 322 00:18:52,382 --> 00:18:53,717 -We… -…promise… 323 00:18:53,800 --> 00:18:54,801 -…we will never… -Never. 324 00:18:54,885 --> 00:18:57,846 …give you… honest… and… transparent… information. 325 00:18:57,930 --> 00:18:59,515 So let's not forget that-- We make things up. 326 00:18:59,598 --> 00:19:02,100 -We just make things up here. -Again, we're just making things up. 327 00:19:02,184 --> 00:19:03,268 You bet we do. 328 00:19:03,352 --> 00:19:04,686 CNBC. 329 00:19:11,818 --> 00:19:14,029 Apes are amateur investors. 330 00:19:14,112 --> 00:19:17,616 They came out of this Reddit group called WallStreetBets. 331 00:19:17,699 --> 00:19:18,992 And they were just 332 00:19:19,076 --> 00:19:22,120 exchanging stock ideas, like, finance ideas. 333 00:19:22,204 --> 00:19:25,123 And then they decided to go into GameStop. 334 00:19:25,207 --> 00:19:26,750 "All people equal." 335 00:19:26,834 --> 00:19:29,461 That's what I read somewhere. Is that true? 336 00:19:29,545 --> 00:19:32,130 -Yes. -They saw that there was a hedge fund 337 00:19:32,214 --> 00:19:36,969 that was shorting the stock at a higher percentage 338 00:19:37,052 --> 00:19:39,012 than there was of the stock. 339 00:19:39,096 --> 00:19:41,807 They were like the Scooby-Doo kids in a van. 340 00:19:41,890 --> 00:19:43,475 And the van was Reddit. 341 00:19:43,559 --> 00:19:45,727 And the scooby snack… 342 00:19:45,811 --> 00:19:47,062 …was still weed. 343 00:19:51,984 --> 00:19:55,237 Welcome back. The stock market in this country is treated basically as 344 00:19:55,320 --> 00:19:56,989 one of the vital signs of our economy. 345 00:19:57,072 --> 00:19:58,282 We're always checking it. 346 00:19:58,365 --> 00:20:00,909 But the stock market is not our economy. 347 00:20:00,993 --> 00:20:02,286 It's more like a casino. 348 00:20:02,369 --> 00:20:05,163 The only real difference between the stock market and a casino is 349 00:20:05,247 --> 00:20:08,041 a casino is well-regulated. 350 00:20:09,376 --> 00:20:11,336 And they kick out cheaters. 351 00:20:12,546 --> 00:20:15,549 To discuss this more, and how it affects you at home, 352 00:20:15,632 --> 00:20:19,219 we've got J. Brown, a self-taught retail investor 353 00:20:19,303 --> 00:20:22,639 who identifies as a member of the online ape movement of investors. 354 00:20:22,723 --> 00:20:25,434 Dave Lauer, a market structure consultant 355 00:20:25,517 --> 00:20:28,437 and former quantitative analyst at Citadel. 356 00:20:28,520 --> 00:20:31,273 He is currently the CEO of Urvin Finance. 357 00:20:31,356 --> 00:20:34,860 Danny Moses. He's an investor and former Wall Street trader, 358 00:20:34,943 --> 00:20:36,778 cohost of finance podcast On The Tape, 359 00:20:36,862 --> 00:20:38,906 and was profiled in the movie The Big Short. 360 00:20:38,989 --> 00:20:41,575 And Matt Kohrs, an investor and YouTube host 361 00:20:41,658 --> 00:20:45,162 who has been called a leading voice in the ape movement. 362 00:20:45,245 --> 00:20:47,164 Thank you, guys, very much for joining us. 363 00:20:48,665 --> 00:20:51,168 So, you know, we talked about 364 00:20:51,251 --> 00:20:55,631 all these different kind of complex financial instruments 365 00:20:55,714 --> 00:20:58,509 that go on in the stock market and the complexities of it. 366 00:20:58,592 --> 00:21:01,094 But it took the online movement, 367 00:21:02,095 --> 00:21:05,182 Redditors and retail investors, 368 00:21:05,933 --> 00:21:12,523 to uncover that GameStop was being shorted at 140% of its value 369 00:21:12,606 --> 00:21:14,483 and that if you all got together-- 370 00:21:14,566 --> 00:21:17,194 How in God's name did this happen? 371 00:21:17,277 --> 00:21:19,071 I guess the best way I can explain it 372 00:21:19,154 --> 00:21:22,574 is that people had a chance to reset during the pandemic. 373 00:21:22,658 --> 00:21:25,702 People had a chance to start thinking of different ways to make money, 374 00:21:25,786 --> 00:21:27,538 different ways to survive. 375 00:21:27,621 --> 00:21:29,790 And in moments of great struggle, 376 00:21:29,873 --> 00:21:32,459 people usually band together to protect each other. 377 00:21:32,543 --> 00:21:36,630 It gave rise to all these guys sharing this information. 378 00:21:36,713 --> 00:21:40,884 Now, how did you learn to trust each other in this scenario? 379 00:21:40,968 --> 00:21:44,096 I think it's one of those things where we were all in the exact same boat. 380 00:21:44,179 --> 00:21:48,100 So there we were during the pandemic. A lot of us just downloaded Robinhood. 381 00:21:48,183 --> 00:21:49,852 We're sitting on our couch, hearing about it. 382 00:21:49,935 --> 00:21:51,395 Maybe we could make some money. 383 00:21:51,478 --> 00:21:53,897 And a community was built around it. 384 00:21:53,981 --> 00:21:56,567 And at first you're just talking about GameStop, 385 00:21:56,650 --> 00:21:58,443 a company that sells video games, 386 00:21:58,527 --> 00:21:59,820 something weird going on, 387 00:21:59,903 --> 00:22:01,321 leading to this exact moment 388 00:22:01,405 --> 00:22:04,116 when we're talking about some of the serious issues, 389 00:22:04,199 --> 00:22:06,743 manipulation and the fragility of the overall system? 390 00:22:06,827 --> 00:22:09,037 -Right. -It's absolutely wild. 391 00:22:09,121 --> 00:22:14,710 I think it was amazing to see this self-organized movement 392 00:22:14,793 --> 00:22:17,462 come together and uncover something 393 00:22:17,546 --> 00:22:19,882 and push the market to the breaking point. 394 00:22:19,965 --> 00:22:22,217 Because markets have become more fragile. 395 00:22:22,301 --> 00:22:24,178 All of this complexity 396 00:22:24,261 --> 00:22:27,890 between the derivatives and, you know, 15 stock exchanges 397 00:22:27,973 --> 00:22:30,601 and 40 dark pools and all these internalizers 398 00:22:30,684 --> 00:22:33,061 is an extremely complex system. 399 00:22:33,145 --> 00:22:35,397 And the complexity leads to fragility. 400 00:22:35,480 --> 00:22:36,857 And that's what these guys showed. 401 00:22:36,940 --> 00:22:39,985 They came at it. They found the hole, and they came at it. 402 00:22:40,068 --> 00:22:43,739 And they exposed that fragility, and the markets nearly fell apart. 403 00:22:44,364 --> 00:22:46,033 It's insane to think 404 00:22:46,116 --> 00:22:49,161 that a video game store almost broke the market. 405 00:22:49,244 --> 00:22:51,830 A video game store that sells hard copies… 406 00:22:51,914 --> 00:22:53,790 -Yes. -…of something that's d-- 407 00:22:53,874 --> 00:22:57,711 It'd be like if Blockbuster had come back, 408 00:22:57,794 --> 00:23:00,923 and everybody's like, "This Blockbuster's going through the roof." 409 00:23:01,590 --> 00:23:07,429 So how is it legal that they can hold a larger share 410 00:23:07,513 --> 00:23:10,265 in shorting a stock, in betting that it will go down, 411 00:23:11,433 --> 00:23:14,144 larger than the actual company is worth? 412 00:23:14,228 --> 00:23:15,395 You really can't do it, 413 00:23:15,479 --> 00:23:17,147 except market makers get an exemption 414 00:23:17,231 --> 00:23:20,067 to provide "liquidity." That's what they're doing to short stocks. 415 00:23:20,150 --> 00:23:22,402 You can have a situation where, for a period of time, 416 00:23:22,486 --> 00:23:25,113 there can be more shares short than are outstanding, potentially, 417 00:23:25,197 --> 00:23:27,407 or "overborrowing," as they say. 418 00:23:27,491 --> 00:23:29,034 You have to make that right over time, 419 00:23:29,117 --> 00:23:31,286 but there are periods, days, until a trade settles, 420 00:23:31,370 --> 00:23:32,996 where you don't know the bar wasn't secure. 421 00:23:33,080 --> 00:23:35,332 I don't want to go in too much detail. It's technical. 422 00:23:35,415 --> 00:23:37,668 Here's why you shouldn't go into too much detail. 423 00:23:37,751 --> 00:23:40,087 I stopped listening to you a minute ago. 424 00:23:42,631 --> 00:23:43,632 Fair enough. 425 00:23:43,715 --> 00:23:45,133 But isn't that part of this? 426 00:23:45,217 --> 00:23:48,470 Isn't what's part of this is the complexity of it? 427 00:23:48,554 --> 00:23:51,473 What it sounds like is they set up structures on the market, 428 00:23:52,099 --> 00:23:56,061 and then the insiders exploit those systems. 429 00:23:56,144 --> 00:23:59,481 Oh, yeah. The complexity is purposeful. 430 00:23:59,565 --> 00:24:02,568 You know, they could have set up rules and regulations 431 00:24:02,651 --> 00:24:05,445 that would have simplified markets dramatically. 432 00:24:05,529 --> 00:24:08,365 But they specifically elected not to go down that path. 433 00:24:08,448 --> 00:24:11,410 They built complexity on complexity on complexity. 434 00:24:11,493 --> 00:24:14,371 And what happens with an extremely complex system is 435 00:24:14,454 --> 00:24:17,416 that it leads naturally to this level of inequality 436 00:24:17,499 --> 00:24:19,042 and this level of exploitation, 437 00:24:19,126 --> 00:24:24,131 because a few firms who are big enough can take advantage of that complexity. 438 00:24:24,214 --> 00:24:27,176 But it doesn't mean it makes any sense. That's part of the problem. 439 00:24:27,259 --> 00:24:29,219 You can't explain to a rational person 440 00:24:29,303 --> 00:24:32,264 how you can have more than the entire float of a company short. 441 00:24:32,347 --> 00:24:34,516 And so I think the retail community saw this, 442 00:24:34,600 --> 00:24:39,438 and they saw an opening to potentially attack the existing system, 443 00:24:39,521 --> 00:24:40,647 and they were right. 444 00:24:40,731 --> 00:24:42,691 Look, I don't understand the markets so well. 445 00:24:42,774 --> 00:24:44,943 But I play craps. 446 00:24:45,027 --> 00:24:47,571 So I understand what gambling is, you know? 447 00:24:47,654 --> 00:24:50,199 And all this being talked about, when I talk to guys on it, 448 00:24:50,282 --> 00:24:53,076 they roll their eyes at me like, "You just don't understand. 449 00:24:53,160 --> 00:24:57,206 Shorting is important to hedge a bet and hedge risk and do all these things." 450 00:24:57,289 --> 00:25:00,250 And I'm like, "No, no, no. You bet the pass line and then the come line. 451 00:25:00,334 --> 00:25:02,336 And then you tried to offset your bet. 452 00:25:02,419 --> 00:25:04,296 I get it. But it's gambling. 453 00:25:04,379 --> 00:25:09,426 And don't try and tell me that Robinhood isn't fucking FanDuel, 'cause it is. 454 00:25:12,679 --> 00:25:14,056 It has to be. 455 00:25:15,098 --> 00:25:17,476 -Jon, if I could make a comment. -Yes, please. 456 00:25:17,559 --> 00:25:19,853 Gamification of the markets, which I think you're referring to-- 457 00:25:19,937 --> 00:25:24,024 People are treating a Robinhood account, a Coinbase account, you know, 458 00:25:24,107 --> 00:25:26,068 and a DraftKings account as the same. 459 00:25:26,151 --> 00:25:29,488 They're betting on Seattle, taking that money and buying crypto and-- 460 00:25:29,571 --> 00:25:33,158 I think that's one of the problems here, the access to trade on Robinhood. 461 00:25:33,242 --> 00:25:36,370 I think it sucked in a lot of people that think that way. 462 00:25:36,453 --> 00:25:39,331 These stocks are not trading on fundamentals, AMC and GameStop. 463 00:25:39,414 --> 00:25:41,333 But, Danny, what I would say to you is 464 00:25:42,167 --> 00:25:47,631 it's not the retail investor that really takes advantage of the gamification. 465 00:25:47,714 --> 00:25:49,466 It's the hedge fund investors. 466 00:25:49,550 --> 00:25:55,806 It feels like the pushback is because the retail guys got wise 467 00:25:55,889 --> 00:25:59,017 to what the game was in the back of the casino. 468 00:25:59,101 --> 00:26:01,436 It's all about inducements and incentives. 469 00:26:01,520 --> 00:26:03,397 And that's what we're seeing here, right? 470 00:26:03,480 --> 00:26:08,402 Because Robinhood is not incentivized for its customers to do well. 471 00:26:08,485 --> 00:26:11,697 It's incentivized for them to trade a lot. And-- 472 00:26:11,780 --> 00:26:14,700 You're saying volume and volatility makes them more money? 473 00:26:14,783 --> 00:26:18,161 Exactly, and that's what makes Citadel and Virtu more money, and the wholesalers. 474 00:26:18,245 --> 00:26:21,248 So it's not a free market. The only reason there's this much churn is 475 00:26:21,331 --> 00:26:24,209 the Federal Reserve has hyperinflated the stock market 476 00:26:24,293 --> 00:26:27,796 by making it impossible for people to have savings accounts. 477 00:26:27,880 --> 00:26:30,507 -Yes. Inducements and incentives. -Oh, okay. 478 00:26:31,967 --> 00:26:33,635 I-- You know what I just realized? 479 00:26:33,719 --> 00:26:36,847 I should have known what inducements and incentives mean! 480 00:26:38,390 --> 00:26:40,642 My wife will tell you I watch CNN, Fox Business. 481 00:26:40,726 --> 00:26:43,687 I just watch all this stuff. I'm watching all of these things happen. 482 00:26:43,770 --> 00:26:46,440 And I just started just absorbing it. 483 00:26:46,523 --> 00:26:49,318 And then I found a community on Twitter. 484 00:26:49,401 --> 00:26:53,155 And I'm like, "Hold up. These are a bunch of people that get it." 485 00:26:53,780 --> 00:26:57,868 And it's not necessarily getting together to, you know, "collude" or anything. 486 00:26:57,951 --> 00:27:01,663 We're just sharing, learning and connecting with each other. 487 00:27:02,247 --> 00:27:03,790 To share information. 488 00:27:03,874 --> 00:27:09,296 Is information the most valuable part of this new movement and this connection? 489 00:27:09,379 --> 00:27:11,632 And has it really not democratized the stock market? 490 00:27:11,715 --> 00:27:13,675 It's democratized information 491 00:27:13,759 --> 00:27:17,679 that allows you to go to battle with these larger firms? 492 00:27:17,763 --> 00:27:19,515 I definitely think it's the information, 493 00:27:19,598 --> 00:27:22,559 and that's kind of one of the crazy things is there's a lack of it. 494 00:27:22,643 --> 00:27:24,520 It's very difficult. 495 00:27:24,603 --> 00:27:26,146 At first you look into the market, 496 00:27:26,230 --> 00:27:28,524 and it's very much, "Is the stock going up or down?" 497 00:27:28,607 --> 00:27:30,651 And then you dive into it a little bit more, 498 00:27:30,734 --> 00:27:32,611 and you find additional things out. 499 00:27:32,694 --> 00:27:35,948 Like, "Okay, how could short interest get that high? How is that possible?" 500 00:27:36,031 --> 00:27:37,908 And it's purposely complex. 501 00:27:37,991 --> 00:27:39,910 I don't think we're supposed to understand it, 502 00:27:39,993 --> 00:27:42,120 and then you start to ask legitimate questions. 503 00:27:42,204 --> 00:27:45,123 It's very much perceived that we're a monolith of people 504 00:27:45,207 --> 00:27:47,042 who don't know what we're talking about 505 00:27:47,125 --> 00:27:49,294 when I feel that we're asking very legitimate questions. 506 00:27:49,378 --> 00:27:54,800 Jon, people in the professional investment community have been upset 507 00:27:54,883 --> 00:27:58,095 about payment for order flow and these market makers for years. 508 00:27:58,178 --> 00:28:02,224 And I'm glad you guys are starting to see what it really is in the underbelly. 509 00:28:02,307 --> 00:28:03,350 But let me just say something. 510 00:28:03,433 --> 00:28:05,185 Stocks trade on fundamentals in the long term. 511 00:28:05,269 --> 00:28:07,229 They can do whatever they want in the short term. 512 00:28:07,312 --> 00:28:09,106 -Right. -So, short sellers get vilified, 513 00:28:09,189 --> 00:28:11,567 but short sellers can be a source of great information 514 00:28:11,650 --> 00:28:14,403 the same way that retail and long buyers can be. 515 00:28:14,486 --> 00:28:15,320 Right. 516 00:28:15,404 --> 00:28:18,782 So I think, to get everyone in a room and talking about that is very constructive. 517 00:28:18,866 --> 00:28:20,325 But I think fundamentals matter. 518 00:28:20,409 --> 00:28:22,077 And I just think it's key to understand that. 519 00:28:22,160 --> 00:28:24,288 That's one of the things when I say about the connection. 520 00:28:24,371 --> 00:28:28,000 I want to bridge and try to help others. And Matt does it all the time too. 521 00:28:28,083 --> 00:28:30,502 We all want to have these conversations, 522 00:28:30,586 --> 00:28:34,464 but the thing about it is, we need to have answers to certain things. 523 00:28:34,548 --> 00:28:37,301 I need to know why, in January, when this was running up, 524 00:28:37,384 --> 00:28:40,262 the "buy" button was taken away in the midst of a run-up. 525 00:28:40,345 --> 00:28:42,222 That's never happened. And because-- 526 00:28:42,306 --> 00:28:45,684 -And the "sell" button still worked. -Yeah, the regular people like me, 527 00:28:45,767 --> 00:28:50,397 who finally have a chance, the waitress, the meter maid, whoever-- the janitor. 528 00:28:50,480 --> 00:28:52,524 Tell me that answer, 529 00:28:52,608 --> 00:28:54,610 and then we can have the larger conversation. 530 00:28:54,693 --> 00:28:56,987 Because right now that's all we see 531 00:28:57,070 --> 00:28:59,406 is that every time we get ready to get ahead, 532 00:28:59,489 --> 00:29:00,699 you take it from us. 533 00:29:00,782 --> 00:29:04,286 And once you take it, we're supposed to just take your word for it and accept it. 534 00:29:04,369 --> 00:29:07,122 I've learned fundamentals. I've learned price discovery. 535 00:29:07,206 --> 00:29:09,082 We can preach fundamentals all day. 536 00:29:09,166 --> 00:29:12,419 Knowledge is wonderful, 537 00:29:12,503 --> 00:29:17,174 but a Wharton business degree and a life living, 538 00:29:17,257 --> 00:29:19,092 they collide in this movement. 539 00:29:19,176 --> 00:29:21,553 People are learning where their money is going. 540 00:29:21,637 --> 00:29:23,931 You spent all day cooking the Thanksgiving dinner. 541 00:29:24,014 --> 00:29:25,891 You mean to tell me you want to watch everybody eat? 542 00:29:25,974 --> 00:29:28,310 No. Damn that. I want to eat too. 543 00:29:28,393 --> 00:29:31,772 -That's where we're at. -Do people normally want to hug you? 544 00:29:34,733 --> 00:29:36,777 That was beautifully spoken. 545 00:29:36,860 --> 00:29:40,531 We're gonna take a quick break, and then we're gonna straighten it out. 546 00:29:40,614 --> 00:29:44,993 'Cause there's solutions that are on the table here that can be done, 547 00:29:45,077 --> 00:29:46,954 and these guys will help figure it out. 548 00:30:02,928 --> 00:30:04,847 Throughout my 30-year career, 549 00:30:04,930 --> 00:30:08,642 I would tell myself, "It's okay. I'm going to be secure when I retire. 550 00:30:08,725 --> 00:30:12,479 I will have this pension until the day I die." 551 00:30:12,563 --> 00:30:17,943 And so, it's a kick in the teeth to have them go back on that. 552 00:30:18,026 --> 00:30:22,531 I've already lost, since 2011, over 30,000. 553 00:30:22,614 --> 00:30:25,325 Everybody, all retirees, lost that money. 554 00:30:25,409 --> 00:30:29,705 I was stunned, and then I was angry, and then I just started worrying. 555 00:30:29,788 --> 00:30:31,957 It's a mixture of anger, despair… 556 00:30:32,040 --> 00:30:35,878 We've had over 30,000 teachers in Ohio… 557 00:30:35,961 --> 00:30:37,671 that retired and have died 558 00:30:37,754 --> 00:30:41,675 without receiving the benefits they were promised. 559 00:30:41,758 --> 00:30:42,968 Wall Street doesn't care. 560 00:30:43,051 --> 00:30:49,057 So if our pension fund goes belly-up, it doesn't matter. 561 00:30:49,141 --> 00:30:51,101 They're good with that 562 00:30:51,185 --> 00:30:52,644 because they got it all. 563 00:30:52,728 --> 00:30:55,898 Benefits to workers that have been promised are being slashed 564 00:30:55,981 --> 00:30:58,400 in order to pay Wall Street more. 565 00:30:58,483 --> 00:31:00,777 Three percent cut from workers 566 00:31:00,861 --> 00:31:04,323 to pay Wall Street 4% or 5% in additional fees. 567 00:31:15,626 --> 00:31:17,002 We're talking about 568 00:31:17,085 --> 00:31:20,923 the health of what many wrongfully consider the lifeblood of our economy, 569 00:31:21,006 --> 00:31:22,007 the stock market. 570 00:31:22,090 --> 00:31:25,427 We're gonna talk about what a healthier and simpler marketplace could look like. 571 00:31:25,511 --> 00:31:30,182 But it brings up-- Here's this other sort of unforeseen circumstance. 572 00:31:30,265 --> 00:31:34,144 All these public union pension funds with billions of dollars 573 00:31:34,228 --> 00:31:37,272 have to hire hedge fund money managers. 574 00:31:37,356 --> 00:31:40,943 And if it goes in the tank, they still walk away with those fees. 575 00:31:41,026 --> 00:31:44,279 Again, transparency, fundamentals. 576 00:31:44,363 --> 00:31:48,242 Why doesn't it apply to these hedge fund operators? 577 00:31:48,325 --> 00:31:52,955 It's being nickel-and-dimed at every point in this very complex set of pipes-- 578 00:31:53,038 --> 00:31:57,584 And then at the end, when that underfunded pension plan has underperformed 579 00:31:57,668 --> 00:32:00,128 and it's time for someone to collect their benefits, 580 00:32:00,212 --> 00:32:01,588 there's not gonna be enough money. 581 00:32:01,672 --> 00:32:02,673 And it's a huge problem. 582 00:32:02,756 --> 00:32:04,383 And then the taxpayers are gonna have to step in. 583 00:32:04,466 --> 00:32:07,886 So that's where market-structure issues and complexity intersect 584 00:32:07,970 --> 00:32:10,681 with both shareholders and retirees and taxpayers. 585 00:32:10,764 --> 00:32:12,891 And that's why everybody should care about these issues. 586 00:32:12,975 --> 00:32:17,563 Who is on the side of the retail investor and those people? 587 00:32:17,646 --> 00:32:20,065 You look at-- It's the regulators, the SEC, 588 00:32:20,148 --> 00:32:21,483 but they're outgunned. 589 00:32:21,567 --> 00:32:23,777 And if you could talk to the head of the SEC-- 590 00:32:23,861 --> 00:32:25,237 What would you say to him? 591 00:32:25,320 --> 00:32:30,325 People might not realize that many of the regulatory structures in the market 592 00:32:30,409 --> 00:32:32,119 are self-regulatory. 593 00:32:32,911 --> 00:32:34,121 Okay? So you have-- 594 00:32:34,204 --> 00:32:36,248 Self-regulatory meaning, "You guys handle this"? 595 00:32:36,331 --> 00:32:38,250 -Yes. -Like baseball arbitration. 596 00:32:38,333 --> 00:32:43,964 Yes. So, the stock exchanges, for example, are for-profit, publicly traded companies 597 00:32:44,047 --> 00:32:47,718 who set the rules for both their exchanges and the market overall, 598 00:32:47,801 --> 00:32:48,927 and then they're the ones… 599 00:32:49,011 --> 00:32:51,054 -What? -…charged with enforcing them. 600 00:32:51,138 --> 00:32:53,849 There's no real accountability. 601 00:32:53,932 --> 00:32:56,977 It's all self-regulation and access, 602 00:32:57,060 --> 00:32:59,229 because the money that these companies make-- 603 00:32:59,313 --> 00:33:04,234 Man, if that guy's got a $150 million house in London, 604 00:33:04,318 --> 00:33:07,237 I think, "How much money is he spending in Washington?" 605 00:33:07,321 --> 00:33:08,488 Yeah. 606 00:33:08,572 --> 00:33:11,074 -Do you know what I mean? -Yeah. We call it the Acela economy. 607 00:33:11,158 --> 00:33:13,076 We used to say "the merger of Wall Street and K Street." 608 00:33:13,160 --> 00:33:16,371 So much goes on behind the scenes between Washington and New York City. 609 00:33:16,455 --> 00:33:18,749 That's where they used to run and write the rules on the lobbyists 610 00:33:18,832 --> 00:33:20,459 and even the Wall Street rules that exist. 611 00:33:20,542 --> 00:33:26,173 It's not politically viable anymore not to hyperinflate the stock market. 612 00:33:26,256 --> 00:33:30,928 If that's the thing that everybody sees on their screen at night on the news, 613 00:33:31,720 --> 00:33:37,392 if that thing goes down, it puts lawmakers in political peril. 614 00:33:38,185 --> 00:33:40,604 And so they won't take any steps 615 00:33:40,687 --> 00:33:43,899 that may bring it more into a fundamentals market. 616 00:33:43,982 --> 00:33:47,986 Listen. It's been this moral hazard for a long time on Wall Street. 617 00:33:48,070 --> 00:33:51,114 No one went to jail, really, after the Big Short, after the financial crisis. 618 00:33:51,198 --> 00:33:52,241 Couple people here and there, 619 00:33:52,324 --> 00:33:55,577 but everybody just paid their fines and moved on. It's the culture of it. 620 00:33:55,661 --> 00:33:57,913 The fines are paid by the shareholders of the company themselves, 621 00:33:57,996 --> 00:33:59,498 and no one's held accountable for it. 622 00:33:59,581 --> 00:34:02,501 It's really become an upsetting part of Wall Street. 623 00:34:02,584 --> 00:34:06,922 We live in a system where it's easier to paint retail as the bad people 624 00:34:07,005 --> 00:34:11,844 opposed to people stepping up and addressing politicians insider trading. 625 00:34:11,927 --> 00:34:14,554 We have Federal Reserve members insider trading. 626 00:34:14,638 --> 00:34:15,764 Self-regulation. 627 00:34:15,848 --> 00:34:18,725 When, in reality, we're trying to address very serious things. 628 00:34:18,809 --> 00:34:22,478 I want to get a take on where you guys would go 629 00:34:22,563 --> 00:34:26,275 that would make this function in a way that made a little bit more sense. 630 00:34:26,358 --> 00:34:28,485 -I got three. -Okay. Let's hear 'em. 631 00:34:28,569 --> 00:34:31,112 Number one, all politicians make minimum wage. 632 00:34:37,995 --> 00:34:39,746 Yeah, write that down. 633 00:34:41,415 --> 00:34:43,958 Boy, would that get raised quickly. 634 00:34:44,042 --> 00:34:45,043 Yeah. Yeah. 635 00:34:45,127 --> 00:34:46,795 No super PACs and no donations 636 00:34:46,879 --> 00:34:50,507 because what it is, is that we don't have the ability as regular people 637 00:34:50,591 --> 00:34:52,592 to have someone go and speak for us 638 00:34:52,676 --> 00:34:54,969 -unless we have the type of power… -Access. 639 00:34:55,053 --> 00:34:56,429 …as a community. 640 00:34:56,513 --> 00:34:59,433 Secondly, the transparency that they talk about. 641 00:34:59,516 --> 00:35:03,687 How is it that a particular ticker can trade at 67% in the dark pool 642 00:35:03,770 --> 00:35:05,105 and we not know what's going on, 643 00:35:05,189 --> 00:35:09,443 as I know myself and others are actually buying that stock in droves, 644 00:35:09,526 --> 00:35:11,528 and we don't see the buying pressure? 645 00:35:11,612 --> 00:35:14,448 So more transparency is definitely needed. 646 00:35:14,531 --> 00:35:17,201 And the third one, and the most important one, 647 00:35:17,284 --> 00:35:22,080 is that we allow ourselves to connect to all voices involved 648 00:35:22,664 --> 00:35:26,752 so that we don't just scream at the wall and nobody hears us. 649 00:35:26,835 --> 00:35:29,755 We have to organically connect 650 00:35:29,838 --> 00:35:33,091 to understand that every decision we make affects everybody, 651 00:35:33,175 --> 00:35:35,844 including the person that gives you an extra pack of ketchup at McDonald's. 652 00:35:35,928 --> 00:35:36,762 Right. 653 00:35:36,845 --> 00:35:39,264 Final word on the things you'd like to see. 654 00:35:39,348 --> 00:35:43,060 Yeah. Overall, the highest-level thing is market transparency and fairness. 655 00:35:43,143 --> 00:35:46,063 I think it very much starts with the extreme amount of off-exchange trading. 656 00:35:46,146 --> 00:35:48,023 I think we're bringing up very serious things 657 00:35:48,106 --> 00:35:49,983 that should not be swept under the rug, 658 00:35:50,067 --> 00:35:53,946 because I think our market was at a serious risk, 659 00:35:54,029 --> 00:35:57,074 and it needs to be fixed so it doesn't happen in the future. 660 00:35:57,157 --> 00:36:00,953 The biggest things that I would do is I would get rid of unnecessary complexity, 661 00:36:01,036 --> 00:36:03,705 and I would get rid of these incentives and inducements. 662 00:36:03,789 --> 00:36:04,998 Who would get rid of that though? 663 00:36:05,082 --> 00:36:07,918 -You need the regulator to step up. -The SEC would have to this. 664 00:36:08,001 --> 00:36:11,296 The SEC has to step in, and Congress would have to support it. 665 00:36:11,380 --> 00:36:13,382 But right now, the SEC could step in, 666 00:36:13,465 --> 00:36:16,760 and it could peel away these layers of regulation 667 00:36:16,844 --> 00:36:18,512 and simplify markets. 668 00:36:18,595 --> 00:36:20,681 I think we'd have a much better outcome. 669 00:36:20,764 --> 00:36:24,685 Danny, do you have anything solutionary that you would like to throw out there? 670 00:36:24,768 --> 00:36:27,062 Retail investors, people can do a lot in that regard, 671 00:36:27,145 --> 00:36:28,939 these changes that you want to invoke. 672 00:36:29,022 --> 00:36:30,315 They can go to a company and say, 673 00:36:30,399 --> 00:36:33,068 "We're not gonna buy your shares if you trade on that exchange," 674 00:36:33,151 --> 00:36:35,362 or, "We're not gonna do so-and-so." You can invoke change. 675 00:36:35,445 --> 00:36:37,531 It'll be hard. It'll take time. But there's been movement-- 676 00:36:37,614 --> 00:36:39,700 -Grassroots power. -Grassroots power going on. 677 00:36:39,783 --> 00:36:41,034 So maybe you can invoke some change. 678 00:36:41,118 --> 00:36:43,245 I think this movement is a differentiator. 679 00:36:43,328 --> 00:36:46,039 You know, we've been having this market structure conversation for years, 680 00:36:46,123 --> 00:36:49,042 and the involvement of the retail investor and people caring, 681 00:36:49,126 --> 00:36:50,586 millions of people caring, 682 00:36:50,669 --> 00:36:53,130 is something that has never happened before 683 00:36:53,213 --> 00:36:58,135 in this, like, extremely detailed part of politics and regulation. 684 00:36:58,218 --> 00:37:00,095 And I think that that can make a big difference. 685 00:37:00,179 --> 00:37:03,015 And so I hope that it will show regulators 686 00:37:03,098 --> 00:37:05,392 that this is something they need to address. 687 00:37:05,475 --> 00:37:07,603 Well, it's terrific. I can't thank you guys enough. 688 00:37:07,686 --> 00:37:08,937 Thank you for being here. 689 00:37:10,105 --> 00:37:12,900 To my distinguished panel. 690 00:37:13,400 --> 00:37:15,569 J., Dave, Danny, Matt. 691 00:37:16,486 --> 00:37:17,696 We'll be right back. 692 00:37:25,954 --> 00:37:30,876 You are the commissioner, the head commissioner, the chair. 693 00:37:30,959 --> 00:37:34,880 The SEC began as a way to get investors 694 00:37:34,963 --> 00:37:37,966 to have confidence in the stock market. 695 00:37:38,050 --> 00:37:40,886 That markets won't necessarily self-regulate. 696 00:37:40,969 --> 00:37:44,223 This idea of a free and fair marketplace 697 00:37:44,306 --> 00:37:50,437 can be exploited by those where greed might be more of a motivating factor. 698 00:37:50,521 --> 00:37:51,813 Look, it comes down to this. 699 00:37:51,897 --> 00:37:54,608 We want to achieve things as society. 700 00:37:55,150 --> 00:37:59,112 To make it fair, and also to lower the cost. 701 00:37:59,196 --> 00:38:02,741 So the SEC has three parts in our mission. 702 00:38:02,824 --> 00:38:09,122 Investor protection, facilitating capital formation, raising money. 703 00:38:09,206 --> 00:38:10,874 And then, that which is in the middle, 704 00:38:10,958 --> 00:38:14,086 the markets, we call it fair, orderly and efficient markets. 705 00:38:14,169 --> 00:38:15,879 -Right. -So it's those three. 706 00:38:15,963 --> 00:38:19,758 And if we do the middle right, if we make them fair. 707 00:38:19,842 --> 00:38:23,387 And efficient, meaning lower cost in the middle. 708 00:38:23,470 --> 00:38:27,307 Investors do better and companies raising money better. 709 00:38:27,391 --> 00:38:31,186 -And that also lowers the cost… -How are we doing with all that? 710 00:38:31,270 --> 00:38:32,396 …to the companies raising money. 711 00:38:32,479 --> 00:38:35,148 It does raise the question. 712 00:38:35,732 --> 00:38:41,738 Are we creating confidence in the markets to really protect investors 713 00:38:42,364 --> 00:38:48,704 or to make sure that we do not interrupt capital formation 714 00:38:48,787 --> 00:38:49,997 to these businesses? 715 00:38:50,080 --> 00:38:54,751 Because if you look at the equality of that equation. 716 00:38:54,835 --> 00:38:58,589 Yeah. Which way-- Where we leaning more into. Is what-- 717 00:38:58,672 --> 00:38:59,756 Well, I think we know. 718 00:38:59,840 --> 00:39:02,926 84% of the equities market is owned by 10% of the people. 719 00:39:03,010 --> 00:39:05,179 No-- No-- Think of it as this. 720 00:39:05,262 --> 00:39:09,141 We're not gonna-- We're not gonna-- Nobody bats 1,000. 721 00:39:09,224 --> 00:39:10,726 But we're going to, every day, 722 00:39:10,809 --> 00:39:13,437 be thinking about those working families, those retirees, 723 00:39:13,520 --> 00:39:15,397 those early investors in the markets. 724 00:39:15,480 --> 00:39:19,443 But the retail investor… they're at a real disadvantage. 725 00:39:20,444 --> 00:39:21,612 And you're the sheriff. 726 00:39:24,031 --> 00:39:25,199 And you're outgunned. 727 00:39:25,282 --> 00:39:27,367 I walked into your coffee room today. 728 00:39:27,451 --> 00:39:30,329 There's a little sign that says "Coffee donations welcome." 729 00:39:31,788 --> 00:39:33,165 We're at the SEC. 730 00:39:33,248 --> 00:39:35,417 -Yeah. -Holy shit. 731 00:39:36,126 --> 00:39:38,795 Now we could use some more resources. That is for sure. 732 00:39:38,879 --> 00:39:42,382 There's 4,500 people that are full-time here. 733 00:39:42,466 --> 00:39:43,759 I wish it was more. 734 00:39:43,842 --> 00:39:47,304 We shrank in the prior administration 5%. 735 00:39:47,387 --> 00:39:49,264 -Right. -And this is in the time when 736 00:39:49,348 --> 00:39:51,266 markets were growing dramatically. 737 00:39:51,350 --> 00:39:53,560 And we should have, frankly, I believe, 738 00:39:53,644 --> 00:39:56,688 grown during the last five years instead of shrunk. 739 00:39:56,772 --> 00:39:59,358 How outmanned are you? 740 00:39:59,441 --> 00:40:02,569 Are you an abacus in a calculator world? 741 00:40:02,653 --> 00:40:04,613 Are you analog in a digital world? 742 00:40:04,696 --> 00:40:05,739 -Because-- -It's hard. 743 00:40:05,822 --> 00:40:06,823 -Yeah. -We spend-- 744 00:40:06,907 --> 00:40:09,201 We have about a two billion dollar-a-year budget here. 745 00:40:09,284 --> 00:40:13,830 We spend about 350 to 400 million a year on technology. 746 00:40:13,914 --> 00:40:19,878 Which is probably what one of the top five or six banks spend in a few weeks. 747 00:40:19,962 --> 00:40:21,755 -Right. -You know, on technology. 748 00:40:21,839 --> 00:40:26,176 I feel like the SEC is put in an impossible position. 749 00:40:27,135 --> 00:40:32,933 And that if we don't change the way that the SEC does business, 750 00:40:34,059 --> 00:40:38,146 investors are going to continue to receive the ass-kicking 751 00:40:38,230 --> 00:40:41,567 that they're getting right now from institutional investors 752 00:40:41,650 --> 00:40:45,904 who are generating overwhelming returns. 753 00:40:45,988 --> 00:40:50,117 And the agility of the markets to exploit things 754 00:40:50,200 --> 00:40:54,288 that are even foundational, has so far surpassed 755 00:40:54,371 --> 00:40:59,001 the ability of the police to come in and stop it. 756 00:40:59,084 --> 00:41:01,503 The challenge for an agency like ours, 757 00:41:01,587 --> 00:41:03,964 and Congress gives us a lot of authorities, 758 00:41:04,047 --> 00:41:10,345 to use them in policy and market oversight 759 00:41:10,429 --> 00:41:12,055 and, of course, enforcement. 760 00:41:12,139 --> 00:41:14,183 -Right. -A matter of setting priorities, 761 00:41:14,266 --> 00:41:19,146 a matter of moving a policy agenda with a five-member commission. 762 00:41:19,229 --> 00:41:20,981 -Yes. -Doing the economic analysis. 763 00:41:21,064 --> 00:41:23,609 Staying within the chalk lines of the law. 764 00:41:23,692 --> 00:41:25,319 And so, I mean-- 765 00:41:25,402 --> 00:41:31,283 Laws that are oftentimes written by the very people you're trying to regulate. 766 00:41:31,366 --> 00:41:33,202 No, they're written by Congress. 767 00:41:33,285 --> 00:41:36,538 Written by the very people you're trying to regulate. 768 00:41:36,622 --> 00:41:42,169 Because who do you think writes the laws for Congress on financial instruments? 769 00:41:42,836 --> 00:41:43,921 Realistically. 770 00:41:44,004 --> 00:41:45,380 -Congress-- -Knowing what you know. 771 00:41:45,464 --> 00:41:49,092 Congress and remarkable staff at congress. I've worked with a lot of them. 772 00:41:49,176 --> 00:41:51,553 So you've been in there a long time. 773 00:41:51,637 --> 00:41:54,765 You're telling me that financial institutions, 774 00:41:54,848 --> 00:41:57,309 large financial institutions, 775 00:41:57,392 --> 00:42:00,103 don't lobby Congress on the writing of those regulations. 776 00:42:00,187 --> 00:42:02,481 -Jon, they absolutely-- -So who-- 777 00:42:02,564 --> 00:42:05,150 -Well, that's what I'm asking you. -They lobby, they have… 778 00:42:05,234 --> 00:42:06,235 Of course. 779 00:42:06,318 --> 00:42:08,779 …an ability to get meetings-- Oh, absolutely. 780 00:42:08,862 --> 00:42:13,825 So the laws that Congress writes are manipulated and coerced-- 781 00:42:13,909 --> 00:42:15,536 Those are your words. 782 00:42:17,079 --> 00:42:20,916 How are you gonna be-- I'm, like, talking to a sheriff, and I'm like, 783 00:42:20,999 --> 00:42:22,835 "The drug dealers are out there." And you're like, 784 00:42:22,918 --> 00:42:26,922 "Drug dealers? Now? Come on now. Let's not be unfair to them." 785 00:42:27,005 --> 00:42:28,674 -Jon, I-- -You're the cop. 786 00:42:28,757 --> 00:42:30,592 I understand that. I understand that. 787 00:42:30,676 --> 00:42:36,014 But you also want somebody in my role to be successful at being a cop. 788 00:42:36,098 --> 00:42:37,099 Oh, my Lord. 789 00:42:37,182 --> 00:42:40,269 So Congress writes the laws. We implement those laws. 790 00:42:40,352 --> 00:42:44,189 Yes. Congress, lobbied by financial institutions, writes the laws. 791 00:42:44,273 --> 00:42:46,650 I guess, ultimately, what it comes down to is this. 792 00:42:46,733 --> 00:42:50,571 Is the SEC the best system to do this? 793 00:42:50,654 --> 00:42:54,324 I think the American public kind of gets it. 794 00:42:54,408 --> 00:42:57,452 That the system is not fully working for them. 795 00:42:58,036 --> 00:43:01,206 -That's right. Okay. All right? -Oh, yes. I believe that's true. 796 00:43:01,290 --> 00:43:03,125 The apes exposed something really interesting. 797 00:43:03,208 --> 00:43:08,088 They crowdsourced a way of rooting out corruption. 798 00:43:08,172 --> 00:43:11,925 They found things in the system that didn't seem right. 799 00:43:12,009 --> 00:43:16,013 Like the information that they were getting was two weeks old. 800 00:43:16,096 --> 00:43:17,514 That they weren't being told 801 00:43:17,598 --> 00:43:23,770 that these 140% shorts totaled that 140%. 802 00:43:23,854 --> 00:43:27,316 They knew there was a short, but they didn't get that information until later, 803 00:43:27,399 --> 00:43:30,110 and they didn't get the information to the extent of it. 804 00:43:30,194 --> 00:43:32,154 And doesn't that show 805 00:43:32,237 --> 00:43:37,367 that disclosure and transparency are not functioning 806 00:43:37,451 --> 00:43:39,286 to the protection of investors? 807 00:43:39,369 --> 00:43:42,623 I'm not saying this is without its challenges. 808 00:43:42,706 --> 00:43:45,667 There are real challenges. There are real challenges. 809 00:43:45,751 --> 00:43:49,004 -Complexity helps them-- -Give me a better system. 810 00:43:49,087 --> 00:43:52,299 Give me a better system to do this than the one we have in place. 811 00:43:52,883 --> 00:43:54,927 'Cause the one we have is getting its butt kicked. 812 00:43:55,010 --> 00:43:58,764 I believe in this system. 813 00:43:58,847 --> 00:44:01,600 I believe in our American democracy. You're not gonna get me to say-- 814 00:44:01,683 --> 00:44:04,311 I'm not saying give me a different system than American democracy. 815 00:44:04,394 --> 00:44:05,229 Wait, listen-- 816 00:44:05,312 --> 00:44:10,317 Purely based on the financial system we have and the stock market, 817 00:44:10,400 --> 00:44:14,821 is there a better system than the SEC-- 818 00:44:14,905 --> 00:44:18,784 Is there something in this crowdsourcing 819 00:44:18,867 --> 00:44:22,079 that the apes brought to bear that can be useful-- 820 00:44:22,162 --> 00:44:27,251 Can there be a partnership between the SEC and a more crowdsourced-- 821 00:44:27,334 --> 00:44:31,004 Jon, I live within the system I'm in-- 822 00:44:31,088 --> 00:44:32,673 Dream, man. Dream! 823 00:44:32,756 --> 00:44:37,427 Yeah, I'll dream, but I also want to get things done. 824 00:44:37,511 --> 00:44:40,556 I want to get things done on behalf of the investing public. 825 00:44:40,639 --> 00:44:44,351 Have you thought about, outside of the bureaucracy, 826 00:44:45,686 --> 00:44:48,856 is there something that could help you be more agile? 827 00:44:48,939 --> 00:44:53,694 So I would say, and the compliment goes to Senator Grassley from Iowa. 828 00:44:53,777 --> 00:44:57,239 -He-- No-- Senator Grassley fought hard… -All right. Here we go. 829 00:44:57,322 --> 00:44:59,491 …on a decentralization point you're talking about. 830 00:44:59,575 --> 00:45:01,493 It's called the whistleblower law. 831 00:45:01,577 --> 00:45:06,290 So in the aftermath of the '08 crisis and that big reform law, Dodd-Frank, 832 00:45:06,373 --> 00:45:10,294 Senator Grassley fought hard that this agency and some other agencies 833 00:45:10,377 --> 00:45:13,755 stood up and put in place a whistleblower program. 834 00:45:13,839 --> 00:45:17,176 And over the ten or so years that this has stood up, 835 00:45:17,259 --> 00:45:19,887 we've given awards. 836 00:45:19,970 --> 00:45:23,223 -That's a crowdsourcing, decentralized-- -Right. Right. 837 00:45:23,307 --> 00:45:29,146 What do we need to do, and is the SEC not enough? You know? 838 00:45:29,229 --> 00:45:31,440 If you look at the past ten years, right? 839 00:45:31,523 --> 00:45:33,066 Or the past 20 years. 840 00:45:33,150 --> 00:45:38,488 The SEC very rarely will send something 841 00:45:38,572 --> 00:45:40,908 and recommend it to the DOJ for prosecution. 842 00:45:40,991 --> 00:45:43,869 -The 2008 financial crisis-- -That's not true. 843 00:45:43,952 --> 00:45:47,748 We bring about 700 enforcement-- 844 00:45:47,831 --> 00:45:52,377 750 enforcement cases a year, and I could give you the exact figures, 845 00:45:52,461 --> 00:45:57,049 but a whole chunk of those are also joint criminal investigations. 846 00:45:57,132 --> 00:45:59,259 You know, with all the financial shenanigans 847 00:45:59,343 --> 00:46:00,677 that have gone on over the years, 848 00:46:00,761 --> 00:46:04,389 the only person we've really brought to heel is Martha Stewart. 849 00:46:04,473 --> 00:46:08,685 And that's got to tell you something about just how tilted this thing is. 850 00:46:08,769 --> 00:46:11,355 You've forgotten a little bit about Bernie Madoff, but… 851 00:46:11,438 --> 00:46:14,983 Well, speaking of Bernie Madoff, who came up with payment for order flow? 852 00:46:15,067 --> 00:46:16,902 -Yeah, yeah. No, I understand. -Right. 853 00:46:16,985 --> 00:46:19,696 But he did serve his time in jail and everything. 854 00:46:19,780 --> 00:46:22,699 One guy and one woman. 855 00:46:22,783 --> 00:46:25,994 Generally, it seems like people don't go to jail for financial crimes. 856 00:46:26,078 --> 00:46:27,120 They pay fines. 857 00:46:27,204 --> 00:46:28,622 I think that's a fair statement. 858 00:46:28,705 --> 00:46:30,624 -That's fair. -Generally-- 859 00:46:30,707 --> 00:46:33,126 The Department of Justice has the criminal authorities… 860 00:46:33,210 --> 00:46:34,711 -Understood. -…we have the civil. 861 00:46:34,795 --> 00:46:36,880 That's right. And on the civil side, 862 00:46:37,381 --> 00:46:43,637 more than 50% of the fines levied from SEC judgments are not collected. 863 00:46:44,721 --> 00:46:48,684 There are less financial judgments that are levied now 864 00:46:48,767 --> 00:46:50,686 than there were 15 years ago. 865 00:46:51,311 --> 00:46:57,568 It doesn't seem like the SEC has the ability to keep up. 866 00:46:58,235 --> 00:47:02,573 Is there anything that you would think could bring more teeth to the SEC, 867 00:47:02,656 --> 00:47:03,949 in terms of accountability, 868 00:47:04,032 --> 00:47:06,577 that would be more of a stick? 869 00:47:06,660 --> 00:47:12,457 I think what we can do is bring important cases 870 00:47:12,541 --> 00:47:17,296 that are sort of high-profile cases that show people, "No. You're over the line." 871 00:47:17,379 --> 00:47:20,549 It could be accounting fraud. It could be insider trading. 872 00:47:20,632 --> 00:47:24,803 But is there something that would be more of a deterrent-- 873 00:47:24,887 --> 00:47:30,934 More of a deterrent is bars, where individual accountability-- 874 00:47:31,018 --> 00:47:33,020 There's nothing like individual accountability 875 00:47:33,103 --> 00:47:36,648 to send a deterrent across the whole market. 876 00:47:36,732 --> 00:47:38,400 If somebody's held accountable. 877 00:47:38,483 --> 00:47:42,613 We only have civil law enforcement, but that means barring them from the industry… 878 00:47:42,696 --> 00:47:45,532 -Trading. Right. -…or trading, or appearing before us. 879 00:47:45,616 --> 00:47:47,159 Willing to litigate-- 880 00:47:47,242 --> 00:47:51,079 This agency has to be willing to go into court 881 00:47:51,163 --> 00:47:54,541 and, you know, take some losses from time to time. 882 00:47:54,625 --> 00:47:57,002 -But go into court. -Right. 883 00:47:57,085 --> 00:47:58,462 I think all of those things. 884 00:47:58,545 --> 00:48:01,423 But it's trying to use high-profile cases 885 00:48:01,507 --> 00:48:05,469 to bring folks back on the right side of the line. 886 00:48:05,552 --> 00:48:09,389 And also, I would say a focus on gatekeepers. 887 00:48:09,473 --> 00:48:14,770 Gatekeepers. The accountants, the lawyers, the underwriters and so forth. 888 00:48:15,938 --> 00:48:18,440 That sends a signal across a market too. 889 00:48:18,524 --> 00:48:20,317 Take out the little guys. 890 00:48:20,400 --> 00:48:21,401 No, no, no, no, no. 891 00:48:21,485 --> 00:48:24,321 The gatekeepers. The gatekeepers, Jon. 892 00:48:24,404 --> 00:48:26,823 Coming back in a year, we're gonna see how this all worked out. 893 00:48:26,907 --> 00:48:28,575 Give us a little bit more time. But, yeah, I got it. 894 00:48:28,659 --> 00:48:30,536 By then it'll be a whole different financial market. 895 00:48:30,619 --> 00:48:32,746 -All right. Thank you. -Appreciate it. Fascinating. 896 00:48:32,829 --> 00:48:34,122 -Thank you. -Thank you. 897 00:48:35,457 --> 00:48:39,670 A message from a Robin Hood to Robinhood. 898 00:48:39,753 --> 00:48:42,756 The whole thing about Robin Hood is... 899 00:48:42,840 --> 00:48:45,843 he steals from the rich and gives to the poor. 900 00:48:46,677 --> 00:48:49,263 That's it. Steals from the rich, gives to the poor. 901 00:48:49,346 --> 00:48:53,350 Robin Hood steals from the rich, gives to the poor. 902 00:48:53,433 --> 00:48:57,479 Again, from the rich, to the poor. 903 00:48:57,563 --> 00:49:00,315 Takes from the rich and gives to the poor. 904 00:49:00,399 --> 00:49:02,192 From the rich. To the poor. 905 00:49:02,276 --> 00:49:03,861 To the poor! 906 00:49:03,944 --> 00:49:07,698 You can't be a Robin Hood and not do that. 907 00:49:08,991 --> 00:49:11,952 It's not rocket science. 908 00:49:12,494 --> 00:49:15,122 You're a worse Robin Hood than Errol Flynn, 909 00:49:15,205 --> 00:49:18,709 and he was drunk the whole shoot. 910 00:49:20,043 --> 00:49:22,212 Thank you, Robin Hood. 911 00:49:22,296 --> 00:49:23,630 Thank you. 912 00:49:32,681 --> 00:49:34,933 I've been gone a long time, but I still got it. 913 00:49:36,602 --> 00:49:39,062 Thanks for tuning in to what has to be, I think, 914 00:49:39,146 --> 00:49:43,442 one of the best pass-fail financial seminars we've ever given here. 915 00:49:44,484 --> 00:49:46,028 I feel like I'm at the New School. 916 00:49:46,111 --> 00:49:49,114 Please check out these resources. 917 00:49:49,198 --> 00:49:52,159 And while you're on the Web, you can also listen to our podcast. 918 00:49:52,242 --> 00:49:56,288 It's ad-free, so you don't have to listen to me pretend to be excited 919 00:49:56,371 --> 00:49:57,831 about a better way to buy stamps. 920 00:49:57,915 --> 00:49:58,916 I won't. 921 00:50:01,043 --> 00:50:03,670 Although, if you are interested in-- No, I won't do it. 922 00:50:05,797 --> 00:50:07,758 We also have a website, theproblem.com. 923 00:50:07,841 --> 00:50:10,928 It's almost as good as YouTube, but it's not as good as YouTube. 924 00:50:11,720 --> 00:50:13,305 Which is also why we're on YouTube. 925 00:50:14,473 --> 00:50:16,433 Thank you so much for tuning in to the program. 926 00:50:16,517 --> 00:50:19,520 We will see you next time. Bye-bye. 927 00:50:28,904 --> 00:50:31,990 The rich and powerful employ an army of lobbyists. 928 00:50:32,074 --> 00:50:34,952 And the only thing that can fight back against that 929 00:50:35,035 --> 00:50:37,037 is an army of investors, like the apes. 930 00:50:37,120 --> 00:50:40,624 And this army needs to get organized and it needs to come together. 931 00:50:40,707 --> 00:50:41,875 And they need to engage 932 00:50:41,959 --> 00:50:44,127 with the Securities and Exchange Commission, the SEC. 933 00:50:44,211 --> 00:50:47,965 You can write comment letters. You can even meet with SEC commissioners or staff. 934 00:50:48,048 --> 00:50:50,092 By doing so, you can make sure 935 00:50:50,175 --> 00:50:52,845 that the rules and regulations that are being considered and passed 936 00:50:52,928 --> 00:50:55,389 are more favorable to individual retail investors 937 00:50:55,472 --> 00:50:58,725 as opposed to this conglomerate of Citadel and Robinhood.