Thread by @dlauer

I think I'm going to watch #TheProblem (aka Not-Ted-Lasso) episode on Stocks and tweet about it.

Seriously @jonstewart there's never a good reason to invoke Larry Kudlow's nipples.

(If that doesn't get you to watch the episode, I don't know what will).
#TheProblem

This J Paul Getty commercial is an amazing throwback. TV standards have ... uh... changed a bit, eh?

#TheProblem

HARK! The e-brokers have arrived! Access is granted and affordable! Surely this must level the playing field??

And somehow inequality in the market increased? How is that possible?
#TheProblem

No, to really democratize the market, we need a hero! Or an app. Someone to steal from the rich and give to the poor. "A bow-and-arrow Bernie Sanders!"

You make trading free, and... inequality increased even more?!?

#TheProblem

@jonstewart referring to Vlad is one of the best lines: "Thank you haunted Victorian boy."

#TheProblem

@jonstewart In 2021, more money flowed into the stock market than in the previous 20 years combined!

And inequality went up even further! Amazing how that works... more access to the "wealth machine" has not appeared to distribute that wealth.

#TheProblem

@jonstewart I think the episode's description of Payment for Order Flow is excellent - does a great job illustrating how this relatively unknown part of the market works.
#TheProblem

@jonstewart "How fucking invincible do you have to feel to name the place where you conduct your least transparent business dealings 'dark pools'?! Thank you for your order, I'll just take it down to my chamber of schemes..." ROFL.

#TheProblem

How do you profit from PFOF? For every trade, you skim pennies off the top.

PFOF should be going back to the retail investor.

The pennies being scalped should go back to the retail investor.

Yes... Bernie Madoff invented PFOF. Do you know the name Bernie Madoff?

#TheProblem

I love that @jonstewart highlighted Citadel's 2004 letter against payment for order flow. I wrote about this several times - they made the same arguments against it we make today:

https://twitter.com/dlauer/status/1362470053321523202

"A bunch of reddit users harnessed years of advanced meme-training to realize that the company Gamestop was being massively shorted by hedge funds."

And to be fair, those reddit users also saw promise in the future of the company.

#TheProblem

"Why would Robinhood halt buying GME not selling it?"

This is the crux of the issue. Why was the buy button turned off? Why did retail lose, when they had been right, and Robinhood, Apex, Citadel and other firms were protected?

"If this sounds insane, it's because it's insane."

"We will never understand all of it and we're not supposed to. It took a bunch of redditors to figure out the Gamestop shorting situation."

Then @jonstewart DESTROYS CNBC. This is vicious.

#TheProblem

OH SHIT I'M ON TV

I love how @jjbrown111076
describes the genesis of the ape movement, in the midst of the pandemic: "In moments of great struggle, people usually band together to protect each other.

#TheProblem

"All of the complexity in markets has made them more fragile, and the apes found the hole in the system and exposed it. The markets nearly fell apart. It's insane to me that a video game store almost broke the market."

#TheProblem

@dmoses34 tried to explain market maker exemptions and over-borrowing, and @jonstewart's eyes glazed over. "Here's why you shouldn't explain it, because I stopped listening a minute ago." ROFL

#TheProblem

@dmoses34 @jonstewart Me: "It doesn't make any sense! You can't explain to a rational person how you can how more than the float of a company short."

#TheProblem

Inducements and incentives. Robinhood is not incentivized for its users to do well, it's incentivized for them to trade more.

#TheProblem

Yes @jonstewart - we all want to hug @jjbrown111076.

This segment on pension plan losses is just disgusting. The fees paid to hedge funds, that by and large underperform the market, meant that the Ohio Teachers fund couldn't pay benefits. There's no excuse for this. Market structure and inducements/incentives have real impacts.

When underfunded pension plans underperform, retirees either don't get their benefits, or taxpayers have to step in. One way or another, someone else pays, not Wall St.

#TheProblem

Then I gave a mini-seminar on self-regulation - it's insane that exchanges are for-profit but self-regulated. They set the rules for trading and "enforce" those, and their best customers are also the target of enforcement.

#TheProblem

Great points from @dmoses34 on moral hazard. People pay their fines and go about their business. Nobody goes to jail. That's #TheProblem.

Both @jjbrown111076 and @matt_kohrs point out how serious the problem is of such high levels of dark trading. Retail orders need to be executed on transparent venues, with open competition.

#TheProblem

I love @dmoses34 idea - we need a grassroots movement to address this problem.

#WeTheInvestors we-the-investors.org

#TheProblem

Now @jonstewart is interviewing @GaryGensler.

SEC Mission:
Investor Protection
Capital Formation
Fair, Orderly Efficient Markets

YES! Fair and efficient markets mean that investors do better and companies do better. But it's not working.

#TheProblem

@GaryGensler: "we could use some more resources, that's for sure. We shrank in the prior administration 5%, while markets were growing dramatically."

This is an important point. The SEC needs more funding, but that funding needs to go to data scientists, not lawyers.
#TheProblem

@GaryGensler explains that SEC needs to work within the laws that Congress makes. Jon makes the point - "Laws are written by the very people you're trying to regulate."

There's no argument. Lobbyists write the laws. Retail needs its own lobbyists. #WeTheInvestors
#TheProblem

@GaryGensler: "The American public gets it, that the system isn't working for them."

"There are real challenges. Complexity helps them."

Jon wants Gensler to engage with the apes, to be more agile.

#TheProblem

@jonstewart asks why the SEC doesn't refer more cases to the DOJ. Why don't people go to jail for financial crimes, they pay fines? @GaryGensler says, "that's fair." This is the core of the issue. This is what needs to be fixed. This is #TheProblem

Cary Elwes is just too hilarious. He explains that Robinhood takes from the rich and gives to the poor. You can't be a Robin Hood and not do that!

#TheProblem

I hope you liked my Last Word. We need to come together in a grassroots advocacy movement to make real change, and we're doing that with #WeTheInvestors. The only thing that can fight an army of lobbyists is an army of retail investors: we-the-investors.org

#TheProblem