5-45 senate vote. afterwards, the senate approved the trial and adjourned until tuesday, february 9, marking the start of the senate impeachment trial. watch the senate impeachment trial live at 1:00 p.m. eastern on c-span two, streaming live at c-span.org, or listen on the c-span radio app. >> we are back with public radio full disclosure host robin, who is going to help us decipher all of the news we heard this week about gamestop and read it and the stock market and hedge funds and make all of this make sense to us. welcome. good morning. host: let's set the scene. tell us what happened with gamestop, reddit and the stock market. guest: revenge of the nerds is the easy way to call it. you have a group of diehard

renegade retail investors. a lot of them use the app robinhood. the honor of gamestop. gamestop is a struggling mall retailer that sells video games, comic books and other things. the stock has been assailed by short-sellers, these hedge fund investors that can go in and borrow a stock and that it will fall and put pressure on the stock. kind of a feeding wolf pack mentality. these guys meanwhile want to defend the alamo. they say we can ruin their lives. we can make their mischief painful and difficult by banding together and buying gamestop stock. not for any fundamental reason. not that anybody is driving to

the multibyte videogames of this company is out of the woods in any measure. long story short, when that happened in these people engage in that self-fulfilling prophecy, the stock is up 15 fold in less than a month. that really hurt the short-sellers out there. they are getting the sensitive vindication and the little man won over the wall street fatcats in the country is fascinated. host: for those of us who read peter lynch's "beating the street" in the -- and decided the stock market is not for us, what exactly is shortselling? why is it effective? it seems like it would not make sense to bet for a company to fail, which means the stock would go down. what is the hedge fund part of this? explain how believing in a company, even though it's not a

great company, would hurt the hedge fund. guest: suppose the hedge fund is skeptical. go back to enron in 2001. i hedge fund short-sellers was notoriously skeptical. financials don't seem to make sense. every time i asked more and more about the dynamics and particulars, they footnote the financials even more. they move stuff off the balance sheet. i have a thesis this is a scam, that something is decidedly un-kosher. someone looking at lehman brothers in 2007 saying their exposure to real estate and the bad debts is worse. there is a lot to this massive iceberg. i don't believe it should be a $100 stock. i believe it is worth less than that, maybe worthless.

what you are able to do as a skeptic, and you have to be a hedge fund a lot of times. there are requirements are having lipid assets and financial sophistication or investors with enough of a risk tolerance. you can go say let me borrow the shares. hook me up with $10 million of enron stock. since i'm borrowing them, i'm going to take them and go out and sell them in the open market, get the $10 million of proceeds myself. in the future, fight over those shares back to the brokerage firm. i'm betting if they fall from $100 to two dollars, when i have been vindicated, i can go back and close the short position by buying all the shares back. hi pocket the difference between $100 and two dollars. the difficulty with that is let's say you buy a stock. the most you can lose is what you put into the stock. i by $1000 of the stock, that's all i can lose if it goes to

zero. the short-sellers can just keep losing money if they are wrong. tesla. there was no shortage of short-sellers two or three years ago. we think it is a scam. he's not going to make money on cars. i don't trust his financials. the problem is when they were shown to be wrong and tesla is turning a profit and suddenly added to the s&p 500 index, all the skeptics have to cram back into the room and by the stock back to cover themselves. that causes this buying frenzy. this unnatural thing. tesla has now become those valuable carmaker in the world. a large part of that is the short squeeze. these guys on the wall street bets reddit forum can cause that. we can cause the tipping point by going and in a mischievous way buying the stock in making

their lives difficult enforcing this game of chicken for the hedge funds don't know if they stick around long enough. i can't lose millions of dollars on this. what you are seeing is a short squeeze. is esoteric. we buy indexes or mutual funds. he's a kind of drips in the lake of the ocean what happens but it is fascinating to see animal spirit back in retail investment the life we have not seen in 20 years. host: let's talk about robinhood. there has been a fear -- furor of them blocking trades. guest: robinhood is an app. it has not been covered a lot on

wall street. the collapse of the trading. he used this he adds on tv. gigabyte 50 years, sometimes you have to pay $150 to trade a stock. there are 70 brokerage firms and apps like robinhood who will offer free trades. they have taken out the friction. you don't have to second-guess if i go out there and speculate if i have to pay $10 here or $20 there. they come out, robinhood, under pressure and restricted people from investing in the stocks, these speculative things. the wall street bets community is targeting gamestop at amc. that caused a huge pushback from investors saying you are allowing the hedge fund short-sellers to go in there and pressure it and we are trying to do something to counter them.

we have skin in the game and risking money. that is not fair. i think a lot of people are chiming and saying, are these guys supporting market manipulation? people are deciding fundamentals be damned. i like the concept of gamestop at amc and blackberry, nokia, blockbuster video. i would to go out there and defend their honor. is that market minute relation? that's an open debate. these small investors, this pack of -- there are many metaphors. this swarm of fish, whatever he want to call it, they are fronting their own money. they are on the line. this is a really fiery debate that will spill over into next week and the rest of the year. host: let me provide viewers and followers they can join in on this conversation.

if you want to talk about what's going on in the stock market and the economy, we will open up the regular lines for this conversation. democrats, you can call in at (202) 748-8000. republicans, your line will be (202) 748-8001. independents, you can call at (202) 748-8002. keep in mind you can always text us at (202) 748-8003. we are always reading on social media, twitter and on facebook. like we said earlier, this is an esoteric conversation going on that seems to be affecting only a small segment of wall street and the small bettors -- small investors on robinhood and similar apps. are there any concerns this

could cause a stock market crash or even bring the economy down? or is this just a flash in the pan? guest: there is worry this could cause more volatility. they could cause you to think twice if you see strange echo chamber movements and individual stocks. -- in individual stocks. differ holding the broad index, it should be muted because these companies are tiny players. if you are diversified, your protected. you cannot trust the information flow coming out. the worry is a band of retail investors could come up with a prophecy, whatever it is, and self fulfilled it. that's a dangerous amount of power. the small investor has this power. you can band together. this unionization sticking it to the big you will hedge fund in the lore of what these people are saying.

it is not like the little rascal gang collecting $.25. these are people fronting thousands of dollars. it's a high-stakes game of chicken. there are investors -- there was a piece in the wall street journal. they devil just for giggles -- dabble just for giggles. that's dangerous. people will get burned. there is room for manipulation, for things -- you look at gamestop. suddenly a company with billions and billions more of market valuation than it had a month ago for no fundamental reason other than this battle between small retail investors and short-sellers. could it turn real? could gamestop make enough paper money on these small investments to go out and sell a ton of stock and by itself another

reality? that is when this gets meta. so much of this seems stranger than fiction. i could not have predicted it even weeks ago. host: does this make a difference for a company that is still open like gamestop, like blackberry? we saw a similar jump in hertz stock last year after they declared bankruptcy. does it make an actual difference ideology the audi to these companies who stocks are being that around like this? guest: if it lasts long enough in the market capitalization is sustainable in the bank takes it seriously enough to allow the company to come in and do a secondary offering. then again, sell more stock or something like that, what are

you going to put into the prospectus or the offering statement? well, we are so blessed we are suddenly worth $5 million more than -- $5 billion more than we were a month ago. please buy the stock. there's not much to hang your hat on. you take apple for example, 1997. maybe it was 60 days away from bankruptcy. it had really kind of innovative is way out of morass and over 25 years become the most valuable company on the planet. tesla gets out of its short squeeze and something worth a lot. added to the standard & poor's 500 index. institutional investors can come in. they can parlay that and sell that to investment bank and say let's do a bond offering on this. let's do a secondary stock offering. i don't know if a shell company or gamestop suddenly comes out,

i don't know how you pitch that. we have this ragtag group of investors that likes us and sell stocks into that momentum. that is speculation. the longer it does last, the executives do bank money because they are pegged to the stock. it would be so fascinating if the reddit community could sustain this for so long it creates a company. i for example love rc cola. on the last person in the united states who seeks out rc cola. could i create a movement where i have rc cola separately traded from its parent company? we run up the stock and sell stock and build a marketing budget and flood the place with rc cola and suddenly give pepsi and coke a run for their money? that's a tall order but it might be for a great screenplay fodder. host: i remember rc cola. my grandfather paid me in moon pies and rc cola.

guest: love them. host: the same question came in from one of our social media followers. i will put it in his words. we have a social media followers saying, "he mentioned market minute relation in regards to the reddit community. how is there behavior different from hedge funds who push the stock price down?" guest: hedge funds are working on it. this is a fair criticism. hedge funds are not allowed to engage -- no one is allowed to engage in a pump and dump scheme to put out false reports and make things up. there are bears reports that have been vindicated. i front of enron, lehman brothers. there are dozens more that have failed. they fell on their face. one hedge fund came out in 2012, 2013, and said chipotle's days are counted.

you cannot charge seven dollars for a burrito when taco bell is coming after you. i was like this guy has never been to a chipotle or recently at taco bell. he was wrong and lost money. that's the price tag attached to it. your skin is in the game if the stock goes up. they are also regulated. they can't go out to do these schemes where they pump something or dump something and do the opposite. it's a higher stakes more regulated game. i see the argument of an apples to apples comparison. the question is, are you seeing anything that says i think these hedge funds, their thesis is wrong and i believe there is much more in the way of fundamentals at gamestop? if we buy the stock we will be vindicated? that is fair game if you going out there and saying let's

attack for attacks sake and make of this narrative or fiction, i think the sec could be all over that. host: speaking of regulation, we have a story from axios. senate banking chairman says he will hold a hearing on the current state of the stock market in response to the events of this week. "it's time for the sec and congress to make the economy work for everyone,. not just wall street." what can congress do and should they be getting involved with reddit and robinhood shortselling? is that something congress to get involved in? guest: i don't know. there are regulations. fair disclosure. you have to come out and offer -- you can't get anybody first dibs material information. it has to be released in one fell swoop.

what are they going to regulate? free speech issue. a bunch of people on a reddit community want to risk their own money and take on a group of adult investors who are out there with a riskier than usual behavior in shortselling. as long as there isn't misrepresentation or calling a broker in boca raton to pump this and have mom-and-pop investors on the other side of the trade, i don't see what congress can do. congress wants to have its say and call hearings and say we have to get down to the bottom of it, they try to do it with a flash crash in 2010, markets will market. what can i say? host: let's let viewers take part in the conversation. veronica calling from tampa, florida on the democratic line. good morning. caller: good morning.

i would like to say i never look at this station. i don't. tiktok. i have learned so much about the stock market. these millennials are basically telling amc is going to the moon. i spent $2000 this week. i never did anything like this before. if you go on tiktok, you listen to these kids and they are telling you -- tesla, the guy that owns tesla, debbie says don't put money on that, that's it. got money. it is not a game but that is what is pushing this. that is what is driving this right now. tiktok. there are millions of people spending money because these kids are telling you how to do it. host: she brings up a great

point. elon musk and others are now getting involved in this. what effect does their statement have on this whole market manipulation/reddit/hedge fund controversy. guest: market influencers. elon musk infamously got himself in trouble by saying -- he effectively secured an acquisition price for tesla at $420. it turned out the sec came after him and sanction him. you can't just do that as a ceo. millions of people are following you, you have to be careful what you say. material information. it's a fascinating conversation. there is a group of skeptics that say they are sophisticated hedge funds and institutional investors who trade by the

fraction of the second enter paid a lot of money to follow global markets 24/7 and look at the dimensionality, things you cannot even imagine. trades. there is absolutely no way in the world retail investor can compete with them, the algorithms they have programmed. if there is a rush nac $2000 going this -- and they see $2000 going to $6,000, that the dopamine hit. heartz saw its stock bumped up because of a robinhood-centric echo chamber. the company is not solvent but suddenly there is funny money left on the sideline. same thing with amc theaters. how does it make money? people coming in and blowing $12

on a coconut popcorn. that is not -- coke and a popcorn. that is not happening right now. if wall street bets on reddit is defending the honor of the stock, you have to ask yourself twice, three times, four times as a person coming to that game late, to my going to be the one holding the bucket when these guys leave and something else happens? suppose there is a market shock next week and all this echo chambering gets flushed out of the room. in my going to be the one who bought the stock at $20 and he goes down to five dollars when everyone has exited rapidly? that is one of the huge perils of speculation. go back and see if any people got burned like this in 2001. 1999, 2000, 2001. the last time we had an of retail investors piling into a

late bull market trade. host: we have got a bunch of people throwing red historical market crashes. people talk about dutch tulip bulbs. they talk about work edges and this follower on twitter says this is rather similar to 1929 when all sorts of stock thieves and shocks pumped worthless stocks up until the end, which did not end well. does it look like those situations where you have the tulip bulb bubble in the mortgage bubble and the tech bubble? will we see a bubble that could burst and affect the economy? guest: it could happen but what is the line that the market can remain irrational longer that you can remain solvent. was it alan greenspan he warned about irrational movement in

1996? the tech market. the dotcom bubble peak in 2000, then it fell 80 plus percent over the next two years. this can happen for a long time. let's not forget about the backdrop. we are still in a financial crisis. the fed -- money is super easy and cheap. the fed is buying all sorts of debt and supporting the financial markets, which have had an enormous run. it makes this magical thinking possible. i want to quote from the great jason zweig. this is a remarkable moment. it's as if a bunch of cows potatoes watching a lakers basketball game on tv barged onto the court and proceeded to block lebron james and mercilessly dunk on anthony davis.

that's an amazing feeling to have. i don't know how long it will last. host: it's quebec to the phones and talk to william from feeding hills, massachusetts. good morning. caller: good morning. this story goes back almost a year. if you go on youtube, a guy name roaring kitty. he's been buying gamestop for over a year. six month ago, he put out a thesis saying they will be able run on gamestop -- bull run on gamestop. his idol but 9% of gamestop. then in october, kramer on cnbc says that is a mistake.

cohen doubles out and now owns 12%. he keeps putting it youtube videos as part of wall street bets. he watches youtube videos. roaring kitty is amazing. hello? if you keep looking at it, they gets more interesting. he's happy when i got to 20. then it gets to $60. then he puts at a big youtube video. he's all happy. that is when it took off. host: i think the person the caller was talking about is profiled in one of the papers this morning. this individual investor, roaring kitty. talk about how individual investors are moving these markets. guest: there is real paper value on it. i'm looking at the 52-week range on gamestop. when the market crashed it hit three dollars a few weeks ago to open the year.

the stock was at $18 or so. he closed at $325. the market value is $23 billion. you are not talking about a couple of hundreds of thousands of dollars of market cap on a stock among friends. at some point the physics, the gravity of fundamentals have to reassert themselves. if we get past this and the malls open up again and you look at the viability of this company, and also e-commerce is exploding. how competitive is gamestop against amazon or -- i'm not a simile with the sector as other people but suppose you were making the same argument with blockbuster. when netflix was ruling the world. blockbuster will come out and really defend against netflix. can we really see the streaming

revolution ahead of us with netflix and disney plus at hbo max and everything? it is interesting, the extent to which these investors -- i will not call them a bunch of kids in pajamas and their parents basements with mountain dew and extreme doritos. and there is significant sway here to be able to move a company from a piddling market capitalization to $23 billion. host: the profile i saw about roaring kitty was in the new york times yesterday. i will read a couple of paragraphs. "over the next few years, he began tweeting about gamestop, making youtube and tiktok videos about his investment. he started livestream his financial ideas. other users began following his every move and piling into gamestop.

"if he is in, we are in," one user wrote on tuesday. roaring kitty, who is keith gill, a former financial educator in massachusetts has now become a central figure in this week's stock market frenzy. inspired by him in a small crew of individual investors together at him and they put themselves against sophisticated hedge funds and upending wall street's norms in the process.' keith gill is not someone who does know anything about the stock market. he was a former financial educator. he seems to know a little bit about what he is doing here. for those of us who don't know anything about the stock market, is this something we should stay away from and sit back and watch? would you say people with money to spare should jump in? guest: i am skeptical because

i'm an agnostic. the best you can do is to keep costs down and keep trading down, buy the index to ride the market return over the long haul. commissions have gone away in the market has never been as democratized and access is never as easy as possible. you can invest $50 in an index. there are all the services that cater to mom-and-pop out there. it is not just the province of high net worth investors anymore. i'm skeptical of a person to the game coming on and saying i found my muse in this roaring kitty or whatever form on twitter or facebook or snapchat. i will take that gospel and put money behind it. what makes you so smart you can be vindicated by that?

there are many super wealthy people that have paid a lot of money to track the market 24/7 globally, every aspect of trade, scrutinize them. they pay $25,000 a year for bloomberg terminals. the odds are so stacked against

>> that is something the sec will have to consider. this has real-world implications. i go back to the fact that companies that were afterthoughts a few week ago have added tens of billions of dollars of market cap. that could be ephemeral or all disappear as quickly as it materialized. if individual investors get caught in the crossfire and you lose a generation of them, there were many people who swore off the markets for good after 2002, after 2008, much to their detriment because the markets ran up again and they did not fully use the situation to diversify to buy a sober portfolio of indexed -- index funds or etf's. many are wondering if they should get back in the makes, fear of missing out. that is a whole new aspect and may is much more indicative of a

fraught stock market than a normal stock market. host: fact our phone lines and let's talk to orlando who is calling from georgia on the democratic line. good morning. i think i lost orlando so let's go to chris calling from alexandria, virginia on the independent line. good morning. caller: good morning. i was just working on my taxes and had your show on. i think it is ironic that we are talking about market manipulation and looking at the private sector. i think the really bad actor in this is allowing this kind of shenanigans to go on, is the federal reserve and the european central bank and every other major central bank in the world making money cheap and allowing this kind of stuff to happen.

i got out of the stock market years ago except for my 401(k). i don't dabble in it anymore. i think that one of the other areas in the economy that is on the rise is crypto. with the dollar becoming as cheap and getting into the gutter as it is i think we are going to see a lot more bitcoin purchases, an increase in prices of other old coins that are going to really change the economy. they factor in senator schumer that is crying for more and more bailout money because people can take care of -- can't take care of themselves. not saying that is anyone's fault, people are getting into the mindset where they can get to the government hat in hand --

i don't know if we are to the point of no return where the dollar will collapse but i think we will see a flight of capital into crypto where that kind of manipulation cannot happen. host: cryptocurrency, what do you think? guest: i wish someone could explain crypto to me in 30 minutes or left. there crypto trend to have a life changing meaning full observation to share. crypto talking about bitcoin and a theory him and these other things. they are open to their own speculative bubble and what happened in 2018 and 2019. theoretically they should be vindicated if you have a fiat currency you have something meaningless and the federal reserve keeps printing it and the federal reserve says they are at maximum, they need congress and the white house to take over.

a one point $9 trillion stimulus package. there is even a nickname for a stimulus check, called a stimmy. we have a whole new vernacular. gamestop is becoming synonymous with certain actions in the market. i do wonder if this is going to be the vindication of bitcoin versus the dollar which has been in some ways debated by that activity. i don't know if bitcoin is the pure hedge again and the basis of the u.s. dollar. -- there are other people out there who are saying you should be in swiss francs and buying precious metals. it's the kind of thing you think would make a perfect case for gold. property speculators are saying if you can get a mortgage for 2.5 percent the best hedge against inflation of the dollar

is real property and real estate. it is a meaning of life question and you have thousands of different theories and philosophies about. host: i remember a story in the new york times from a couple of weeks back, here it is on screen , had to guess is left to figure out the password that is worth $220 million of bitcoin. apparently you cannot recover the money -- press sec. psaki: i just have a couple of things for all of you at the top. over the weekend the presidents homeland security advisor convened a coordination call with the acting fema administrator and the director of the national weather service on the storm system moving towards the mid-atlantic region, it is here. up the eastern seaboard --