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How Redditors Exposed The Stock Market | The Problem With Jon Stewart | Apple TV+ - YouTube
Channel: The Problem With Jon Stewart
[0]
Tonight, we’re going
to be talking about
[1]
the stock market...
[3]
[AUDIENCE MEMBER WOOS]
[5]
...really?
[5]
[LAUGHTER]
[7]
A “woo” for the stock market.
[9]
Millions of Americans talk about the
stock market every day
[12]
from the ballrooms of the richest
Connecticut country clubs
[16]
to the ballrooms
[17]
of some of the poorer
Connecticut country clubs.
[20]
[LAUGHTER]
[21]
No matter
what's happening in the world,
[23]
all eyes are always on
the market.
[26]
We stock watch,
[27]
while waiting to find out
who's gonna be president.
[29]
We stock watch,
[30]
while globally warming.
[31]
And neither Santa
[33]
nor a global pandemic
[35]
can distract us
[36]
from our minute to minute
[38]
check in.
[39]
All happening
[40]
just below Larry
Kudlow's nipples.
[43]
Oh look at ‘em!
[43]
[LAUGHTER]
[45]
But our national obsession
[46]
came from quite humble roots.
[49]
The stock market
[50]
began with a very simple premise.
[52]
Let's have people invest their money
[54]
in companies that they believe in.
[57]
If the company does well,
[58]
the people will do well.
[61]
But you couldn’t
just drive to the company,
[64]
give them your money.
[66]
That’d be super weird.
[68]
You needed a place,
[69]
a building made of, let's say, marble.
[71]
[LAUGHTER]
[73]
But you couldn't
just go into that building
[74]
made of marble and buy your stock
[77]
That'd be too much like a store!
[79]
[LAUGHTER]
[80]
You'd need a broker.
[82]
Someone...
[83]
...better than you.
[84]
[LAUGHTER]
[85]
So from the beginning,
[87]
it was elitist.
[89]
To buy a stock,
[90]
you had to pay
a heavy commission
[93]
to whichever...
[94]
college lacrosse benchwarmer
turned broker
[97]
you could find.
[99]
[LAUGHTER]
[100]
[LAUGHTER]
[101]
And the only folks
[102]
more elite than the brokers
[103]
were those who vouched
[105]
for the brokers on television.
[107]
My name is J. Paul Getty.
[110]
The brokerage house of
EF Hutton Company
[113]
is a firm with which I've had close
[115]
and pleasant relationships
[117]
for four decades.
[118]
They have been helpful
[120]
and their service has been good.
[122]
[LAUGHTER]
[126]
[LAUGHTER]
[133]
“It's too late for me now.”
[135]
[LAUGHTER]
[137]
“For I am...
[139]
...more couch than man.”
[141]
[LAUGHTER]
[143]
“More pillow than human.”
[146]
[LAUGHTER]
[148]
Given that the investor class
[149]
was made up of literal
Monopoly men,
[153]
the stock market was wildly unequal
[156]
when the Federal Reserve
started analyzing
[158]
stock ownership in 1989.
[159]
It found that the top 10% of households
[162]
owned 78%
[166]
of the stock market.
[168]
But the revolution was coming.
[170]
Hark!
[172]
Sorry.
[173]
[LAUGHTER]
[175]
That "hark" even scared me!
[178]
Hark!
[179]
Its clarion call is upon us!
[182]
The e-brokers have arrived!
[184]
-$8, my man!
-$8?
[185]
My broker charges me $200
for this trade
[187]
-You're riding the wave of the
future, my man.
[189]
-Ameritrade. Believe in yourself.
[192]
But is a meth head
[193]
and his father in the market...
[195]
[LAUGHTER]
[197]
...still too high a bar?
[199]
-You know,
I conceal this bad boy
[201]
underneath my blanket
just so I can get on E-Trade.
[203]
-Click. I just bought stock.
[206]
If I can do it.
[207]
You can do it.
[211]
[LAUGHTER]
[212]
Whoa.
[213]
A fucking baby!
[215]
If you want to get in the market,
[216]
you just need to be a fucking
baby with $6!
[218]
A six-dollar fucking baby!
[222]
By the way, someone needs to do a
[223]
“Where are they now?" on that baby.
[225]
[LAUGHTER]
[226]
I'm pretty sure he's hosting a podcast
[228]
where he's just, "asking questions
about ivermectin!”
[231]
“I'm just asking questions!"
[232]
[LAUGHTER]
[234]
and calling women "females."
[235]
"They're females!"
[237]
[LAUGHTER]
[239]
Discount e-brokers
[241]
democratized the stock market,
[243]
and inequality went...
[246]
Up?! Fuck!
[247]
Are you serious?!
[249]
They democratized the stock market
[251]
and inequality went up!
[254]
Are you kidding me?
[256]
Turns out to really democratize
this market,
[258]
we were going to need something
[260]
that completely breaks down
[262]
all barriers.
[263]
Someone had to take away fees
[266]
completely.
[267]
We'd need a hero
[269]
or...
[270]
...not a hero more like...
[272]
...an app.
[273]
We need some kind of an app.
[274]
There we go.
[275]
[LAUGHTER]
[276]
Robinhood!
[278]
The OG sexy socialist.
[280]
The bow-and-arrow
Bernie Sanders.
[283]
Leveling the playing field!
[284]
Stealing from the rich...
[287]
...and giving-
[288]
Who is he giving it to?
[289]
Robinhood’s made it
extremely easy
[291]
for me to take the
income I make from my
[293]
commission paintings
and invest it into stocks.
[296]
Robinhood showed me
that my money can work for me.
[300]
My name's Azim
[300]
and I'm a Robinhood user.
[302]
I'm an investor.
[303]
-I'm an investor.
[304]
We are Robinhooders.
[307]
Cozy-sweatered lesbians?!
[309]
[LAUGHTER]
[314]
[LAUGHTER]
[316]
In the stock market?!
[317]
Well I never!
[319]
[LAUGHTER]
[321]
By the way, in the nineties,
[322]
they were referred to as, "just friends."
[323]
[LAUGHTER]
[324]
Pray tell!
[326]
How has Robinhood managed
[328]
to breach the palace walls
[330]
and throw down the drawbridge
for these
[332]
sweatered Lilith Fair maidens?
[335]
Robinhood CEO, tell us.
[337]
I think the combination
[338]
of zero commissions,
[339]
no account minimums,
[341]
fractional shares...
[342]
Helped level the playing field for people
[344]
to participate in the markets.
[346]
Thank you,
[348]
haunted Victorian boy.
[350]
[LAUGHTER]
[353]
[LAUGHTER]
[357]
Zero commissions!
[358]
And the markets were flooded
[361]
with new customers.
[362]
And not only that,
[364]
on top of this no-commission model,
[366]
the Federal Reserve's new
low interest rates
[369]
made savings accounts
pretty much worthless.
[373]
So even more stock buyers
[375]
and money flowed
into the stock market.
[378]
In 2021, more money
[380]
flowed into the stock market
[381]
than in the previous
[382]
20 years combined.
[386]
It was a golden age
[387]
of wealth generation.
[389]
The unwashed masses
[391]
finally have their moment
[393]
to get into the stock
market, and...
[395]
IT WENT UP?!
[396]
Inequality went up?!
[398]
Are you fucking kidding me?!
[401]
[LAUGHTER]
[403]
And thus,
[406]
The Problem
with the Stock Market.
[409]
The Grand Poobahs of the
stock market
[412]
keep creating easier access
[414]
to this wealth machine.
[416]
Yet, somehow always
still manage to be
[419]
the greatest beneficiaries
[421]
of that wealth.
[423]
Perhaps if we examine exactly
what happens
[425]
when you buy a stock
through Robinhood,
[427]
we can understand
[428]
the system a bit better.
[430]
I pick up my phone
[432]
and I'd hit the old Robinhood
"Buy" button
[434]
and boom!
[435]
My order...
[436]
doesn't
go to the stock exchange,
[438]
because of something called
[439]
“payment for order flow.”
[442]
My order somehow goes
[443]
to this other company no one’s
heard of
[444]
called “Citadel.”
[446]
They're a middleman known
as a market maker.
[448]
They match buyers to sellers.
[450]
And they have paid Robinhood
[453]
hundreds of millions of dollars
[456]
for the privilege
[458]
of processing the order.
[460]
And then Citadel,
[461]
or any market maker,
[463]
still doesn't have to take that order
[465]
to the stock exchange.
[466]
They just match it
to other orders
[468]
they've also already paid for.
[471]
Or they slip the order into
[473]
what are called "dark pools."
[476]
And dark pools are private exchanges
[477]
where the big boys trade stocks
[479]
in the dark.
[481]
Yes.
[483]
The actual name of that
[485]
is "dark pools."
[487]
[LAUGHTER]
[488]
They named it "dark pools".
[490]
[LAUGHTER]
[491]
How fucking invincible
[494]
do you have to feel
[496]
to name the place
[497]
where you conduct your least
[499]
transparent business dealings,
[501]
"dark pools?"
[503]
[LAUGHTER]
[504]
"Thank you for your order!
[506]
I'll just take it down to my
[508]
Chamber of Schemes."
[510]
[LAUGHTER]
[514]
So now we know why
[515]
Robinhood is free to use.
[518]
They're being paid
[519]
hundreds of millions of dollars
by middlemen
[522]
for the privilege of processing stock orders
[525]
So we know who their real boss is.
[528]
But why the fuck with these guys pay
[529]
hundreds of millions of dollars
[531]
for that privilege?
[533]
Let's ask Citadel CEO, Ken Griffin.
[536]
-Payment for order flow
[537]
is a cost to me.
[539]
Oh, well yes!
[541]
It costs you hundreds
[542]
of millions of dollars.
[544]
[LAUGHTER]
[545]
Why would you do it?
[546]
-We want to hold on to
[548]
this democratization of finance
[550]
that's taken place.
[551]
If payment for order flow helps
[553]
to maintain that as a reality,
[554]
I think that's good for everybody
[557]
You're a really good person!
[559]
[LAUGHTER]
[562]
See Ken Griffin, he’s just a nice guy!
[563]
He's going broke
[565]
to create
this democratization of markets!
[568]
Obviously, not that broke.
[569]
He does live in literally
[571]
the most expensive house
[572]
in the history
[574]
of the United States of America.
[576]
And also spends time
[577]
at his other house here
[579]
and this other one here
[582]
and then this one here.
[584]
And of course,
[586]
any of these here...
[587]
any of these here,
you know what?
[587]
Fuck this guy.
[588]
[LAUGHTER]
[590]
So what's really going on here?
[592]
How do these particular
middlemen
[594]
even make money?
[595]
Say, Jason, you want to buy a stock for $10
[600]
and Caroline,
[601]
you're selling it for $9.99.
[602]
Well, they'll internalize that trade
[605]
and they'll make a cent per share.
[607]
It doesn't sound like a lot,
[608]
but if you do it enough.
[609]
Over and over again.
[610]
Those pennies add up.
[612]
Huh...
[613]
So for every trade,
[614]
they're skimming
pennies off the top.
[617]
How many fucking pennies
[618]
puts you in all those houses?
[619]
Well, let's break this down.
[620]
first of all,
the hundreds of millions
[622]
that Citadel kicks back to Robinhood,
[625]
should be going to the retail investors,
[627]
or at least a cut of it,
[628]
and the pennies
[629]
they're scooping on price differential
[631]
should also be going to the retail investors.
[633]
I mean, who came up with payment
for order flow?
[636]
Bernie Madoff?
[637]
Yes, it
was actually Bernie Madoff.
[639]
[LAUGHTER]
[640]
It was literally Bernie Madoff
[642]
who came up with payment
for order flow.
[644]
It was...
[644]
It was Bernie Madoff.
[645]
[LAUGHTER]
[646]
Bernie Madoff
[647]
came up with payment
for order flow...
[649]
[LAUGHTER]
[649]
Let me...
[650]
do you know the name “Bernie Madoff?”
[652]
[LAUGHTER]
[654]
Bernie Madoff
[655]
came up with payment
for order flow.
[656]
That's the business model that
all these guys are working on.
[659]
Bernie Madoff.
[660]
BERNIE MADOFF!
[662]
[LAUGHTER]
[665]
This should be illegal!
[667]
Which, by the way, it is
[669]
in many other countries.
[671]
Somebody should really tell
the Securities and Exchange Commission
[674]
about this, and it turns out somebody did.
[676]
In 2004,
[678]
a whistleblower
[679]
wrote a letter to the SEC,
[681]
saying payment for order flow,
[683]
“lacks transparency...”
[685]
“...is anti-competitive...”
[688]
and “...creates an obvious
[689]
and substantial conflict of interest
between brokers and their customers...”
[693]
and should be banned
[694]
”...altogether.”
[698]
Pray tell...
[699]
unmask the hero of our tale,
[702]
the brave whistleblower
from the year 2004.
[705]
It is...
[709]
Citadel Investment Group!
[711]
[LAUGHTER]
[712]
It appears
[713]
that these companies
[714]
don't so much want to
[715]
democratize the stock market,
[717]
as bring in chump money
[719]
for their penny game.
[721]
So what might happen, though,
[724]
if these new chumps,
[725]
bringing in all this new money,
[727]
got wise?
[728]
-Small investors banding together
[731]
to take on big firms
[731]
by running up the stock price
[733]
of video game seller, GameStop.
[735]
-It’s a stock worth
just a few bucks a year ago
[737]
and closed at $347.
[740]
If you invested $5,000
[742]
in the GameStop
just two weeks ago,
[745]
you would have made more than
[746]
86,000 bucks.
[748]
The hedge funds that bet against it
[750]
have lost billions.
[752]
A bunch of Reddit users
[755]
harnessed years of
[756]
advanced meme training...
[758]
[LAUGHTER]
[761]
to realize that the company, GameStop,
[764]
was being massively shorted
[766]
by hedge funds.
[768]
Basically, hedge funds placed
[770]
giant bets
[771]
that GameStop's price
[772]
would go down.
[774]
The Reddit users
[775]
thought, "Well, geez,
[777]
why don't
we all just get together
[779]
and short-squeeze them?
[781]
Drive the price up,
[782]
hold the stock,
[784]
make a little money
[785]
and as a consequence, force
those hedge funds
[788]
into massive losses."
[791]
And it worked.
[793]
Really well.
[794]
[LAUGHTER]
[795]
Discount online brokerage, Robinhood
[797]
barred users, without warning,
[799]
from buying new shares of GameStop.
[801]
I opened up the app.
[802]
I saw that you could no longer press
[804]
the "Buy" button in Robinhood,
[806]
and I said, "Holy *bleep*."
[809]
[LAUGHTER]
[812]
Don't be coy!
[813]
Holy what?!
[814]
[LAUGHTER]
[816]
Holy what?
[816]
Did you..
[817]
What'd you say?
[818]
"Cock?!"
[819]
[LAUGHTER]
[821]
Did you say,
[823]
"cock?”
[823]
[LAUGHTER]
[826]
Why would Robinhood
[828]
halt buying GameStop
[830]
but not selling it?
[833]
They said it was because
[834]
they received a call
[836]
from their clearing house.
[838]
But let's...
[839]
from their bookie.
[841]
Who said,
[842]
"They're
on the way to the house!
[843]
Get the fuck out of the house!
[844]
They're in a black
Lincoln Continental!"
[845]
[LAUGHTER]
[846]
But other people were suspicious
for a couple of reasons.
[849]
One being, a hedge fund
[850]
called Melvin Capital,
[852]
which racked up billions
[853]
of dollars of losses
[855]
in the GameStop frenzy,
[856]
received a bailout
[859]
from none other than
[861]
Citadel Hedge Fund.
[863]
The utterly unrelated hedge fund,
[865]
owned by the same people
[867]
who own Citadel Securities,
[870]
which is the payment
for order flow company
[873]
that handles Robinhood orders.
[876]
And if this sounds insane,
[878]
it's because it's insane!
[881]
Which really has to make you wonder,
[884]
how dark
are these fucking pools?
[886]
[LAUGHTER]
[888]
And here's the kicker.
[890]
This payment for order flow
[892]
situation and GameStop mess
[895]
are the part
[895]
of the American stock market
[897]
that is the most transparent,
[899]
well-regulated
[900]
and straight forward part
[902]
of our entire market system.
[903]
There's a whole other back
[905]
room of derivatives and swaps
[907]
and less transparent
transactions,
[909]
with even more fuckery!
[913]
Subsidized by
[914]
public union pension funds.
[918]
It's unsustainable.
[921]
One could compare it
[922]
to the subprime mortgage market
[924]
that has capacity
[925]
to blow up the world economy.
[928]
We will never understand
all of it,
[931]
and we're not supposed to.
[933]
It took a bunch of Redditors
[935]
to figure out the GameStop
[937]
shorting thing.
[939]
What the hell was CNBC doing?
[941]
-Show me the money!
[943]
-Look at all that green baby!
[944]
-Wealth creation
right in front of our eyes!
[946]
-Cha-ching!
[947]
♩HALLELUJAH♩
[948]
♩HALLELUJAH♩
[949]
-Watch your money grow!
[951]
♩HALLELUJAH♩
[952]
-You're gonna make a lot of money!
[953]
♩HALLELUJAH♩
[955]
-Thank the market gods.
[957]
-Because baby,
[958]
this stock is born to run!
[960]
[LAUGHTER]
[969]
Someone should question him
[971]
publicly.
[972]
[LAUGHTER]
[973]
I'm sure that would have
[974]
tremendous ramifications.
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