There’s been lots going on regarding r/WallStreetBets and I’ve been paying attention, of course. Let’s summarize.

r/WallStreetBets is a Reddit group where traders evaluate investment options. The opinions on who they actually are, are divided, but it is my opinion that at least a percentage of them are professionals: expert traders who do this for a living, some of whom used to work for Wall St. hedge funds, investment banks etc. I’ve seen media portrayal of r/WallStreetBets as a band of disenfranchised millennials who are trading with welfare money out of their moms’ basements, and this image is very misleading. The part of them being millennials might be true, but think Elon Musk. Some of those people could invest 10M USD just for shits and giggles. I’ve seen reports of some players using 640M USD. Those are not what you would expect to see if you trusted the “main stream” media, were you by some chance foolish enough to do so. No. The top 1% percent or so of r/WallStreetBets are basically super-wealthy people who habitually invest in the stock market, and have a very large portfolio, and a comparatively small amount they can gamble away on questionable things.

One of those questionable things is investing in shares of failed or deeply distressed companies, where the Wall St. professionals, namely the hedge funds, are betting on them going belly-up in the very recent future, and are invested in short-selling their shares, which basically means “borrowing” shares now, to be paid at a later date at the price as it is on that date, and selling them now, at the current price. If the price goes down as expected, they sell expensive, buy cheaper and pocket the difference. In cases where they are betting that the company will declare bankruptcy before they need to purchase the shares, they gamble by “borrowing” more shares than there actually are in existence; one such case was “caught” by the r/WallStreetBets analysts, who found out that the shares of GameStop are shorted at a record rate of 140% of total shares in existence, which means the hedge funds who were betting heavily on the company going belly-up in the short term could be caught with their pants down if the price of the shares happened to be driven up by, let’s say, record demand from a huge number of Internet traders from r/WallStreetBets. Initially, it was seen as an opportunity to make money, because the investment funds will be forced to buy the shares at higher prices to close their short positions, but very quickly it evolved into “payback time, bitches”, because those hedge funds apparently have many things to account for, such as people’s homes being foreclosed, or people’s businesses struggling because all the credit money circulates in the upper echelons of Wall St., never trickling down into the actual economy, and they are seen as someone with a deep insider connection with any sitting government, because they finance politicians from both parties, and so the government keeps bailing them out whenever their gambles fail to pay off. This was seen as a “let’s see you get out of this” situation, and that is when large groups of young/disenfranchised people started gambling on GameStop shares with money they couldn’t afford to lose, basically throwing their livelihoods on the line in an attempt to damage the “system” they perceived as inherently oppressive.

At some point the GameStop shares jumped from the initial $17.25 to $483, but later fell down to $225. It is my opinion that this will be hugely profitable for those who bought below $100 and sold above $400, but I also expect the short-sellers to have bailed themselves out quite early, and then used the momentum to make money out of it, and the millions of amateur traders who came to the party too late, and those who naively hold on to the stock for too long, will be left with the bag, even poorer than they were before. This just can’t end well for the majority of investors because the fundamentals of GameStop aren’t good enough to justify anything even approaching this astronomic valuation. What needs to be seen is whether the hedge funds that were caught with their pants down already closed their short positions accepting a limited loss, because if that is so, remaining in GameStop shares might actually help the hedge funds recuperate their previous losses. The ability of professionals to out-manoeuvre hysterical mobs who think in memes and emotions should not be underestimated. r/WallStreetBets movement can basically execute only one manoeuvre at the time, because if they try to introduce complexity, they disperse, and, although the “leaders” of the movement are highly competent and intelligent, the mob they are guiding has huge inertia, measured in days, in a job where seconds can make all the difference. It is therefore my opinion that it is quite possible for the movement to produce real and significant effects, but it is also almost certain that most of them will incur heavy losses.

There was talk about r/WallStreetBets trying to influence the silver market, silver being the most “shorted” thing in existence today. As a result, the silver prices spiked and the retail sellers of physical silver sold out their inventory within a day. People on r/WallStreetBets concluded that the idea must come from the hedge funds themselves, who are trying to disperse the attack on GameStop, but I would not be so sure. In fact, I think r/WallStreetBets “short squeeze” of GameStop seems to have given some very smart people an idea, because it is known in the precious metals market that the prices of silver and gold are being artificially suppressed for a very long time, and the supply side hasn’t really recovered from the shortages that became visible around April last year. Also, Tesla is really ramping up their car production, and they need significant amounts of silver to put each of those cars on the road. r/WallStreetBets might actually have very little to do with the rising prices of silver and gold, because I expected those to rise before GameStop was even a thing, for completely unrelated reasons, having everything to do with the fundamentals. Sure, I wouldn’t mind someone accelerating the process, but I certainly don’t rely on that alone.

My opinion on gold and silver is known, as is the fact that I’m heavily invested in gold, and to a much lesser degree in silver, because I expect the financial system to be restructured with gold as one of the main pillars of currency, together with real-estate mortgages and sovereign bonds. For that to happen, the price of gold will have to go up by an order of magnitude, and I don’t know what silver will do. Also, I expect the real-estate prices to collapse, because they are currently maintained at this level by artificial means. The entire system – governments, banks, stock market, businesses – is presently stretched beyond the expected breaking point and the only thing keeping it together is a combination of inertia and unwarranted optimism. This overextended rubber band will break, and when it does, I don’t want to be anywhere near. I see this stock market madness of inflating certain shares far beyond their fundamentals as a symptom of desperation, and historically it is a precursor to the collapse.

Sure, there is good money to be made in this phase, if you’re positioned well, you know what you’re doing and are willing to gamble, but my assessment is that when this thing starts to unravel, huge amounts of money will start collapsing into precious metals as the only remaining safe haven, and I want to be there already when that happens. The only reason why we haven’t had hyperinflation in the Eurodollar zone already is because all of the money is basically locked in the upper echelons of finance and business, none of it trickling down to the masses, so basically the wealthy have so much cash they can’t decide what to spend it on, and the masses are starved for basic liquidity and fundamentally disenfranchised. Also, the system is so hyper-regulated, it is almost impossible to do business at all. If you think this can end well, I have a piece of real estate on the Moon to sell you.

But there’s more. 🙂 I remembered some more lessons from the 2020.

Probably the most important one is, never tell me “but what are the odds?” Yeah, what are the odds that there will be a global pandemic-induced hysteria, and that we’ll locally also have two major earthquakes on two separate fault systems, none of which would be the one that causes periodic earthquakes in Zagreb? In hindsight, the odds were 100%, and foresight is only quantified ignorance anyway.

Also, people tend to ridicule preppers, usually by prefacing the term with the attribute “doomsday”, as in “doomsday preppers”. Actually, doomsday is the only thing I’m not prepping for, because it’s pointless. If it’s doomsday, everybody dies and as far as I’m concerned it’s the best possible outcome, because fuck this place. You don’t prepare for doomsday, you prepare for the situation where there was a flood and water is not drinkable, and your house is rendered uninhabitable, or there was an earthquake and your apartment building was damaged, there’s no electricity and there’s a major gas leak. You prepare for a civil war where city block limits become the front lines and there’s sniper and mortar fire. If you think that’s unrealistic, you haven’t been in Croatia or Bosnia in the 1990s. I live here and it sounds very realistic. Also, I remember the power outages in the 1980s, the fuel shortages, and basically everything-shortages, plus hyperinflation of two different currencies in two different states. I get especially pissed off when I meet Croats who act as if such things are impossible and you’d have to be crazy to anticipate the possibility in your plans. As far as I’m concerned, they are the insanely gullible ones. This year I was one significant crack on the outer wall away from emergency evacuation and relocation, in which case I would have needed both my cash reserves, gold bullion, the redundancy of having two cars, and the precaution of having the necessary things in backpacks already. It was a very close shave, and although I’m very happy not to have needed it, having the option didn’t feel like very much of a luxury, or like overkill planning. It felt like just the right thing.

Another thing is, you don’t know what you’re preparing for. 2020 shows it’s possible to have more than one significant crisis at the same time, and not only that, they can also be completely unrelated. Also, you can have a crisis-cluster, in the sense that a civilizational crisis of identity and worldview can produce an economic crisis, a political crisis, mass hysteria, overreactions to actual threats that could have been dealt with in a more calm and rational manner, and then you can have a debt crisis, financial system crash, pension fund crash, mass unemployment and business infrastructure crash, etc., and on top of that you can have random natural disasters such as hurricanes, snowstorms, earthquakes, fires, floods etc. And on top of all that you can have wars. If you’re lucky, most of that can miss you, and it’s only something in the news, with no bearing on your daily lives. Or, if you’re less lucky, you can barely survive covid and then an earthquake can demolish your condo. There is such a thing as a shitstorm, which makes the concept of preparing for a specific single type of a disaster misguided and naïve. You need to cover a reasonably wide spectrum of disasters, and the good thing is that the recommended measures mostly overlap. In the majority of scenarios, you need to have as much money saved as possible, so you can react and solve whatever problem it is that happened to knock on your door. Also, you need to factor in the possibility of utility disruptions, and not necessarily short ones – if a major transformer station is flooded or there’s a fire, the damage can be very hard and slow to fix. If a major power station blows, the entire electric grid can go offline and it can take months to fix. If an earthquake really hits, as it did in Zagreb, the buildings might still remain damaged almost a year later, simply because the state will fuck up the reconstruction effort as it invariably does, and people don’t have the money to do it themselves.

Another important thing to consider is that a crisis can impact your source of income, even if it didn’t affect you directly. Companies can go under and people can be fired. The entire industries can be shut down – for instance, tourism won’t do well in lockdown times.

Also, when shit starts happening, it’s too late to take warnings seriously and start preparing. Everybody will have the same idea and you won’t be able to get things. Necessary supplies might be out of stock or rationed. Also, trying to find a place to rent in the aftermath of a major disaster that hit your area, well good luck with that, because if everybody’s house is damaged everybody will have the same idea and you’ll have the choice between terrible and terribly overpriced. Have all the necessary hardware and supplies now. Make all the emergency plans now. When you’re hit by a disaster, you’ll be in a state of shock and you won’t be able to think clearly, let alone make coherent plans. That’s how you get a rush on toilet paper supplies – people aren’t thinking clearly, they just shat themselves and something gravitating around their arseholes is the main thing on their mind. You need several plans, made when you’re calm, secure and lucid, and then you get to pick one that’s appropriate for the type of crisis that struck.