It takes a spark

Former Prime Minister and Donald Trump wannabe Tony Abbott bobbed up again in the media recently. Apparently our world class response to COVID19, driven by the Premiers and Chief Ministers was a hysterical reaction driven by health despots. Abbott, now a ‘distinguished fellow’ (their words, not mine) of the conservative ‘think tank’ the Institute of Public Affairs used his announcement of employment to promote his beliefs that would, in his view, save the Australian way of life.

The Australian Communications and Media Authority recently forced Skynews ‘to publish a correction to an ‘editorial’ by their ‘personality’ Alan Jones where he claimed that the Victorian Government severe lockdown in the middle of 2020 to snuff out the community transmission of COVID 19 was excessive
“I thought a pandemic was a disease which was prevalent over a whole country or the world,” Mr Jones said.

“I think that spells four words; catastrophic state government failure.”

“We have never seen this incompetence in the history of Australian government.”
The three-paragraph clarification of Jones remarks have been added to the editorial on Skynews’ website, although the original statements remain online. It advises that Jones’ claim of a report proving that masks and lockdowns were ineffective were wrong as he misrepresented the evidence presented in the source journals.

It’s not the first time Abbott, Jones or any other politician or media ‘personality’ has attempted to fire up public indignation by skewing the evidence presented. In the same editorial
I’d suggest [Andrews is] fighting a virus with the wrong response,” Jones said. “Listening to the wrong experts and trashing everything in our wake.
Notwithstanding the obvious — extremely sick or dying people aren’t usually out and about spending money in the community — Abbott and Jones are, in the words of Monty Python, pining for the fjords of a land when the establishment had all the power and, when asked to jump, the minions (that’s the rest of us) asked ‘how high’?

Things aren’t going well for the establishment. Apart from pesky laws requiring equality between all people, questioning of the establishment’s authority, the images of American insurgents storming the US Capitol seemingly at the request of the US President and the demonstration that alternatives to fossil fuels are capable of equal or better performance and economics, it seems that the establishment finance system is also now under attack.

One of the tools in the Investment Bankers shed is the art of ‘short selling
Here's how it works. Essentially, you sell before you buy, and like any trade, you hope to sell at a higher price than your purchase price. It's just the timing is reversed. To do so, they have to borrow or rent the shares from someone, usually a big insurance company or investment fund.

That makes it a risky trade. Because unlike a purchase, you can't just sit on your investment indefinitely. You have to hand those rented shares back.
Let’s say that our Investment Banker (let’s call him Jonathan) has sold 1 million Widgets Pty Ltd shares Jonathan’s firm don’t own at $10 each. As it usually takes 2 days to transfer the ownership of a share, Jonathan has to rent or borrow 1 million shares in Widgets Pty Ltd at a price under $9 a share - so costs such as his salary, office space and so on can be covered.

However Jonathan would have a problem if he couldn’t find enough shares to ‘borrow’ at a lower price than his sale price. As he has contracted to deliver 1 million shares to a purchaser for $10 a share, if he couldn’t find the shares available at a lower price, he would have to pay whatever it took to purchase the required shares to fulfil his contract. This could cost serious money.

In January, a group of people on the ‘Wall Street Bets’ subgroup on Internet site Reddit gamed the system. They found a computer game shop in the USA called GameStop which was publicly listed (you could buy shares in the company) and poorly regarded by the Investment Banking community. As reported in The New Daily
The simplest explanation for what happened is that a bunch of hyper-online mischief-makers in Reddit’s WallStreetBets forum — a clan of self-described degenerates with user names like “dumbledoreRothIRA” and “Coldcutcombo69” — decided it would be funny and righteous (and maybe even profitable, though that part was less important) to execute a “short squeeze” by pushing up the price of GameStop’s stock, entrapping the big-money hedge funds that had bet against it.

The strategy worked. Within two days, GameStop was the most heavily traded stock in the world; Elon Musk and Rep. Alexandria Ocasio-Cortez got behind the revolt; and WallStreetBets users were posting screenshots of their suddenly inflated account balances.

The scheme’s originator, whose Reddit user name is unprintable, claims to have turned an initial investment of $US50,000 into a windfall of more than $40 million. One of the hedge funds that had shorted GameStop’s stock, Melvin Capital, had to get a $2.75 billion bailout from two other investors after it was hammered with huge losses.
By early February, Gamestop’s share price, which reached $483 in January had sunk back to $90 and the similarly fuelled rally on silver had run out of steam as well. As the author of the article in The New Daily observes
While watching the GameStop drama, I’ve been reflecting on what author Martin Gurri calls “the revolt of the public.” Gurri writes that the internet has empowered ordinary citizens by giving them new information and tools, which they then use to discover the flaws in the systems and institutions that govern their lives. Once they’ve discovered these shortcomings, he writes, these citizens often rebel, tearing down elites and dominant institutions out of anger at having been lied to and withheld from.
Which is where the likes of Abbott, the IPA and Skynews need to be careful. Their audience is the establishment and a lot of it is either ageing or responsive to counter argument by others. Considerable numbers of the ‘minions’ are coming to an understanding they also have power and can exercise control, should they choose to mobilise it. While the Reddit subgroup members didn’t win in the end — as the ‘market establishment’ enforced new rules to ensure a ‘short squeeze’ doesn’t happen again, the ‘proof of concept’ is out there that there are ways to manipulate the financial system, even if you’re not part of the establishment.

Like a bushfire — all it takes is a spark that is given time to develop. The Abbotts and Jones’ of this world do need to worry as their control is slipping day by day.

What do you think?

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Michael Taylor

9/03/2021

One only has to see the damage Fox News is doing in the USA for an example of how dangerous lies and misinformation can be. 

How many umbrellas are there if I start with two and take 2 away?