♪ ♪ well, happy friday and welcome to "squawk alley." i'm jon fortt with carl quintanilla and deirdre bosa the reddit rebellion is where we're going to start this morning. gamestop resuming its rally now up 73% plus. amc also up 56%. blackberry up about 10%. survey of the shorts our next guest is saying the recent reddit trade is, quote, the messy middle of a revolution early robinhood investor and inside.com founder joins us now. jason, what a story. what an investment for you, i'm

sure you say you are off skiing but now you're back paying attention to the story there's a conspiracy theory brought out by winklevoss yesterday. >> i have no information on that and good luck with the winklevoss twins and trading bitcoin. they're heroes to me i'm joking i don't know that they know what they're talking about. i would disregard whatever they say. it is an interesting turn of events and, yes, that's a blizzard behind me this has tipped over into the consciousness of everybody on the lift in front of me people were talking about should they buy gamestop. i kid you not. this was a 15-year-old kid and parents and they're talking shorts i was like, you know what, this is actually why i invested in robinhood this is why robinhood was formed

robinhood, and i don't speak for the company. i don't have any inside information. i did not speak to vlad but did see the hit andrew did last night. that was a good get. congratulations on that. when they pitched me this idea at antonio's nut house in palo alto before the product was launched, vlad said to me we went to get millennials to trade stocks and i said these are the same people who are totally commitment phobic, they're on their mom and dad's netflix accounts they don't buy cars. they take ubers. how are you going to get them to do that? what's the opportunity there he said, well, what if we do -- what if we do get them to trade? what would that look like? okay, great. i like that idea it's a new market. i said retail is gone. there's no retail investors. i like the way you're talking. great, keep going. what's the business model? we're going to let them trade for free i'm in this is a great idea this is what my life is.

the same pitch as uber people are going to give up their cars and use an app. these crazy ideas work >> is this free-to-trade model as we see it now sustainable under these conditions how much money is robinhood going to need in reserve is it going to have enough to operate when things like we've seen over the past few days happen >> yeah, and that clearly is the issue here clearly communication wasn't very good. vlad owned that. great. these are growing pains. facebook went through 12 of these. uber went through 17 of these. i talked to you about every single one of them hyper growth has edge cases. they're going to need to have more money on hand i'm not an expert on the regulations of what the covenants are and what the coverage needs to be but this is a great stress test of our financial system and it's absolutely awesome that young people are on wall street getting this financial education

because the way to accumulate wealth in the united states is to own equity and equity participation. you cannot win just being and you condition change your strata in life and move up intoanothe level if you don't have equity participation. it's very hard to do that on income and so it's great that this education is occurring you have to understand when something hits number one in the app store, that is a large amount of downloads. so this is as if everybody in the country decided they're going to go to las vegas on the same weekend this is unsustainable. it's unsustainable to onboard all these accounts, i am certain. and it's unsustainable, certainly, to have people either trading on margin or doing puts and calls. this is unprecedented, and i think they're going to need to digest -- they're not the only ones every single broker is having the same issue there's too much participation and that participation will take time to digest and we'll get on the other side of it i'm sure. >> jason, it's deirdre

you mentioned the interviews that vlad did last night he said in a number of them that robinhood has restricted trading to protect their customer. who is robinhood's customer? >> i think ultimately it's those retail investors if they lose them, there is no business >> hold on the retail investors, jason, a customer is someone who pays robinhood, as you've mentioned a few times. the retail investor does not pay robinhood. those are commission-free trades the customer is actually wall street, isn't it it's the market makers who pay for order flow so how can the business model be let traders trade for free it's actually making money off order flow, is it not? >> ell, of course, and they're very upfront about that now and it's been very clear some businesses are based on having large audiences that trickle. >> are they? are they like you said, they talk about democratizing trading and commission-free trades all the

time we rarely hear them talk about order flow >> i think people understand it. i think it's in all the terms of service, and they've been very clear about it it's very similar to the facebook situation where you get a free product if those consumers don't use facebook or instagram or twitter, the free product or cnbc, the free product, you don't have the ability to make the money off that audience, if you will >> okay, so, jason, you brought up facebook -- >> yeah, sure. go ahead >> so there's been a lot of trust lost in facebook over the last few years >> absolutely. >> so why should traders trust robinhood if they now know they're turning around and selling their trades to market makers and perhaps not executing at the best price? >> number one, they've been clear about with the market makers that's how they make money. everybody understands that the second piece is should they trust them after having turned off trading yesterday? i think they have to rebuild that trust so i think these companies when

they go through crises like these and every company whether it's tesla, whether it's facebook, whether it's uber or airbnb when somebody trashes an apartment, these new platforms, there's always going to be these crises moments the way you can judge the founder do they communicate well i think vlad is doing a good job of that and did last night he'll do a better job tomorrow you ask the question, let me give the answer, please. the answer is they need to earn that trust every day by having a stable great product and whether it was uber, which took a lot of hits, or facebook and instagram, yes, all these platforms have taken hits and have made mistakes what i look at as an investor is do they learn from them and do they get stronger. >> jason, what i'm hearing you say basically, i mean, i'm less concerned about robinhood and more concerned about the broader market -- >> i think that's the big issue. >> the classic cyclical flow of retail into the market and that

it will ebb out, as it always does i don't hear you talking about major structural change or some sort of end of centralized finance as we know some people tried to argue on our air. >> yeah, that's a little silly the crypto folks going down the crypto rabbit hole the block chain that's not controlled by anybody. that's super interesting and a great intellectual argument. not very realistic sometimes you do need to have central controls and bitcoin is a fantastic technology they're a little drunkon the distributed finance and all of that stuff i know it's real but you can't apply it to everything what we saw here was these shorts, i mean, i think that's the bigger issue it's easy to gang up on robinhood, whoever the lead company is, all due respect, deirdre, and they have the responsibility as the lead company to be the best performing company, and i guarantee you they will be the best performing company. i've seen this movie before. putting that aside the big issue

here is who is shorting this stock? how can you short 130% of a company? i still don't have a great answer for that. that makes no sense. and have these shorts all covered their position if people are buying the stock now at $20 billion or $30 billion or whatever they wind up buying at, any chance the company can live up to that? and has the company done a secondary? have they put a billion dollars of this incredible acceleration in their enterprise value into their coffers? and is there some vision for how gamestop becomes aed $20 billion company? i see it becoming a $5 billion company. that's what i'm getting concerned about. >> i am, too, jason. something i've raise thid this not just wall street bets but this whole surge that we've seen in consumer interest in finance is handling some of the nuts and bolts, too equity investing is great, but so is saving so is budgeting. so is getting those tools and

tips together, getting good research together so that the individual retail investor has really deep insight into what's happening with these stocks. do you think that's going to happen is that an angel investing opportunity, and when? how? >> it's already happening. what you're seeing now between young people who have time on their hands, instead of gambling, instead of going to vegas, instead of going to school and being on zoom classes and playing video games, they've decided this is a more interesting video game they're learning by doing. that is the best way to do it. if you don't understand -- if you want to learn to play poker, get to a poker table and play below stakes games don't play high stakes, though that's what we need. >> i hope it's instead of gambling it's harder to do the research versus to be on a ski lift and talk about should i buy gamestop it's harder to download a pdf and figure out a model for selling that not just to 50 or

500 people but 500,000 people. how is this movement or maybe the kinds of silicon valley innovators who brought us robinhood, how are they going to get us there >> it's already happening. if you just go to wall street bets and you start reading some of these threads as my besty chamath said wednesday when he was going on his tirade on "halftime," i believe, these folks are very sophisticated and they have time on their hands and collectively, collectively the internet can produce amazing things that individuals cannot one example of that is the wikipedia. there is no paid staff yet they've built the biggest corpus of knowledge and it's growing every day, day in and day out. somebody has to pay for this stuff, right back to business models, i think that's what's happening and there are discord services talking about it it will be amazing for society what they're also doing is

stress testing all of these crazy hedge fund folks who short stocks and then do all the fear, uncertainty and doubt. the fud they did to tesla, betting against tesla for years, and i had to come on the air and say it's the greatest car in the world. the guy landed two rockets at the same time. why are you shorting this stock? it's so stupid shorting elon musk is the stupidest thing you could do this is like shorting apple and steve jobs. >> not to say all shorting is bad. >> of course >> enron we had shorts against the housing bubble sometimes the shorts are the heroes questions about what happens when we end up in that situation. jason, i think we have to leave it there >> thank you for the time. i'm going to get out in that blizzard and hit some runs >> enjoy the slopes. jason calacanis, always great to have you in the meantime the debate continues over j&j's vaccine data we got earlier this morning. meg terrell is covering that all day. so j&j with its single shot

vaccine reporting results from that phase three trial and 44,000 people across three continents in the united states efficacy of 72% against moderate to severe disease. overall globally the efficacy was 66%, which included south africa where they saw a lot of that strain of b1351 which was thought to evade the protections from vaccines. importantly they're focusing on this figure, 85% efficacy overall in preventing severe disease, actually keeping people out of the hospital and preventing potential death from covid. now the company says it plans to file for emergency use authorization in the u.s. next week and in addition to being a one-shot vaccine this one can be stored in the fridge for three months at 36 to 46 degrees fahrenheit we talked with the chief scientific officer about that severe disease figure earlier. here is what he said >> we got 85%protection agains severe disease

100% protection for death and 100% protection for hospitalization. you look at the challenge of the pandemic at the moment, it's exactly that it's people dying, people get to hospital, and people getting to intensive care and so it showed that across the regions including in south africa where 90% of the patients with the south african strain we got this high protection including protection for death and hospitalization. and that's where we think it's important. >> now, guys, novavax out with data from a trial in the uk and one in south africa. they showed 96% efficacy against the prior strains. up there with the mra vaccines and 49% to 60% efficacy against the b-1351 these trial results were outside the u.s. we've heard from dr. faulk why from a u.s. trial. i talked to the ceo of novavax

who told me they're hoping to use these data once they complete the trial to potentially file in the u.s. here is what he said >> our expectation is the first licensure will be in the uk. what we hope to do, we'd like to do is take those data and those submissions and submit to the ema of europe and talk to the fda and see if they will accept for licensure and other places like canada and australia. i think mhra is a well-respected regulatory agency. if they give us a blessing and then i think a lot of other people will follow on very quickly. >> so, guys, we have to see what the fda would do with that here. thee are going to be evaluating j&j next because the data came from the u.s the fda did not accept astrazeneca's data from overseas they are waiting for the u.s. results. novavax perhaps could be different. we'll have to see.

back to you. >> yeah, we will meg tirrell, thank you for that. big show ahead the former ceo of etrade joins us next with his take on the reddit rally here you see some of those names surging again today. don't go away. competition beat us, again. how? they have a better finance system than we do. i feel like they might have a better finance system than we do. workday. how do they make better decisions faster? workday. got to do something. workday! i think i got something. work... hey, rob, you're on mute. hello. [all] hey... there he is. workday, the finance, hr, and planning system for a changing world. ♪ch-ch-changes♪

it's moving day. and while her friends are doing the heavy lifting, jess is busy moving her xfinity internet and tv services. it only takes about a minute. wait, a minute? but what have you been doing for the last two hours? delegating?

oh, good one. move your xfinity services without breaking a sweat. now that's simple, easy, awesome. xfinity makes moving easy. go online to transfer your services in about a minute. get started today. some of those restrictions in those highly shorted names have created an outcry among politicians and investors alike. joining thus morning is the former etrade ceo karl roessner currently ceo of left terrace

acquisition corps which is look to go acquire a company in the fintech space. happy friday it's good to see you >> good morning, carl. thank you. it's nice to be here >> i want to talk a bit about sort of robinhood reputational risk and all of that it sounds like the most important thing you're trying to get across is the urgency of the s.e.c. to start to draw some guidelines, otherwise we're going to continue to see interest and money continue to flow in and heat up the space. >> so, i think, that's right, carl i think it goes back to the first steps in trading and investing is extremely important. it started a movement a long time ago when etrade dropped the first trade over the internet. but you flash forward to today and with the accelerated adoption of it technology as a result of the pandemic as well as the willingness and necessity really for folks to interact with their finances remotely and you begin to see more and

more the leveling of the playing field that's being pulled forward for retail investors so you couple it with the execution speeds, their willingness and ability to participate in these markets, and you couple that with social media and you start to see how we got to where we are it's truly uncharted territory, and i believe we're in unprecedented situations so when i talk about the s.e.c. coming in, okay, we need more regulation and thoughtfulness around what's happened, but i do believe it's great to see the playing field leveled to the point the retail investor really matters and has the ability to participate in this marketplace. but when i talk about the s.e.c. and rules and regulations coming onboard, they can't just be focused on the retail investor and stopping trading or putting them in the penalty box. it has to be a system wide situation. you have to find or make a

solution to the entire thing >> right now that makes sense i mean, give our viewers a sense of what's a good idea of a sample regulation that you think might make sense that has sort of universal acceptance among lawmakers and regulators what could we be looking at say six months or a year from now? >> i think one of the most morning things is to take a step back and look at the entirety of the situation. social media and its use and adoption when you couple that with retail investing or trading, i think that's here to stay and i think it's important because i think that social media is a phenomenal way to get education now, teach investors about the market, share ideas, share thoughts about companies or that information sharing piece. so i don't think it's going anywhere quickly but i do think piloting some rules and regulations around the exact type of trading in situations we're seeing today on both sides, that's what the s.e.c.

really needs to focus on take a look at it. run a few pilots take a few names see how we can get to a point that you're not just moving the goal posts on the retail investor that's what has always been done in the past and that has to stop >> karl, what should happen with short selling? not a lot of tears being shed about citron's pain for sure today. i think about mortgage-backed securities, the big short. i think about enron. time when the shorts were arguably the good guys and i can imagine the scenario under today's conditions where those people could get taken out. what should happen there >> i don't think you can look at just one trade or one type of trade by being a short position. you need to look at all of the options that folks have to trade. all of the different ways they can get involved with their finances and securities. i don't think it's fair to say shorts aren't good or bad. as you just pointed out in certain situations they can be

quite helpful at getting information out to the marketplace and alerting investors. what's going on today in the market, again, it's completely unprecedented. and we haven't ever seen this type of activity and the types of names that we're seeing it's a movement. it's not necessarily just about valuation of companies it's a movement and the retail investor is taking the plan. >> karl, it's deirdre. we got into this conversation a little bit with jacob calacanis. robinhood's business model relies to pay for commission-free payments i wondered does that make it different from other brokerages? there's been talk over the last 24 hours that, yes, it wasn't just robinhood restricting trading. other brokerages did that as well but robinhood has its own clearing house does that make it different for them >> so payment flow is a

situation that's been around for a very long period of time when you look at payment flow in the way that trades get routed you need to look for the best execution for your customer at all times. i'm not going to get into robinhood's practices or any other firm's practices on the back end of that, but that is really a way to get your customers the best possible speed and pricing on a trade that you possibly can each and every time they press that trade button that's the way that has to work. there is a payment involved because the market centers on the back end and wants to interact with the flow coming from the retail trader and that's a very competitive marketplace in order to route your trades because they have a way of monetizing those. so it's a practice that you need to be extremely careful about and you need to be almost religious in terms of your approach it really matters to the investor how well you run that system on the back end

>> finally, karl, i wonder do you see any of robinhood's competitors using the scrutiny on robinhood through a marketing effort to say, look, they're not treating you right, we will? is there an edge for their rivals at this point >> look, i think that robinhood and others are faced with very difficult decisions in terms of what to do with capital requirements, in terms of positions that had been opened on their books and how to respond. when i was at my former shop, i know it took the approach of sort of piling on or getting involved when others are having outages or issues because it can quickly be you so i wish them well and i hope they work through it i wish them well in future endeavors. >> karl roessner, formerly with etrade what a week. we'll see you later. >> thank you all very much

and still to come early robinhood investor tim draper. bitcoin's boom and a lot more. (vo) businesses are always making choices. here's a choice you don't have to make: the largest 5g network... award-winning customer satisfaction... or insanely great value. now, with t-mobile for business, there's no compromise. network. support. value. choose. all. three. t-mobile for business. ready when you are. sofi made it so easy to pay off my student loan debt.

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take a look at the reddit trades as we head to another quick break. gamestop up more than 70% in today's session. blackberry up another 9.5% they just keep going early robinhood investor tim draper joins uafr e eas tethbrk. a visual snapshot of your investments, key portfolio events, all in one place. because when it's decision time, you need decision tech. only from fidelity. your grooming business is booming. you need to hire. i need indeed. indeed you do. the moment you sponsor a job on indeed you get a shortlist of quality candidates from a resume data base. claim your seventy-five-dollar credit

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one key decision by robinhood made two years ago is now being seen as that first domino, that triggered the platform to restrict trading kate rooney joins us on this kate, this is wonky but it needs to be broken down. it's such an important part of the story. >> that's right, deirdre this is key. i talked to a ton of analysts and even some early robinhood investors last night who say the decision in 2018 by robinhood to get rid of a middleman -- so they now clear and custody trades in house is the crux of what's happening this week it kicked off robinhood need to go restrict games of gamestop. going back to 2018 this was a major investment, seen as a money safer at the time. vlad tenev told me this would help them expand quickly and liken it had to apple deciding

to build its own chips or amazon investing in fulfillment centers. instead of relying on a third party, think of square, who use a middleman and another clearing house, robinhood settles and clears customer trades, provide custody for assets giving them a bigger slice of the revenue behind trading it also raises the bar for how much money robinhood needs to have in house to meet those capital requirements they need to send cash every day to the depository trust company nope as the dtc, and that can change on a dime based on trading volumes. i'm told the dtc increased the amount firms needed for margin calls especially on gamestop robinhood told cnbc these moves were preemptive. they raised $1 billion from existing investors, sequoia and ribbit in there, had to tap their banks for a line of credit, and told some customers

they might need to close at-risk positions. robinhood getting accused of changing the rules in the middle of the match robinhood has to comply with regulators it happens all the time at schwab and fidelity. viral social investing, robinhood has been the face of it, people are piling in the same stocks and using a lot of leverage jon, back to you >> kate rooney, a lot to digest and investors need to understand how all of this works. for more on the reddit revolution and for his reaction to this boom that we're seeing in bitcoin early robinhood investor tim draper. tim, great to have you what's the lesson about the way markets are changing from what we're seeing and i know that besides being early in robinhood you are you

were also early in tesla tesla has been dogged by shorts in the past. i'm sure you're not crying any tears for the likes of citron. what's this new era we're entering into? >> i think if the government locks people up in their house for long enough those people figure out ways of gaming and eventually breaking the system this is really -- to the reddit investor group, my hat is off to you. it is amazing what you've done to take a company that's clearly on its last legs and bolster it up with investment and send a ripple through the -- i don't know if a ripple is the right word -- >> tidal wave. >> of fear through the minds of these short sellers. and it's true.

they make money. they're like the undertakers of the financial community. they make money on the harm of others >> i mentioned before mortgage backed securities -- >> they do create liquidity? >> the big short, enron, sometimes the shorts will do investors a service, right >> they will highlight things that need to be highlighted, absolutely and they create more liquidity in the market and that is an absolute wonderful thing to do on the other hand, i kind of love what's happened here. the reddit investors have used robinhood and other platforms but mostly robinhood because it's so easy to use. they've made it so there are no commissions on the trade they've made the app so easy it's as easy as ordering a

burrito owe something. and it's kind of allowed that small investor to get involved i feel for the small investors who are getting caught in the middle of it, not really knowing what they're doing and jumping in and getting stuck because when robinhood hits these ratios they have to stop trading. when you have a short position like that or when the short guys have the short position -- i never go short i don't recommend anyone ever to go short your down side is unlimited. >> well, tim -- >> yes, go ahead >> sorry i just want to ask you something -- it's deirdre, by the way. good to see you.

as an early robinhood investor, how was the business model pitched to you >> i asked how are they going to make money and it was on selling the data and that was a great model. and has been a great model and they've grown and that has allowed them to take more responsibility >> tim, i just wonder does that business model, though, incentivize robinhood to act in the best interests of its traders or to allow market makers to pay for the flow and allowing them to profit off these commission-free trades >> well, they love their customer they love the small investor who can participate in this global economy. >> but are they getting the best executed trade in this business model is the retail investor getting the best executed trade the best price for their trade >> they're getting a lot better

than they did from any other, so, i guess that would be a yes. >> tim, let's talk about bitcoin. it has been moving on -- i'm not sure exactly why it has been moving what is your take? how much of this has been about the sort of global and even u.s. domestic instability how much of it has been concerns about the financial system and even the situation we were just talking about and whether it's rigged against the little guy and how much of it is what you've been say that go bitcoin is the future and it will go up and up and up? >> well, i do think that bitcoin is just a better currency and in all technology battles out there the winner is the one with the best technology.

eventually people see the light, and it's starting to happen. bitcoin has been a marginalized currency and it's gone mainstream when the u.s. printed all that extra money people said, oh, wow, there's an inflation risk and they didn't want to go back to gold because that's going back into the past, that they would want to go into the future and have some sort of a hedge. now actually the financial institutions are saying it's a risk not to have bitcoin in your portfolio because they've made calculations that even 1% your portfolio of bitcoin hedges against inflation but it also has the potential to make a 1%

return on the entire portfolio >> and you're a savvy investor, tim, of course -- >> it's gone from marginalized to mainstream. >> but how much -- >> i have to have it on my balance sheet. i have to be a part of this. >> how much have you sold? i know you're still holding -- i assume you're still holding bitcoin, but how much have you sold is this a hold on for dear life situation for you or do you balance out your portfolio over time do you have a strategy where that is concerned with bitcoin >> no, i'm actually just buying more the thinking is -- over time we're going to be able to spend it i have no interest in ever selling my bitcoin for dollars why would i take the currency of the future and sell it for the

currency of the past do i want like con fefederate dollars? no i'm looking to continue to build on my currency of the future but long term i like to put this to work i think the regulators will recognize this is a valuable way for people to conduct business and they get their tax dollars, they get their share and with my business, i can actually raise money in bitcoin, invest it into a bunch of companies in bitcoin and play suppliers in bitcoin and the whole thing keeps a perfect record of everyone's financials all the way through so i can see how my portfolios are doing. >> i love that whatever one might believe you

can pay in bitcoin, too. >> it then filters through on a smart contract so i don't need to have a transfer agent or the audit, i don't have to have the accountants, i don't have to have the book keepers. it's all done right there on the block. >> you clearly believed in it and the fact you are adding even as high has it has gone speaks to that. tim draper, thank you. we're watching a couple of different things one is the treasury secretary briefing the president on the state of the economy comments from president biden a few moments ago. we'll get those to you after the break. despite the selling today nasdaq is hanging on to a gain of 2% or more for the month led by some gainers.

the attack on short sellers continues this time from ceos. citron research said it will no longer publish short reports and instead focus on long positions. shopify ceo, betting against the stock back in 2019 now says that he will donate $200,000 to the robinhood fund

not the trading platform also boxes, aaron levy tweeting, quote, did you it, reddit. wow. we are going to ta aui eamuch more ahead. change is all around us. shaped by technology and human ingenuity, we can make it work for you and your business. ♪♪

gamestop was the big hedge fund squeeze, at least that's how many in the reddit community framed it. so what is the view from within the long short hedge funds the active hedge fund had taken a position in one of these

shorted names, blackberry. he joins us now. brad, do you still have that short position in blackberry >> no, no, no. that's a mistake we weren't short blackberry. we were long that stock in our long/short portfolios. >> okay. got it and are you still long then? it. and are you still long then? >> we are in the high teens and it certainly went higher and lower and we caught a nice piece of the move and there's been plenty of them >> okay. let's talk about this whole phenomenon more broadly. we just heard from some ceos speaking out against citron, abandoning its short selling do you think this changes the industry the way that hedge funds play short bets ultimately >> for the time being they're going to certainly be more cautious we do have a short only etf with the symbol ofhdge. i used to do this for the bass brother, as well in the mid-90s

and it was certainly a robust rally period and i ran a long hedge fund, as well and i can say that experienced short sellers traditionally do not get into these crowded names these crowded names, frankly, are extremely expensive to borrow from the banks and it's just something that we really don't engage in. if we find a company that we think stinks and we think it might have a bankruptcy, but the fact is that 50 or 30% of the float is already short, there's really, you're telling noah about the flood. everyone's on it everyone knows about it. the idea of shorting is basically finding names that no one's heard about that are in trouble and not the high-profile names that can get you in trouble like what we've just seen >> that's interesting, brad. i guess two questions would follow from that one is how do we explain melvin. the other would be, it doesn't sound like you necessarily agree with this dark view that the

short funds will be scared into shorting from now on they'll delever on the long side spreads will widen markets become more brittle and that's how crashes happen and it doesn't sound like that's the scenario taking place. >> i'm wnot saying that things haven't gone overboard in the past year. i have a research portal called lmtr.com this we put out a lot of this stuff in all of the gauges and the put call ratios and any type of euphoric type of sentiment that you're looking at is very 1999-2000-ish and the fact is there was a lot of money on the side lines and people were scared and they didn't want to put money in during the year we were very bullish at the lows and hdge and etf went to 50% cash we are certainly not there now, and i definitely think we need a

pullback, and i frankly think that higher interest rates are probably going to be the catalyst no matter if the fed likes it or not. >> so, brad -- >> go ahead. >> so how should the rules change around the process of shorting and how much people are allowed to pile into these positions? >> yeah. i've always thought -- like i told you, i think it's crazy that some of these guys gang up on these stocks at 40, 50, 80% because the winner is the stock lending departments that are lending you the stock at 30% interest a year. so when you think about that, if you think that you can make 50% on a stock, but you're paying the bank 30% a year in interest, that leaves you a very small profit left over so to borrow securities at such a high interest rate just doesn't make any sense to us whatsoever >> brad, why are hedge funds allowed to short up to 50% of

the flow of a company and that's the economic benefit of that >> there is no benefit except that they obviously felt like they've done a lot of work they've put a lot of time and effort interest finding something that they think might go bankrupt. maybe the positions, the company is so small that they continue to pile on even thereafter you know, being over 100% is illegal. the security lending departments are certainly as much to blame as anybody else. you have to be able to secure the borrow before you lend a stock and that's just a lackadaisical compliance officer as far as i'm concerned. i mean, to be -- >> if there is no economic benefit, then i wonder -- go ahead. >> well, you know, there is no extra economic benefit except that they want to short more i mean, there is none. for me, i run a group --

right. >> i run a group and we have a strategy called focus momentum and we, specifically, go after stocks that are highly shorted as you know, a few years ago i came up with the xqzz etf and i had a disagreement with the group that was running it for me so i moved it into an sna account and we've caught many of the stocks all year long and it's frankly puzzling to me why so many managers pile into a name like, say, workhouse which we're still long and it's 30%, 40% short flow like, it's crazy, and it gives the longs a huge -- brad. >> right >> well, brad, thank you for coming on and explaining this to us brad lemensdorf. >> thank you >> as we go to break, take a look at new york city. governor cuomo following through on a promise to open indoor dining at new york city restaurants on february 14th

maybe in-person weddings by march 15th we will watch that, and as we go to break, take a look at gamestop remains in a pretty narrow range relative to the ysice action in the next few da we'll be right back. zip cod or just the west side. run payroll in less than five minutes with intuit quickbooks. does your vitamin c last twenty-four hours?

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>> before we go, the information has a piece out this morning on the reactions of several robinhood employees yesterday after the platform restricted buying of certain stocks like gamestop saying the company, quote, lost its way in its decision to halt trading robinhood then in response gave everyone on staff about a thousand people $40 doordash gift cards, a gesture, john, that the information says was largely seen as empty handed so they're not only dealing with blowback from their clients often dealing with blowback from their staff. >> rough week in a lot of ways for robinhood. you heard from jason earlier, deidre, about still believing in the company and its mission. we'll see if some of these individual investors who were caught in this situation this week, forgive them, but i've got to think it's not everybody, probably on robinhoodthat was

caught in this, and if they raised a billion there y can afd to give away the $40 gift cards. >> it's the narrative they've made over the last few years empowering small investors and as people are finding out on the show that they're just as much in bed with wall street as many others, carl >> yeah. have a good weekend, everybody we'll see you on monday. let's get to the judge carl, thanks welcome to "the halftime report." i'm scott wapner the state of stocks after this wild week ask what lies ahead for it >> joining me for the hour jim lebenthal, pete najarian and kate firestone, and we'll take you to the wall to see where stocks are currently trading s&p is off 1.25%, you and the russell 2000 flat and the worst week in about three months and i like to set the state of play. we have the month end for the markets and the s&p is fla