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As the Fed begins their journey into a deflationary blizzard, they are beginning to break markets across the globe. As the World Reserve Currency, over 60% of all international trade is done in Dollars, and USDs are the largest Foreign Exchange (Forex) holdings by far for global central banks. Now all foreign currencies are crashing against the Dollar as the vicious feedback loops of Triffin’s Dilemma come home to roost. The Dollar Milkshake has begun.submitted by peruvian_bull to Superstonk [link] [comments]
The Fed, knowingly or unknowingly, has walked into this trap- and now they find themselves caught underneath the Sword of Damocles, with no way out…
Sword Of Damocles
“The famed “sword of Damocles” dates back to an ancient moral parable popularized by the Roman philosopher Cicero in his 45 B.C. book “Tusculan Disputations.” Cicero’s version of the tale centers on Dionysius II, a tyrannical king who once ruled over the Sicilian city of Syracuse during the fourth and fifth centuries B.C.
Though rich and powerful, Dionysius was supremely unhappy. His iron-fisted rule had made him many enemies, and he was tormented by fears of assassination—so much so that he slept in a bedchamber surrounded by a moat and only trusted his daughters to shave his beard with a razor.
As Cicero tells it, the king’s dissatisfaction came to a head one day after a court flatterer named Damocles showered him with compliments and remarked how blissful his life must be. “Since this life delights you,” an annoyed Dionysius replied, “do you wish to taste it yourself and make a trial of my good fortune?” When Damocles agreed, Dionysius seated him on a golden couch and ordered a host of servants wait on him. He was treated to succulent cuts of meat and lavished with scented perfumes and ointments.
Damocles couldn’t believe his luck, but just as he was starting to enjoy the life of a king, he noticed that Dionysius had also hung a razor-sharp sword from the ceiling. It was positioned over Damocles’ head, suspended only by a single strand of horsehair.
From then on, the courtier’s fear for his life made it impossible for him to savor the opulence of the feast or enjoy the servants. After casting several nervous glances at the blade dangling above him, he asked to be excused, saying he no longer wished to be so fortunate.”
Damocles’ story is a cautionary tale of being careful of what you wish for- Those who strive for power often unknowingly create the very systems that lead to their own eventual downfall. The Sword is often used as a metaphor for a looming danger; a hidden trap that can obliterate those unaware of the great risk that hegemony brings.
Heavy lies the head which wears the crown.
There are several Swords of Damocles hanging over the world today, but the one least understood and least believed until now is Triffin’s Dilemma, which lays the bedrock for the Dollar Milkshake Theory. I’ve already written extensively about Triffin’s Dilemma around a year ago in Part 1.5 and Part 4.3 of my Dollar Endgame Series, but let’s recap again.
Here’s a great summary- read both sides of the dilemma:
Triffin's Dilemma Summarized
(Seriously, stop here and go back and read Part 1.5 and Part 4.3 Do it!)
Essentially, Triffin noted that there was a fundamental flaw in the system: by virtue of the fact that the United States is a World Reserve Currency holder, the global financial system has built in GLOBAL demand for Dollars. No other fiat currency has this.
How is this demand remedied? With supply of course! The United States thus is forced to run current account deficits - meaning it must send more dollars out into the world than it receives on a net basis. This has several implications, which again, I already outlined- but I will list in summary format below:
Essentially, they print their own currency to buy Dollars. Wanting to earn interest on this massive cash hoard when it isn’t being used, they buy Treasuries and other US debt securities to get a yield.
As their domestic economy grows, their need and dependence on the Dollar grows as well. Their Central Bank builds up larger and larger hoards of Treasuries and Dollars. The entire thesis is that during times of crisis, they can sell the Treasuries for USD, and use the USDs to buy back their own currency on the market- supporting its value and therefore defending the peg.
This buying pressure on USDs and Treasuries confers a massive benefit to the United States-
The Exorbitant Privilege
This buildup of excess dollars ends up circulating overseas in banks, trade brokers, central banks, governments and companies. These overseas dollars are called the Eurodollar system- a 2016 research paper estimated the size to be around $13.8 Trillion USD. This system is not under official Federal Reserve jurisdiction so it is difficult to get accurate numbers on its size.
This means the Dollar is always artificially stronger than it should be- and during financial calamity, the dollar is a safe haven as there are guaranteed bidders.
All this dollar denominated debt paired with the global need for dollars in trade creates strong and persistent dollar demand. Demand that MUST be satisfied.
This creates systemic risk on a worldwide scale- an unforeseen Sword of Damocles that hangs above the global financial system. I’ve been trying to foreshadow this in my Dollar Endgame Series.
Triffin’s Dilemma is the basis for the Dollar Milkshake Theory posited by Brent Johnson.
The Dollar Milkshake
Milkshake of Liquidity
In 2021, Brent worked with RealVision to create a short summary of his thesis- the video can be found here. I should note that Brent has had this theory for years, dating back to 2018, when he first came on podcasts and interviews and laid out his theory (like this video, for example).
Here’s the summary below:
“A giant milkshake of liquidity has been created by global central banks with the dollar as its key ingredient - but if the dollar moves higher this milkshake will be sucked into the US creating a vicious spiral that could quickly destabilize financial markets.
The US dollar is the bedrock of the world's financial system. It greases the wheels of global commerce and exchange- the availability of dollars, cost of dollars, and the level of the dollar itself each can have an outsized impact on economies and investment opportunities.
But more important than the absolute level or availability of dollars is the rate of change in the level of the dollar. If the level of the dollar moves too quickly and particularly if the level rises too fast then problems start popping up all over the place (foreign countries begin defaulting).
Today however many people are convinced that both the role of the Dollar is diminishing and the level of the dollar will only decline. People think that the US is printing so many dollars that the world will be awash with the greenback causing the value of the dollar to fall.
Now it's true that the US is printing a lot of dollars – but other countries are also printing their own currencies in similar amounts so in theory it should even out in terms of value.
But the hidden issue is the difference in demand. Remember the global financial system is built on the US dollar which means even if they don't want them everybody still needs them and if you need something you don't really have much choice. (See DXY Index):
Although many countries like China are trying to reduce their reliance on dollar transactions this will be a very slow transition. In the meantime the risks of a currency or sovereign debt crisis continue to rise.
But now countries like China and Japan need dollars to buy copper from Australia so the Chinese and the Japanese owe dollars and Australia is getting paid in dollars.
Europe and Asia currently doing very limited amount of non-dollar transactions for oil so they still need dollars to buy oil from saudi and again dollars get hoovered up on both sides
Asia and Europe need dollars to buy soybeans from Brazil. This pulls in yet more dollars - everybody needs dollars for trade invoices, central bank currency reserves and servicing massive cross-border dollar denominated debts of governments and corporations outside the USA.
And the dollar-denominated debt is key- if they don't service their debts or walk away from their dollar debts their funding costs rise putting great financial pressure on their domestic economies. Not only that, it can lead to a credit contraction and a rapid tightening of dollar supply.
The US is happy with the reliance on the greenback they own the settlement system which benefits the US banks who process all the dollars and act as gatekeepers to the Dollar system they police and control the access to the system which benefits the US military machine where defense spending is in excess of any other country so naturally the US benefits from the massive volumes of dollar usage.
Other countries have naturally been grumbling about being held hostage to the situation but the choices are limited. What it does mean is that dollars need to be constantly sucked out of the USA because other countries all over the world need them to do business and of course the more people there are who need and want those dollars the more is the pressure on the price of dollars to go up.
In fact, global demand is so high that the supply of dollars is just not enough to keep up, even with the US continually printing money. This is why we haven't seen consistently rising US inflation despite so many QE and stimulus programs since the global financial crisis in 2008.
But, the real risk comes when other economies start to slow down or when the US starts to grow relative to the other economies. If there is relatively less economic activity elsewhere in the world then there are fewer dollars in global circulation for others to use in their daily business and of course if there are fewer in circulation then the price goes up as people chase that dwindling source of dollars.
Which is terrible for countries that are slowing down because just when they are suffering economically they still need to pay for many goods in dollars and they still need to service their debts which of course are often in dollars too.
So the vortex begins or as we like to say the dollar milkshake- As the level of the dollar rises the rest of the world needs to print more and more of its own currency to then convert to dollars to pay for goods and to service its dollar debt this means the dollar just keeps on rising in response many countries will be forced to devalue their own currencies so of course the dollar rises again and this puts a huge strain on the global system.
(see the charts below:)
To make matters worse in this environment the US looks like an attractive safe haven so the US ends up sucking in the capital from the rest of the world-the dollar rises again. Pretty soon you have a full-scale sovereign bond and currency crisis.
We're now into that final napalm run that sees the dollar and dollar assets accelerate even higher and this completely undermines global markets. Central banks try to prevent disorderly moves, but the global markets are bigger and the momentum unstoppable once it takes hold.
And that is the risk that very few people see coming but that everyone should have a hedge against - when the US sucks up the dollar milkshake, bad things are going to happen.
Worst of all there's no alternatives- what are you going to use-- Chinese Yuan? Japanese Yen? the Euro??
Now, like it or not we're stuck with a dollar underpinning the global financial system.”
Why is it playing out now, in real time?? It all leads back to a tweet I made in a thread on September 16th.
Tweet Thread about the Yuan
The Fed, rushing to avoid a financial crisis in March 2020, printed trillions. This spurred inflation, which they then swore to fight. Thus they began hiking interest rates on March 16th, and began Quantitative Tightening this summer.
QE had stopped- No new dollars were flowing out into a system which has a constant demand for them. Worse yet, they were hiking completely blind-
Although the Fed is very far behind the curve, (meaning they are hiking far too late to really combat inflation)- other countries are even farther behind!
Japan has rates currently at 0.00- 0.25%, and the Eurozone is at 1.25%. These central banks have barely begun hiking, and some even swear to keep them at the zero-bound. By hiking domestic interest rates above foreign ones, the Fed is incentivizing what are called carry trades.
Since there is a spread between the Yen and the Dollar in terms of interest rates, it thus is profitable for traders to borrow in Yen (shorting it essentially) and buy Dollars, which can earn 2.25% interest. The spread would be around 2%.
DXY rises, and the Yen falls, in a vicious feedback loop.
Thus capital flows out of Japan, and into the US. The US sucks up the Dollar Milkshake, draining global liquidity. As I’ve stated before, this has seriously dangerous implications for the global financial system.
For those of you who don’t believe this could be foreseen, check out the ending paragraphs of Dollar Endgame Part 4.3 - “Economic Warfare and the End of Bretton Woods” published February 16, 2022:
Triffin's Dilemma is the Final Nail
What I’ve been attempting to do in my work is restate Triffins’ Dilemma, and by extension the Dollar Milkshake, in other terms- to come at the issue from different angles.
Currently the Fed is not printing money. Which is thus causing havoc in global trade (seen in the currency markets) because not enough dollars are flowing out to satisfy demand.
The Fed must therefore restart QE unless it wants to spur a collapse on a global scale. Remember, all these foreign countries NEED to buy, borrow and trade in a currency that THEY CANNOT PRINT!
We do not have enough time here to go in depth on the Yen, Yuan, Pound or the Euro- all these currencies have different macro factors and trade factors which affect their currencies to a large degree. But the largest factor by FAR is Triffin’s Dilemma + the Dollar Milkshake, and their desperate need for dollars. That is why basically every fiat currency is collapsing versus the Dollar.
The Fed, knowingly or not, is basically in charge of the global financial system. They may shout, “We raise rates in the US to fight inflation, global consequences be damned!!” - But that’s a hell of a lot more difficult to follow when large G7 countries are in the early stages of a full blown currency crisis.
The most serious implication is that the Fed is responsible for supplying dollars to everyone. When they raise rates, they trigger a margin call on the entire world. They need to bail them out by supplying them with fresh dollars to stabilize their currencies.
In other words, the Fed has to run the loosest and most accommodative monetary policy worldwide- they must keep rates as low as possible, and print as much as possible, in order to keep the global financial system running. If they don’t do that, sovereigns begin to blow up, like Japan did last week and like England did on Wednesday.
And if the world’s financial system implodes, they must bail out not only the United States, but virtually every global central bank. This is the Sword of Damocles. The money needed for this would be well in the dozens of trillions.
The Dollar Endgame Approaches…
(Many of you have been messaging me with questions, rebuttals or comments. I’ll do my best to answer some of the more poignant ones here.)—-----
Q: I’ve been reading your work, you keep saying the dollar is going to fall in value, and be inflated away. Now you’re switching sides and joining the dollar bull faction. Seems like you don’t know what you’re talking about!
A: You’re mixing up my statements. When I discuss the dollar losing value, I am referring to it falling in ABSOLUTE value, against goods and services produced in the real economy. This is what is called inflation. I made this call in 2021, and so far, it has proven right as inflation has accelerated.
The dollar gaining strength ONLY applies to foreign currency exchange markets (Forex)- remember, DXY, JPYUSD, and other currency pairs are RELATIVE indicators of value. Therefore, both JPY and USD can be falling in real terms (inflation) but if one is falling faster, then that one will lose value relative to the other. Also, Forex markets are correlated with, but not an exact match, for inflation.
I attempted to foreshadow the entire dollar bull thesis in the conclusion of Part 1 of the Dollar Endgame, posted well over a year ago-
Unraveling of the Currency Markets
I did not give an estimate on when this would happen, or how long DXY would be whipsawed upwards, because I truly do not know.
I do know that eventually the Fed will likely open up swap lines, flooding the Eurodollar market with fresh greenbacks and easing the dollar short squeeze. Then selling pressure will resume on the dollar. They would only likely do this when things get truly calamitous- and we are on our way towards getting there.
The US bond market is currently in dire straits, which matches the prediction of spiking interest rates. The 2yr Treasury is at 4.1%, it was at 3.9% just a few days ago. Only a matter of time until the selloff gets worse.
Q: Foreign Central banks can find a way out. They can just use their reserves to buy back their own currency.
Sure, they can try that. It’ll work for a while- but what happens once they run out of reserves, which basically always happens? I can’t think of a time in financial history that a country has been able to defend a currency peg against a sustained attack.
Global Forex Reserves
They’ll run out of bullets, like they always do, and basically the only option left will be to hike interest rates, to attract capital to flow back into their country. But how will they do that with global debt to GDP at 356%? If all these countries do that, they will cause a global depression on a scale never seen before.
Britain, for example, has a bit over $100B of reserves. That provides maybe a few months of cover in the Forex markets until they’re done.
Furthermore, you are ignoring another vicious feedback loop. When the foreign banks sell US Treasuries, this drives up yields in the US, which makes even more capital flow to the US! This weakens their currency even further.
FX Feedback Loop
To add insult to injury, this increases US Treasury borrowing costs, which means even if the Fed completely ignores the global economy imploding, the US will pay much more in interest. We will reach insolvency even faster than anyone believes.
The 2yr Treasury bond is above 4%- with $31T of debt, that means when we refinance we will pay $1.24 Trillion in interest alone. Who's going to buy that debt? The only entity with a balance sheet large enough to absorb that is the Fed. Restarting QE in 3...2…1…
Q: I live in England. With the Pound collapsing, what can I do? What will happen from here? How will the governments respond?
England, and Europe in general, is in serious trouble. You guys are currently facing a severe energy crisis stemming from Russia cutting off Nord Stream 1 in early September and now with Nord Stream 2 offline due to a mysterious leak, energy supplies will be even more tight.
Not to mention, you have a pretty high debt to GDP at 95%. Britain is a net importer, and is still running government deficits of £15.8 billion (recorded in Q1 2022). Basically, you guys are the United States without your own large scale energy and defense sector, and without Empire status and a World Reserve Currency that you once had.
The Pound will almost certainly continue falling against the Dollar. The Bank of England panicked on Wednesday in reaction to a $100M margin call on British pension funds, and now has begun buying long dated (10yr) gilts, or government bonds.
They’re doing this as inflation is spiking there even worse than the US, and the nation faces a currency crisis as the Pound is nearing parity with the Dollar.
BOE announces bond-buying scheme (9/28/22)
I will not sugarcoat it, things will get rough. You need to hold cash, make sure your job, business, or investments are secure (ie you have cashflow) and hunker down. Eliminate any unnecessary purchases. If you can, buy USDs as they will likely continue to rise and will hold value better than your own currency.
If Parliament goes through with more tax cuts, that will only make the fiscal situation worse and result in more borrowing, and thus more money printing in the end.
Q: What does this mean for Gamestop? For the domestic US economy?
Gamestop will continue to operate as I am sure they have been- investing in growth and expanding their Web3 platform.
Fiat is fundamentally broken. This much is clear- we need a new financial system not based on flawed 16th fractional banking principles or “trust me bro” financial intermediaries.
My hope is that they are at the forefront of a new financial system which does not require centralized authorities or custodians- one where you truly own your assets, and debasement is impossible.
I haven’t really written about GME extensively because it’s been covered so well by others, and I don’t feel I have that much to add.
As for the US economy, we are still in a deep recession, no matter what the politicians say- and it will get worse. But our economic troubles, at least in the short term (6 months) will not be as severe as the rest of the world due to the aforementioned Dollar Milkshake.
The debt crisis is still looming, midterms are approaching, and the government continues to deficit spend as if there’s no tomorrow.
As the global monetary system unravels, yields will spike, the deleveraging will get worse, and our dollar will get stronger. The fundamental factors continue to deteriorate.
I’ve covered the US enough so I'll leave it there.
Q: Did you know about the Dollar Milkshake Theory before recently? What did you think of it?
Of course I knew about it, I’ve been following Brent Johnson since he appeared on RealVision and Macrovoices. He laid out the entire theory in 2018 in a long form interview here. I listened to it maybe a couple times, and at the time I thought he was right- I just didn’t know how right he was.
Brent and I have followed each other and been chatting a little on Twitter- his handle is SantiagoAuFund, I highly recommend you give him a follow.
I’ve never met him in person, but from what I can see, his predictions are more accurate than almost anyone else in finance. Again, all credit to him- he truly understands the global monetary system on a fundamental level.
I believed him when he said the dollar would rally- but the speed and strength of the rally has surprised me. I’ve heard him predict DXY could go to 150, mirroring the massive DXY squeeze post the 1970s stagflation. He could very easily be right- and the absolute chaos this would mean for global trade and finance are unfathomable.
History of DXY
Q: The Pound and Euro are falling just because of the energy crisis there. That's it!
Why is the Yen falling then? How about the Yuan? Those countries are not currently undergoing an energy crisis. Let’s review the year to date performance of most fiat currencies vs the dollar:
Japanese Yen: -20.31%
Chinese Yuan: -10.79%
South African Rand: -10.95%
English Pound: -18.18%
Swiss Franc: -6.89%
South Korean Won: -16.73%
Indian Rupee: -8.60%
Turkish Lira: -27.95%
There are only a handful of currencies positive against the dollar, the most notable being the Russian Ruble and the Brazilian Real- two countries which have massive commodity resources and are strong exporters. In an inflationary environment, hard assets do best, so this is no surprise.
Q: What can the average person do to prepare? What are you doing?
Obligatory this is NOT financial advice
This is an extremely difficult question, as there are so many factors. You need to ask yourself, what is your financial situation like? How much disposable income do you have? What things could you cut back on? I can’t give you specific ideas without knowing your situation.
Personally, I am building up savings and cutting down on expenses. I’m getting ready for a severe recession/depression in the US and trying to find ways to increase my income, maybe a side hustle or switching jobs.
I am holding my GME and not selling- I still have some shares in Fidelity that I need to DRS (I know, sorry, I was procrastinating).
For the next few months, I believe there will be accelerating deflation as interest rates spike and the debt cycle begins to unwind. But like I’ve stated before, this will lead us towards a second Great Depression very rapidly, and to avoid the deflationary blizzard the Fed will restart QE on a scale never seen before.
QE Infinity. This will be the impetus for even worse inflation- 25%+ by this time next year.
It’s hard to prepare for this, and easy to feel hopeless. It’s important to know that we have been through monetary crises before, and society did not devolve into a zombie apocalypse. You are not alone, and we will get through this together.
It’s also important to note that we are holding the most lopsided investment opportunity of a generation. Any money you put in there can be grown by orders of magnitude.
We are at the end of the Central Bankers game- and although it will be painful, we will rid the world of them, I believe, and build a new financial system based on blockchains which will disintermediate the institutions. They have everything to lose.
Q: I want to learn more, where can I do? What can I do to keep up to date with everything?
You can start by reading books, listening to podcasts, and checking the news to stay abreast of developments. I have a book list linked at the end of the Dollar Endgame posts.
I’ll be covering the central bank clown show on Twitter, you can follow me there if you like. I’ll also include links to some of my favorite macro people below:
Nothing on this Post constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person.
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I am getting increasingly worried about the amount of warning signals that are flashing red for hyperinflation- I believe the process has already begun, as I will lay out in this paper. The first stages of hyperinflation begin slowly, and as this is an exponential process, most people will not grasp the true extent of it until it is too late. I know I’m going to gloss over a lot of stuff going over this, sorry about this but I need to fit it all into four posts without giving everyone a 400 page treatise on macro-economics to read. Counter-DDs and opinions welcome. This is going to be a lot longer than a normal DD, but I promise the pay-off is worth it, knowing the history is key to understanding where we are today.submitted by peruvian_bull to Superstonk [link] [comments]
SERIES (Parts 1-4) TL/DR: We are at the end of a MASSIVE debt supercycle. This 80-100 year pattern always ends in one of two scenarios- default/restructuring (deflation a la Great Depression) or inflation (hyperinflation in severe cases (a la Weimar Republic). The United States has been abusing it’s privilege as the World Reserve Currency holder to enforce its political and economic hegemony onto the Third World, specifically by creating massive artificial demand for treasuries/US Dollars, allowing the US to borrow extraordinary amounts of money at extremely low rates for decades, creating a Sword of Damocles that hangs over the global financial system.
The massive debt loads have been transferred worldwide, and sovereigns are starting to call our bluff. Governments papered over the 2008 financial crisis with debt, but never fixed the underlying issues, ensuring that the crisis would return, but with greater ferocity next time. Systemic risk (from derivatives) within the US financial system has built up to the point that collapse is all but inevitable, and the Federal Reserve has demonstrated it will do whatever it takes to defend legacy finance (banks, brokedealers, etc) and government solvency, even at the expense of everything else (The US Dollar).
I’ll break this down into four parts. ALL of this is interconnected, so please read these in order:
Updated Complete Table of Contents:
“Enter the Dragon”
The Inflation Dragon
PART 5.0 “The Monster & the Simulacrum”“In the 1985 work “Simulacra and Simulation” French philosopher Jean Baudrillard recalls the Borges fable about the cartographers of a great Empire who drew a map of its territories so detailed it was as vast as the Empire itself.
According to Baudrillard as the actual Empire collapses the inhabitants begin to live their lives within the abstraction believing the map to be real (his work inspired the classic film "The Matrix" and the book is prominently displayed in one scene).
The map is accepted as truth and people ignorantly live within a mechanism of their own design and the reality of the Empire is forgotten. This fable is a fitting allegory for our modern financial markets.
Our fiscal well being is now prisoner to financial and monetary engineering of our own design. Central banking strategy does not hide this fact with the goal of creating the optional illusion of economic prosperity through artificially higher asset prices to stimulate the real economy.
While it may be natural to conclude that the real economy is slave to the shadow banking system this is not a correct interpretation of the Baudrillard philosophy-
The higher concept is that our economy IS the shadow banking system… the Empire is gone and we are living ignorantly within the abstraction. The Fed must support the shadow banking oligarchy because without it, the abstraction would fail.” (Artemis Capital)
The Inflation SerpentTo most citizens living in the West, the concept of a collapsing fiat currency seems alien, unfathomable even. They regard it as an unfortunate event reserved only for those wretched souls unlucky enough to reside in third world countries or under brutal dictatorships.
Monetary mismanagement was seen to be a symptom only of the most corrupt countries like Venezuela- those where the elites gained control of the Treasury and printing press and used this lever to steal unimaginable wealth while impoverishing their constituents.
However, the annals of history spin a different tale- in fact, an eventual collapse of fiat currency is the norm, not the exception.
In a study of 775 fiat currencies created over the last 500 years, researchers found that approximately 599 have failed, leaving only 176 remaining in circulation. Approximately 20% of the 775 fiat currencies examined failed due to hyperinflation, 21% were destroyed in war, and 24% percent were reformed through centralized monetary policy. The remainder were either phased out, converted into another currency, or are still around today.
The average lifespan for a pure fiat currency is only 27 years- significantly shorter than a human life.
Double-digit inflation, once deemed an “impossible” event for the United States, is now within a stone’s throw. Powell, desperate to maintain credibility, has embarked on the most aggressive hiking schedule the Fed has ever undertaken. The cracks are starting to widen in the system.
One has to look no further than a simple graph of the M2 Money Supply, a measure that most economists agree best estimates the total money supply of the United States, to see a worrying trend:
M2 Money Supply
The trend is exponential. Through recessions, wars, presidential elections, cultural shifts, and even the Internet age- M2 keeps increasing non-linearly, with a positive second derivative- money supply growth is accelerating.
This hyperbolic growth is indicative of a key underlying feature of the fiat money system: virtually all money is credit. Under a fractional reserve banking system, most money that circulates is loaned into existence, and doesn't exist as real cash- in fact, around 97% of all “money” counted within the banking system is debt, in one form or another. (See Dollar Endgame Part 3)
Debt virtually always has a yield- that yield is called interest, and that interest demands payment. Thus, any fiat money banking system MUST grow money supply at a compounding interest rate, forever, in order to remain stable.
Debt defaulting is thus quite literally the destruction of money- which is why the deflation is widespread, and also why M2 Money Supply shrank by 30% during the Great Depression.
Interest in Fractional Reserve Fiat Systems
This process repeats ad infinitum, perpetually compounding loan creation and thus money supply, in order to prevent systemic defaults. The system is BUILT for constant inflation.
In the last 50 years, only about 12 quarters have seen reductions in commercial bank credit. That’s less than 5% of the time. The other 95% has seen increases, per data from the St. Louis Fed.
Commercial Bank Credit
Even without accounting for debt crises, wars, and government defaults, money supply must therefore grow exponentially forever- solely in order to keep the wheels on the bus.
The question is where that money supply goes- and herein lies the key to hyperinflation.
In the aftermath of 2008, the Fed and Treasury worked together to purchase billions of dollars of troubled assets, mortgage backed securities, and Treasury bonds- all in a bid to halt the vicious deleveraging cycle that had frozen credit markets and already sunk two large investment banks.
These programs were the most widespread and ambitious ever- and resulted in trillions of dollars of new money flowing into the financial system. Libertarian candidates and gold bugs such as Peter Schiff, who had rightly forecasted the Great Financial Crisis, now began to call for hyperinflation.
The trillions of printed money, he claimed, would create massive inflation that the government would not be able to tame. U.S. debt would be downgraded and sold, and with the Fed coming to the rescue with trillions more of QE, extreme money supply increases would ensue. An exponential growth curve in inflation was right around the corner.
Gold prices rallied hard, moving from $855 at the start of 2008 to a record high of $1,970 by the end of 2011. The end of the world was upon us, many decried. Occupy Wall Street came out in force.
However, to his great surprise, nothing happened. Inflation remained incredibly tame, and gold retreated from its euphoric highs. Armageddon was averted, or so it seemed.
The issue that was not understood well at the time was that there existed two economies- the financial and the real. The Fed had pumped trillions into the financial economy, and with a global macroeconomic downturn plus foreign central banks buying Treasuries via dollar recycling, all this new money wasn’t entering the real economy.
Financial vs Real Economy
Instead, it was trapped, circulating in the hands of money market funds, equities traders, bond investors and hedge funds. The S&P 500, which had hit a record low in March of 2009, began a steady rally that would prove to be the strongest and most pronounced bull market in history.
The Fed in the end did achieve extreme inflation- but only in assets.
Without the Treasury incurring significant fiscal deficits this money did not flow out into the markets for goods and services but instead almost exclusively into equity and bond markets.
QE Stimulus of financial assets
The great inflationary catastrophe touted by the libertarians and the gold bugs alike never came to pass- their doomsday predictions appeared frenetic, neurotic.
Instead of re-evaluating their arguments under this new framework, the neo-Keynesians, who held the key positions of power with Treasury, the Federal Reserve, and most American Universities (including my own) dismissed their ideas as economic drivel.
The Fed had succeeded in averting disaster- or so they claimed. Bernanke, in all his infinite wisdom, had unleashed the “Wealth Effect”- a crucial behavioral economic theory suggesting that people spend more as the value of their assets rise.
An even more extreme school of thought emerged- the Modern Monetary Theorists%20is,Federal%20Reserve%20Bank%20of%20Richmond.)- who claimed that Central Banks had essentially discovered a ‘perpetual motion machine’- a tool for unlimited economic growth as a result of zero bound interest rates and infinite QE.
The government could borrow money indefinitely, and traditional metrics like Debt/GDP no longer mattered. Since each respective government could print money in their own currency- they could never default.
The bill would never be paid.
Or so they thought.
The American ReckoningThis theory helped justify massive US government borrowing and spending- from Afghanistan, to the War on Drugs, to Entitlement Programs, the Treasury indulged in fiscal largesse never before seen in our nation’s history.
The debt continued to accumulate and compound. With rates pegged at the zero bound, the Treasury could justify rolling the debt continually as the interest costs were minimal.
Politicians now pushed for more and more deficit spending- if it's free to bailout the banks, or start a war- why not build more bridges? What about social programs? New Army bases? Tax cuts for corporations? Subsidies for businesses?
There was no longer any “accepted” economic argument against this- and thus government spending grew and grew, and the deficits continued to expand year after year.
The Treasury would roll the debt by issuing new bonds to pay off maturing ones- a strategy reminiscent of Ponzi schemes.
This debt binge is accelerating- as spending increases, (and tax revenues are constant) the deficit grows, and this deficit is paid by more borrowing. This incurs more interest, and thus more spending to pay that interest, in a deadly feedback loop- what is called a debt spiral.
Gross Govt Interest Payments
The shadow threat here that is rarely discussed is Unfunded Liabilities- these are payments the Federal government has promised to make, but has not yet set aside the money for. This includes Social Security, Medicaid, Medicare, Veteran’s benefits, and other funding that is non-discretionary, or in other words, basically non-optional.
Cato Institute estimates that these obligations sum up to $163 Trillion. Other estimates from the Mercatus Center put the figure at between $87T as the lower bound and $222T on the high end.
YES. That is TRILLION with a T.
A Dragon lurks in these shadows.
What makes it worse is that these figures are from 2012- the problem is significantly worse now. The fact of the matter is, no one knows the exact figure- just that it is so large it defies comprehension.
These payments are what is called non-discretionary, or mandatory spending- each Federal agency is obligated to spend the money. They don’t have a choice.
Approximately 70% of all Federal Spending is mandatory.
And the amount of mandatory spending is increasing each year as the Boomers, the second largest generation in US history, retire. Approximately 10,000 of them retire each day- increasing the deficits by hundreds of billions a year.
Furthermore, the only way to cut these programs (via a bill introduced in the House and passed in the Senate) is basically political suicide. AARP and other senior groups are some of the most powerful and wealthy lobbying groups in the US.
If politicians don’t have the stomach to legalize marijuana- an issue that Pew research finds an overwhelming majority of Americans supporting- then why would they nuke their own careers via cutting funding to seniors right as inflation spikes?
Thus, although these obligations are not technically debt, they act as debt instruments in all other respects. The bill must be paid.
In the Fiscal Report for 2022 released by the White House, they estimated that in 2021 and 2022 the Federal deficits would be $3.669T and $1.837T respectively. This amounts to 16.7% and 7.8% of GDP (pg 42).
US Federal Budget
Astonishingly, they project substantially decreasing deficits for the next decade. Meanwhile the U.S. is slowly grinding towards a severe recession (and then likely depression) as the Fed begins their tightening experiment into 132% Federal Debt to GDP.
Deficits have basically never gone down in a recession, only up- unemployment insurance, food stamp programs, government initiatives; all drive the Treasury to pump out more money into the economy in order to stimulate demand and dampen any deflation.
To add insult to injury, tax receipts collapse during recession- so the income side of the equation is negatively impacted as well. The budget will blow out.
The U.S. 1 yr Treasury Bond is already trading at 4.7%- if we have to refinance our current debt loads at that rate (which we WILL since they have to roll the debt over), the Treasury will be paying $1.46 Trillion in INTEREST ALONE YEARLY on the debt.
That is equivalent to 40% of all Federal Tax receipts in 2021!
In my post Dollar Endgame 4.2, I have tried to make the case that the United States is headed towards an “event horizon”- a point of no return, where the financial gravity of the supermassive debt is so crushing that nothing they do, short of Infinite QE, will allow us to escape.
The terrifying truth is that we are not headed towards this event horizon.
We’re already past it.
True Interest Expense ABOVE Tax Receipts
As brilliant macro analyst Luke Gromen pointed out in several interviews late last year, if you combine Gross Interest Expense and Entitlements, on a base case, we are already at 110% of tax receipts.
True Interest Expense is now more than total Federal Income. The Federal Government is already bankrupt- the market just doesn't know it yet.
Luke Gromen Interview Transcript (Oct 2021, Macrovoices)
The black hole of debt, financed by the Federal Reserve, has now trapped the largest spending institution in the world- the United States Treasury.
The unholy capture of the Money Printer and the Spender is catastrophic - the final key ingredient for monetary collapse.
This is How Money Dies.
The Underwater State
(I had to split this post into two part due to reddit's limits, see the second half of the post HERE)
Nothing on this Post constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. From reading my Post I cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you, so any opinions or information contained on this Post are just that – an opinion or information. Please consult a financial professional if you seek advice.
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THERE IS NO PRESSURE TO DO SO. THIS IS NOT A MONEY GRAB- the entire series is FREE! The reddit posts start HERE: https://www.reddit.com/Superstonk/comments/o4vzau/hyperinflation_is_coming_the_dollar_endgame_part/
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Thank you ALL, and POWER TO THE PLAYERS. GME FOREVER
You can follow my Twitter at Peruvian Bull. This is my only account, and I will not ask for financial or personal information. All others are scammers/impersonators.
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Disclaimer: "maybe we are all living in a simulation." -FCMsubmitted by edwinbarnesc to Superstonk [link] [comments]
I wasn't going to post this but then I noticed something come up today and thought to myself well shit, maybe it would have been less tinfoil-ish had I posted this the other day. So yeah, if you don't like speculation combined with possible DD then just skip this.
The post I am referring to is about the SAW game that just released on nft.gamestop.com
To give you some context, last week I started digging into BuyBuyBuyYes (still cant say cause auto-censorship), in which I made a comment then someone screenshotted it, and it found its way to the frontpage of the internet. Later in that same thread, I made this comment: https://www.reddit.com/Superstonk/comments/y5c3ax/comment/isktiuo/
If you noticed, someone awarded me 10x platinum which to me sounded like: "yo, diamond fingers this lead and hodl."
The day after my comment, RC tweets a photo of him and Icahn. Okay, maybe just dumb money luck or so I thought.
Well, I kept digging cuz diamond fingers.
Shortly after, Gamestop NFT releases a collector's pin and in it secrets.txt is discovered, but if you look back at the other Easter egg and hidden file (yes, there was another) then you'll find there were clues about BuyBuyBuyYes already in there, as posted by u/Real_Eyezz:
Oh look clues from 11 months ago, when did that sub get started? Jan 2021. Makes sense cause they began segregation & censorship around discussion of BuyBuyBuyYes
Alright now that you have some background info, I am going to layout what I believe has been a series of Cohencidences and is building up a crescendo that will undoubtedly unfold in epic fashion and fireworks.
Let's start from the beginning.
The Activist InvestorsDo you remember the sneeze of Jan 2021? Yeah, it was 84 years ago for some. Here let me just draw your attention to this by NBA Dallas Maverick owner and Shark Tank's Mark Cuban who as many know has been in favor of apes (even if he does not publicly declare himself an activist investor). This is what he said over a year ago, u/mcuban:
Mark Cuban was very vocal and active in the community early 2021 (u lurking bro?)
DO THE WORK.
POWER IN NUMBERS.
Where have I heard that before? Probably cohencidence.
Fact is, Mark Cuban was one of the first to come on here and help make sense of the fiasco that happened in 2021 when nobody else gave two shits about retail traders and how we all got rug pulled when they illegally removed the buy button which still to my knowledge today: NOBODY HAS GONE TO PRISON.
Moving forward, what's the connection? You'll see.
Enter the O.G. Ape aka MSM-dubbed "Corporate Raider"Carl Icahn was recently tweeted in a photo side-by-side with Ryan Cohen and this leads me to believe that they started working together or has been, although I like to think the later. But before I jump ahead, I want to share with you some background info about Carl Icahn:
This man fucks wallstreet, diamond nuts achievement unlocked.
And $1 TRILLION dollars produced for shareholders? Diamond hands, OG ape right here.
I cahn see why Ryan Cohen likes this guy, I like him too.
Okay, now to explore a side-quest.
The Mondelez Spin-OffI will summarize this section and come back to it later as it relates to that other company RC recently bought in and still has his hand-picked board members and executive team operating.
What is Mondelez? A snack company that did a spin-off, where a company sells off a subsidiary company, is a tax-free write off to parent company, and awards free shares to shareholders of parent company. The deal involved Kraft Heinz, parent company, which spun off Mondelez to focus on the International market (credit u/Real_Eyezz) but more importantly the deal involved Yang Xu, global treasurer and an executive committee at Kraft Heinz, and also on the board of Gamestop since June 2021 (credit u/iamhighnlow).
Talking about spin-offs, kinda reminds me of that letter RC sent to a certain board suggesting to spin-off and sell its subsidiary BuyBuyBABY company.
I wonder where he got that idea? We'll find out soon.
Mondelez spin-off and Yang Xu, Gamestop board member
Now back to the main storyline.
Activist Investors That Go Way BackIn 2008, Carl Icahn and Mark Cuban joined forces to proxy battle and remove board members from Yahoo! Inc as detailed here. Icahn wanted to clean house and remove all 10 board members but was only able to replace a few, needless to say, he made significant changes.
(Cleaning house? Reminds me of original Gamestop board and BuyBuyBuyYes board activist takeover)
Again, in 2010, Cuban and Icahn began a hostile takeover of Lionsgate film studios (the company that just released SAW game on Gamestop NFT marketplace). Things got heated during negotiations and Mark Cuban unsatisfied with how things were going agreed to Tender offer, or sell his 5.3% stake of shares to Icahn already with 19% stake and with additional shareholders, eventually bringing it to 33.2% outstanding shares. What's interesting about the Tendie offer, is that it was presented by Perella Weinberg Partners (more about them later), a law firm which specializes in Mergers & Acquisitions, according to this press release by Lionsgate on April 20, 2010.
Lionsgate was struggling with debt (perhaps someone stepped on shit, ew...) and wanted to merge with MGM studios, a rival company, but Icahn said NO - bad deal and it didn't happen. 3 years later, Icahn exited Lionsgate, broke-even on cost-basis, and perhaps getting involved was a good thing because the studio is still standing and about to get filthy rich partnering with my favorite company.
And it seems to be working out with one of Lionsgate's intellectual property: KICK-ASS' John Romita is already on Gamestop NFT marketplace and I'm sure more like him will join soon (or already have).
Back to Mark Cuban: someone who is very familiar with blockchain technology and digital assets like NFTs (he's been minting since 2021). He understands what the real value of NFTs (non-fungible tokens) as a digital asset can be and has been running experimental tests by combining NFTs with Dallas Maverick's NBA tickets. He even owns an NFT company.
Moreover, I believe Carl Icahn has come to a similar conclusion. When asked about the crypt0currency space, Icahn admitted he might invest heavily into digital assets. On May 27, 2021, Icahn said the following on Bloomberg about digital assets and meme stonks:
"I mean, a big way for us would be, you know, $1 billion, $1.5 billion," he said in an interview, adding, "I'm not going to say exactly."Let me get this straight, Carl Icahn knows about Reddit, Robinhood, and the value of digital assets then goes as far as to say he is willing to invest up to $1.5 Billion?
My MGGA, BULLISH!
MGGA = Make Gamestop Great Again, or Microsoft, Gamestop, Google, Apple aka the FAANG of Metaverse / Web 3.0
Let's keep going.
Prelude to MOASSOn October 16, 2016, Icahn coined the term MOASS, 6 years ago, as of 10/17/22. He squeezed Bill Ackman's shorts for $1 Billion by locking up 26% of Herbalife by direct registering the shares in his name and not allowing shares to be loaned out (kind of like DRS with Computershare).
Six years ago last week, "Mother of All Short Squeezes" - MOASS was coined and on that same day RC tweeted a photo of him and Carl Icahn.
Every diamond handed ape knows a squeeze is coming (short interest easily over 1,000% even if FINRA confirmed 226% minimum). It will be marvelous and Icahn loves a good squeeze, just Acksomebody.
Cohencidentally, RC previously tweeted this on the same day as Carl Icahn's birthday - February 16:
Corporate Raider x Activist Investor
Enter The Whales Backing GamestopFor some time, many have wondered why has no whale come to save the day?
I believe they have already moved in, a long time ago. Perhaps through indirect channels by purchasing $GME with offshores, family offices, etc. or by supporting Gamestop through strategic alliances and partnerships.
Now, I want to draw your attention to some confirmed whales.
First, the #3 richest man in the world Bernard Arnault, CEO of LVHM - Moet Hennessey Louis Vuitton, the world’s largest luxury goods company.
LVHM is a direct partner with L Catterton.
L Catterton directly funds Dragonfly, a company that buys ecommerce brands and grows them, which Ryan Cohen is a member of the board.
For those in the back, L Catterton is a well-funded private equity conglomerate spanning across multiple continents in North America, South America, Europe, and Asia -- can you say GMERICA(S)?
Here, from the official website:
"In January of 2016, Catterton, the leading consumer-focused private equity firm, LVMH, the world leader in high-quality products, and Groupe Arnault, the family holding company of Bernard Arnault, partnered to create L Catterton. The partnership combined Catterton's existing North American and Latin American private equity operations with LVMH and Groupe Arnault's existing European and Asian private equity and real estate operations, resulting in the largest, diversified consumer-dedicated private equity firm in the world."Read that last part and let it sink in because to me, that sounds like a conglomerate whale and one that is whale-financed.
And if that doesn't get your tits jacked, just recall one of Gamestop NFT creators: u/cybercrewnft teaser: https://www.youtube.com/watch?v=R6B8KuSj1Ik
Inside the METAVERSE with LVHM plus other major brands - oh look, Apple too (credit u/HealsOnWheals)
GMERICA: The Dream TeamNow to wrap things up, BuyBuyBuyYes is at the center of this play. (insert always has been meme)
Let's start with a tweet from the chairman:
When asked about the investing style between Warren Buffet and Carl Icahn on March 22, 2022, Icahn states:
I think we’re to a certain extent in a different business with Warren. I’m an activist,” Icahn said. “I look for a company that’s, in my mind, way undervalued [...], and there’s something I can do about it. That’s what I enjoy doing. That’s why I come to work every day.”
Do the work (Mark Cuban), Come to work (Icahn), Born to work (RC - March 31, 22)
Wow, work is so sexy. (Cohencidentally, another RC tweet)
Now, let's tie it all together.
Starting with Dragonfly, a privately-owned venture capitalist fund that buys ecommerce brands then places its members within the newly acquired company to scale and grow it. What's interesting about Dragonfly is that most of its team members are ex-Wayfair employees with deep expertise in home goods and retail furniture. (See where this is going?)
Next, re-visiting L Catterton (a whale-financed company), they conducted a market survey and discovered a massive emerging market in China after ending its 2 child policy, which creates huge opportunity for maternity and children at tier 1 and tier 2 cities. (credit u/Movingday1 for Catterton study)
L Catterton study: https://www.lcatterton.com/pdf/2021-LC-Crisis_or_Opportunity.pdf
Furthermore, Patty Wu was hired to head the baby division at BuyBuyBuyYes and previously she was Chief Commercial Officer for Honest Company, a brand owned by L Catterton.
Do you see the vested interest of L Catterton for da BABY?
Do you see the vested interested of the #3 richest man in the world who owns LVHM in partnership with L Catterton?
Are you starting to see how Dragonfly, the venture capitalist fund that Ryan Cohen is member of the board and has an interest too?
(Almost there, promise)
We know for a fact that Gamestop's stock price is being suppressed, and that swaps are involved to prevent this rocket from flying (u/criand DD on TRS or the smooth brain edition).
On November 2, 2021, BuyBuyBuyYes initiated a stock buyback which caused its stock price to soar up to 91% after-hours and for No reason, on Zero news, AND after market-hours which most retailers do not buy - Gamestop's stock price also soared.
Total Return Swaps: one goes up, then they all go up and vice-versa - kinda of like today
Now that you know the relation of the two stocks, then you probably have figured out what Ryan Cohen is really up to.
"The last time people were excited to see me" - picture of baby sonogram, tweeted RC.
GMERICA: "Born to work"Let's go back one more time to Mondelez about the spin-off and about RC's letter to a board about a subsidiary BABY spin-off. Then top it off with RC Ventures LLC's placement for 3 new board members who specialize in Mergers & Acquisitions.
Following that, BuyBuyBuyYes retains one of the world's elite law firm specializing in restructuring and M&A, Kirkland & Ellis, to help prepare the accounting books and review the debt notes that has plagued the company and is oddly reminiscent of u/thabat's cellar boxing DD.
Aaand fast-forward to today, it sets the stage, beginning with Perella Weinberg Partners.
(Did you forget their involvement? Carl Icahn utilized them to make a TENDIE offer with Lionsgate)
Restructuring the debt notes to escape bankruptcy and ending the cellar boxing
With the debt notes restructured for BuyBuyBuyYes, it now makes the company attractive for a whale-financed buyer to swoop in, make a tendie offer (subject to shareholder's approval), and take over. I can guess one international conglomerate that might want da BABY plus the kitchen sink.
How do I know there might be a tendie offer? It's explicitly stated multiple times on BuyBuyBuyYes' S-4 form (ctrl+F tender offer).
At this point, I'd like for you to blink, think, and take a deep breath.
You might be wondering if da BABY gets spun-off, where does GMERICA come into play? Great question because I don't know but I have some ideas.
I mean, GMERICA is born to work.
There are multiple M&A specialists on every side: board members inside that company, members outside that company, and members involved with Gamestop, Dragonfly, and partners.
If there ever existed a super squad of GMERICAN M&A specialists then I think this would it.
I believe Gamestop will transform into GMERICA and that Carl Icahn will invest into it for digital assets (possibly up to $1.5 Billion). Although it may not be Gamestop itself, but perhaps Gamestop NFT which if you think about is a crappy name, but GMERICA is a pretty awesome replacement. (perhaps RC thinking about a double spin-off for wombo combo)
So why do I think this could happen?
Another clue has appeared with the changing of permanent corporate addresses, which for the first time in its history, just happened:
BuyBuyBuyYes and Gamestop changed to CT Corporation System
What is CT Corporation System? It's owned by Wolters Kluwer which provides registered agent services, has 185-year legacy and used by 70% of Fortune 500 companies. They are under an umbrella that has a multitude of services including assistance with legal compliance in mergers and acquisitions among other things.
You could say things are getting pretty serious.
So how will GMERICA debut?
One guess might involve a Reverse Morris Trust (RMT). This would involve a spin-off of a "subsidiary" not da BABY, but as I pointed out above. The shareholders of this spin-off, that means those who Directly Registered Shares (DRS) of the parent company ($GME) would receive FREE shares from the spin-off in the newly formed GMERICA company and it would be a tax-free event.
Here from Investopedia about RMT:
The RMT starts with a parent company looking to sell assets to a third-party company. The parent company then creates a subsidiary, and that subsidiary and the third-party company merge to create an unrelated company. The unrelated company then issues shares to the original parent company's shareholders. If those shareholders control at least 50.1% of the voting right and economic value in the unrelated company, the RMT is complete. The parent company has effectively transferred the assets, tax-free, to the third-party company.Okay, so a third-party company like RC Ventures LLC (RCV)?
With a subsidiary spun-off like Gamestop NFT?
Then RCV and Gamestop NFT merging to create an unrelated (new tech) company like GMERICA?
And ownership of original parent company with at least 50.1% of value and voting rights by DRS hodlers?
Lastly, third-party company like RCV that is same size or smaller than spun-off company? I mean he did sell all his BuyBuyBuyYes shares so no conflict of interest there.
Kinda sounds like RC Ventures could become GMERICA.
And then there's that tweet RC posted about a tombstone, "RYAN COHEN RIP DUMBASS."
Conclusion - GMERICA: The GameStopLarry Cheng, a board member of Gamestop, once tweeted:
It feels like we are headed to two different financial markets - the traditional one where institutional support is the driver and a decentralized one where community support is the driver. When these two worlds meet in the same asset, there will be fireworks.Then I was reminded of this Direct Public Offering (DPO), which is entirely possible with Gamestop's partnership with FTX for tokenized-stocks.
GMERICA goes public with DPO via FTX? Wow, that would be a lotta assets and fireworks.
Digital assets are so hot right now.
Anyways, I look forward to how this ultimately plays out and I need to rest, "its brain consuming" is an understatement.
This is a once in a lifetime opportunity.
Only a matter of time to see how it all works.
Buy, DRS, HODL. MOASS IS TOMORROW.
-Diamond fingers out
Edit: if you like tendies and offers, check out the DD put together by u/BiggySmallzzz and for more NFT clues see the work by u/Real_Eyezz
TL:DR -submitted by kibblepigeon to Superstonk [link] [comments]
Both Plan & Book are held in the name of the registered shareholder (I.E, you).
Please Avoid Community Division
There might be implications involved in the switch from Plan to Book - such as fractional shares being sold, and recurring buys shut off - be sure to do your due diligence.
COMPUTERSHARE - THE BASICSComputershare FAQ: https://www.computershare.com/us/becoming-a-registered-shareholder-in-us-listed-companies
You are legally recognised as the direct owner of the shares.
Shares are not lent out.
Shares belong to you, the registered shareholder.
Shares are not accessible to DTCC/DTC or CEDE & Co.
All shares as DRS'd are visible to the issuer - in both Plan and Book.
GameStop (the issuer) decides what is disclosed in the quarterly DRS figures.
\"Both DSPP & DRS are ‘book entry’ means of holding shares\"
"[CS] keep a portion of DSPP shares in the DTC"From a user:
"Here's another source, from the DTCC, which shows that Computershare's nominee, "Computershare Trust Company, N.A.", which holds their DSPP shares (well documented), is listed as a DTC Participant:Check out this FAQ here:
"What is the Depository Trust Company (DTC)?Computershare is a Transfer Agent.
Transfer agents are "limited participants" within DTC.
DSPP (I.E Plan) shares are held in Computershare nomiee (as rightly outlined above) and removed from CEDE & Co - which is the DTC nominee.
Shares held in a Computershare nominee for either Plan or Book are:
Book & Plan - there’s "no practical difference".It was mentioned in the first Computershare AMA: https://youtu.be/LVEJo87jejo?t=1090 that shares in PLAN and BOOK are recorded in a similar way.
Here's an interview where Computershare discuss there exists no practical difference between these classification titles: https://www.youtube.com/watch?v=9H_pEIhIdTo&t=481s
Information directly from source.
This is in-keeping with the Computershare AMA with Paul Conn, President of Global Capital Markets carried out 10 months ago:
^(\*The following statement is an extract from a second spoken interview. The phrasing open to interpretation.)* Relying on interpretation - without context or wider understanding - could be detrimental to learning as assumptions are based on misconceptions. Cross-reference information from a multitude of different sources to draw meaning from this statement. We are not discrediting it's value but are highlighting that this source cannot be used as a means to form an opinion *alone**.*This is not a legally verified source.
11 months ago:
Pink: ...And something else that you did clear up before but I want to reiterate here, is the difference between Book vs. Plan. There’s a lot of confusion online around this still… so, as you discussed in previous interviews, the Direct Stock purchase plan describes shares I buy thru Computershare that you keep in a separate sort of custodial type account. Which is different from ‘Book’ shares. Do I have that right?We recognise that Plan v Book is an internal categorisation system used by Computershare to differentiate between shares for processing purposes. As such - these naming conventions do not affect the underlying security of your shares.
For clarity - do not misinterpret the term "Plan subclass" to mean 'inferior' compared to Book. Dr. T will tell you, Book and Plan share a difference without distinction -
".....but the underlying shares are held in a nominee owned by Computershare"I notice that a number of people are getting caught up this term "nominee" and this is due to our understanding of this term in this context:
"A nominee account is a type of account in which a stockbroker holds shares belonging to clients, making buying and selling those shares easier and for safekeeping. In such an arrangement, shares are said to be held in street name."
"The securities are held in trust and the nominee is the legal owner, but you hold on to real ownership as the beneficiary."
But remember people:
Computershare isn't a brokerage, it's a Transfer agent.So what is a transfer agent (such as Computershare)?
What is a Transfer Agent?
A Computershare nominee where DSPP shares are held are still in Computershare. I.E "a Computershare nominee". Not a third party brokerage accessible to DTC/DTCC or CEDE & Co.
The term "nominee account" is said in reference to the differentiation between "Book" and "Plan" - being that one classification of share type is "reported to the issuer, just as if they were common shares" (I.E Book) and the other is not (I.E Plan).
UPDATE [DEC, 2022]:Different classification terms, both entry shares:
The above is supported in a second CS AMA: https://youtu.be/bo427AW0anw?t=671 where CS said they record our names on a subclass within the registrar, so these are not treated as if they are "common shares".
This is the difference (semantics and classification terms), and doesn't affect the security of your shares or the differences between the way they are held.
DRISP/DSPP - WHAT IS THIS?DRISP/DSPP - refers to a Dividend Reinvestment Plan: https://www.computershare.com/uk/individuals/im-a-shareholdedividend-reinvestment-plan
DSPP is often spoken about in regards to Plan.
No difference noted.
There has been discussion speculating that DSPP shares are not included in the Quarterly report earnings.
In context of Book v Plan, this suggests DRISP/DSP DRS'd figures could be tallied separately in terms of disclosure within Gamestop quarterly DRS reports but that doesn't affect how shares are held within Computershare.
GameStop (the issuer) decides what is disclosed in the quarterly DRS figures.
\"It is up to the individual companies what information on shareholdings they disclose...\"
Specific questions about an issuer’s financials or its holdings should be directed to the company.
NOT IOUSShares held in Plan (fractional or otherwise) are not IOUs. All shares registered in your name, belong to you.
A share can't be registered to 2 names - I.E Can't be your shares AND an IOU from Computershare whilst still accessible to the DTC. Once the shares are in Computershare, they are yours.
PAPER CERTIFICATES"Plan Holdings.... Are not eligible for requesting a paper certificate (without first converting to "Book").
Plan and book shares are held in book-entry, that's the type of in-your-name holding. Transfer agents not issuing a paper certificate for fractional shares does not diminish the validity of held shares in DSPP.
As stated within the email, issuing paper certificates is a "program that GameStop has indefinitely Suspended without providing a reason". You will not get a paper certificate from GameStop in Plan or Book.
Directly from Computershare's whitepaper:
"Shares can either be held electronically, in “book entry,” or as printed certificates. Records for registered shareholders’ holdings are held by the transfer agent and may be recorded in book entry — through the Direct Registration System (DRS) or through a DRP/ DSPP (described below) — or certificated form. Shares of private companies or non-exchange-listed securities may also be held in book-entry form on the transfer agent’s records."As you can see its linguistics. You can hold in your name through book-entry or you can have physical certificate.
Here's some more from the whitepaper:
"Book entry also allows corporations to issue stock without printing stock certificates — known as a “certificateless issuance.” Computershare offers issuers the option of producing print-on- demand certificates: physical certificates that can cost-effectively be printed as needed, eliminating the need to print and store high volumes of preprinted engraved certificates."As you can see GameStop is clearly part of the modern stockholding system and you could ask for a print-on-demand certificate if they would allow it (they don't).
The DSPP in the whitepaper:
"DSPPs offer the full complement of functionality that today’s investors demand. Some features include dividend reinvestment, optional cash purchases, and initial investments for new investors. Full and fractional shares are allocated to accounts in book-entry form."So "certificated shares" are shares held as a physical certificate. Here's a bit about selling certificated shares from the whitepaper:
"If the shares are held by the holder in certificated form, the holder must surrender the certificate to the transfer agent and have the shares deposited in either DRS or in a DRP/DSPP. A shareholder may also sell his or her certificated shares through a broker, by delivering the certificate to the broker and requesting that the broker sell the shares on his or her behalf."All of that to say that yes Plan shares are uncertificated but in their current form so are Book shares. They're electronic, not physical. The terms "certificated and uncertificated" are being misused by many users and it's causing a lot of confusion.
DRS SHARES ARE NOT AVAILABLE TO DTC OR ANY BROKER FOR ANY PURPOSEShares are eligible to be withdrawn from Computershare and sent to the DTC for the purpose of enabling any sales to be settled efficiently.
Taking case in point SHLDQ - if you hold this stock, you cannot sell this from Computershare directly. But you can send this back to a brokerage, therefore back to the DTCC, before you sell.
You don't need to send GME to a brokerage to sell. Even fractional shares can be sold via Computershare - just not via a limit order. If you place a limit order it will just sell at market price by end of day.
So rest assured: The DTCC/DTC and Cede & Co cannot borrow shares from registered shareholders, or claim them back:
\"DTCC/DTC and Cede & Co cannot borrow shares from other registered shareholders. Computershare does not lend securities.\"
Brokerages cannot \"reverse\" DRS'd shares
Remember, GME is a US based security, not the UKThere have been rebuttals in comment sections claiming that there are T&Cs that "prove" that shares held in Computershare are in "nominated names" like, IOUs. These have been debunked:
Held by ComputerShares nomineeAs you can see here, this is a link to a UK based terms and agreement - not viable for US securities - so is inapplicable here. Please stop sharing this as it's misinformation in context of this issue.
BEWARE OLD FAQsPlease note that as of early 2022 - the following FAQ was removed from Computershare's site as often referenced in Dr. T's tweet below (dated November, 2021):
Archive is here: http://web.archive.org/web/20220223200242/https://www.computershare.com/us/becoming-a-registered-shareholder-in-us-listed-companies
Computershare is a transfer agent. They cannot trade as brokers do. They move shares to the DTC for efficient settlement after registered shareholders request to do so. This is not where shares are being held.
Dr. T also explicitly states that Directly Registered Shares (DRS) are not available to the DTC or any broker "FOR ANY PURPOSE".
RISKS INVOLVED WITH TRANSFER - MAKE INFORMED CHOICES:TRANSFERRING TIPS:
Always time to take a moment to assess the situation and make decisions that are right for you.
It's entirely your choice as to how you hold shares in Computershare, but just to remind you that there might be implications involved in the switch from Plan to Book - such as fractional shares being sold, and recurring buys shut off.
If you change from DRIP to BOOK it will automatically trigger a sale of any fractional shares leftover AND IT WILL SHUT OFF YOUR DIRECT PURCHASE PLAN, in other words, if you have it set to buy automatically every month, that will get SHUT OFF.
You can cancel the fractional share sale, and you'd have to enroll in DRIP again if you want to continue to have shares purchased automatically every month. You can set a limit order for a fractional share, but it will just sell it as a market order if you leave it there overnight.. so don't actually do that!
If you are going to go "book," it's been discussed that Computershare strongly advises calling them at 1-800-564-6253 to do so. There have been reports of those who have done the after hours termination of the plan still had their fractional sold, even with canceling the pending sell order that appears.
The selling of fractional shares can be avoided by calling Computershare and asking them to keep one share plus the fractional in plan. For those that want to move shares from plan shares to “pure DRS” that is the safest way to avoid having a fractional share be potentially sold. That avoids the possibility of shares being sold and also avoids any fees.
More detail in this post here (courtesy of u/platinumsparkles): https://www.reddit.com/Superstonk/comments/zhxaeh/dont_forget_to_set_your_full_dividend/ -(don't miss out on buys by forgetting to switch them back on - instructions with pictures)
GETTING INFORMATION STRAIGHT FROM SOURCEThe only way to get absolute resolve in any understanding is to get information directly from source. Draw meaning or conclusions from accurate and relevant resources - and not interpretation or speculation.
How to contact GameStop Investor Relations:
Please Avoid Community DivisionThere’s no wrong way to like or hold the stock. No matter how you hodl GME, you’re welcome in this community. Everyone is an individual investor and someone’s investment strategy may be different than yours. Even if you disagree with someone’s investment strategy, while participating in Superstonk, it’s still expected that you engage constructively and respectfully.
Rule 1. Be Nice or Else
If you have information that conflicts with that as presented here, I only ask you provide evidence to support your findings in your counter arguments and do so constructively and respectfully as we look to find the truth together.
Please be wary of anything that compels people to act quickly and hastily, as this is where mistakes happen. There is always time to take a moment to assess the situation and make decisions that are right for you.
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